OEMs Talk Economy, Outlook

Some OEMs ended their business year Dec. 31, while others look forward to ending their fiscal year March 31. Want to know how your OEM supplier has been doing in this depressed economy?

Those who’ve just ended their year supplied us with numbers that should be pretty much spot-on once formally unveiled later this month, while those OEMs with a business year ending three months from now comment about how the current economic environment will likely impact their financial results.

Arctic Cat
For its fiscal 2009 third quarter ending Dec. 31, Arctic Cat expects net sales to range between $179 million and $189 million compared with $159.6 million for the same period last fiscal year. The company expects net sales for the full year, ending March 31, 2009, to grow between 5 percent and 8 percent, and be in the range of $650 million to $674 million.

“Dealer inventory levels are critical to the overall health of our business, and we are confident that last year's inventory reduction measures, and our strong product lineup, position us well compared to our competitors,” says Christopher A. Twomey, chairman and CEO. Twomey says the company will continue to closely monitor the macroeconomic environment, industry trends and dealer inventories. Plans are to remain focused on further cost reductions through strategic sourcing initiatives and leveraging efficiencies.

Arctic Cat’s sales rose on dealer purchases of ATVs and snowmobiles coming into the fall and winter seasons. A low-snow start to the winter could change the company’s current year-end outlook.

Hendrik von Kuenheim, general director, BMW Motorrad, says the OEM plans to boost worldwide annual sales 50 percent to about 150,000 units by 2012. BMW sold 102,467 motorcycles worldwide last year, up 2.4 percent from sales of 100,064 units in 2006. BMW motorcycle sales in the U.S. last year fell 5.7 percent to 12,094 units.

"BMW Motorrad, like all European motorcycle manufacturers, currently faces special challenges,” Kuenheim says. “We see almost daily how conditions are becoming tougher, with the prices of raw materials and energy going up all the time and currency risks becoming greater. Obviously, we must find answers to these challenges, since we cannot pass on these cost disadvantages directly to our customers in a one-to-one process.

“To remain competitive we are therefore continuing to enhance our efficiency in development, production and sales, intensifying our international purchasing activities, and creating a very attractive, innovative product portfolio.”

Ducati shipped 38,365 motorcycles in 2007, up 18.7 percent from 32,312 units in 2006. Sales revenue in ’07 totaled €397.7 million. For the year ended Dec. 31, 2008, Ducati expects revenue up 18 to 20 percent compared to 2007.

Despite the positive forecast, Ducati CEO Gabriele Del Torchio remains wary concerning ’09. “The general downturn in almost all countries served, which is predicted to continue to the end of the year, and the normal seasonal nature of sales, suggest a very prudent outlook should be maintained both with regards to the 2008 full year results and the predicted trend in 2009,” he said.

Harley-Davidson revenue for the first nine months of 2008 totaled $4.30 billion, a 0.9 percent decrease from the year-ago period — motorcycle revenue was $3.26 billion, down 2.2 percent; P&A revenue was $706.6 million, up 0.5 percent; General Merchandise revenue totaled $244.8 million, up 5.5 percent. Shipments of Harley-Davidson motorcycles were 226,898 units, a 9 percent decrease compared to last year's 249,413 units.

“Going forward, we expect the global economy and consumer concerns to continue to create challenges for Harley-Davidson through the end of the year and in 2009,” says Jim Ziemer, Chief Executive Officer of Harley-Davidson, Inc.

Honda leadership says it expects its global operating environment for the year ending March 31, 2009, to remain "difficult" because of political and economic uncertainties; fluctuations in oil and raw material prices; movements in currency, finance and capital markets; and concerns about recession while the financial crisis worsens and the yen appreciates against the dollar.

Still, while Honda’s total motorcycle and ATV sales in North America fell 9.9 percent to 453,000 units for its business year ended March 31, 2008 — motorcycle sales fell 14.2 percent to 242,000 units and sales of ATVs decreased 4.5 percent to 211,000 units — the company expects total North American sales to rise 6 percent to 480,000 units for the year ending March 31, 2009. The rise will likely come from small-displacement units, such as scooters, in the face of continually falling sales for units like sport ATVs.

Kawasaki Heavy Industries (KHI) ends its fiscal year March 31. Last year, KHI’s sales of motorcycle, ATVs, utility vehicles, and personal watercraft to North America declined 9.4 percent to 230,000 units. The company says the contraction of credit and the deceleration of economic growth in the U.S., the emergence of the subprime loan crisis and other factors all combined to bring instability to the economic environment during the past year.

