Saviero Truglia

Cycle World Interview, Matt Levatich, Harley-Davidson President And CEO

A conversation with the leader of the free motorcycling world about the state of The Motor Company, the future of motorcycling, autonomous vehicles, Big Data, and riding every possible day

L

eader of the free motorcycling world? Hard to argue against Matt Levatich, a 52-year-old engineer-turned-executive at Harley-Davidson Motor Company. After climbing through the ranks of The Motor Company beginning in 1994, Levatich was made president and CEO in 2015 and his charge has been to navigate this $5-billion-a-year motorcycle maker and cultural icon through the challenges and uncertainty that face the industry. I joined Levatich in his fourth-floor office at 3700 Juneau Avenue in Milwaukee in late January following the 2017 earnings announcement to discuss the challenges facing new-motorcycle sales, Harley-Davidson's shift to focusing on building riders, what's happening in transportation and cultural trends, plus the bikes he currently rides.

Cycle World: One of the things that stood out in the earnings announcement was the closing of the Kansas City, Missouri, plant. How will this impact manufacturing capacity?

Matt Levatich: The context of that decision is that the transformation of manufacturing coming out of the downturn (of 2008), we closed an engine plant, we closed a lot of buildings at York (Pennsylvania), we modernized our approach to manufacturing, and we did not lose capacity in that process. We didn't lose the capacity we had at our peak in 2006, which was about 360,000 bikes. It wasn't just consolidation, it was really a lot of improvement and we didn't lose capacity.

So you fast-forward to the beginning of 2015 when the dollar strengthened and we started to see an impact on new sales. We then started to dig deeper into what's really going on because we were growing out of the downturn and it leveled off and started to decline. It's been over two years of quarter after quarter decline in new sales. Total Harley sales are actually great. Our market share of total demand, which as an industry we don't talk about, has never really been stronger, so the appeal of the product and the brand is stronger than ever.

Harley-Davidson
“Our investments in making the new way better than the used—which I think we all agree whether it's the Softails or Touring bikes that are the predominant bikes in the US marketplace—that product content and customer value we are putting in the bike is intended to separate the decision.”Courtesy of Harley-Davidson

But there has been a shift from new to used, for simple reasons: the quantity of available used, and therefore the affordability. Our investments in making the new way better than the used—which I think we all agree whether it's the Softails or Touring bikes that are the predominant bikes in the US marketplace—that product content and customer value we are putting in the bike is intended to separate the decision. "Okay, I can get that used for less money, but I want that." You can use the Rushmore example: I want the GPS or the Milwaukee-Eight or the touring suspension. Or the new Softails. The investment in product is intended to put more of an idea in people's heads that it's worth that financial gap.

CW: Still how do you compete with yourself, so to speak, in the used market? Consider the Sportster: Roughly 800,000 sold since 2004, with similar reliability and performance and styling for quite a bit less than a new one.

ML: Sportster is a good example in our portfolio, but in general the used quality and price is a strong proposition for people. So our emphasis on new product is to put space between new and used. We haven't done as much with Sportster recently so it's the last example of a platform that doesn't have that space, content-wise.

But going back to the capacity question. We were coming out of the downturn and there was a path, if you will, to utilize that capacity. As of about 2015 and sort of nine quarters of decline, and all of our recognition of what we really need to do is revitalize the sport with new riders, as we look forward we think we are going to have the capacity, with this move (closing Kansas City and expanding the operation in York) for the next decade.

We are going to work hard to grow more than that because we are investing in York. We're not just shutting Kansas City down, we are expanding York. We're doing that in a way that we have capacity for the next decade.

It is costing a lot of money to do this. It's impacting a lot of employees, obviously, which we don't like to do, but ultimately it is reducing the overhead that we carry by having excess capacity. And that money, that savings, we can turn into other investments to grow the business. We are working hard at growing the business.

CW: As you suggested, motorcycle sales growth is taking place in the used sector, and smaller direct-to-consumer aftermarket business are selling riders parts for these used bikes for maintenance, repair, and customization. There is a whole segment of the motorcycle industry outside traditional OE dealerships and aftermarket distribution. What do you think about this?

ML: It's exciting! As a manufacturer, a year ago as part of our strong statement about building riders, a piece of that for the US is embracing used motorcycles. Now let me explain that. Call this a mindset shift. For 115 years we've gotten up in the morning and said, "We make great motorcycles." What changes when you get up in the morning and your first thought is, "We build riders." Because when we have riders, the motorcycles will follow. I used an example yesterday in our Town Hall (company meeting): We have a dealer who is a passionate skier, I saw him last week at our Retail Readiness event in Nashville (Tennessee). He had recently posted a bunch of pictures of skiing. I said, "You know, Scott, the reason you like great skis is because you are a skier. If you weren't a skier, you wouldn't have a clue about the equipment that makes for great skiing." So when we focus on the rider, the product will follow.

