DEFC14A: H Partners Launches Proxy Fight Against Harley-Davidson, Seeks Removal of Key Directors

H Partners Management, a significant Harley-Davidson shareholder, is soliciting votes to withhold support for the re-election of three long-tenured directors, including CEO Jochen Zeitz, citing poor performance and governance.

Summary

• H Partners Management, owning 9.1% of Harley-Davidson's stock, is launching a proxy solicitation to vote against the re-election of CEO Jochen Zeitz, Presiding Director Norman Thomas Linebarger, and Director Sara Levinson.
• H Partners believes these directors are responsible for the company's poor performance, strategic failures, and misalignment with stakeholders.
• The firm cites Harley-Davidson's negative total shareholder returns (TSR) and underperformance compared to the S&P 500 Index and the S&P 400 Consumer Discretionary Index since the introduction of the 'Hardwire' strategic plan in February 2021.
• H Partners argues that the 'Hardwire' plan has failed to deliver on its promises, with declines in touring, cruiser, and trike shipments, as well as disappointing results in the electric motorcycle business.
• The proxy statement criticizes the company's corporate governance practices, including the combination of the CEO and Chairman roles, the long tenure of certain board members, and what they see as misaligned executive compensation.
• H Partners is urging shareholders to vote 'WITHHOLD' on the election of the three directors at the upcoming annual meeting on May 14, 2025, to send a message that change is needed.
• H Partners previously engaged with the board privately to address concerns but found the board unwilling to embrace necessary changes.
• The proxy statement highlights that the election of directors requires a majority vote, and the company has a director resignation policy in place for uncontested elections.
• H Partners believes that if any of the targeted directors fail to be elected, they should resign, and the board's failure to accept such resignations would be a violation of corporate governance.
• H Partners has retained Saratoga Proxy Consulting LLC for solicitation and advisory services, with fees not to exceed $175,000, plus expenses.

Sentiment

Score: 2

Explanation: The document expresses a highly negative sentiment towards Harley-Davidson's current management and board, citing poor performance, strategic failures, and governance concerns. The call for the removal of key directors indicates a lack of confidence in the company's current trajectory.

Positives

• H Partners is a long-term shareholder, indicating a vested interest in the company's success.
• H Partners has experience in successfully executing similar proxy contests, as demonstrated by their actions at Tempur Sealy.
• The company has a director resignation policy in place, which could force the targeted directors to resign if they fail to receive a majority of votes.
• H Partners recruited a candidate who is a former public company CEO and who delivered significant outperformance over a long period of time in a relevant industry.

Negatives

• Harley-Davidson's TSR has significantly underperformed relevant benchmarks under the current leadership.
• The 'Hardwire' strategic plan has reportedly failed to deliver on its promises, with declines in key product categories and disappointing results in the electric motorcycle business.
• Dealer sentiment is low, and some dealers have been forced to close.
• H Partners believes CEO compensation is misaligned with shareholder returns.
• H Partners believes the Board's current structure has excessively consolidated power into the hands of Messrs. Zeitz and Linebarger, and it has allowed for Mr. Zeitz to be insulated from accountability.

Risks

• The board may choose to reject the resignations of the targeted directors, even if they fail to receive a majority of votes.
• The board may re-appoint the directors after the annual meeting, even if they are not re-elected.
• The proxy solicitation may not be successful, and the current leadership may remain in place.
• The company's performance may continue to decline under the current leadership.
• The company's iconic headquarters has been shuttered and its corporate culture has been depleted by a remote work environment.

Future Outlook

H Partners believes that with the right leadership, alignment, and governance structures in place, the Company can deliver substantial value for all of its many stakeholders.

Management Comments

• Mr. Zeitz acknowledged the weak sales trends but stated that he was pleased with the Company's strategy and execution, and blamed the Companys weak sales trends almost exclusively on macroeconomic issues.
• Mr. Zeitz informed Mr. Jaffer that he intended to retire as Harley-Davidson's CEO in July 2025 and that Mr. Zeitz planned to orchestrate the succession of Harley-Davidson's CFO, Jonathan Root, to the CEO role in order to ensure the continuation of Mr. Zeitz's Hardwire strategy.
• Mr. Linebarger vehemently disagreed with the characterization that the Company was in a crisis saying that there was just a lot of noise from a few disgruntled dealers.
• The Company recently stated that it Successfully executed the Hardwire Plan.

Industry Context

The proxy fight highlights concerns about Harley-Davidson's ability to adapt to changing consumer preferences and compete in the evolving motorcycle market, particularly in the electric vehicle segment.

Comparison to Industry Standards

• The document compares Harley-Davidson's TSR performance to the S&P 500 Index and the S&P 400 Consumer Discretionary Index, indicating underperformance relative to broader market and consumer discretionary benchmarks.
• The document references Tempur Sealy International, Inc. (n/k/a Somnigroup International, Inc.) as a comparable situation where H Partners successfully solicited stockholders to vote against the election of three directors at Tempur Sealy's 2015 Annual Meeting of Stockholders.

Stakeholder Impact

• Shareholders may experience changes in the value of their investment depending on the outcome of the proxy fight and the company's future performance.
• Employees may be affected by potential changes in leadership and strategy.
• Dealers may see changes in their relationship with the company and its profitability.
• Customers may experience changes in product offerings and brand perception.

Next Steps

• Shareholders are urged to vote on the election of directors at the Annual Meeting on May 14, 2025.
• The Board will consider the results of the vote and may need to address the concerns raised by H Partners.
• The company will continue its search for a new CEO to replace Jochen Zeitz.

Key Dates

Keywords

proxy solicitation, Harley-Davidson, H Partners, Jochen Zeitz, board of directors, shareholder value, corporate governance, Hardwire plan, director election, TSR