Harley-Davidson profits hit lower gear

The Harley-Davidson sign at the company's plant in York, Pa.

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KAI RYSSDAL: The fourth quarter of the year 2007 is not going to go down as one of the brightest spots in the history of American capitalism -- I think we can all agree on that. Set Wall Street financiers aside for a minute, though, and a second look can give you a different impression. Yesterday, after the bell Microsoft splashed some pretty impressive numbers around. Profits at the software company almost doubled September through the end of the year. Today Caterpillar reported an 11 percent rise in net earnings. All the more impressive if you remember Caterpillar makes construction equipment at a time when the housing market is stalled. A good part of those profits did come from overseas.

Back home, though, an icon of American industry is an object lesson in the trickle down effects of a slowing economy. Harley-Davidson downshifted in its fourth quarter to the tune of a 26 percent drop in profits. This country's biggest motorcycle company couldn't swerve out of the way of some larger economic troubles. Danielle Karson has more.


Danielle Karson: Charley St. Claire has been cruising on his Harley since 1969. He blames the dip in sales on the economy.

Charley St.Claire: Peoples' passion for motorcycles has not dropped 26 percent. It's just about money. People aren't buying a lot of stuff. They're spending it all on the basic necessities of life.

St. Claire organizes the annual Laconia Motorcycle Week in New Hampshire. He says visitors at international motorcycle shows are also tightening their belts.

St. Claire: People are still coming but they're not spending money like they were. And actually it's been the same thing at the big three motorcycle rallies -- Sturges, Daytona and Laconia.

People are no longer taking $10,000 out of home-equity lines for a shiny new Harley.

Susan Carpenter, motorcycle columnist for the L.A. Times, says the motorcycle industry had a great run in the 80's and 90's but it was bound to drop off. The problem is Harley-Davidson has relied on one iconic product.

Susan Carpenter: The Japanese have a broad base of different motorcycle models to choose from. But Harley doesn't really have that, because they're just cruiser, cruiser, cruiser.

As baby boomers age, their Harleys are gathering dust in the garage. Carpenter says the company needs to court future generations.

Carpenter: "Gen X and Gen Y don't want the same bike that baby boomers have been buying. So I think that they need to really, kind of, hone in on that.

Carpenter thinks they can do that by rolling out an electric cruiser.

Meanwhile, even if the company's sales in the U.S. are slipping, exports are up. During the same quarter, sales jumped nearly 46 percent in Canada because of the declining dollar.

In Washington, I'm Danielle Karson for Marketplace.

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