Part of this mindset shift, when you're in the business of building and selling motorcycles, as we are and have been, you don't like the used business. It's the biggest “competitor.” The biggest competitor to Harley is used Harleys: timeless, reliable, durable, classic, beautiful, affordable. And that's this “total demand” thing. But when you're in the business of building riders, you love the used marketplace. It's probably the biggest asset we have because a 20-year-old can get on a Sportster and fiddle with it and make it his own for $2,500 and it's a great motorcycle. The AMF days of reliability are gone. As a manufacturer, how do we embrace it psychologically, when it doesn't do a lot [directly] for our business?

Harley-Davidson CEO
“For 115 years we've gotten up in the morning and said, ‘We make great motorcycles.’ What changes when you get up in the morning and your first thought is, ‘We build riders.’ Because when we have riders, the motorcycles will follow."Saviero Truglia

CW: How could Harley-Davidson make the used market do more for its business directly?

ML: There might be an opportunity there through HDFS [Harley-Davidson Financial Services] which does quite a lot in the used marketplace, and getting our dealers to think more broadly about used. Many of them have continued to embrace used more and more, but also having that conversation with the dealer network that we need them to sell new, too, because we need that income to continue to invest to differentiate the product. So this is a careful thing to navigate in the near term. The real goal becomes building riders, these problems go away. This is basic economics. There are 3.4 million Harleys on the road, registered in the United States. They are owned by slightly less than 3 million people. So I have four—some people have multiple bikes. We'll sell new motorcycles into that population every year and some will leave the population—they'll be deregistered, scrapped, whatever the case may be. Our goal is to grow the riders faster than the machines. That's basic econ 101 stuff. That helps the value proposition that exists on a trade-up—my trade is worth more because there is more demand. That makes the new bike easier to buy into when I'm ready. So this is really what is fundamentally behind the strategy to grow riders, accelerating the pace of rider growth faster than the growth of available bikes, not just ours but all the alternatives people have.

It's a long-term goal because it's not been a focus of the company, it's not been a focus necessarily of the dealer network, and it's not been the industry's focus. The AIMExpo speech I gave [in 2017] really said, "Please, just join the march." I talked about it in the Cycle World interview in California in April of 2015 that we need to shift our attention from "we build bikes" to "we build riders." Part of the AIMExpo discussion was how does the motorcycle press participate in shifting from the machine to the activity? Again going back to the skiing example: We only want great hardware because we want to ride. How do we get interest in "I want to ride"? "I don't ride, I want to ride. That looks like fun. And that looks easy. I know how to do it—I know what that path [to riding] looks like."

Not just manufacturers, but the motorcycle press, the popular press, other influencers who are out there—it might be granddad who rides, but his son doesn't ride, and he is therefore a firewall to the grandson. How does granddad help build the next generation of Harley riders?

CW: We've discussed this topic at CW and considered mentor programs, where we work with a manufacturer to give demo access to new models to experienced riders, and their cost of admission, so to speak, is to bring two or three people who don't ride who have expressed interest, for example.

ML: Mentorship is a huge opportunity. We call it "activate the base." We have 3 million people. How do we ask them to participate? And that's just 3 million Harley riders. How do we activate that base to help us build the next generation of riders. Because we haven't asked, and I think many people will do it. But if we asked and we gave them means—and some dealers are working on mentorship programs where, "You've passed Riding Academy, and every Saturday there's a group of our riders who will ride with you." A lot of these insights came from watching my own sons consider…because I don't push things. My wife and I don't push things on our kids. We try to give them the menu, support, it's your life, we're here to help you find your path. Here's a dirt bike, teach them how to use it, CRF125 or whatever it was. They learned how to shift and I watched them wobble around the backyard and you know they were like, "Well, that was kind of fun." When my older son went to college, it was his roommate from Japan who found out I worked for Harley and immediately said, "Oh, you're so lucky you get to ride a Harley-Davidson," and he said, "Oh, no, I don't ride." Then he came home that spring of freshman year and said, "I want to ride."

So then I watched. Because everyone in your publications, mostly in our business, and our dealers, we've forgotten everything that we ever knew about what it was really like to learn to ride. We were six years old when we did it or it was 30 years ago and we think we remember but we don't. And when you really try to see that journey through the eyes of someone who is new, an adult or young adult, it is a journey. It is a journey from no knowledge to confident riding, to safe riding, to riding you can really enjoy.

Matt Levatich
Levatich riding through the streets of Milwaukee in a Harley-Davidson parade.Courtesy of Harley-Davidson

Both of our sons did it at different times on their own choice. An insight from my younger son, he finished the Riders Academy here locally, the dealer said to the class, “Congratulations, you're now qualified to ride around in a parking lot.” And he shared that with me and I said, “That's a perfectly accurate statement.” The journey is from there; that's like step one of a 100-mile march, to be trained.

What else can we do to recognize that rider training isn't rider creation? We need a rider development path, we need other tools and techniques to grab hold of the hand of someone who's just gotten their endorsement, connect them with people, mentors—I served as mentor for my sons. I have the Sena headsets, and we would go out on the road. I don't lead, I follow. Because they need to be seeing the world for themselves for all its hazards and opportunities and glory and distractions, and I am behind them seeing the world through my eyes and saying, “Heads up, there's gravel; see the gravel? See the deer? See the postman? See the ball bouncing down the driveway?”

