Executive Briefings

Harley-Davidson's Road Trip to Kansas City

When once-ailing American icon Harley-Davidson decided it had to build a new plant to meet increasing demand, many locales wanted the nod. In the final round, Kansas City's air links to Harley headquarters and its "common culture" theme carried the day.

When motorcycle builder Harley-Davidson Inc. announced late in 1995 that Kansas City, Mo., was one of five candidates for its new $100-million manufacturing facility, area officials had to scramble. Harley wanted a meeting, and there were only a few days to prepare.
In a late-night brainstorming session, development staffers decided to produce a videotape starring a local public-relations executive, Dick Grove, a burly, bearded biker and Harley aficionado.

According to Robert Marcusse, president of the Kansas City Area Development Council, the idea was to link Kansas City to Harley's vision of what it means to ride a motorcycle. "We did a lot of research, and we found that Harley-Davidson had a very distinct culture. Their product is an American icon, and they are very proud of what they are doing," he said. "We came across a series of words and phrases that they use that sort of typify who they are. And we wanted to let them know that we understood what they were all about."

The three-and-a-half minute video intersperses shots of Grove and his 1991 Sturgis Harley-Davidson with graphics and dialogue that related to Harley's culture. "This is where a man first straddled his ride and headed West," Grove says. The phrase "It's more than a lifestyle, it's an attitude," appears on the screen.

The hook to the film is that it isn't about Harley-Davidson; the company is never mentioned. Rather, the video is about Kansas City. With images of the West, Harry Truman and baseball, the video portrays Kansas City as the home of American individualism.

The concluding line - "If I have to explain it, you wouldn't understand it" - proved to be the hoped-for clincher. That's the unofficial slogan of Harley-Davidson, but in the video the phrase is used to capture the spirit of the city.

The idea worked. "We didn't have to explain it," Marcusse said. "They got it, we knew they got it. And we got them."

Look for the Union Label
Harley's need for a new plant is born of high-speed growth. The company saw sales of $1.5 billion last year - the highest in its 93-history and a 13.4 percent rise from 1995. But the rapid growth, which began after a near miraculous turnaround in the mid 1980s, has put a strain on production. A Harley customer waits an average of 24 months before accepting delivery of his motorcycle.

KC is on a Roll
Robert Marcusse, president of the Kansas City Area Development Council, says he has it good these days.

"It's relatively easy to recruit here," he said. "Housing costs are very low. Typically we are No. 1 or No. 2 in cost of living. We have reasonable real estate, cutting-edge technology and great schools."

Certainly KC has been an easy sell in recent years. Nearly every survey of business environments and standards of living rank the Kansas City area as one of the best places to live and work in the country. And Kansas City most certainly has been cashing in.

The same month that Harley-Davidson said it would bring a new plant to town, AlliedSignal's Commercial Avionics Division announced the planned consolidation of four plants around the country into a new facility on the Kansas side of the state line. The $132 million plant adds 1,100 new jobs to the area.

Ford Dodge Laboratories, a drug-manufacturer owned by American Home Care Products, is building a 37,000-square-foot complex in the suburb of Overland Park, Kan. Seventy executives are relocating, and an additional 100 technical and support staff will be hired.

Sprint Communications and Bayer Corp.'s Agricultural Division both are based in Kansas City and both have announced major expansions of their headquarters beginning this year.
Overall, a full three-quarters of a billion dollars in private investment already has been earmarked for the Kansas City area in 1997.

With delays like that, Harley had little choice but to expand. In fact, Harley expects to spend about $500 million from last year through 1998 to increase capacity at existing plants in Wisconsin and Pennsylvania. The company's goal is to produce 200,000 units a year by 2003, its 100th birthday. Last year, Harley built 119,000 motorcycles and recently increased its 1997 projection to 130,000 units.

When Harley set its mind on expansion, it created a rather unusual team to conduct the search for a new plant location. First, Harley hired Mike Mullis, president and chief executive of J.M. Mullis Inc., a site-consulting firm in Memphis, to conduct the search. Second, Harley chose its only executive representative for the site-selection team - Karl Eberle, the man who had been tapped as manager of the new facility, wherever it might be. Third, Harley placed two employees and union members on the search committee.

