Thursday, 19 March 2020

BREAKING NEWS: Harley Investor Unrest Goes Public; Production Suspended


Harley Investor Unrest Goes Public;
Production Suspended


March 18 - Harley has filed a form DFAN14A with the SEC - a form used to advise of "non-management proxy solicitations not supported by the registrant," covering "Additional Definitive Proxy Solicitation Materials Filed by Non-Management." In essence, notification of a motion requiring a shareholder vote that has not been put forward by the company itself - in this case a motion proposed by one of Harley's investors.

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The investor concerned is Impala Asset Management, a multibillion investment management firm established in 2004 by noted veteran investor Bob Bishop, an "activist investor." Impala says of itself that it "invests in global cyclical equities" and that "our investment process combines deep, bottom-up research with extensive sector expertise complemented by a macro perspective. We manage a fairly concentrated portfolio that seeks to take advantage of the natural volatility in companies within basic industries such as autos, capital goods, basic materials and energy."

Basically, Impala is nominating former car racer, Tele-Communications, Inc., and AT&T Broadband President and CEO Leo Hindery, Jr. and former NASCAR Chief Operating Officer and GM senior executive Brent Dewar to be appointed to Harley-Davidson's Board of Directors to "provide needed fresh perspectives for [the] company's strategic direction and critical input on [the] hiring of a new CEO."


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Acting CEO/President Jochen Zeitz has been appointed with a pay package that could provide up to $8.5 million in salary, bonuses and restricted units for a short assignment.

Robert Bishop, Impala's founder and Chief Investment Officer, made the following statement: "Impala believes that with the right leadership, Harley-Davidson can return to its former position of strength. This is why we have nominated Leo Hindery, Jr. and Brent Dewar to the Board - both are exceptional leaders who can provide valuable perspectives on Harley's strategic direction, as well as critical input on the hiring of a new CEO.

"We have had significant concerns about the strategic direction and actions taken by the Board under former Chairman Michael Cave's stewardship for some time - and we have voiced these concerns privately to Harley.
"Notably, it took our urging to convince the Board to terminate the prior CEO, Matthew Levatich, despite years of poor performance. In 2019, Mr. Levatich's reported compensation increased to a new annual record of more than $11 million, even as adjusted motorcycle operating income declined by more than 20% and the stock underperformed Harley's peers.

"The Board has still not shown that it is focused on positive change. To the contrary, one of the first decisions the incumbent directors made after firing Mr. Levatich was to reward their longstanding colleague, Jochen Zeitz, the new Acting President and CEO, with a pay package that could provide up to $8.5 million in salary, bonuses and restricted units for a short assignment. This is yet another instance of this Board being tone deaf to the plight of shareholders and further demonstrates the need for new perspectives on the Board.

"At the appropriate time, we at Impala will present our detailed case to investors in full. Given the ongoing national emergency posed by COVID-19, and out of respect for all stakeholders of Harley during this time of duress, we believe that now is not the appropriate time to hold this discussion. We will be in touch with our fellow shareholders in due course, as necessitated by the company's annual meeting timeline."


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In unrelated news...
March 18 - Harley-Davidson, Inc. announces a temporary suspension of "the majority of production at its U.S. manufacturing facilities" through March 29 to "help support employee health and further bolster coronavirus containment efforts."

Facilities temporarily suspending production are York Vehicle Operations in Pennsylvania and Wisconsin facilities Tomahawk Operations and Pilgrim Road Powertrain Operations.

"We recognize the unprecedented nature of this global crisis. In order to best support our employees and following the social distancing guidance issued by public health authorities, we are temporarily suspending the majority of production at our U.S. manufacturing facilities," said Jochen Zeitz, Acting CEO and President, Harley-Davidson. "We will continue to monitor the situation and take necessary steps to prioritize employee health and safety."

Harley-Davidson says it will "continue monitoring the situation closely and make additional adjustments as necessary in accordance with World Health Organization (WHO) and Center for Disease Control and Prevention (CDC) guidelines." The majority of its U.S. production employees will be on temporary layoff with medical benefits. The company will use this time to "continue deep cleaning and disinfecting its production areas and common areas to further protect workers upon their return."

Harley-Davidson closed its Pilgrim Road Powertrain Operations after an employee tested positive for the COVID-19 coronavirus and is thoroughly cleaning and disinfecting the building, per the company's coronavirus response protocol.

On Monday, March 16, Harley-Davidson asked employees at its Milwaukee-area headquarters and Product Development Center, except those business-critical roles that must be done onsite, to work remotely through at least the end of March. Additionally, the company is "proactively working with its dealers to assess individual impacts and is encouraging dealers to follow the public health guidelines in their communities for the safety of their consumers. In accordance with social distance guidelines, all Harley-Davidson sponsored events have been cancelled until mid-April."




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