There's a little sidebar to this: We get done, both of them independently say things like, “Dad, thank you for being there. Thank you for sharing your knowledge. Thanks for helping me.” And I'm like, What 18-year-old boy ever says that to their dad?! I mean, this is a bonding thing, and it's more fun for me than it is for them—to see their confidence grow. But it takes attention, it takes care, it takes the recognition that this is a journey. And because we've all forgotten everything about what it was like to learn how to ride, we're not necessarily equipped as an industry to shift our attention to building riders.

We have seen the actual commitment and care to create a rider, I mean a confident rider. It is an investment of people's time, and there is a lot of competition for people's time and their money and lots more easy things to do than learn how to ride. The sort of threshold for people to cross to make the commitment—and it's more about time not because of attention span or hundreds of other things you can do with your time and money that might be easier.

And it's hard to convey to somebody what's on the other side. The joy of riding. We know it. That's why we ride. We like great hardware because we like a great ride. If we didn't ride, we wouldn't care as much about the hardware. But it is about the riding. How do we help people understand what the payoff is? We'll never go back, you and I. Right? We'll find time, and make time, riding is our best time.

CW: Time and attention are big issues, but do you think this is also an economic problem? I see young people working very hard to make rent and pay student loans. Would Harley-Davidson work on economic policy, for example, to relieve the much-reported affordable housing crisis or student loan crisis?

ML: All of these things are forces placing economic pressure on people. By the way, some of it, things have changed. When I was growing up, I didn't have an $800 phone and a $100-a-month data plan. These things are necessities now. So there's a lot of competition for the money, whether it's cost of housing or lower wages or other things that people need that they didn't used to need, and there is a lot of competition for people's time. There are skill gaps we didn't used to have. Almost nobody learns to drive a stick shift in a car now. Fewer people have the mechanical aptitude that the current senior riders just had because they grew up needing it. So there are forces that are against us.

What is the draw to make people take the trip to riding? How do we—and you guys are a big part of this—paint a picture of the Promised Land of riding? Because the journey is harder than it used to be. It's harder financially, it's harder emotionally, it's harder mechanically, it's harder from a competitive-alternative standpoint. How do we as an industry get behind the payoff to riding because the journey to get there is harder?

CW: There is research to suggest the “smartphone generation” does differ in some significant ways from previous generations, but wouldn't the desire to venture forth be the same as it has been for the existence of humanity?

ML: The yearning to be free. Yearning to be an individual.

CW: That leads me to a young guy I saw riding a hardtail Panhead chopper near our Irvine office. He was wearing a Schuberth helmet, riding jeans, super-hip boots. He was a great example to me of that young rider who we are having a hard time “counting” as part of the established motorcycle industry.

ML: He is making the strong statement that he is different. He's not part of the herd. That's something that if we look at motorcycling in general on-road, 2.8 or 2.9 percent of US adults ride motorcycles. We are a rare breed.

Why do you love to ride? The Japanese have this technique of the “five whys,” that you don't really get to the root cause of anything until you ask why five times. So I love to ride. Why? Then you're like, well, I like the wind in my hair. Why? Well, because I'm…

When you ask the five whys about riding, you get to things like freedom, independence. I know I'm an individual, I'm not part of the herd. You get to these very deep human elements across cultures, across generations, across genders, and are written about by Aristotle and Socrates.

So these are human values. Why does riding elicit that for people? This is the promised land, but it is hard to communicate.

Harley-Davidson calls it personal freedom.

CW: Perfect segue: What do you think when I say “autonomous vehicle”?

ML: I think of things that have nothing to do with motorcycling. I think basic transportation. I think utility. I think boring. I think commodity. I think necessary. I think inevitable.

CW: What's the negotiation between all that and motorcycling?

ML: Coexistence with autonomous vehicles because people don't ride motorcycles for transportation, commodity, boredom, utility. It's the antidote to all that, right?! Of course there are technologies that are being developed that can make motorcycling safer as well—lane departure, perimeter awareness—that we see coming into the sport and that will make it safer without taking away from the payoff. But coexistence and, okay, perhaps in a number of years when autonomous vehicle reach a certain percentage there will probably be areas of the country where certain roads—probably interstates, freeways, beltways, toll roads—are autonomous vehicles only to incentivize more of the change. And I think to myself, "Okay that would almost by definition mean you couldn't drive your '65 Mustang and you couldn't ride your Harley on that road." But I don't think people are driving a '65 Mustang or riding a Harley to be on that road anyway. They do it. But our industry is a sport, not transportation, even though the motorcycle does have practical use. I ride my bike back and forth to work. And it's a better way to get back and forth to work. If I had to take city streets and not the freeway. It would take me longer, but it wouldn't deter me.

Our emphasis is that it is probably coming, and it's probably safer for motorcycles when it comes. Although there was a lawsuit in California about an autonomous vehicle running into a motorcycle [this interview was conducted prior to the pedestrian death caused by an Uber autonomous vehicle in Arizona]. There is also lane-splitting and other interesting implications of autonomous vehicles and motorcycles.

CW: In 1900 to 1910, a photo of a big city would have shown 90-percent horse-based transportation and 10-percent auto. Twenty years later it would be the reverse. Do you see our time in as significant a period of change as this?

