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Don James, Chairman, Deeley Harley-Davidson Canada

If you want to see how hard Harley-Davidson has fallen from its glory days of just a couple of years ago, check out Harley's stock on the NYSE (ticker symbol: HOG).

As Harley's core customers - greying baby boomers - watch their retirement funds go up in smoke, fewer and fewer of them are forking over $20,000 or $30,000 for a big, shiny toy.

Harley sells a lifestyle, not merely motorcycles. If a meek and mild accountant wants a big cruiser bike, he or she can buy a Hog and begin a secret life as a born-to-be-wild rebel on the road.

That formula propelled Harley to year after year of record sales in the consumer-driven, cheap-money era. Harley had nearly doubled production to more than 300,000 bikes a year just as the roof fell in.

Harley-Davidson Inc. of Milwaukee, Wis., seems to understand what a jam they've got themselves in. A new CEO was recently hired, for the first time from outside the company. In fact, most of the C-Suite is now new.

A man who is playing a key role in this is Don James, the longest-serving director on the Harley-Davidson board. James is chairman of Vancouver based Deeley Harley-Davidson Canada, this country's exclusive Harley distributor.

Vaughan: Harley's been a great business story. It was nearly bankrupt in the 1980s and then bought by an employee group. There was the IPO and the soaring stock price and 11 straight years of sales growth. But now the slump and it's big; what are you going to do to keep Harley fresh in its second century?

James: The biggest thing we're doing is a slow evolution of the product.

We always have to remember the loyalty of our existing customers and at the same time we have to reach into new markets with the models like Dark Custom, with sport bikes from Buell and with more sophistication in our touring motorcycles.

There's a steady improvement. But there's no doubt we're working on new products that nobody will talk about.

Diversification.

There's been diversification around Tri-Glide, our three-wheeled motorcycle - one in the front, two in the back.

It's done well with women, among others, as it's less intimidating to be on three wheels.

If you can do a three-wheeler, why can't you do a four-wheeler?

I don't think that's our forte, but we're certainly exploring every avenue whether it's alternate technology in fuels, whether it's electric.

We have to look at that stuff while always maintaining our base customers and giving them what they want.

An electric motorcycle?

I don't think that will happen, but you never know.

You'd have to add sound effects because people buy Harleys for the noise they make.

Maybe we could put a piece of cardboard against the spokes with a clothes pin like we used to do with our bicycles.

Is the current slump in the motorcycle industry as bad as the one in the early 1980s?

Well it's nowhere near as bad as the slump in auto sales.

But in Canada we're coming off a record year last year. This year, the industry is running 23 to 25 per cent down.

I guess, like everybody, we got used to living with just incredible sales.

There have certainly been some adjustments. We've been pretty aggressive in following the strength of the Canadian dollar and adjusting our prices down so we have fair prices for our customers. That's had a very positive effect.

So, on the Harley-Davidson board, you're not viewing this as a sunset industry.

Certainly not.

We have such loyal, loyal customers.

What about your loyal shareholders? They've seen the stock take a terrible dive.

The stock has been brutal.

I do think we got lumped in with automotive.

We've had to readjust our volume on a worldwide basis for the size of the market. North America is slower. Europe is still hanging on, Asia is down a little bit, South America is still going well.

We've given guidance about our production numbers and we're going about 15-per-cent less than last year and we'll continue to adjust that if necessary because the key is to make the right number for the size of the market. We don't want to get into a situation where we over-produce.

In the short term, customers might get a slightly better deal if dealers are aggressively trying to unload their inventory like autos, but we don't want to do that because nobody wins in the end as it affects the resale value.

One of the things about buying a Harley-Davidson is that our customers have always managed to maintain a pretty fair resale value.

I want to ask you about End of the Empire, which is the great display of historic and significant British motorcycles you have running at the Deeley Museum in Vancouver. I hope you keep it going for Olympic year because motorcycle fans will love it, especially because it's free.

I think we will.

We've been at this for almost 40 years as a distributor for Harley-Davidson and the industry and the people have been really good to us and we think it's important that the heritage is preserved.

It's more than Harley-Davidson; we have 52 different makes and some 350 motorcycles in our collection. Before we did Harleys, we distributed Triumph and BSA and Norton and Matchless.

We watched the Empire end. We were there.

Michael Vaughan is co-host with Jeremy Cato of Car/Business, which appears Fridays at 8 p.m. on Business News Network and Saturdays at 2 p.m. on CTV.

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