Harley Davidson Motorcycle Factory, Milwaukee Wisconsin
The company began inauspiciously enough in 1903 when Bill Harley, Art Davidson and Walt Davidson began to tinker in the 10' x 15' shed behind the Davidson family home at 38th Street and Highland Boulevard. That year the three men produced their first motorcycle, a glossy black machine with a three horsepower DeDion type single cylinder engine. Arthur Davidson, pattern maker, and Bill Harley, engineer, had become acquainted with each other from working together at the Barth Manufacturing Company. Brother Walter Davidson added his expertise as a machinist. The three men were among many across the country who were experimenting with motorcycles at the time. Unlike many of their would-be competitors, however, they hit upon the right internal dimensions for a reliable engine. Ole Evinrude, who lived in the area, also added his invaluable expertise on carburetors.
The company grew slowly in the early years. In 1904, the three men sold two of their machines while in 1905, eight were produced. In 1906 the production figure jumped to 50 and the firm's first employee was hired. On September 17, 1907 the group added another Davidson brother, William, and incorporated. By 1908 the business launched into the mass production of 450 cycles. By this time there were 18 employees working for the firm and a 2,380 square foot brick building was built for production. None of these first production buildings are extant.
It was during the decade from 1910 to 1919 that the company experienced its greatest expansion as it grew from a major domestic producer to the international leader of the motorcycle industry. In response to the anticipated popularity of the motorcycle, the two massive office, research and production buildings at 38th and Juneau were erected, in 1910 and 1926. These structures housed all Harley-Davidson operations until 1947 when final assembly was moved to a new plant on Capitol Drive in suburban Wauwatosa. The number of employees reached 1,574 and manufacturing occupied 297,110 square feet by 1921. Advertising, competitive racing, salesmanship and quality improvements all contributed to spreading the fame of the Harley-Davidson motorcycle. In 1908, for example, Walt Davidson had entered and won the New York endurance run an event that finally gave the motorcycle a national reputation. This was followed by a company sponsored racing team called the Wrecking Crew, whose victories through the teens helped to change the Harley-Davidson image from reliable and slow to reliable and invincible. The accounts of such races as well as travel information and personal stories found their way into a company publication, The Enthusiast, beginning in 1916.
Salesmanship and distribution also played a significant part in the popularity of the Harley-Davidson motorcycle. Company secretary and general sales manager Arthur Davidson had a remarkable facility for organizing dealerships and soon had a network of dealers across the country. Sales were extended as far as New Zealand and Australia. By 1921 there were dealers in 67 countries, a figure that has not been equaled since by a U.S. producer.
Quality improvements also captured the interest of the buying public. A desirable twin cylinder engine was introduced as well as a three-speed transmission. Since the well-built Harley outlasted many of their competitors, they were popular with those who wanted a vehicle that would last for more than 5,000 miles.
Harley-Davidson also began to diversify during the 1920's and offered bicycles, accessories and side cars. The latter were among the most unusual of Harley-Davidson productions, and were the company's answer to pickup and delivery problems. The side car bodies were created in the shape of cameras, shoes, platforms and other forms.. Some were produced by the Harley-Davidson factory and some by the Seaman Body Company of Milwaukee (later part of Nash Motors.)
Large government contracts during World War I made Harley-Davidson the world's largest manufacturer of motorcycles in 1918. As much as one-third of their production was exported during this time. The glory days were soon over for the firm, however. The post-war depression devastated the motorcycle market. Production in 1921 fell to a mere 10,202 units compared with the 28,189 cycles produced in 1920. Although a world wide economic recovery began in 1922, it did not revive the slumping cycling industry. The romance of the motorcycle had begun to wane as rich and poor alike turned to the automobile for their transportation needs. Mass produced Ford Model T's cost a mere $245.00 each, which made them highly competitive with Harley-Davidson motorcycles.
The company responded to the drop in sales by retrenching. Company supported racing was dropped. Fewer cosmetic changes were made each model year. Engineering refinements continued, however, and cycles were kept up-to-date with such features as balloon tires, front brakes and standardized parts. The Kilbourn Finance Corporation (1923) was set up as a subsidiary to help individuals finance the purchasing of their cycles. Harley-Davidson also began to advertise in national magazines (1927) to keep its product in the buyer's eye.
