Archive for October 2009

Near Miss Accident Survey

October 21, 2009

A new study was published today—the Near Miss Accident Survey of Riders.

According to the report, “The purpose of the survey was to find out from motorcyclists, whether they had experienced situations in which they believed they could have crashed and/or been injured (but were able to keep control of their motorcycle) as well as the type of situations they had experienced.”

Near-misses are critically important because the rider both believed a crash couldn’t occurred but it didn’t–thus resulting in safer riding. Why near misses occur tells us information about why actual crashes happen–and may yield information in how to avoid crashes in the future.

An internet survey of 257 motorcyclists in Ireland (Northern and Southern) and Great Britain (England, Scotland and Wales) was conducted by Right To Ride, a Northern Ireland motorcycle rights group.

Profile of the respondent

The average respondent to the survey was a 40-year old male who had completed a basic training course. Basic training is mandatory (Compulsory Basic Training) in Southern Ireland and Great Britain. It is not in Northern Ireland. About 24% had taken an advanced course and another 38.9% had taken an “assessment course” like Bikesafe.

89.5% had taken a practical riding test. Over 99% were licensed with the vast majority having a full license (93.4%). (UK countries have graduated licensing including provisional and restricted and full tiers).

The average rider had ridden a motorcycle between 4,000 to 6,000 miles per year without a break in riding for 10 years. Almost 89% always rode in the summer with spring (70.4%) and autumn (65.8%) following. Almost half always rode in the winter with most of those using their bikes for commuting.

The motorcycle was, on average 7.5 years old and the majority (69.1%) rode adventure/sport/enduro/naked street bikes and were represented proportionally in near miss events. 82.9% of the respondents rode motorcycles with engine sizes between 401cc and 1200cc.

Almost half (45.1%) used their motorcycle for personal leisure and 38.9% for commuting to and from work.

(For USA readers’ background information, helmets are mandatory in all three survey areas.)

Crashing and near missing

Of those 257 riders, 78.2% of the respondents reported such near-miss events, 22.6% had had a non-injury crash in the past 24 months. Of all crashes reported, 49% were single vehicle crashes and 51% were multi-vehicle—which is roughly the USA percentages for types of crashes.

Of riders in injury crashes 62.9% reported that they were in multi-vehicle collisions and 37.1% had experienced a single vehicle crashes (4 did not answer).

Interestingly, there was no statistical difference between those who had taken either the assessment course or advanced training when it came to crashing without injury:

20% of those who taken an assessment course vs. 19.7% who had taken an advanced training course had a non-injury crash within 24 months.

Fewer riders who had taken either the assessment or advanced training had an injury crash: 15% of those who took an assessment course had a crash with injury and 16.4% who had done an advanced training course.

Iow, both means produced about the same results when it came to non-injury or injury crashes and 5% fewer injury crashes v. non-injury crashes.

However, when it came to those who hadn’t taken an assessment or advanced training it gets even more interesting:

Of those who did not take an assessment course, 24.5% had non-injury crashes—or 4.5% more than those who had taken the course. While that’s less than 5%, it still suggests that training or at least evaluation makes a difference.

However, it’s a different story when it comes to injury crashes—undoubtedly more serious in effect (though admittedly a non-injury crash may only have avoided injury by random factors).

Of those who hadn’t taken an assessment course 15.2% had an injury crash—which is virtually identical to the 15% of those who had.

And when it came to advanced course participation, only 14.9% who hadn’t taken an advanced course had an injury crash—or 1.5% fewer than who had taken an advanced training course.

Iow, we don’t find the difference we’d expect to find if further training/evaluation did make riders safer on the road. That was not observed by the writer of the report, Dr. Elaine Hardy.

This, however, supports what other researchers have found about training in the USA and Australia—it does not have an observable safety effect in injury crashes.

What the survey found

In brief, what the report finds is what riders would expect it to find:

A 2004 Department of Transport study that examined 1,790 accidents found that  38% involved Right Of Way Violations (ROWVs). “However, less than 20% of these

involve a motorcyclist who rated as either fully or partly to blame for the accident.” This, as the Near-Miss report states, is higher than the Hurt Study found. Other causes garnered far less than 5% each of responses.