"You have to understand about Harley-Davidson," Mullis said. "This is an American-made product and always will be an American-made product. This company has a remarkable relationship with their unions. The unions take an active part in everyday decisions."

Mullis said that the search team worked quickly. About 60 cities in 20 states in the Midwest and Northeast were considered, but all but five of those locations were dismissed without so much as a visit. "We did a very typical analysis," Mullis said. "We looked at start-up costs, logistics, labor pools, incentives, etc." Harley had given the team just six months to complete its search, so only those communities with the most potential could be examined up close.

The team visited five cities: Kansas City, Louisville,Ky., Omaha, Neb., Fort Wayne, Ind., and Oklahoma City. The incentive packages being dangled by Kansas City and Louisville quickly prompted Harley to pare its list of contenders to those two.

There was one other consideration - Harley was not interested in building in a right-to-work state. Although the Kansas City Area Development Council represents communities on both sides of the Missouri-Kansas border, Harley would not cross the line into right-to-work Kansas.

Deal Maker and Deal Breaker
Mullis said that Kansas City was clearly eager to please. "We did exceptionally well," he said. "The idea of 500 well-paid employees, combined with the notoriety of Harley, allowed us to negotiate some things that we wouldn't have done otherwise."

At first, Kansas City, Platte County and the state of Missouri came up with about $3.5 million in incentives for Harley. Road improvements, new sewer and water lines, and a training program for workers at local community colleges were all part of the package. Missouri also agreed to designate the Harley plant as an enterprise zone (giving partial exemptions for business and property taxes for 10 years). In exchange, Harley would promise to hire 15 percent of its work force from people on public assistance or living in other enterprise zones.

But there was a problem. Missouri state law required that any new plant install pollution-abatement equipment. Louisville had no such regulations. But as negotiations continued, Kansas City came up with a plan. The city offered to issue $3 million in 15-year bonds to cover the cost of the equipment and to purchase 320 acres of land for the plant near Kansas City International Airport. "We can't give enough credit to the mayor (Emanuel Cleaver); he just wouldn't let this go," said Mullis.

The city bonds put Kansas City and Louisville on equal footing, according to Mullis. The thing that gave Kansas City the deal was the presence of Midwest Express Airlines, which has four flights a day between Kansas City and Milwaukee, Wis., where Harley has its corporate headquarters. Louisville has no direct service to Milwaukee. "This was the advantage that we had," said Marcusse. "It was the frosting on the cake."

"Either Louisville or KC would have worked," said Mullis, "But the airport and Midwest Express were critical. There will be several hundred trips each month by Harley people between Milwaukee and the new facility."

In May 1996, Harley announced it would build its 300,000 square foot plant on land that is about a five-minute drive from KCI.

The new plant will build the Harley-Davidson XL Sportster and some of the performance motorcycles sold under the brand name Buell (Harley is the exclusive distributor and 49 percent owner of Buell Motorcycle Co.). Assembly, painting, engine assembly, fabrications and final assembly will all be done in-house. Only some components will be built by outside vendors.

Harley's belief is that the company will eventually find new component suppliers locally, or that existing suppliers will relocate to Kansas City. "They'll grow a new base of suppliers, with as many as 30 to 40 small facilities producing components," said Mullis.

One component supplier to Harley, Fargo Assembly of Pennsylvania Inc., already has announced that it will build a plant for its electrical wire harnesses in the suburb of Atchison, Kan. Until other suppliers arrive in town, or new ones can be found, Harley is willing to pay to transport components from suppliers located near Harley plants in Milwaukee and York, Pa.

Logistics a Non-Issue
There is no question that one of KC's biggest selling points is its transportation system. "You can't beat the distribution system here," Marcusse said. "We are at the convergence of north-south and east-west interstates. This is the second largest rail hub in America. There are 150 trucking companies here. In addition, air freight in and out of KC is far stronger than any other metropolitan area in the Midwest."