ML: There was a lot of incentive for people to get rid of horses. There is much less incentive to change from what we have now. I think the tail-off of non-autonomous vehicles, because of the installed base, the economics, is going to be a lot slower than the fall-off to change from the horse.

That's how we view things, and we are interested in building better motorcycles and we need to come up with technologies that make for a better ride. Not technologies that take away from the ride. Yeah, I suppose if you came to a stop sign and something engaged that prevented the motorcycle from falling over, would that deter from the ride or would that make the motorcycle safer? On its face, probably not. The technology and its extra mass to do that probably would. You'd be hauling around a big flywheel the rest of the time.

The big point here, though, is we aren't doing a good enough job as an industry talking about the promised land. And why make the trip to learn to ride.

CW: What other kinds of motorcycles could you put the Harley-Davidson name on the side of? I look back at bikes like the Harley-Davidson SX250 of the 1970s, the vibe of the bike, low cost, even the ad creative you could use right now. The paint scheme of those bikes is like what is now on the new Sportster Iron 1200 and Forty-Eight Special!

ML: Let me answer more philosophically. When we did LiveWire, first of all, we developed the product. Out here in Burlington [Wisconsin] there is a little test track that AMC used to use that we use from time to time. It's got this cool, one-lane, wooded, hilly road course on it that's quite fun. The guys in the Product Development Center (PDC) who created the LiveWire prototype said here's an opportunity to try it out. It was like a year after we commissioned and funded that. They built seven of them and did an amazing job. I rode that bike there.

I've got my full-face helmet on, and I'm coming up to this rather steep hill that has a right-hand bend at the top. I'm thinking to myself as I'm approaching this hill, “I better really lean into the throttle because I'm really not sure if my 240-pound frame is going to make it over this hill.” I'm thinking “golf cart” power. As I'm getting into the steepest part of the hill I'm rolling on the throttle and I practically missed the turn at the top because both wheels are coming off the ground as I sailed over the crest of this hill and have to negotiate the downward turn. Meanwhile, I am hearing the crickets and the birds in the trees and the grass blowing in the wind. It was a totally different motorcycling experience.

So we talk about look, sound, and feel. First of all the LiveWire sounds cool, but there are all the other sounds. When we did the early press stuff, I was out at that airstrip in Southern California [the closed El Toro Marine Corps Air Station]. I was riding side by side with a journalist and we were having a conversation at 70 mph like you and I are now. We got excited about the product and then we commissioned 33 of them at quite a lot of money because we needed to see what customers thought.

First of all, we had to put a no-excuses electric motorcycle in their hands because everyone is thinking what I was thinking: golf cart, probably anemic. To a person, 12,000 people said, “It's done, I want it now. You guys nailed it. Why can't I buy one?” And there were practical reasons why. Cost. Range at the time. We could have met range requirements by making the battery bigger but it wouldn't have been that product, it would have been a heavier product, a wider product.

Why is all this important? The biggest thing that it demonstrated to us is that the customers are much more willing to see innovative and progressing things from Harley than probably we are allowing ourselves to do. Through our history there are a number of examples of different things we have done that maybe they were successful or maybe they weren't, but they seem to sit in everybody's memory as authentic, credible things that Harley did that we can do again.

We have to be very disciplined in the choices we make. There's not a lot of margin in a little minibike. There is not a lot of competency we have as a manufacturer to make the compromises in the product that are necessary for the dealer to make money and for us to make money and for it to be affordable. There are certain brand quality standards that apply themselves to everything we try to do that drives costs. Metal fenders and all these rules, which we're dealing with. We understand all this stuff and we have to make choices using limited capital—how do we best invest in product?

The reason that bike is in my office rather than the XR-750, that's a 1921 Sport Twin and in talking to the archives staff that was the first motorcycle Harley developed to build the next generation of riders. So I love the XR, I'll always love the XR, and I have an XR1200X which I'll never sell because it's an amazing bike—it has as much of the DNA of the flat-track XR-750 as you can get in a street motorcycle in modern trim. But that XR is elemental. Two wheels and a motor, purely built to perform, evolved every race, and refined and refined. The racebike metaphor is really important from a business perspective. It's continuous improvement and it's never done. How can we be better? Over and over. So that XR-750 was inspiration for me walking in every day for those kinds of reasons. Love the bike, love the sport, love flat track. As a racing spectator sport, in all motorsports, it has to be one of the most exciting types. You can see the physicality, you can see the skill of the rider, there's no mystery to it. Unlike NASCAR you can see the rider. So the sport is great, the metaphor is great, but I needed to shift my focus [to building new riders].

CW: On the subject of the XR-750, what's the strategy for racing and what's the relationship between the Harley-Davidson internal racing department and Vance & Hines?

ML: We're connected with Vance & Hines. We don't have a huge racing department. But we're absolutely connected, especially last year because we were campaigning; I mean it wasn't a stock Street 750 but was a whole lot more of what you can buy at the dealership than some of the other bikes. That's shifting a little bit this year as we work on, you know, winning. Because winning matters.

