For those who have played the board game “Life” before, you’ll know there’s an immediate decision that needs to be made when you start. A decision that has made my life as a parent all that much more difficult.
You see, the second-grader in the household, a fiscal conservative in the making, has decided attending college is way over-rated and that getting into an immediate $100,000 hole is not exactly his cup of tea.
For those of you not in the know, the game of Life requires a player to pick between
college or an immediate career, with the latter choice providing less salary but also no
The choice is an obvious one for the
second-grader, who can’t fathom the idea of actually paying money to listen to a teacher and then be forced into hours of homework. Go figure.
The choice of Life — to dive into debt in the hopes of a long-term return on investment — also stands to present a more practical question for our industry’s leaders in the months ahead. You see, the incredibly difficult retail environment that dealers have been immersed in for the past year now stands to hit, in full force, upon the manufacturer.
And let me explain. That’s not to imply the retail scene is going to rewind to the summer of 2008 and the dealer’s life is suddenly going to be stress-free. Hardly. But there are certainly signs that consumer confidence is returning and even though holiday spending may not break the bank, it and the coming spring figure to get us on the road to recovery.
But even if that road is as smooth as we hope, it doesn’t stand to help the manufacturer much. This summer’s startling squeeze on the on-road retail pipeline will remain an immense and hugely costly hurdle for OEMs to bear in the months to come.
That reality leaves me wondering if the industry’s own game of Life won’t change. And by change I don’t mean in terms of game conditions, but the actual players involved.
In other words, times seem ripe for a truly notable acquisition to occur. And really, up to this point, there hasn’t been a landscape-changing acquisition in this recession. Not that there haven’t been some notable ones. Harley-Davidson purchased MV Agusta, and now is trying to sell it. BMW now owns Husqvarna. KTM is now heavily involved with a manufacturer from India.
Interesting yes, game-changing no.
Could such an acquisition happen now?
We certainly haven’t been forewarned of anything, but signs suggest that if such a bold undertaking is done, it will occur sometime in the next six months. After all, the financial markets for this seem to be loosening, as evidence by recent billion-dollar acquisitions in other industries (entertainment and pharmaceutical to name two). Also, the next six months figure to be daunting for OEMs, meaning prices could be dropping.
And for buyers, this will be where that game of Life choice presents itself — stick to the safe path (the “career” choice) or immerse yourself in debt and go for the gold.
And if you take the latter road, where exactly do you go? I’ve put myself in the shoes of a manufacturer and asked that very same question.
Do you buy an established brand name with the thought of improving its market share in the lucrative North American market? Or buy a lesser brand name with a solid manufacturing core and a cost-friendly personnel base? (Think overseas.) The former will certainly be more costly than the latter, but the return on investment also could be much quicker.
In either of those equations, the question of what market to tackle becomes of imminent importance. The sport bike market is highly competitive, not to mention incredibly costly. Plus, the last year has brought about some considerable anxiety about the market and its utter reliance on favorable lending standards. The cruiser and touring markets often offer less tooling costs, but contain a monster of a presence in Harley-Davidson, which has made perhaps the biggest market share gain of any one OEM in the business this year. The scooter business is an enigma after two wildly different retail years but remains attractive with a huge, youthful consumer group entering the retail world.
It’s a tough choice and surely a gamble either way. You can just imagine the amount of paperwork, calculating and recalculating that firms must be doing to decide their future move. Undoubtedly it’s an experience as difficult and time-consuming as explaining the importance of a college education to a second-grader.
Copyright 2009 Powersports Business