Harley-Davidson Recalls 312,000 Bikes -- and That's Good News?
- Oct 10, 2015
- 2 min read
Motorcycle-maker Harley-Davidson recalled roughly 10 times as many motorcycles in 2014 as it did in 2013 -- and 2015 is on course to become another record year.
According to a tally conducted by The Wall Street Journal this week, Harley-Davidson has recalled 312,000 motorcycles so far this year. With two months left to go in the year, Harley is en route to its worst year for recalls, ever.
Or looked at another way -- its best year ever. According to the Journal'sresearch, Harley-Davidson had to recall an average of 94,000 bikes per year over the decade from 2003-2013. Last year's total of 210,000 recalls ran to more than twice that number, while this year's total could reach three to four times the average.
Harley senior vice president for manufacturing and suppliers Michelle Kumbier said she is "disappointed"at the number of recalls the company is experiencing, and called this not "acceptable." But in at least one respect all these recalls aren't just "acceptable." They're wonderful.
How big of a problem is this?
Viewed from one perspective, growing numbers of product recalls sounds like a big problem for Harley-Davidson. Recalls hurt perceptions of brand quality, while repairs performed to fix the problems that forced the recall subtract profits from Harley-Davidson's bottom line.
According to the company's most recent 10-K filing with the SEC, Harley announced 24 separate recalls over the past three years, and incurred total warranty costs of $30 million on those recalls. Mathematically, that works out to about $1.25 million in added cost for Harley-Davidson per recall. Looked at another way, though, the 230,000-odd motorcycles recalled in those 24 incidents cost Harley just $130 or so per bike to fix.
Weighed against the $16,699 starting price of a Harley-Davidson Fat Boy, though, that's less than 0.8% of the bike's price. Despite these costs, Harley-Davidson still averaged a 19.5% operating profit margin across those three years (according to data from S&P Capital IQ).
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