We have lots of ways to make sure we make great motorcycles for the street. We have an unbelievable engineering team, physical investments and equipment and technology, our test track in Arizona… We're making the best motorcycles we've ever made from a dynamic perspective, from a quality perspective, from a durability perspective. We don't need racing per se to make better motorcycles. It helps, we get some insight, but racing serves more of a purpose, in my mind, of stimulating interest in the sport.

And competition is good. You know I didn't like losing. I don't like losing. My older sister taught me more than anything to hate losing way more than I love winning. Okay. But the competition created interest and interest is what matters. Interest is most important when you talk about building riders. You know a dad who likes flat track, or a grandfather taking his grandson to see a flat-track race because it's exciting to watch… Let's go check it out. There's real competition.

Look at Flat Out Friday [run alongside the Mama Tried Show in Milwaukee during February]. I can't believe on a random February… You know, when I went three or four years ago—it was packed. They ran out of beer! I mean when has a stadium ever run out of beer?! That's, you know, sacrilege. But, you know, that's awesome. Because that's interest, that's passion.

CW: Given the interest in the sport generated by flat track, does a CVO XG750R based on the racer make sense?

ML: We could, for the enthusiast. I mean I've got an XR1200X. My wife had a Street 500 when the first-year's bike came out. I wanted to send it to Terry [Vance], saying make me a flat-track 750 out of this, and then he told me how much they cost. I was like never mind. But that is a cool motorcycle. And now it's even cooler. Okay, so what's the market for a flat-track-edition XG750?

CW: Harley-Davidson does work on a different scale than other manufacturers when you consider the 50,000 to 60,000 Sportsters a year that have historically been sold, or the volume of baggers.

ML: You're right. When you when you ask a dealer how are Street sales? And they're like, "Well, not very good," because they're comparing it to bikes like the Street Glide. But when you look at Street on a national basis, it is pretty damn good. We're sort of proud of it. So it is a different scale.

CW: Given the shift in the market and the search for new riders, is the plan for the 115th Anniversary Celebration different from those of the past?

ML: The emphasis for the 115th in Milwaukee is on riding. There will be rides from four corners of the United States to Milwaukee, for example. But what about when you get here? In the past, it was a lot of buzz around maybe see a couple of dealers, go to the plant, take a demo ride, sit down and watch Toby Keith or whatever in the afternoon and evening. Now we are shifting the emphasis entirely of the 115th to participation into moto culture. Things like beach racing on Lake Michigan, hill climb, an indoor flat track. Demo rides at every dealer. We're taking our corporate fleet assets and giving people a reason to go to every area dealer to try the new product—really partnering with the dealers and giving people no reasons to sit down but to move about.

And everybody else who's sort of there watching—you can imagine somebody sitting on a hill above Bradford Beach who's, you know, just come back from the library or whatever watch beach racing for a while from a distance going, “Huh!” The entire emphasis of the anniversary celebrations is celebrating riding and celebrating moto culture. Participate. Ride here, right around here. Have a great time. Be on the road with like-minded people doing things that we all love to do and see.

You know we haven't had a hill climb in Milwaukee for 100 years. That's an emphasis shift which again is purely about why we ride. Not what we ride. There's plenty of great product. Our product has never been better. It's going to continue to get better.

Matt Levatich

“There's a certain thing that I treasure about this company which is that four young adults got together and decided they want to make a cool product, they wanted to do it right, and they did. And they had complementary skills.”

“There's a certain thing that I treasure about this company which is that four young adults got together and decided they want to make a cool product, they wanted to do it right, and they did. And they had complementary skills.”Saviero Truglia

CW: What would 2018 Matt Levatich say to 1994 Matt Levatich?

ML: I can't even imagine '94 Matt Levatich! You asked what's different about the company today. We know what's different about the company today than when I started. And I actually found myself gravitating more to what's the same. There's a certain thing that I treasure about this company which is that four young adults got together and decided they want to make a cool product, they wanted to do it right, and they did. And they had complementary skills.

There was there was one, obviously, engineer. Arthur was focused on the dealer network and distribution which is such an underappreciated part of our business even today. William Davidson was focused on manufacturing. Walter was focused on running the company. I treasure the fact that for 115 years that has been the spine of Harley-Davidson—there have been a few offshoots around golf carts and snowmobiles and motorhomes and other things—but that spine of commitment to being in the motorcycle business, to me, is an absolute treasure. And we still do—the people in this building, in the plants, in the PDC . Every one of our facilities has a level of passion for the product and the sport and the brand that I don't think exists in most companies. It is raw energy that is channeled toward what we do and how can we be better.

You are seeing it actually manifest itself again in the same ways as it was in the beginning. How are we going to be sure that we are great at manufacturing? How are we going to be sure that we're great at product development? The recent Softails being the best example of the process and outcome we've ever had: on time, on plan, on the market. How are we going to revitalize and be sure we modernize the distribution side, the customer side, the marketplace side of the business? Because that's where the emphasis is in my thinking right now. We have to do all those kind of core elements right.

My job is mostly sort of the Walter Davidson job of running the company. I have a lot of help doing that, but making sure that that part of the stool is the part that is really invested in and perfected and improved—how are we building the sport, how are we modernizing our methods, how are we maintaining our relevance, and how we go to market. So that's where my attention is.

