New CEO driving Harley comback

MILWAUKEE — Keith Wandell is trying to do at Harley-Davidson what Alan Mulally did at Ford.

Both were brought in as chief executive officer from outside the company — even from a different industry. Neither owned a vehicle made by the company he took over. When they got their new jobs, they cut fixed costs in labor contracts so the company could respond better to downturns. They also shed brands that detracted from the one that shares the company’s name.

Wandell, one of the first auto-supplier executives Mulally met after joining Ford, said his automotive counterpart provided him with a useful template for his own corporate turnaround.

“I was always intrigued by Alan,” said Wandell, who has golfed with the Ford chief and enjoyed beers together watching college football. “He came to Detroit and they wrote his obituary before he even got off the ground. But he had a vision and a focus and wouldn’t let any of that get in his way.”

Wandell, 61, took over as Harley’s CEO weeks after the stock, which peaked above $75 in late 2006, bottomed at $8.20. His hiring in April 2009 from the No. 2 position at Johnson Controls Inc., the largest U.S. auto supplier, was not well-received at Harley in Milwaukee or on Wall Street. The announcement sent shares down 5.9 percent. They have recovered to $36.34 on Nov. 18.

Neither executive had previously sold products to consumers through independent franchisees. Harley has a network of 1,334 dealerships, many of who have been coping with bike sales that dropped 31 percent from the 2006 pre-recession peak. Harley has shrunk their number by about 10 percent, pruning underperforming outlets, mostly in big cities.

Now, Wandell is pushing dealers to improve their stores and boost customer service to a level more befitting a showroom for premium bikes that can top $35,000.

The Harley retail experience is as varied as its customer base, which includes tattooed biker guys and gals as well as doctors and lawyers. Some stores feature buffed-concrete floors and wood-paneled displays reminiscent of J. Crew. Others resemble a body shop, with $35 T-shirts jammed on mobile racks.

“We have a great retail experience, but the variability is tremendous,” Wandell said. “But we can’t sit the dealers down like we can one of our employees and say, ‘This is how it’s going to be.’ We need a compelling argument.”

The pitch, laid out by Wandell at Harley’s summer dealer meeting in Anaheim, Calif., in July: Harley is a premium brand. Treat it like one and profit will come.

“They have to trust and believe in where we’re trying to take them,” Wandell said.

In a six-story, 97-year-old brick building on Milwaukee’s west side, Harley’s 12-member dealer council meets three days each quarter to discuss issues facing the network.

In the past, CEOs would drop in for an hour or two while the council was in town, said Jimmy Pilavin, who owns dealerships in Framingham, Mass., and Pawtucket, R.I.

At his first meeting, Wandell, blunt and direct, sat and listened as the meeting quickly turned into a complaint session. He cut it off and focused the dealers on the most important issues.

“I’m just going to tell you exactly what I think,” Wandell said. “I want to hear what you think as well, but I’m not going to take a lot of time to try to soft-sell anything. We don’t have time to sit around and make each other feel good.”

He has since spent entire days with the group resolving issues, Pilavin said. From concerns raised in those meetings, Wandell has agreed to changes that protect the dealers. He has trimmed their number in the United States and stepped up audits to guard against dealers selling below minimum advertised prices, he said.

“He’s an interesting mix,” Pilavin said. “He’s a very polished CEO, but he can be like a truck driver another minute. He’s likes a good fight and he likes people to stand up to him. He’s everything you’d want in a CEO as far as I’m concerned.”

Wandell, a native of Lima, Ohio, worked summers in a union school-bus factory to help pay tuition at Ohio University. He has an MBA from the University of Dayton, which he earned at night. He started with Johnson Controls in 1988 running its car- battery factory outside Toledo. By 1996, he ran the entire battery unit. Johnson Controls now has 36 percent of the global lead-acid auto battery market, the No. 1 share. It is Johnson Control’s smallest and most profitable business.

In 2003, he was promoted to run the battery and auto-parts divisions in Plymouth, Mich., then, four years later, brought back to Milwaukee as the second in command. His office was 10 feet down the hall from Bruce McDonald, Johnson Control’s chief financial officer.

“What Keith and Alan do well is they have the innate ability to take a complex situation, boil it down to the critical things that need to be done and communicate it in a way that people get it,” McDonald said.

Wandell is the first outsider to run Harley since employees bought it from sporting-goods maker AMF a quarter century ago.

Wandell has overseen the closing of four plants and the cutting of about 3,800 jobs, decisions made before he took over. He has trimmed production to match demand and accelerated Harley’s push into fast-growing markets including China and India.

“He’s a tremendous operator,” Craig Kennison, a senior analyst at Robert W. Baird & Co. in Milwaukee, said in an interview. “He knows how to produce high value at low cost.”

Harley, which received 25 percent of revenue outside the United States in 2006, forecasts 40 percent of sales from international markets by 2014. More than half of Harley’s dealerships are outside the U.S.

Now a proud owner of a Road King Classic bike, Wandell has ridden in motorcycle rallies to the Great Wall in China, up Mount Fuji in Japan, and from Arizona to Sturgis, S.D.

Wandell is leading Harley to its first sales gain in four years. The stock has more than doubled since Wandell’s hiring was announced, outperforming the Standard & Poor’s 500 Index, which has gained 49 percent over that same period. His total compensation in 2010 was $6.42 million.

“I know there was a lot of early angst about Keith going in to Harley and not being lifelong Harley guy,” McDonald said. “But passion around the brand, focus on dealers and product — those are things Keith just really excels at. He has the ability to present something in the boardroom and then go and talk to the guys on the shop floor. He came from humble beginnings and earned his way.”