Harley-Davidson CEO on what drives growth

Harley-Davidson CEO Matt Levatich discusses sales, free-trade and his outlook for growth.

Harley-Davidson CEO: Trade Deal Tackles Barriers to Asia

By Business Leaders FOXBusiness

Harley-Davidson (HOG) CEO Matt Levatich said Wednesday the Trans-Pacific Partnership, which has been a subject of debate on the campaign trail, should help the motorcycle maker as it pursues growth in Asian markets.

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The Trans-Pacific Partnership, or TPP, was signed by a dozen nations earlier this year, including the U.S., Mexico, Canada, Japan and Vietnam. The agreement needs the approval of Congress. Both frontrunners in the presidential race, Republican Donald Trump and Democrat Hillary Clinton, have expressed opposition to the deal.

In an interview on FOX Business Network’s Mornings With Maria, Levatich said international regions, especially Asia, are important to Harley-Davidson. The Milwaukee-based company currently has dealers in 90 countries.

“The big opportunity for Harley, growth-wise, is in Asia, and a lot of the work with the TPP addresses some of the barriers that are in the way of our growth in Asia,” Levatich said. “We are a U.S. company manufacturing almost all of our products here in the United States, which is good for America when we can have freer trade.”

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Harley-Davidson reported first-quarter earnings on Tuesday. Although the company’s profits narrowed year-over-year, earnings and revenue both beat Wall Street’s expectations.

Sales in America slipped 0.5%, and Harley-Davidson’s market share ticked lower to roughly 51%. The iconic motorcycle maker continues to grapple with competition from Japanese and European brands who, due to a strong dollar, can undercut prices from Harley-Davidson and other American brands like Polaris-owned (PII) Indian Motorcycle.

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“That’s why we’ve really stepped up our efforts to be more competitive,” Levatich said.

On Tuesday’s earnings call, Chief Financial Officer John Olin said Harley-Davidson will compete with rivals by “driving equity into the brand,” rather than getting into a price war. Executives have maintained that discounting would hurt Harley-Davidson’s profit margins and its position as a high-end brand.

“We still have a very strong leadership position” in the U.S., Levatich said, noting that Harley-Davidson’s market share remains above its historic average of 45%.

Levatich also noted that Harley-Davidson showed strong results internationally, as sales outside the U.S. grew 4.5%.

He said the quarter reflects the “pivot” Harley-Davidson has made to drive demand. Over the course of the full year, the company plans to invest $70 million in marketing campaigns, a 65% increase versus 2015.

While core customers are a key driver for Harley-Davidson’s sales, Levatich said the brand is investing in advertising, dealer training and new products that resonate with younger riders and women. Those efforts have moved the needle. Non-core customers account for 39% of sales, up from 34%, according to Levatich.

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