In “1994 Matt,” my attention was where my attention needed to be. This company was trying to figure out a way to make way more motorcycles to meet demand that was there. And because this company had such a significant prolonged period of growth, I was allowed to do things that probably in quieter times I wouldn't have been allowed to do. “Matt, we need somebody to go launch Buell in Europe.” Okay. Put me in coach, I'll figure it out.

Why I was the best choice to do that, on paper at that time, one might have questioned based on my background, education, and so forth. So there are examples of things that, because of the company's growth profile, I got to participate in.

By the way, many of those things culminated in the opportunity to run MV Agusta. We bought that, and now you can argue whether it was the right thing for the company to do at that time, but the world unfolded differently rapidly. And that didn't stick. Okay, but based on my opportunities within Harley-Davidson over the years I was, humbly speaking, a great choice. I had a product development and manufacturing background, head of European sales, and marketing with Buell, and so putting all that together MV Agusta was a wonderful experience for me and yet another crystallization of what does Matt need to be thinking about now.

I, without giving it even any thought, recognize that it takes everything, right, and it's sort of like the racebike example, or what was I thinking in 2015 versus what am I thinking now.

You can take nothing for granted. Now more than ever you have to be great at everything that you do and you have to be on your toes, on your front foot, questioning everything: Is it good enough because tomorrow it may not be. Everything's moving so fast. And consumer preferences and trends in digital, all these things you mentioned in the publishing industry.

Would I have been that crystal-clear on that in 2015 taking over as CEO? That's much nearer [than 1994 Matt], and no, and no I wouldn't have. Am I clear about it now? Yes I am, and we are fixated on this marketplace, particularly the US element of our business.

While we continue to drive great product, while we continue to be great at manufacturing, and at the end of the day it goes right back to what this company has always been: great products engineered, manufactured, and distributed to create a marketplace for something that you know people don't really need. Even back then [in the early days of Harley-Davidson], maybe there was more of a need in 1912 or something, but pretty quickly once the Ford Model T came along, motorcycling became a sport. And sport needs passion. Sport needs inspiration. Sport needs creativity and innovation.

I read this really great book a month or so ago. It's a Valentine book series from the ’60s and ’70s and it was about the history of Harley-Davidson. It's fascinating to read about the history of Harley from the vantage point in 1970 versus the vantage point of today. You know that bike [the 1921 Sport Twin] is discussed in that book, for example, and it was heavily valued in Europe but didn't do so well in the United States. That's why it didn't last, but, you know, you quickly see that this business is about inspiration—this business is not about rational. There are rational components. But rationality doesn't sell motorcycles. And that's really I think an insight that maybe I didn't have in 1994 that I really hold dear today. We have to earn the business and the loyalty which we enjoy. We enjoy incredible customer passion and loyalty. We have to earn it every day. Everything we do.

Levatich profile
“And I think a lot of reasons people ride is because very few people ride—in some ways, you know, you're sort of making a statement, ‘I’m an individual.’ ‘I’m a human being. I'm not part of the herd.’”Saviero Truglia

CW: How do you work with essentially 650 independent businesses in the dealer network?

ML: First of all I think they do a very good job today. We like to talk about national averages here at Juneau Avenue. There is no average dealer. And that's part of what makes them great. Part of what makes it interesting. But they will play a very critical role in our business going forward. Some of them are ahead of us as far as meeting customers on their terms. Some are behind. But getting ourselves clear and then getting them all to buy in and be good is part of that process.

Dealers are part of making sure that when we do find a lead at an event—someone who goes to flat track and sits on a Jumpstart and gives us their information and says, “I'd like to learn how to ride” or “I'm interested in the brand.” How is that person who is a hand-raiser really valued for the treasure that they're bringing to the business? How are they shepherded into Riding Academy or into the dealership if they're already licensed? And then once there, how are they guided through that rider-development path which isn't just training—it is training, but it's way more than training. How are they welcomed and greeted on the back side by the enthusiast community?

I've got a sticker on my computer, it says ride every day. It was a call to action to the dealers a couple of years ago because I found myself defaulting to my pickup truck. It's comfortable, I can listen to music, I can make calls. It's got cupholders, this and that. And one day—you asked about 1994 Matt—I'm in the cafeteria a couple of years ago and I looked out on a pretty decent spring or so day and there were 20 to 30 bikes out front. And I said it seems to me that in 1994—and again you know it's hard, I don't have a photograph—but, boy, my memory suggests that there would have been 100 bikes out beside Juneau Avenue in 1994. So I started a self-examination: “I'm taking my truck more than I should. Maybe others are doing the same thing.” And so it became a call to action. Ride your motorcycle, participate. When I ride my bike I literally have the thought: “Why don't I do this more often?” It's a payoff even if it's a commute in traffic. I'm reminded how awesome it is to ride. And why don't I do this more? I need it every day. It's your medicine. So that was that was the stimulus the call to action. We need to be reminded why we do this. It's awesome and so get on your bike and ride.

