Harley-Davidson, engaged in a proxy fight, now temporarily shuts down production
Harley-Davidson Inc is engaged in a fight with one its large investors over the direction of the company that’s now struggling with coronavirus and a temporary shutdown of its manufacturing plants.
Wednesday, the hedge fund Impala Asset Management said it’s seeking two seats on Harley’s board of directors, a move the motorcycle manufacturer rejected — saying it would not bring fresh skills to the company and declining to settle with Impala when it first sought board nominations.
Impala, a $2.8 billion hedge fund, has nominated former auto industry executive Brent Dewar and Leo Hindrey Jr., a telecom investor, as directors to Harley’s nine-member board.
The fund, which owns 1.9 million Harley shares or about 1% of the company, has criticized management for losing market share and the board for not responding quickly enough to a declining stock price. It also pushed for the recent firing of President and CEO Matt Levatich.
“Impala approached the Board and advocated for the removal of then-CEO
Levatich and a modest refresh of the Board itself,” Impala said in a Securities and Exchange Commission filing.
“We believed then, and still believe, that the company underperformed its potential under Mr. Levatich and that the Board should have taken action on its own,” the hedge fund said.
On Feb. 28, Harley named board member Jochen Zeitz as interim CEO. Like other Harley executives, he is working remotely and communicating by video as the company aims to curb the spread of coronavirus.
Zeitz is “in the process of moving to Milwaukee,” according to the company, which did not provide further details.
Wednesday afternoon, Harley said it was suspending production at its U.S. manufacturing facilities until March 29 after one of its Wisconsin employees tested positive for the coronavirus.
The facilities temporarily suspending production are Pilgrim Road Powertrain Operations in Menomonee Falls, Tomahawk Operations in Tomahawk, and York Vehicle Operations in Pennsylvania, according to the company.
The Menomonee Falls facility closed Wednesday afternoon following the positive COVID-19 test, the company said. The other plants closed by the evening. The company on Monday asked employees at the Milwaukee corporate offices to work from home if possible at least through the end of March.
The majority of Harley’s U.S. production employees will be on temporary layoff with medical benefits, according to the company.
Harley said it will “use this time to continue deep cleaning and disinfecting its production areas and common areas to further protect workers upon their return.”
All of Harley’s company-sponsored events have been canceled until April.
None of this comes at a good time for the world’s largest manufacturer of heavyweight motorcycles. Its bike sales in the U.S. dropped for a fifth straight year in 2019, covering most of Levatich’s tenure as CEO. The company’s global motorcycle shipments were the lowest since 2010.
Levatich emphasized a strategy of attracting new riders and launching new motorcycle models to reverse the sales declines. The company’s recently introduced electric motorcycle, LiveWire, has been well-received by test riders but has yet to show any traction in the marketplace.