Without a solid infrastructure, Kansas City would doubtless not have made Harley's first cut. But, with the exception of Midwest Express' passenger service, the selection team said transportation was not a deciding factor in the company's move to Kansas City.

"Realistically, this plant could have been built anywhere," Mullis said. "Logistics was not a factor in choosing where we would build."

Eberle, the new plant manager and member of the site-selection team, agreed. "If anything, transportation is costing us money here. It doesn't mean that there isn't good transportation here, because there is. It's just that for us, Kansas City wasn't about transportation."

Most of the motocycles built in Kansas City will be shipped east or overseas, another indication that logistics was not a critical issue. "There's no port here that I'm aware of," quipped Eberle.

Harley's distribution system, using a company-owned fleet of trucks as well as some common carriers, calls for bringing all finished motorcycles to the York facility, where they are sorted for the orders of individual dealerships. "We don't have it all ironed out yet," Eberle said. "We may just truck the overseas stuff to York, and truck the rest direct from here."

Foreign sales are an area of tremendous growth potential for the company. Last year 32,000 motorcycles were exported to Europe, giving Harley a 9.1 percent share of the continent's 751+cc market. Harley's Buell motorcycles, some of which will be made at Kansas City, will be introduced in Europe this year, providing its first competitive entry in the EU's fast-growing market for performance motocycles.

"We believe Buell is well-suited for the European marketplace," said CEO Rich Teerling when announcing the company's fourth-quarter earnings. The countries of Europe, he added, "continue to present signficant long-term opportunities for Harley-Davidson."

FedEx Chooses KCI Airport for New Regional Hub
Sometimes the biggest deals come to you. Take for instance, Kansas City's landing of a new $10 million, 85,000-square-foot regional hub for express delivery company Federal Express Corp.

"Marketers are supposed to take credit for everything we can, but the FedEx deal just sort of marketed itself,' said Michael Webber, manager for air cargo development at Kansas City International Airport.

According to Webber and other development officials, the FedEx deal just fell in the lap of KCI airport. FedEx simply called the airport and said it was coming. No sales pitch required. No incentives needed.

"There were no economic-development incentives at all," Webber said. "Absent that, what a great endorsement for us.'

FedEx is no newcomer to KCI. The company already leases 27,000 square feet of space in two buildings at the airport. But the new plans call for an additional facility with the capacity to handle 6,000 packages an hour. They also include a new 400,000-square-foot aircraft parking lot and taxiway.

FedEx's decision to add Kansas City to its list of regional hubs (the others are in Detroit, Minneapolis/St. Paul and Houston) can be traced to the enormous growth in air cargo through KCI. In the past three years, KCI has been the busiest cargo airport in the six-state region covering Missouri, Kansas, Iowa, Nebraska, Oklahoma and Arkansas.

As the Kansas City area has boomed in recent years, airport cargo figures have soared, reaching 317 million pounds last year. Such growth tends to feed on itself: the city booms, and more businesses come, bringing more cargo, bringing more money, bringing more business and more cargo. Webber credits the FedEx facility to just that cycle. "The Kansas City economy is really robust," he said. "Airports are considered a good barometer for a local economy. The FedEx expansion is, as much as anything, a testimony to the local market's ability to support that growth."

The FedEx facility may be the impetus for expansion by KCI's other air-cargo companies, according to Joseph McBride, manager of marketing and communications for KCI. "The industry does take notice when the biggest air-cargo carrier in the world chooses your city for this type of facility," McBride said. "This has to send a message; FedEx is well respected for its business acumen."

Webber said that he's spending a lot of time these days trying to convince other tenants like DHL Worldwide Express and Burlington Air Express to enlarge their presence at KCI. "I tell them that if FedEx has figured this out, maybe they're missing something," he said.

What FedEx may have figured out is that KCI is the ideal place to expand. The airport sits on the crossroads of two interstate highways. A commercial-only road allows truckers to access cargo terminals without fighting passenger traffic. Perhaps most importantly, the airport sits on the outskirts of the city surrounded by empty space - thus no noise complaints about the nighttime flights that mark the air-cargo business.