Riding is the example we need to set. The industry, everyone who rides, needs to help grow motorcycling. And guess what. If I'm in my pickup truck on I-43 coming to work, I guarantee you—other than I have a nice Harley sticker on the back—nobody's thinking about motorcycling. If I'm on my bike, maybe three people I pass will be thinking: “You know, I need to think about motorcycling, that looks like fun.” Or if I’m at the gas station—and I’m circling back to your comment about the enthusiastic and active base: Somebody is pumping gas next to me might be thinking, “That’s a cool bike. That looks like fun. I should look into doing that.” They might even actually take the step and say to me, “That's an awesome bike.” And then what do I say? Do I say, “Yep. Thanks.” Do I think: “I bet you wish you had one.” Which probably a lot of macho motorcyclists might think. Or do I say, “You know what, you need to learn how to ride! You have no idea what you're missing. You think the bike's cool? Wait ’til you get on one. Here's how!” This is what being an ambassador of the sport is, being an evangelist.

We call it activating the base. We need we need to create a movement, the whole industry, manufacturers, dealers, the press, riders. We [Harley-Davidson] will do as much as we can and we are bound and determined to build the sport. But the more the merrier. Because this is about what we love to do and we need more people—it's not for everybody. This is not for 5 percent of the population, but we need to find the 5 percent of young adults who are going to be, you know, converted.

And I think a lot of reasons people ride is because very few people ride—in some ways, you know, you're sort of making a statement, “I’m an individual.” “I’m a human being. I'm not part of the herd.” Plus it’s fun; man, is it fun.

CW: Where does the LiveWire electric fit in the Harley-Davidson universe?

ML: I remember riding LiveWire at the launch in June of 2014 in lower Manhattan. Being in lower Manhattan with messenger bikes and pedestrians and taxis and potholes and stoplights and it was like a ballet experience. But no heat, no clutch; twist and go, perfectly balanced. Perfect motor control. It was freedom in an urban setting which, you know, on a Street Glide, I have enough skill to be able to do that. And you think about the doors that LiveWire opens to people in urban environments. It's exciting to us because it's a great motorcycle and it enables a different awesome ride. That goes back to your question: What constraints do we have as a brand and company? There are financial constraints and so forth, but we feel like we have way more permission from riders globally than we probably give ourselves internally.

LiveWire launch
Phone in hand, Levatich is shown here perched on the LiveWire.Harley-Davidson

CW: What is Harley-Davidson doing in developing markets like Brazil and China?

ML: The question is good though there is no one answer. The interesting thing about developing markets is they're quite different. They're in different places, and they're moving in different paces in different directions in some cases. Brazil is a challenge just because its economy seems like it goes through this loop of never being able to break out. India's quite a bit different from an infrastructure standpoint. China is different more from my policy and acceptance standpoint.

There is quite a lot of diversity, and those are just the bigger developed markets. It surprises a lot of people that the four biggest powered two-wheel markets are China, India, Indonesia, and Vietnam. The fourth largest, Vietnam, is the size of New Mexico. There are 42 million powered two-wheelers on the road and it's the size of New Mexico. We have about 8 million in the United States. Now there are a lot of small-displacement scooters and small bikes, but you know 30 to 40 years ago they were mostly bicycles. This is what a developing economy looks like. We have a couple of dealers in Vietnam as of two three years ago, for example, so distribution plays a role. Product: The Street was designed primarily for Asia. We utilized it [in the US] as a Riding Academy platform bike. And we figured if we're going to teach people how to ride on the Street, maybe you know some people may want to buy it. But it was intended more as a tool to help bridge into those emerging markets primarily in Asia—physical size and affordability and things like that. It's a great motorcycle; the engine and transmission are fantastic. Street Rod is better looking, more sporty and aggressive, and there are things that we can do I think with that chassis and that engine… We're flat-track racing the damn thing, you know.

Circling around to your “small Harley” comment earlier, I think we, because we're riders, we love product, we think first that the product is the answer to a marketplace. The world is full of plenty of small motorcycles and very affordable ones. To me, if there is a huge demand in the United States for that product solution, the product would be selling. So I'm kind of curious about whether product is the answer to inspiring that type of product. It can absolutely play a role, and does play a role. Dirt bikes and small bikes do exist and do create riders. But it's the whole mix of inspiration and retail experience and product marketing—the constellation of things—that create demand for the sport. And I'm not trying to signal anything with that comment; it's just sort of a reminder to ourselves that product dominates our thinking, our industry, because we're invested in the industry and sport. Product alone will not solve the problem that we need to solve by ridership. The product alone will not do it. What role does product play, etc.?

CW: What bikes do you own?

ML: I got a 2018 Fat Bob. So it's interesting because I have a 2014 Softail Slim, 2012 XR1200X, black; it's beautiful and I love it. Then I got a 2017 Road Glide Special with the new motor and that's fantastic. And then we came out with a new Softails and I was sort of captivated by the Fat Bob. I got the 114 and it rides great. So the dilemma that's created… Okay, I can't really call this a dilemma! I love the process of going into the garage and seeing which bike is speaking to me today. Because they're different. Take the Fab Bob out of the equation for a second. Think: XR, Slim, Road Glide—they deliver different things to me. Right. What am I interested in? How do I want to be "fed" today? Unfortunately the Fat Bob is now competing with the XR for that same attention space. So I'm working through that. But with the XR, I have simple little things, like it perfectly fits my frame. I roll up to a stoplight and my left leg just sort of swings down like a kickstand and perfectly hits the ground. You know it's like the bike doesn't even tilt. You know I just kind of come and my foot goes down. My foot goes up and off I go. It's just like this Zen kind of fit and feel, and it's not perfectly refined which is part of what makes it; you know it's raw and that's part of its attraction.

