The great big truth of the motor industry became even clearer on Friday when General Motors became a smaller company than Harley-Davidson: premium brands rule OK. GM is famously involved in trying to nurture 16 brands simultaneously – ranging from the once-great Chevrolet to the recently well-regarded Saab.
Go deeper with GlobalData
Harley-Davidson meanwhile is the once-bust Harley which was revived in one of the most famous motor industry TLC operations of all time. Ten years ago, it really started to reverberate and if you had bought a share for $6 then you would be delighted to find that you could sell it for $60 today. A ten-fold improvement in 10 years means that owners of the stock are as happy as owners of the bikes.
Admittedly Harley is now more about high-margin belt buckles and T-Shirts than retro-bikes, but whatever the profit ingredients – the management of one automotive brand had created a company worth $17,562m by Friday. GM on the other hand was valued by the world’s stock markets at $15,889m on Friday. Had you bought a GM share for $32 10 years ago you could sell it for $30 today.
Today’s management of GM earn plenty of sympathy for the compromises that they have to make to conserve investment capital. Their forbearers’ generosity towards past and present employees has become the flaw in the fundamental economics. The cost of pensions, health-care and lay-off pay makes the difference between being about to build cars at a competitive price and not being able to build to a price that confronts the product from the Japanese owned car plants in the US.
GM makes nearly nine million vehicles which is 30 times more than the number of Hogs that rumble out of Harley. Its revenue is 40 times as great.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe immediate problem that faces GM is the tradability of its bonds. It thought that it could report a reasonable profit at the end of the current quarter but has just been forced to announce that the number will be the worst for more than a decade.
The next move is with the credit rating agencies. There are three of them of significance and each is waiting for the other to blink and classify GM bonds as junk. If that happens a large number of investment funds will have to sell because the constitution of their funds says so.
And we then have to wait to see whether the bond market can absorb the sellers or whether a new class of investor will emerge to take up the slack.
One thing is certain; more great minds will be exercised about the possibility of the world’s largest car-maker going down than ever there was when Harley was in the bankruptcy courts 20 years ago.
Rob Golding