In this survey, when it came to the cause of those near misses:

  • 40.6% reported “turning into your path from a side road, private driveway or opposite direction”.
  • 15.2% reported someone changing lanes in front of them “on the motorway”.
  • 13.9% reported on-coming traffic in their lane.
  • 12.5% “reported cutting you off at a junction” (or intersection for us Americans).
  • Road conditions were the other major cause of near-misses:
  • 45.3% cited slippery or loose road surface or loose gravel.
  • 34.7% potholes and grooves.

32.1% road markings or over-banding (as far as I can tell, “over-banding” means the strip of bituminous material to repair joints and cracks resulting in a smooth, often slick surface).

Of those respondents who had near misses (five cited more than one cause):

  • 61.5% considered the other vehicle (mainly car) as the cause of the near miss
  • 9% considered the near miss to be their own fault
  • 7.7% considered the conditions of the road as the cause of the near miss
  • 3.8% considered animals on the road as the cause of the near miss
  • 3.8% considered a pedestrian as the cause of the near miss
  • 2.6% considered another motorcycle(s) as the cause of the near miss
  • 1.3% considered a bicycle as the cause of the near miss
  • 10.3% gave “other” reasons or comments.

Focus Group input

The second part of the study was a focus group that discussed the survey findings. The participants were drawn mainly from the motorcycle safety and training community: a Chief Regional Tester for RoSPA in the Republic of Ireland, a Ballymena Rider Training, Instructor and IAM Observer and a Bikesafe Coordinator; and motorcycle rights officers—a former General Secretary, Road Safety Officers and Senior Training Officer. And a UK/Technical Officer Federation of European Motorcyclists Associations) Northern Ireland.

While they agreed with the need to address road infrastructure (and other road conditions), of note was what they had to say about both public PR campaigns to raise motorist/motorcyclist awareness and the marketing/advertising campaigns by motorcycle manufacturers.

The group was divided between how people reacted to “hard-hitting” commercials. Some felt that people would just avoid it by switching channels and “and that advertising of that nature needed to have a message that is factual, relevant and educational.” Others thought that even if they did turn off dramatic message, the point would still sink in.

But, when it came to how manufacturers advertised motorcycles, the group felt, “All participants indicated that the advertising of performance motorcycles by  manufacturers and magazines had a negative effect on rider attitude and behaviour and that this influence was an underlying cause of motorcycle crashes.”

The experts on training

“The view of the participants was that there is a systemic failure on the part of the authorities in all three countries to provide adequate training and relevant testing for motorcyclists and car drivers.”  This is especially significant since training and testing is far more rigorous in the UK than in the USA and there’s a significant portion of both that’s conducted in traffic.

As one participant observed: “In reality motorcyclists and car drivers need a system in place to fully prepare them to ride or drive on all types of today’s roads in different conditions. The system that we have in place at present does not do that. Over the last 3 years 70% of collisions and just over 70% of road users’ fatalities and serious injuries have happened in a rural environment. In stark contrast 70% – 80% of instruction, guidance and testing are carried out within an urban environment. The current scheme is not reflective of the types of driving that drivers and riders are engaged in post test.”

The focus group thought that more people didn’t take advanced training or assessment courses because it was too expensive and/or people didn’t think it was important. That there was no significant statistical difference between those who had and those who hadn’t when it came to any kind of (survivable) crash may be exactly why more riders don’t think its important—somehow, on a gut level, they may sense that in their own experience—more training doesn’t make a significant difference?

MSF has extended its Discovery Project for another year—but at the halfway point, MSF wasn’t getting the results they wanted—MSF training products weren’t showing further training was effective or that they could easily get people to come back for more. It will be interesting is MSF’s study of its own product (that the taxpayers paid for almost half) comes up with different results that so many other studies—including this last one.

At some point, rider educators are going to have to accept that study after study cannot be wrong and that there’s something wrong with the curricular products currently available. Or they may have to think outside the box and figure out why training doesn’t make riders safer and what kind of training would.