CW: Going back to building more riders, are there things that Harley-Davidson Financial Services or Harley-Davidson Insurance Services can do to help incentivize people by making riding more affordable?

ML: HDFS, their core mission is to be a strategic advantage to The Motor Company. It was broader 10 years ago—aircraft, it went into all kinds of different things—but it was still focused on being a strategic advantage to The Motor Company. With lots of sort of firewalls because it's an independent business and there are privacy issues and all kinds of different things that from a regulatory perspective emphasize that.

But how do we work together on coordination? So, for example, you could say, “Let's do low-interest promotion Sportsters.” That could be one simple example. Maybe we have an inventory imbalance. You referenced the Sportster Ride Free Guarantee [a full-price trade-in promotion] earlier. Leasing is another example; could we do leasing. There are pros and cons, but from a practical standpoint we can do that. How could we use HDFS, for example, as a strategic advantage to create new riders? I.e., a new bike is a new rider. Let's say we have this particular new rider: “Great, you're a new rider. Congratulations, you finished Riding Academy. Here's a special promotional offer from the company on how you get into maybe a Street or a Sportster,” including maintenance or whatever. Those are things that we have the ability to do. There are constraints, as there always are. But how do we use that as the strategic advantage given our strategy is to build riders not just sell motorcycles? It's both, of course, and I'm always looking for smart application of assets.

CW: What other kinds of assets does Harley-Davidson have to build the rider population?

ML: We have the rider migration database that I'm particularly excited about.

The entire motorcycle and car industry—think Polk and now IHS Markit—are entirely focused on the machine view of the world. How many Harleys in operation, how many cars, used cars, new cars, right? And we felt that there was really limited insight there. It is useful information but not sufficient given we need to understand what are riders doing. How are they entering the sport? New, used, this brand, that brand, this size, that size? How are they participating in the sport? How long are they owning their first bike? Are they adding to their fleet or de-fleeting? Where are they demographically when they're doing these things?

We have accumulated and aggregated a lot of data assets. And it's a strategic advantage for us because we now have a rider-migration knowledge base where we know what you have—we don't know your name—but we know your demographics. We know exactly how many motorcycles you've bought and sold from 2000 to today. There are reasons we can't go back further. One is the mass of data and some is the integrity of the data. But for the last 17 years, we know how everyone has flowed into, through, and out of this sport. We know we built 257,000 new Harley riders in 2017, 257,000 people who were not present as a rider in that database joined the sport on a Harley in 2017. Two hundred fifty-seven thousand people. Almost half the total number of motorcycle transactions, Harley transactions, in the United States, almost half were people who haven't ridden in the the foreseeable past. Maybe they rode in 1972. I don't know. We've defined a new rider or someone who hasn't participated since 2000. And we didn't know this number until last Friday.

This is sort of a tip of the iceberg of the insight that we can get out of that data. Demographically, who were those 257,000? And, oh, by the way, the net increase in Harley riders in 2017 was 32,000. So 500,000 to 550,000 bikes traded hands. And through all that—new bikes we provided, used bikes that traded hands—there was a net increase in 32,000 riders, which is awesome.

You go back to the basic economics of needing to grow riders faster than the machines. In round numbers, 150,000 new Harleys were sold in the United States. To add to the 3.4 million bikes that were there, there was a net increase of 23,000 Harleys registered in the United States. So we added 150,000 new ones and about 125,000 disappeared. We never have had a very good sense of the machine side of it, but maybe their bike's crashed, or it's old and put in a barn or someone's living room or scrapped or whatever. Off-registration, and maybe it'll come back in registration and we'll know that too. The machine view of the world has sort of always been there. We're doing a better job of mining it. But what was really great about 2017 is we added 32,000 Harley riders to the universe and we only added 23,000 bikes to the universe.

And in basic economic terms that was a win because there was more demand, i.e., riders, than the increase in supply, i.e., bikes total. In a very macro sense as a company and as an industry that's what we need to do—we need to grow riders faster than we want to grow machines because when machines grow faster than riders, the economics tip, used bike values, the ability of someone to bring in a trade and trade up.

This is all insight that we didn't have before, that we've been working feverishly almost for almost 18 months: To build the rider view of the US marketplace not a machine view. And it's very interesting. We can see you as a node, you as a rider. We don't know your name, we don't know where you live. But the opportunity to get this kind of insight more than annually and more than nationally, and how can we get it down to dealer level so dealers can start to understand this pattern… It's a little bit more of a long-term vision but it helps us in the mindset shift from bikes to people. And I'm excited about that because that's what this is about. This is a people business and this is a sport business. And of course we are in the machine business too. But when we understand [people] we understand better how to channel our energy. We've hired data scientists. We've never had data scientists. You know you hear a lot about big data. This is kind of big data.