Founded in 1903 Harley- Davidson is perhaps the best-known name in motorcycling. Yet, in the early 80s, they faced strong Japanese competition; Harley- Davidson’s machines were much more expensive and far less reliable than its Japanese rivals. Only 5% of Japanese bikes failed quality control checks compared with over half the Harley- Davidson coming off the production line. In showrooms, the machines were even put on cardboard because they leaked oil! Dealers who had sold Harley- Davidson for decades switched to selling Japanese models. In 1981, in a single year, Harley- Davidson sales dropped by 18% While Honda’s share of the heavy bike market rose to 33.9%, Harley- Davidson’s fell to 29.6%. Only one bike in twenty sold in the US was a Harley- Davidson.
The following year went extremely badly and produced a $25m loss. After visiting a Honda factory, executives realized they could only survive by adopting Japanese total quality management practices. Ironically, these had largely been based on the work of an American, W Edwards Deming. Harley- Davidson introduced three key changes. The first, ’Just in Time’ delivery of parts, meant that stock and storage were reduced and that two assembly plants could operate without stockrooms. Next, Harley- Davidson worked hard to break down the differences between levels: for example, top managers and line worked side by side to redesign the factory floor. Finally, employees were encouraged to measure quality scientifically and to think constantly about how production could be improved.
The results were dramatic. After two years it only need to sell 35,000 bikes instead of 53,000 to break even. However, even though their bikes had become as good as the Japanese in the market place, it hardly made a difference. Harley- Davidson was caught in a price war between Yamaha and Honda who made their models cheaper than ever and flooded the US market Harley- Davidson sales fell still further. Eventually, the US government agreed to put heavy, but temporary, tariffs on imports of large Japanese bikes. Harley- Davidson used this breathing space to rebuild its by emphasizing Harley as a symbol of the American way of Harley Owners’ Group made owners feel like one of the family. Riders enjoyed wearing Harley- Davidson clothing and thousands met at an emotional 85th birthday celebration. By 1989, Harley- Davidson had jumped to 59% of the heavy bike market. However, by now the average rider was no longer a ‘blue-collar’ worker but a far wealthier 35-year-old professional- a so-called ‘Rolex rider’