"While we're out hustling people to expand, a lot of other airports have their hands tied," said McBride. "They're surrounded by wetlands or residential areas. There's nowhere to grow. We have all the trappings of a major airport without the congestion."

When motorcycle builder Harley-Davidson Inc. announced late in 1995 that Kansas City, Mo., was one of five candidates for its new $100-million manufacturing facility, area officials had to scramble. Harley wanted a meeting, and there were only a few days to prepare.
In a late-night brainstorming session, development staffers decided to produce a videotape starring a local public-relations executive, Dick Grove, a burly, bearded biker and Harley aficionado.

According to Robert Marcusse, president of the Kansas City Area Development Council, the idea was to link Kansas City to Harley's vision of what it means to ride a motorcycle. "We did a lot of research, and we found that Harley-Davidson had a very distinct culture. Their product is an American icon, and they are very proud of what they are doing," he said. "We came across a series of words and phrases that they use that sort of typify who they are. And we wanted to let them know that we understood what they were all about."

The three-and-a-half minute video intersperses shots of Grove and his 1991 Sturgis Harley-Davidson with graphics and dialogue that related to Harley's culture. "This is where a man first straddled his ride and headed West," Grove says. The phrase "It's more than a lifestyle, it's an attitude," appears on the screen.

The hook to the film is that it isn't about Harley-Davidson; the company is never mentioned. Rather, the video is about Kansas City. With images of the West, Harry Truman and baseball, the video portrays Kansas City as the home of American individualism.

The concluding line - "If I have to explain it, you wouldn't understand it" - proved to be the hoped-for clincher. That's the unofficial slogan of Harley-Davidson, but in the video the phrase is used to capture the spirit of the city.

The idea worked. "We didn't have to explain it," Marcusse said. "They got it, we knew they got it. And we got them."

Look for the Union Label
Harley's need for a new plant is born of high-speed growth. The company saw sales of $1.5 billion last year - the highest in its 93-history and a 13.4 percent rise from 1995. But the rapid growth, which began after a near miraculous turnaround in the mid 1980s, has put a strain on production. A Harley customer waits an average of 24 months before accepting delivery of his motorcycle.

KC is on a Roll
Robert Marcusse, president of the Kansas City Area Development Council, says he has it good these days.

"It's relatively easy to recruit here," he said. "Housing costs are very low. Typically we are No. 1 or No. 2 in cost of living. We have reasonable real estate, cutting-edge technology and great schools."

Certainly KC has been an easy sell in recent years. Nearly every survey of business environments and standards of living rank the Kansas City area as one of the best places to live and work in the country. And Kansas City most certainly has been cashing in.

The same month that Harley-Davidson said it would bring a new plant to town, AlliedSignal's Commercial Avionics Division announced the planned consolidation of four plants around the country into a new facility on the Kansas side of the state line. The $132 million plant adds 1,100 new jobs to the area.

Ford Dodge Laboratories, a drug-manufacturer owned by American Home Care Products, is building a 37,000-square-foot complex in the suburb of Overland Park, Kan. Seventy executives are relocating, and an additional 100 technical and support staff will be hired.

Sprint Communications and Bayer Corp.'s Agricultural Division both are based in Kansas City and both have announced major expansions of their headquarters beginning this year.
Overall, a full three-quarters of a billion dollars in private investment already has been earmarked for the Kansas City area in 1997.

With delays like that, Harley had little choice but to expand. In fact, Harley expects to spend about $500 million from last year through 1998 to increase capacity at existing plants in Wisconsin and Pennsylvania. The company's goal is to produce 200,000 units a year by 2003, its 100th birthday. Last year, Harley built 119,000 motorcycles and recently increased its 1997 projection to 130,000 units.

When Harley set its mind on expansion, it created a rather unusual team to conduct the search for a new plant location. First, Harley hired Mike Mullis, president and chief executive of J.M. Mullis Inc., a site-consulting firm in Memphis, to conduct the search. Second, Harley chose its only executive representative for the site-selection team - Karl Eberle, the man who had been tapped as manager of the new facility, wherever it might be. Third, Harley placed two employees and union members on the search committee.