Unfortunately, while the report gives us information about the causes of near-misses, it doesn’t explore why the crash didn’t occur–how the rider avoided the crash successfully–and that’s the critical issue when it comes to increasing rider safety. It is to be hoped that Right to Ride will continue to explore near-misses along those lines in the future.

When it comes to Harley, “it ain’t the economy, stupid”

October 18, 2009

Harley has been the darling of MBA programs and marketers since it’s extraordinary turnaround in the mid-1980s after management bought out the company from American Machinery and Foundry Incorporated (AMF).

AMF, who had bought the company in 1969, had taken the already legendary brand and nearly destroyed its viability with both too fast expansion, shoddy production and poor quality control. Harley’s reputation by the early 1980s could be summed up by the old joke “most Harleys ever made are still on the road…waiting for the tow truck to pick them up.”

It took several years to turn Harley-Davidson around and restore its mechanical reputation and another decade to reinvent its public image into one seen as a highly desirable, premium and exclusive lifestyle purchase. This was reflected in its stock price:

On October 16, 1986—five years after the AMF buyout—the stock was trading for $0.25 a share.

Ten years later to the day it was trading for $11.68.

Jump ahead to Oct. 16, 2006, and the price had risen to $66.70

A few months after that, the stock hit its all-time high of over $72 per share.

That remarkable turnaround and growth was rewarded: In 2001, Harley became the only motorcycle manufacturer elected to the Marketing Hall of Fame—a prestigious award sponsored by the New York American Marketing Association, which honors “brands that have established themselves as true icons by achieving enduring, sustained success in the marketplace and that have contributed to the marketing discipline through their pioneering practices.”

It joined brands such as Barbie and Budweiser, Coke and Marlboros, McDonald’s and Visa in the “Classic Brands” category that only honors brands “that have enjoyed continuous success for 25 years or more”. Harley then celebrated it’s 100 year anniversary in 2003. It certainly seemed as though its star would continue to rise.

But by January 27, 2009, HOG stock hit a low of $11.69—almost the exact same price as it was in 1996.[i] Like many of the corporations on the stock market, Harley appears to be rebounding. It closed yesterday, Friday, October 15, 2009 at $27.86. While that’s quite a comeback, it hasn’t come back as much as analysts predicted it would at this point. And, as Harley’s press release stated, it plans on even more draconian measures to stop the bleeding—including cutting production even more.

Nowhere, perhaps, is the fall of Harley more evident than what the third quarter motorcycle shipments reveal: In 2009 only 132,849 H-D’s were shipped compared to 226,898 in 2008.

The easy answer to Harley’s Icarus-like descent is because people don’t buy discretionary luxuries in a recession—particularly one that’s as expensive as many cars.  Once the recession is over, many stockholders believe, Harley will rise again. They particularly believe that after two analysts RBC Capital and Wells Fargo & Co. upgraded the stock to outperform last week.[ii] All that it takes is continuing to restructure operating costs, selling MV Augusta, dropping Buell, and Harley rebuying stock and all will be well. “It was the economy, stupid” is the thinking.

But as most easy answers are, the recession explanation doesn’t hold up to examination:

Historically, motorcycle sales aren’t related to recessions

AMF bought H-D in 1967 when the company was at the point of bankruptcy. By the early-mid 1970s, the country was in a recession. Interest rates rose through out the decade to a high of 20% and unemployment was 9% for many months in mid-decade. However, motorcycle registrations jumped from 2.8 million in 1970 to almost 5 million in 1975—a 76% increase.

In the early 1980s, the country was very much like today: in a recession and Harley sales were declining. However, just as in the 1970s, motorcycle registrations were at their highest—a height not equaled for another 20 years even though the prime rate was over 15% and unemployment soared to 10.8% in the autumn of 1982 and stayed there for months.

Clearly, the recession wasn’t affecting motorcycle registrations. Instead, the reverse seems to be true: in the mid-late 1980s, as employment improved, the prime rate dropped motorcycle sales and registrations dropped swiftly.

