Thursday, 16 July 2020

Harley Fires CFO John Olin as Zeitz Announces More Job Losses and "Overhaul of Global Operating Model"

Harley Fires CFO John Olin as Zeitz Announces More Job Losses and "Overhaul of Global Operating Model"

In what initially sounded more like an announcement that it "plans to have a plan," 
July 9th saw Harley-Davidson issue an update on its "comprehensive efforts 
to rewire the company" - The Rewire.

The company says it plans to share a summary of The Rewire, including additional costs and expected savings, when it releases its Q2 results at the end of July 2020, with a new 2021-2025 strategic plan "expected to be shared in Q4."
Described as an "overhaul of its global operating model, including a leaner, more nimble organization," Harley says that "initial Rewire actions are expected to result in restructuring costs of approximately $42m in Q2 2020.
"We've taken a hard look at our entire set-up, our spending, and how work is getting done, to align our operating model, structure and processes. We are building a strong foundation to drive a high-performance organization in the future," said Jochen Zeitz, Chairman, President and CEO.

Changes to the company's operating model under The Rewire will include "all areas of the business globally, from commercial operations to corporate functions." Changes have also occurred in the company's leadership, among them, Chief Financial Officer John Olin has left his role, with current VP Treasurer Darrell Thomas assuming duties as interim CFO until a successor is appointed.





Plan for a plan

"Significant changes are necessary, and we must move in new directions. I thank John for his commitment during his 17 years with the company and for his leadership during this critical phase of The Rewire," Zeitz said.

Harley is saying that, overall, the streamlined structure requires approximately 700 fewer positions across the company's global operations, with approximately 500 employees expected to exit the organization through 2020. It is not clear if all 700 of the positions being eliminated include or exclude the 150 job losses already announced at York, Pennsylvania and Tomahawk, Wisconsin.

Harley says that the "key elements of The Rewire" will be to "enhance core strengths and better balance expansion into new spaces; prioritize the markets that matter; reset product launches and product line-up for simplicity and maximum impact; build the Parts & Accessories and General Merchandise businesses to full potential; adjust and align the organizational structure, cost structure and operating model to reduce complexity and drive efficiency to set Harley-Davidson up for stability and success."
Wall Street response to this announcement was muted with it barely registering on the share price either way.

The announcement of CFO John Olin's departure comes as no surprise, and many, from dealers and former company insiders to analysts and investors, have been of the view that his departure is something that should have happened some time ago. After the departure of Matt Levatich as CEO, it only became a matter of when, and timing it for after this year's annual meeting makes sense.

The news of more job losses is no surprise either - it is common knowledge that Zeitz is scrabbling to square circles, and the recession that has been triggered by the COVID-19 pandemic has made his need to act decisively all the more urgent.

There is much speculation about what initiatives Stage One of the "Rewire Reveal" will include, with the smart money on abandoning the Benelli based 350 that Jinjiang was due to build for Harley in China (for Asian markets), and hitting pause on one or both the Pan America Adventure Tourer and Bronx Streetfighter. Given that they require the successful development of at least two displacements of the brand new 'Revolution Max' 60 degree V-twin engine platform, and that Zeitz is on record as saying that the company needs to focus on core markets and competencies, it is highly likely that Harley will hit pause on them both - and there are those who say the Street 500 and 750 are vulnerable too. Plus, there could be some kind of consolidation of manufacturing footprint in either Brazil or India - or both.



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