"You have to understand about Harley-Davidson," Mullis said. "This is an American-made product and always will be an American-made product. This company has a remarkable relationship with their unions. The unions take an active part in everyday decisions."

Mullis said that the search team worked quickly. About 60 cities in 20 states in the Midwest and Northeast were considered, but all but five of those locations were dismissed without so much as a visit. "We did a very typical analysis," Mullis said. "We looked at start-up costs, logistics, labor pools, incentives, etc." Harley had given the team just six months to complete its search, so only those communities with the most potential could be examined up close.

The team visited five cities: Kansas City, Louisville,Ky., Omaha, Neb., Fort Wayne, Ind., and Oklahoma City. The incentive packages being dangled by Kansas City and Louisville quickly prompted Harley to pare its list of contenders to those two.

There was one other consideration - Harley was not interested in building in a right-to-work state. Although the Kansas City Area Development Council represents communities on both sides of the Missouri-Kansas border, Harley would not cross the line into right-to-work Kansas.

Deal Maker and Deal Breaker
Mullis said that Kansas City was clearly eager to please. "We did exceptionally well," he said. "The idea of 500 well-paid employees, combined with the notoriety of Harley, allowed us to negotiate some things that we wouldn't have done otherwise."

At first, Kansas City, Platte County and the state of Missouri came up with about $3.5 million in incentives for Harley. Road improvements, new sewer and water lines, and a training program for workers at local community colleges were all part of the package. Missouri also agreed to designate the Harley plant as an enterprise zone (giving partial exemptions for business and property taxes for 10 years). In exchange, Harley would promise to hire 15 percent of its work force from people on public assistance or living in other enterprise zones.

But there was a problem. Missouri state law required that any new plant install pollution-abatement equipment. Louisville had no such regulations. But as negotiations continued, Kansas City came up with a plan. The city offered to issue $3 million in 15-year bonds to cover the cost of the equipment and to purchase 320 acres of land for the plant near Kansas City International Airport. "We can't give enough credit to the mayor (Emanuel Cleaver); he just wouldn't let this go," said Mullis.

The city bonds put Kansas City and Louisville on equal footing, according to Mullis. The thing that gave Kansas City the deal was the presence of Midwest Express Airlines, which has four flights a day between Kansas City and Milwaukee, Wis., where Harley has its corporate headquarters. Louisville has no direct service to Milwaukee. "This was the advantage that we had," said Marcusse. "It was the frosting on the cake."

"Either Louisville or KC would have worked," said Mullis, "But the airport and Midwest Express were critical. There will be several hundred trips each month by Harley people between Milwaukee and the new facility."

In May 1996, Harley announced it would build its 300,000 square foot plant on land that is about a five-minute drive from KCI.

The new plant will build the Harley-Davidson XL Sportster and some of the performance motorcycles sold under the brand name Buell (Harley is the exclusive distributor and 49 percent owner of Buell Motorcycle Co.). Assembly, painting, engine assembly, fabrications and final assembly will all be done in-house. Only some components will be built by outside vendors.

Harley's belief is that the company will eventually find new component suppliers locally, or that existing suppliers will relocate to Kansas City. "They'll grow a new base of suppliers, with as many as 30 to 40 small facilities producing components," said Mullis.

One component supplier to Harley, Fargo Assembly of Pennsylvania Inc., already has announced that it will build a plant for its electrical wire harnesses in the suburb of Atchison, Kan. Until other suppliers arrive in town, or new ones can be found, Harley is willing to pay to transport components from suppliers located near Harley plants in Milwaukee and York, Pa.

Logistics a Non-Issue
There is no question that one of KC's biggest selling points is its transportation system. "You can't beat the distribution system here," Marcusse said. "We are at the convergence of north-south and east-west interstates. This is the second largest rail hub in America. There are 150 trucking companies here. In addition, air freight in and out of KC is far stronger than any other metropolitan area in the Midwest."

Without a solid infrastructure, Kansas City would doubtless not have made Harley's first cut. But, with the exception of Midwest Express' passenger service, the selection team said transportation was not a deciding factor in the company's move to Kansas City.

