Things are heating up in the world of Harley-Davidson, as H Partners Management—owner of about a 9% stake in the company—has launched a new volley across the Motor Co's bow after being told it couldn't pick the company's new CEO. That shot? The investment firm wants to oust retiring CEO Jochen Zeitz immediately and kick two other board members out, too.
If you're just catching up, Harley-Davidson's current CEO, Zeitz, has announced that he'll be retiring at the end of the year after five years at the job. His tenure had mixed results, but Harley's seen a lot of headwinds, including recurring tariffs, economic stagnation in the United States, and a market that's moving toward small-displacement motorcycles that are inexpensive and geared toward a younger demographic.
Likewise, the Harley demographic of the '80s and '90s, and even somewhat into the early aughts, is no longer interested in buying a $30,000+ cruiser, or they've already bought one, so repeat business just isn't there anymore. All of which has led many to consider Zeitz's tenure not the successful brand rebuild he'd promised when he took the position.
I've criticized Harley and Zeitz myself for not really watching the economic drivers at play, but Zeitz's work did help pull a portion of Harley toward the 21st century. And before the whole "Woke" fiasco, Harley was moving toward modernization. But outside forces are outside forces, and things like the chaos of both Covid and Presidencies are hard to plan for.
And that's part of the backdrop, and the reasoning the management firm gives, of H Partners Management's crusade against the company's board. That they, along with Zeitz, failed to do their fiduciary duty to ensure Harley's investors see a proper return on investment. However, in their open letter to the rest of Harley's stakeholders, they fail to mention that they're launching this campaign to oust folks after going along with the board for the last three years, never once disagreeing with it, but when it came time to pick Zeitz's replacement, they were essentially told they couldn't pick the brand's new CEO.
Now, we've already covered H Partners Management's Jared Dourdeville's resignation letter earlier this week. It was filled with grievances against the company, Zeitz, and Harley-Davidson's board. And like I mentioned in that original report, the whole thing had an air of jilted lover, as if there was something going behind the scenes that we weren't privy to. Politics, basically. And that's when I found Harley-Davidson's Securities and Exchange Commission (SEC) filing response to Dourdeville's resignation and said grievances.
I didn't know an SEC filing could be catty, but here we are.
Basically, Harley-Davidson went point-by-point responding to Dourdeville's issues with the company and laying out that in his three-year tenure, he'd never once voiced anything buy agreement with the board. Not only did Dourdeville as H Partners Management's proxy agree that Zeitz should continue in his position as of late last year, but so too did he agree the board members Thomas Linebarger and Sara Levinson—the two members H Partners Management is now demanding resign—should continue in their respective positions. Yeah, Harley just went line by line dismissing each grievance Dourdeville claimed to have had with the company, its management, and its board. I just kept thinking of this gif while reading it.
And now H Partners Management is back hoping it can curry public favor, as well as stockholder favor, in another bid to choose Harley's next CEO. Further, the investment group wants to put pressure on Linebarger and Levinson to resign their positions by launching a campaign to oust, well, everyone.
According to a letter sent to RideApart from H Partners Management, and published online, the group has filed "Preliminary proxy materials seeking shareholder support to compel the resignations of CEO & Chairman Jochen Zeitz, Presiding Director Thomas Linebarger and long-tenured Director Sara Levinson." That essentially means they've filed materials that would allow them to hold a vote to kick Zeitz out immediately, and send Linebarger and Levinson packing.
"We originally engaged with leadership and the Company’s Board of Directors (the “Board”) in 2021 regarding concerns around executive compensation, corporate governance, and board composition," states a portion of the letter you can read here, adding, "One of our principals, Jared Dourdeville, joined the Board as the result of a cooperation agreement with the Company in February 2022. Since then, we have worked constructively and collaboratively to support Harley-Davidson. However, over the last year, it has become increasingly apparent to us that there have been major execution issues, overseen by an absentee CEO; that the CEO and Presiding Director have not been fully transparent with the rest of the Board; and that certain long-tenured Board members have been unwilling to hold the CEO accountable for severe value destruction and the cultural depletion of this iconic American company."
H Partners Management then goes on to state that Zeitz shouldn't be allowed to continue to make long-tailed decisions for the company, and that the two board members don't have the best interest of the company. They continue and call out the brand's "Hardwire" strategy put in place by Zeitz, it's failure to course-correct given the macro-economic factors at play, and alleged Zeitz, Linebarger and Levinson have "seemingly prevented the appropriate flow of information to the Board."
Interestingly, the letter does address Harley's rebuttal of Dourdeville's resignation. However, it sort of cops to Harley's statements that he voted with the board every time, but paints it as he didn't have the power to stand up to the board, stating "As only one voice on a Board that included eight or nine members during his tenure, our Board representative’s ability to influence the Board was limited – an issue that was further exacerbated by the outsized influence that Mr. Linebarger and Mr. Zeitz exhibited over practically all Board topics or matters. This is why, after careful consideration and numerous attempts to address concerns through private dialogue, our Board representative recently resigned his directorship."
So yeah, Dourdeville just didn't have the power to go against them so he voted with the board every single time before resigning...
The open letter ends with calling for Zeitz to vacate the position immediately, the two board members to resign, for the company to install an interim internal CEO, and then find a new external CEO who will "Repair the relationship with dealers, engage with riders, respect and strengthen the brand, improve the corporate culture, restore the physical presence of the Company at its historic Milwaukee headquarters, and return Harley-Davidson to greatness."
This is an interesting tactic to say the least, especially given the boldness of it. But the backdrop of H Partners Management's issues with the Motor Co feel at odds at with its track record as part of the board. As the firm states, the board was comprised of eight to nine members during Dourdeville's tenure. That's big enough to speak up if you thought something wasn't going right. It's also small enough that a no vote on anything would've spoken louder than words. Why didn't Dourdeville, and in proxy H Partners Management, do that during those votes? Why was it only after Zeitz's retirement announcement, and the board failing to select H Partners Management's replacement pick, that they felt willing to speak to said grievances?
Harley-Davidson responded to H Partners Management's campaign after this was published, but stated, "We are disappointed that H Partners has chosen to take this self-serving action targeting members of our board after that firm’s preferred CEO candidate failed to receive majority support from the Board’s Independent Directors. H Partners has chosen to put its own interest ahead of the interests of other shareholders by attempting to disrupt the Board’s rigorous and thoughtful CEO transition process, creating uncertainty for and putting Harley-Davidson’s future and shareholder value at risk. The Board is committed to acting in the interests of all of Harley-Davidson’s shareholders by continuing to strengthen the Company’s foundation for the future and selecting the right CEO to lead Harley-Davidson into its next chapter."
Like I said, it all feels very politics, and about to get very messy.