Improved sales in the late 1920's rekindled company optimism, but it was quickly extinguished by the Great Depression.
In 1930 only 10,500 cycles were made but by 1933 that number had dropped to 3,703. The only other U.S. manufacturer of motorcycles, Indian, switched to the production of coaster wagons. Harley-Davidson considered and rejected this alternative. Instead, the company expanded its line of bikers' clothing and accessories, since they had a higher profit margin than did the bikes themselves. Harley-Davidson tried new sales techniques and expanded its marketing efforts to police departments.
One act which was to have grave consequences for the future of the company was the selling of engineering blueprints and machinery to the Japanese in 1932. Hit hard by the Depression the company was in dire straits and desperately needed the $32,320 it made on the deal. While the sum seems meager today. it kept the ailing company afloat through the dark days of the early 1930s. Unfortunately. the sale provided the Japanese with the engineering basis for establishing its now highly successful motorcycle industry.
Harley-Davidson limped through the Depression and as the 1930's drew to a close, sales climbed to 674 vehicles in 1937. Workers saw their chance to bargain for better wages and benefits, and successfully unionized under the UAW. In the interim, Harley-Davidson had farsightedly developed prototypes that would be useful in the event of war. Upon the outbreak of World War II the company won lucrative government contracts to manufacture motorcycles and engines between 1943-45. By 1947, production had climbed to 20,392 bikes and a 269,000 square foot plant was purchased for $1.5 million from A.O. Smith in 1947 on Capitol Drive in Wauwatosa in anticipation of a post-war sales boom that never materialized.
Harley's 1932 sale to the Japanese has come back to haunt the company. Since World War II, Harley-Davidson's biggest challenge has been the rise of the foreign import, principally Japanese bikes. As early as 1960, foreign cycle sales amounted to nearly 40% of all new registrations. Harley-Davidson asked the Federal government for a 50% hike on the tariffs for imported motor bikes, but the request was denied. By 1955 production at Harley-Davidson had slumped to 9,550 vehicles. As the company entered the 1960's, it considered diversifying into snow blowers, scooters and lawn mowers but instead Harley-Davidson decided to meet the Japanese competition head on and enter the medium-weight motorcycle market. The Japanese models ranging midway between the easy handling English bikes and the sturdy Harleys, were attractive to many segments of the American market. Harley-Davidson's strategy was to purchase half of the profitable Italian Aermacchi cycle division and produce their own lighter cycle. The venture was a disappointment, however, and sales never reached expectations.
In 1965 the company made its first public offering of stock in order to raise capital for expansion and modernization.
A number of corporate buyers were attracted to the company because of its stability and 12-16% market share. To fend off an unwanted take over by Bangor Punta Corporation, stockholders agreed to merge in 1969 with American Machine and Foundry (AMF) of White Plains, New York, a successful manufacturer of sporting goods and leisure items. Descendants of the founders had always managed Harley-Davidson up to this point. After the merger with AMF, William H. Davidson, son of William A., became chairman of the company for a short time, after which many non-family members chaired the firm. AMF invested millions in the company for development and for advertising and promotion. Harleys were used in the movie Electra Glide in Blue and Evel Knievel performed on a Harley-Davidson bike. By 1973 AMF had moved Harley's assembly operations to a plant in York, Pennsylvania leaving the Milwaukee plants chiefly as components manufacturing facilities. In its annual report for 1975, AMF indicated that its future was in the production of industrial products and services rather than in the leisure field of sporting goods and motorcycles. At this point, only 1% of AMF's profit was derived from the sale of cycles. Another attempt was made to get the Federal government to impose protectionist import tariffs for the cycle industry in 1978, but the outcome did not materially enhance Harley-Davidson's market position. While the U.S. Treasury Department found evidence that three out of four Japanese manufacturers sold their motorcycles cheaper here than at home, the International Trade Commission ruled that Japanese sales had not hurt Harley's sales since Harley's products appealed to an entirely different segment of the market. The Commission felt that Harley-Davidson needed to revamp its product and marketing technique to be competitive.
Finally, in 1981, after a number of years of negotiations, various Harley-Davidson and AMF executives purchased the company from AMF and set it on an independent course once more. John A. Davidson, third generation family member and former Harley-Davidson president, was seen as a key figure to head the buy-back management team, but, in the end, declined to participate.