"Realistically, this plant could have been built anywhere," Mullis said. "Logistics was not a factor in choosing where we would build."

Eberle, the new plant manager and member of the site-selection team, agreed. "If anything, transportation is costing us money here. It doesn't mean that there isn't good transportation here, because there is. It's just that for us, Kansas City wasn't about transportation."

Most of the motocycles built in Kansas City will be shipped east or overseas, another indication that logistics was not a critical issue. "There's no port here that I'm aware of," quipped Eberle.

Harley's distribution system, using a company-owned fleet of trucks as well as some common carriers, calls for bringing all finished motorcycles to the York facility, where they are sorted for the orders of individual dealerships. "We don't have it all ironed out yet," Eberle said. "We may just truck the overseas stuff to York, and truck the rest direct from here."

Foreign sales are an area of tremendous growth potential for the company. Last year 32,000 motorcycles were exported to Europe, giving Harley a 9.1 percent share of the continent's 751+cc market. Harley's Buell motorcycles, some of which will be made at Kansas City, will be introduced in Europe this year, providing its first competitive entry in the EU's fast-growing market for performance motocycles.

"We believe Buell is well-suited for the European marketplace," said CEO Rich Teerling when announcing the company's fourth-quarter earnings. The countries of Europe, he added, "continue to present signficant long-term opportunities for Harley-Davidson."

FedEx Chooses KCI Airport for New Regional Hub
Sometimes the biggest deals come to you. Take for instance, Kansas City's landing of a new $10 million, 85,000-square-foot regional hub for express delivery company Federal Express Corp.

"Marketers are supposed to take credit for everything we can, but the FedEx deal just sort of marketed itself,' said Michael Webber, manager for air cargo development at Kansas City International Airport.

According to Webber and other development officials, the FedEx deal just fell in the lap of KCI airport. FedEx simply called the airport and said it was coming. No sales pitch required. No incentives needed.

"There were no economic-development incentives at all," Webber said. "Absent that, what a great endorsement for us.'

FedEx is no newcomer to KCI. The company already leases 27,000 square feet of space in two buildings at the airport. But the new plans call for an additional facility with the capacity to handle 6,000 packages an hour. They also include a new 400,000-square-foot aircraft parking lot and taxiway.

FedEx's decision to add Kansas City to its list of regional hubs (the others are in Detroit, Minneapolis/St. Paul and Houston) can be traced to the enormous growth in air cargo through KCI. In the past three years, KCI has been the busiest cargo airport in the six-state region covering Missouri, Kansas, Iowa, Nebraska, Oklahoma and Arkansas.

As the Kansas City area has boomed in recent years, airport cargo figures have soared, reaching 317 million pounds last year. Such growth tends to feed on itself: the city booms, and more businesses come, bringing more cargo, bringing more money, bringing more business and more cargo. Webber credits the FedEx facility to just that cycle. "The Kansas City economy is really robust," he said. "Airports are considered a good barometer for a local economy. The FedEx expansion is, as much as anything, a testimony to the local market's ability to support that growth."

The FedEx facility may be the impetus for expansion by KCI's other air-cargo companies, according to Joseph McBride, manager of marketing and communications for KCI. "The industry does take notice when the biggest air-cargo carrier in the world chooses your city for this type of facility," McBride said. "This has to send a message; FedEx is well respected for its business acumen."

Webber said that he's spending a lot of time these days trying to convince other tenants like DHL Worldwide Express and Burlington Air Express to enlarge their presence at KCI. "I tell them that if FedEx has figured this out, maybe they're missing something," he said.

What FedEx may have figured out is that KCI is the ideal place to expand. The airport sits on the crossroads of two interstate highways. A commercial-only road allows truckers to access cargo terminals without fighting passenger traffic. Perhaps most importantly, the airport sits on the outskirts of the city surrounded by empty space - thus no noise complaints about the nighttime flights that mark the air-cargo business.

"While we're out hustling people to expand, a lot of other airports have their hands tied," said McBride. "They're surrounded by wetlands or residential areas. There's nowhere to grow. We have all the trappings of a major airport without the congestion."