“Motorcycles for the industrialized markets, a major, high-priority business in the segment, are facing tough market conditions because of the effects of the subprime loan crisis and other factors,” says Tadaharu Ohashi, president, KHI. “We are taking steps to improve the profitability and product competitiveness of our motorcycles for those markets, while endeavoring to strengthen our development and production systems at the global level.”

Although sales to the U.S. market are expected to decline this fiscal year as a result of the economic downturn, KHI says the decrease will be more than compensated for by higher sales in Southeast Asia. “We are working to increase our development and design capabilities and will launch models that will further strengthen the image of the Kawasaki brand for high performance and high quality,” Ohashi says.

KTM plans to cut motorcycle production by 10 percent and lay off 60 workers this year. “As the risk of a recession has become greater, we have to assume that the relevant sales markets for KTM will become smaller,” says KTM CEO Stefan Pierer.

The 10 percent cut in production equates to about 11,000 units. The worker layoffs are directly related to the decrease in production. KTM employs about 1,600 workers at the company headquarters in Austria. The production cut isn’t expected to impact KTM’s bottom line in the 2008/2009 business year since the company plans to focus on the production of its higher priced on-road models. “Given the premium strategy and action taken to optimize capacity utilization, KTM is prepared to cope with sustained difficult market conditions,” Pierer said.

KTM Power Sports AG ended its fiscal year Aug. 31 with revenue of €566.1 million, or 12.2 percent growth, compared to revenue of €504.5 million last year. KTM-Sportmotorcycle AG sold 90,306 bikes in the recently ended fiscal year, up 7 percent from 83,985 units sold last year.

Piaggio & Co.
Piaggio Chairman and CEO Roberto Colaninno says his group projects revenue of around €1.95 billion by 2010. Sales for the first nine months of 2008, ended Sept. 30, totaled € 1.29 billion, down 5.9 percent compared to the same period in 2007.

Colaninno says the Group plans to enter 2009 with a global focus on raising productivity and containing costs. For the U.S., the Piaggio Group's five-prong plan for 2008-2010 includes:

1) the introduction of selected new products for Vespa and Moto Guzzi, leveraging on their brand name awareness;
2) carrying out a re-launch of the motorcycle brands;
3) further developing the dealer networks, integrating the Aprilia and Moto Guzzi networks, optimizing coverage of major target markets and improving service and support provided to dealers;
4) increasing initiatives designed to provide customers with maximum exposure to, and involvement with, the brands and products;
5) increasing the exposure of brands in magazines, on the Internet and on television.

Polaris leadership says they expected sales to grow in the range of 10 to 11 percent from $1.78 billion for the company’s year ended Dec. 31, 2008. Executives say they based their outlook on the orders received from dealers for model year 2009 products and the continued strength in several markets including the side-by-side market segment, along with ongoing productivity and efficiency improvement efforts. As is possible with fellow Minnesota-based OEM Arctic Cat, a low-snow start to the winter could change the company’s current year-end outlook. Suzuki
Suzuki leadership says this New Year is filled with uncertain factors, such as the future economic trend and exchanges. Suzuki Motor Corp. ended its previous business year March 31, 2008, with worldwide sales of 3,344,000 motorcycles and 102,000 ATVs. For the year ending March 31, 2009, the company anticipates sales of 3,666,000 cycles and 86,000 ATVs.

From April 1 through Sept. 30, 2008, the Japanese OEM sold roughly 67,000 motorcycles and ATVs to its two distributors in North America. This is a decrease of 24 percent compared to the same period last year. “The economic recession became apparent in each part of the world from the second half of this second quarter, influenced by the global financial crisis started by the US subprime loan issues,” company leadership announced following the second quarter.

Japan's Yamaha Motor Co., Ltd. says business conditions surrounding the company "remain worrisome” amid a worldwide economic slowdown resulting mainly from the worsening financial crisis in the U.S., a drop in stock prices worldwide and soaring crude oil and raw material prices.

The OEM says factors likely to impact its profitability this year include shrinking demand in advanced nations; soaring raw material prices; and a decline in production of mainstay products for export to advanced nations like the U.S.

Yamaha motorcycle sales in North America during the first half of 2008 totaled 91,000 units, down from 117,000 units during the first six months of 2007. For the full year ended Dec. 31, the company says it expects decreased sales of motorcycles, ATVs, SxSs and outboard motor sales in the U.S. and Europe.

- Submitted by Guido Ebert