The battle for control of Harley-Davidson is intensifying, with both the MoCo and H Partners making new submissions to the SEC to clarify their positions for shareholders. H Partners has decisively launched their “Free The Eagle” campaign, complete with a “Campaign Fact Sheet” that highlights alleged shortcomings of the current Board of Directors at Harley-Davidson. In response, Harley-Davidson is delivering a counterstrike with their own initiative, promoting their “Highly Qualified Board” and their “exceptional experience and perspectives…”
In The Green Corner
In the green corner stands H Partners, where the focus is on shareholder return and maintaining cash flow. Holding roughly 9 percent of Harley’s stock, this seemingly lightweight contender is equipped with an arsenal of accusations targeting the current Board’s performance. They urge shareholders to use a blue proxy card to vote “withhold” for Chairman, President and CEO Jochen Zeitz, Presiding Director Thomas Linebarger, and long-serving Director Sara Levinson.
H Partners’ Fight Plan
H Partners’ strategy includes pointed claims that the current Board has suffered from “Major Execution Issues.” They specifically highlight three key points:
- A lack of effective oversight from an absentee CEO;
- A CEO and Presiding Director who have failed to maintain transparency with the Board;
- Long-tenured Board members unwilling to hold the CEO accountable for significant value destruction and the cultural erosion of this iconic American brand.
H Partner’s Free The Eagle logo. Screengrab: H Partners
H Partners has also put forward five notable claims of failure:
- Destruction of shareholder value – Asserted to be due to Zeitz, Linebarger, and Levinson’s “…disturbing record of shareholder value destruction…”
- Poor performance – With a reported decline of approximately $1.8 billion in market value under Zeitz’s leadership.
- Low dealer sentiment – With claims that “dealer sentiment is at a decade-long low.”
- Failure of the Hardwire Strategy – Alleging that the Hardwire strategic plan has not resulted in “profitable growth and shareholder value.”
- Inability to make necessary corrections – Stating this poor performance is due in part to a failure in information flow from the CEO to the Board and the Board’s unwillingness to hold the CEO accountable.
FAQing
H Partners’ team is also addressing potential concerns with a FAQ section that seeks to undermine confidence in Harley’s executive leadership and empower shareholders to influence the company’s future. They also clarify who can participate in the proxy fight and the associated procedures, providing their own blue proxy cards for shareholder voting.
Summarizing The Contender
As a challenger, H Partners presents itself as well-prepared for battle. If their claims hold merit and resonate with Harley’s shareholders, they could deliver potentially damaging blows to the current champion. This would herald significant changes in Harley’s leadership or strategy. Do H Partners face improbable odds? Time will tell.
In The Orange And Black Corner
In apparent response to H Partners’ “Free The Eagle” campaign, Harley-Davidson has rolled out its own strategic proxy site, “Vote Harley Davidson.” The key phrase for the reigning champion is “Guided By Experience. United By Purpose.” This champion enters the ring well-armed, asserting that “Harley-Davidson’s Board is focused on securing the Company’s future while upholding its legacy. Together, we are committed to driving innovation, delivering growth, and creating value for all shareholders.”
Harley-Davidson’s Vote Harley Davidson website minimizes Jochen Zeitz’s profile, placing him last among current Board members. Lori Flees remains solely a Director nominee. Screengrab: Harley-Davidson
Harley’s Fight Plan
Examining the website reveals images of Board members alongside their roles and comprehensive biographies. Within each biography, detailed qualifications are highlighted, enhancing their credibility.
Interestingly, the company’s CEO and Chairman, Jochen Zeitz, is positioned last on the site, just before Lori Flees, who is currently only a nominee for the Board. Nevertheless, the primary investor-facing site prominently features Zeitz first.
Harley-Davidson’s current investor website highlights Jochen Zeitz as the Chairman, President, and CEO. Screengrab: Harley-Davidson
Harley’s site also provides resources to access proxy materials, along with a letter to shareholders. This document is particularly crucial, outlining Harley-Davidson’s actions to date and future performance plans.
Notable points from the letter include:
- The Board’s strong focus on executing the Hardwire, a strategic plan aimed at bolstering future foundations.
- Harley’s “Transformation Is Well Underway.”
- Emphasis on the MoCo’s “Profit Focus.”
- Highlighting the return to growth in the highest profit category, U.S. Touring, with a 74.5% market share in 2024 and around 5% year-over-year growth.
- Reduction in dealer inventory.
Selling The Board Of Directors
The MoCo appears to be actively promoting its Board of Directors to shareholders, a logical response to H Partners attacking some Board members. To counteract this, Harley aims to reassure investors of the extensive experience and qualifications each Director possesses.
While Harley-Davidson is showcasing some successes during the Board’s tenure, the primary indicator of a Board’s effectiveness remains the financial performance of the company. Here, Harley-Davidson has challenges, meaning the MoCo will need to emphasize its achievements while deflecting attention from less successful areas.
Knockout Punch Out Of Nowhere
Amidst this back-and-forth, there is the potential for an unexpected knockout punch. Harley-Davidson will disclose its first-quarter results on May 1, 2025, at 8:00 AM Central time. The outcome of these financial results could significantly influence investor sentiment.
At the close of 2024, Harley’s management anticipated relatively modest performance, with expectations for flat revenue and a 10% to 15% drop in operating income for Harley-Davidson Financial Services. Earnings per share were also projected to be flat or down by 5%, and the electric motorcycle segment, LiveWire, expected an operating loss of $70 to $80 million.
If Harley can deliver positive performance in its Q1 2025 report, they may convince investors that the situation is manageable. Conversely, if results match or fall below their pessimistic forecasts, it could be the blow that destabilizes Harley’s current leadership. Clearly, the upcoming Q1 2025 earnings meeting holds significant implications, potentially safeguarding or jeopardizing the existing Board.
Should the earnings call yield positive results, anticipate Harley’s management to herald the dawn of a recovery. Conversely, if the news is unfavorable, expect H Partners to capitalize on the situation, striking repeatedly while the incumbent champions struggles to defend. Either way, a dramatic showdown is on the horizon.
The Referee(s)
The match will be adjudicated by around 800 institutional investors and shareholders. Retail investors, owning just over 3 percent of Harley’s stock, are likely to have a minor role in the outcome. However, if it comes down to a close decision without a definitive knockout, these investors could significantly influence MoCo’s direction.
The Fight Has Begun
While the MoCo is still poised to announce its Q1 2025 earnings and the annual shareholders meeting awaits, the clash between these two giants has already commenced. After round 2, one referee scores the match 13-11 in favor of the green corner. Much fighting remains ahead, and a single impactful strike could change the game entirely. More revelations will emerge after Harley’s annual meeting on May 14, 2025.