Rather, Harley’s difficulties were caused by AMF’s blundering mismanagement in the 1970s—a blinding ignorance of what the motorcycling community valued and how to position the brand as well as abysmally low production and quality control standards—that almost drove the company into bankruptcy. It was also a decade of foolish choices—Harley’s move into snowmobiles, lawnmowers and boats—all of which ultimately failed to transfer brand loyalty. As in this current recession, Harley’s bad shape in the 1980s recession coincided with it rather than was caused by it.

In the brief 1990-1991 recession, the prime rate was about 10%. Unemployment continued to rise to a high of 7.9% by mid-1992. In the very year that unemployment was the highest (and didn’t drop to roughly 5% until 1997) was the same year the most recent motorcycle boom began.

While not all experts would agree there was a recession in 2001, it met many of the requirements[iii] and was characterized by extensive layoffs, outsourcing, and a jobless recovery. Once again, during the “recession” motorcycle sales and registrations zoomed upward.

In short, in four out of four of the past economic downturns, motorcycle registrations did not mimic the recession. Rather registrations rose during or remained high or peaked during the worst of the recession and fell as the economy improved. Investors in any motorcycle manufacturer would be wise to be aware of that.

That doesn’t mean that there weren’t boom and bust cycles in motorcycle sales—it’s just that they weren’t easily associated with the broader economic cycle.

Then what’s going on with Harley-Davidson?

No doubt about it—the precipitous plunge of HOG stock price last fall through early February had a great deal to do with last fall’s Wall Street crisis—all kinds of stock prices fell as the market sought a new bottom. But no matter what problems Harley had and has, it didn’t deserve to fall that far that fast. But it did deserve to fall quite a bit because recession are sooner ended than motorcycle bust cycles.

In many ways, the recession masked what was already occurring—Harley was already slowing down and would’ve continued to slow down quickly even if there hadn’t been a recession. The recession simply masked what would’ve happened anyhow and will continue to happen for a number of years.

A couple basics must be recalled: The summer of 2008 saw soaring gas prices, but unemployment was barely edging up.[iv] While heavyweight motorcycle sales dropped, scooter sales soared and training classes were jammed in many states (except Harley-Davidson’s Rider’s Edge classes) But it wasn’t just Rider’s Edge that was suffering—simply put people who want to save money on gas don’t buy motorcycles that cost as much as new cars. Harley had nothing to sell that economy riders wanted and they were the ones buying.

Motorcycle shipments also traditionally go up in the second and third quarters. The second quarter corresponds with the beginning of the riding season and the third quarter shipments reflect the new model year.

Harley shipments 2005- 3Q 2009

As you see, however, Harley’s 2009 second quarter was down 27.57% and third quarter shipments were down 27.39% from 2008—but 2008’s 2Q were down 15.55% and 3Q were down 13.67% from 2007 and the 3Q was down 10.8% from 2006.

Japanese motorcycle manufacturers’ 2008 USA 3Q shipments were also down (15.13%) from 2007—which were also down from 2006 (27.8%). According to the chart on webbikeworld (scroll way down till you get to it) [v] 2005 marked the apex of this latest cycle for motorcycle sales—even though, according to the Bureau of Traffic Statistics registrations continued to rise.

However many economists believe the current recession began at the end of 2007 by—almost three years after motorcycle sales peaked and began to fall even though all manufacturers were writing subprime loans and credit was easy.

In fact, if the major manufacturers hadn’t done the exact same thing—writing too many subprime loans and securitizing those bad loans—that mortgage lenders did with houses, the boom would’ve turned bust that much sooner.

Iow, recessions don’t drive motorcycle boom and bust cycles—something analysts and stockholders would be wise to keep in mind. Just because the recession is over and unemployment drops doesn’t mean that motorcycle sales will rebound for several years. In the USA, the boom and bust cycle arise from what’s happening in society and are culturally driven responses that consequently have economic effects—more on that one day.

