Harley Davidson 2012 Annual Report Download - page 12

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obligations resulting from adverse business conditions such as weakened retail sales and tightened credit. If dealers are
unsuccessful, they may exit or be forced to exit the business or, in some cases, the Company may seek to terminate
relationships with certain dealerships. As a result, the Company could face additional adverse consequences related to
the termination of dealer relationships. Additionally, liquidating a former dealer’s inventory of new and used
motorcycles can add downward pressure on new and used motorcycle prices. Further, the unplanned loss of any of the
Company’s independent dealers may lead to inadequate market coverage for retail sales of new motorcycles and for
servicing previously sold motorcycles, create negative impressions of the Company with its retail customers, and
adversely impact the Company’s ability to collect wholesale receivables that are associated with that dealer.
• Changes in general economic conditions, tightening of credit, political events or other factors may adversely
impact dealers’ retail sales. The motorcycle industry is impacted by general economic conditions over which
motorcycle manufacturers have little control. These factors can weaken the retail environment and lead to weaker
demand for discretionary purchases such as motorcycles. Tightening of credit can limit the availability of funds from
financial institutions and other lenders and sources of capital which could adversely affect the ability of retail
consumers to obtain loans for the purchase of motorcycles from lenders, including HDFS. Should general economic
conditions or motorcycle industry demand decline, the Company’s results of operations and financial condition may be
substantially adversely affected. The motorcycle industry can also be affected by political conditions and other factors
over which motorcycle manufacturers have little control.
• Retail sales of the Company’s independent dealers may be adversely impacted by declining prices for used
motorcycles and excess supplies of new motorcycles. The Company has observed that when prices for used Harley-
Davidson motorcycles have declined, it has had the effect of reducing demand among retail purchasers for new
Harley-Davidson motorcycles (at or near manufacturer’s suggested retail prices). Also, while the Company has taken
steps designed to balance production volumes for its new motorcycles with demand, the Company’s competitors could
choose to supply new motorcycles to the market in excess of demand at reduced prices which could also have the
effect of reducing demand for new Harley-Davidson motorcycles (at or near manufacturer’s suggested retail prices).
Ultimately, reduced demand among retail purchasers for new Harley-Davidson motorcycles leads to reduced
shipments by the Company.
• The Company may not be able to successfully execute its manufacturing strategy. The Company’s manufacturing
strategy is designed to continuously improve product quality and increase productivity, while reducing costs and
increasing flexibility to respond to ongoing changes in the marketplace. The Company believes flexible
manufacturing, including flexible supply chains and flexible labor agreements, is the key element to enable
improvements in the Company’s ability to respond to customers in a cost effective manner. To implement this strategy,
the Company must be successful in its continuous improvement efforts which are dependent on the involvement of
management, production employees and suppliers. Any inability to achieve these objectives could adversely impact
the profitability of the Company’s products and its ability to deliver the right product at the right time to the customer.
• The Company’s ability to remain competitive is dependent upon its capability to develop and successfully
introduce new, innovative and compliant products. The motorcycle market continues to change in terms of styling
preferences and advances in new technology and, at the same time, be subject to increasing regulations related to
safety and emissions. The Company must continue to distinguish its products from its competitors’ products with
unique styling and new technologies and to protect its intellectual property from imitators. In addition, these new
products must comply with applicable regulations worldwide and satisfy the potential demand for products that
produce lower emissions and achieve better fuel economy. The Company must make product advancements while
maintaining the classic look, sound and feel associated with Harley-Davidson products. The Company must also be
able to design and manufacture these products and deliver them to the marketplace in an efficient and timely manner.
There can be no assurances that the Company will be successful in these endeavors or that existing and prospective
customers will like or want the Company’s new products.
• The Company must invest in and successfully implement new information systems and technology. The
Company is continually modifying and enhancing its systems and technology to increase productivity and efficiency.
The Company has several strategic projects in process. As new systems and technologies (and related strategies) are
implemented, the Company could experience unanticipated difficulties resulting in unexpected costs and adverse
impacts to its manufacturing and other business processes. When implemented, the systems and technology may not
provide the benefits anticipated and could add costs and complications to ongoing operations, which may have a
material adverse effect on the Company’s business and results of operations.