Business - Harley Davidson's wildest child (G.Read)

KRISTINA DELL/EAST TROY

Erik Buell, Founder and Chairman of Buell Motorcycles, the Harley-Davidson subsidiary that makes high-performance sport bikes, is dressed in his signature mechanic's shirt and faded blue jeans when he greets me at the Buell plant in rural East Troy, Wis. He's bouncing around from subject to subject--from his beloved sport bikes to motocross to how he makes guitars--with a passion that's palpable. I quickly forget the plane ride that I spent fretting about how to get out of riding a motorcycle. Buell has turned it into an opportunity you wouldn't want to miss.
The 58-year-old former motorcycle racer from small-town Pennsylvania has this kind of effect on people. There's something about his restless enthusiasm and unpretentious charm that makes you want to hang out with him--and buy his bikes. Just ask Harley-Davidson. The hogmaker fell under Buell's spell 15 years ago when it decided to purchase a 49% stake in the tiny company as a way to attract a younger demographic to the iconic baby-boomer brand. Harley kept increasing its stake over 10 years and finally bought it all in 2003, even though Buell accounts for a mere 2% of Harley's sales. "What does Buell bring to Harley?" asks Don Brown, analyst and president of DJB Associates in Irvine, Calif. "Good question." In 2007 Buell brought in $100.5 million in revenue and shipped 11,513 bikes, compared with Harley's whopping $5.7 billion and 330,619 bikes shipped. "They're almost like a rounding error," says Ed Aaron, an analyst at RBC Capital Markets.
But Baby Buell is Harley's precocious child--with its down-home, out-of-the-box thinking, Buell serves as a testing ground for new ideas. At its core is a small-town team designing and assembling motorcycles in ways that give every employee ownership and even resonate with customers. And Buell gives Harley entrée into the sport-bike market and access to its insanely loyal fans, who might cross over to a Harley cruiser once they tire of Buell's adrenaline rush.
With 195 employees--compared with Harley's 10,000--Buell relies on teamwork, ingenuity and a personal touch to churn out top-notch bikes at affordable prices. Its cycles aren't mass-produced, which is part of the allure that distinguishes the brand from better-financed Japanese competitors. "We need to be more nimble and entrepreneurial in spirit to compete against much larger companies," says Jon Flickinger, president of Buell Motorcycles.
Buell's newest models, the 1125R and the 1125CR, offer more horsepower with the company's first-ever liquid-cooled V-twin engine; its other bikes have air-cooled ones. The success of these models, due in part to people's turning to fuel-efficient motorcycles because of higher gas prices, has helped Buell boost U.S. sales 15% over the past year, even though the motorcycle industry's sales as a whole are flat because of the economic downturn. At $11,995 a pop, these toys aren't cheap. Still, 55% of the company's market remains overseas, and a weaker dollar helps an exporter like Buell.
Sport bikes may dominate Europe, but Buell's methodology is a distinctly American recipe, one that he has honed by fostering a culture of cooperation, ownership and innovation. The nine models Buell sells can be run at any time on its single 50-person assembly line. Each station uses handicraft instead of the automation characteristic of most lines. Small teams promote ownership, and there are no individual supervisors, which cuts out a hierarchical layer. To avoid boredom, each employee is required to know the job ahead of him and behind him on the line and rotates throughout the week. "People come here for a tour and can't believe how little the assembly line is and how the guys are doing so many jobs," says Buell. And when it comes to promoting Buell products at demo days or rallies, plant operators show up alongside the marketing folk. "Who better to sell the product than the employee making it?" says Henry Billingsley, Buell's production manager.
Because the company is so tiny, employees are required to own their work as part of a team. Buell loops everyone--even suppliers and distributors--into a centralized software system to track progress and get a feel for who's doing what.
Every part on a new model has a team comprising a purchasing engineer, a design engineer and a quality engineer--called PDQ--in charge of taking that part from concept through production. "The three of them together act as a business," says Tony Stefanelli, Buell's senior platform director. "They're like entrepreneurs, developing a product that they sell back to Buell every day on the assembly line." Instead of handing off their work to the line engineers, Buell designers own their parts through the manufacturing process. "If your part design isn't working, you have to go over to the line or to the supplier and face the person," says Buell. "People come back with a whole different perspective of how important their job is." Each bike requires 450 parts, so an employee possesses about 30 parts on average per new bike. "If your team doesn't deliver the right part, you live with it, and that can be painful," says Abe Askenazi, senior director of analysis test engineering process.
Buell's collaborative style has led to some of the most innovative designs in motorcycles in recent years. "More than any other place I have been, we have a real blank-sheet-of-paper approach," says Stefanelli. Buell was the first to fit an exhaust underneath the bike so the weight stays low for better control. It was the first to put oil in the swing arm and fuel in the frame to distribute weight more evenly. And it pioneered a perimeter brake disk--replacing a central disk around the hub--that weighs a third less than the standard system. "I want every part to do at least two jobs, maybe three or four," says Buell. "So you have to invent new parts that no one has done that way before." Fewer parts mean less weight, lower costs and fewer production errors. Not everyone likes the novelty. "The design is so out there," says Brown.
Still, Buell fans are usually fanatics. "Once you're into Buell, you'll never go back," says 27-year-old Brian Cessna of York, Pa. Erik Buell's enthusiasm trickles down. "It's not just the bike but what the company stands for that can make people enjoy the ride too," he says. Heading to the airport on the back of a Buell, I'm beginning to understand. The smooth, hour-long journey along the highway--tunes blaring, my leathers flapping in the wind--was exhilarating but strangely relaxing. I stepped onto the plane feeling just a little bit cooler.