Much of Harley’s suffering now and in the future, however, comes from an abysmal lack of understanding of the brands and mismanagement of them—and that lack of understanding of what makes someone ride and how to manage the brand will doom them in the next major boom. That’s what the next entry is about.

[i] Though it closed that day at $12.35.

[ii] Wells Fargo, incidentally, received $25 billion in TARP bailout funds and hasn’t repaid it yet—and, of course,  Wells Fargo Advisors was Wachovia Securities–part of a company that lost billions in reckless risk-taking. So,  whether they’re as good at analyzing stock as they were at managing the rest of their business is anyone’s guess

[iii] In the USA there were not two consecutive periods of negative growth, which is why the period in 2001 was not called a recession.

[iv] Unemployment was still below 6% in July, 2008 and still only 6.2% in September and only after that began to go up rapidly.

[v] Otoh, BMW, Ducati and Aprilia sold more motorcycles than previously.

H-D in a financial endo

October 16, 2009

Shortly after announcing the Buell Blast would no longer be produced, H-D announced the entire Buell line would be no more. A heart-wrenching announcement from Eric Buell is available here.

As other media reports, this means that 80 production jobs and 100 administrative jobs will be lost just before Christmas and joins the other 1,00 jobs lost at other H-D plants this year. Admittedly it’s a small number in the big USA job loss picture but surely not small for those employees who join the millions out of work.

And just over a year after Harley-Davidson bought MV Augusta for roughly $110 million USD, the Motor Company announced today that it was selling the European motorcycle manufacturing group.

The radical about face is just part of Harley’s press release on its third-quarter report:

The company went from an operating profit of $35.6 million in the third quarter of 2008 to an operating loss of $31.5 million for the third quarter of 2009—or a change of $67.2 million.

The financial services subsidiary, HDFS, went from an operating income of $107.7 million in this quarter last year to an operating loss of $110.8 million this year.

In the past nine months, H-D shipped 187,085 motorcycles compared to 226,898 motorcycles in 2008 with revenue falling from $3.23 billion in 2008 in motorcycle shipments to $2.62 billion.

U.S. retail heavyweight motorcycle sales declined 38.7 percent year to date in 2009, compared to 2008.

Net income for the third quarter was $26.5 million, compared to $166.5 million in the third quarter of 2008, which is an 84.1 percent decline in net income.

Diluted earnings per share were $0.11 for the third quarter of 2009 compared to  $0.71 in the year-ago period—or to put it another way—an 84.5 percent decline in diluted earnings per share from the year-ago quarter.

New CEO Keith Wandell put the best face he could on the bleak picture: “While the environment remains challenging for us, we are mildly encouraged by the moderation in the decline of dealer retail Harley-Davidson motorcycle sales.”

Wandell was brought in to replace James Zeimer who lead the Motor Company from the heights to the depths in just four short years. Zeimer wasn’t the only one to lose his job—Thomas Bergmann who was brought in to take Zeimer’s place as CFO and then took over for Donna Zarcone who led the way into Harley’s wild subprime loan underwriting strategy that resulted in almost a third of all the loans being subprime. Harley lost tens of millions in defaulted loans.

James McCaslin was demoted from President of Harley to Executive V-P of Product of product planning and development.

Ironically, perhaps, Harley had moved Matthew S. Levatich from MV Augusta to take McCaslin’s spot and hired Enrico D’Onofrio away from Ducati to take Levatich’s job. Lucky, perhaps, for Levatich—not so lucky from D’Onofrio.

The game of corporate musical chairs, however, did not help the beleaguered company that had, in a great many ways, played the same fast and loose subprime/securitization game that has caused so much devastation in our economy over the past year.

Still, the iconic Motor Company appears that it will make a profit in a very tough year.

Harley explains it’s decision to drop both the Buell and MV Augusta lines as a decision to focus on the Harley brand only by “leveraging unique Harley-Davidson strengths.”

The company’s press release did not address the future of its dealership-based, corporate controlled motorcycle training program, Rider’s Edge. Harley had previously announced that it would continue to produce the Buell Blast–without the name–as a training motorcycle.