1. Does Harley-Davidson have adequate allowance/reserve balances in:
(a) Warranty and safety recall liability.
(b) Accounts receivable.
(c) Finance receivables held for investment.
(d) Finance receivables held for sale.
(e) Inventories? Are these balances more or less adequate than in the past? Explain.
2. Is the “finance receivables held for investment” disclosure adequate? Explain.
3. Evaluate the change in Harley-Davidson’s debt from 2007 to 2008.
4. Evaluate Harley-Davidson’s pension and retiree health-care funds and their asset allocations (from the above table).
A German inventor, Gottlieb Daimler, developed the first gas engine–motorized bicycle in 1885. Ten years later, the first crude motorcycle was produced in the United States. In 1901, William S. Harley, age 21, completed a blueprint drawing of an engine designed to fit on a bicycle. In 1903, he and Arthur Davidson produced the first Harley- Davidson ® motorcycle in a 10-by-15 foot wooden shed with the words “Harley-Davidson Motor Company” scrawled on the door. Arthur Davidson’s brother, Walter Davidson, joined the firm later that year. In 1906, the firm built a 28- by-80 foot factory and increased the number of staff to six full-time employees. The following year brought a variety of developments: William Davidson joined the firm, Harley-Davidson Motor Company was incorporated, and the shares were equally split between Mr. Harley and the three Davidson brothers.1
More than 200 companies began producing motorcycles in the United States in the early 1900s, including Thor, Pierce, Sears, Excelsior, Flying Merkel, Reading Standard, Iver Johnson, Ace, Cleveland, and Indian. By 1917, Harley- Davidson was a growing brand, but little distinguished its reputation from that of competitors. The company’s big break came when the United States entered World War I: Harley-Davidson became the U.S. Army’s primary motorcycle supplier. By 1918, half of the motor-cycles the firm produced were sold to the Army. By the end of the war, the Army had purchased 20,000 motorcycles, most of them from Harley-Davidson, and hundreds of thousands of soldiers had become familiar with the brand. By 1920, Harley-Davidson was the world’s largest motorcycle manufacturer, with more than 2,000 dealers in 67 countries.2