Harley Profit Surges, But Market Share Slips

Harley-Davidson Inc.'s net income more than tripled in the first quarter, but the Milwaukee-based maker of motorcycles reported a small drop in its U.S. market share.

Keith Wandell, chief executive officer, said in an interview that the company was hurt by "fierce price competition" in the U.S. from rivals discounting older models by as much as $4,000 per bike.

Mr. Wandell also said supplies of used motorcycles were at unusually high levels because many people put their machines up for sale after losing their jobs during the recession, reported The Wall Street Journal.

The availability of used bikes at bargain prices hurts sales of new models, but a Harley spokesman said prices of used motorcycles has started to rise as demand recovers.

Harley said its share of the U.S. market for new heavyweight motorcycles with engines of 651 cubic centimeters or greater slipped to 53.4 percent in the first quarter from 55.5 percent a year earlier. The company's rivals include Japan's Honda Motor Co. and Kawasaki Heavy Industries Inc. and Germany's BMW AG.

World-wide retail sales of Harley motorcycles were up 3.5 percent from a year earlier to 49,595 units, the first increase since the fourth quarter of 2006. Sales outside the U.S. accounted for 36 percent of the total. Sales were up 21 percent in Europe, where Harley gained market share, but fell 3.9 percent in the Asia-Pacific reason, partly because the Japanese earthquake hurt business.

Harley also said it faces possible shortages in the current quarter of electronic parts from Japan used in radios on its motorcycles. That could curb production modestly, the company said. It reduced the low end of its projection for total shipments this year to 215,000 from 221,000.

Harley's net income rose to $119.3 million, or 51 cents a share, from $33.3 million, or 14 cents a share, a year earlier. The improvement largely reflected stronger results from its financing arm, which provides loans to motorcycle buyers, and the elimination of losses produced a year ago by operations that have been sold or closed down.

Sales of motorcycles and related products grew 2.5 percent to $1.06 billion.