Warren Buffett Saved Harley-Davidson in ’09, Could He Do It Again?
With Harley again facing a tough road ahead, could Buffett be the cash-laden angel to bring the company back into fighting shape?
In the thick of the global recession resulting from the 2008 financial crisis, Harley-Davidson was in a tough spot. It needed money, and it needed it fast. The saving influx of cash would come from none-other than Warren Buffett. Based on information from a new Business Insider article, Buffett helped keep the company afloat, but he lost out on a lot of income by providing a loan instead of taking stock options.
With Harley again facing a tough road ahead, could Buffett be the cash-laden angel to bring the company back into fighting shape? Would that even be an ideal option for Harley?
It is no secret that Buffett is a shrewd businessman with an eye for safe bets and solid returns. In 2009, he offered Harley-Davidson a loan of $300-million, with a pretty ludicrous interest rate of 15 percent interest. At the end of the loan period, returns on that particular investment were $150-million. However, if Buffett and his investment company had opted for $300 million worth of stock options, they would have made more than $1 billion in profits.
With that knowledge now under their belt, could now be another good time for Buffett and his team to buy into Harley, this time going for stocks over a loan? We already looked at what you guys think could save our favorite motorcycle brand, and a buy-in from an outside source wasn’t even on the radar. It looks like it could be another good way for Buffett to make some money, but that investment brings even more questions than answers.
Would that large of an ownership investment have Buffett asking for a spot on the company’s board of directors? If he did, would a presence like Buffett be a boost to the company, or a hindrance? Harley is sitting squarely on the precipice of success and failure. H-D is prepping its most exciting new lineup of bikes in years, but declining sales, an aging buying group, and a global pandemic are all combining to make this the most difficult time in Harley-Davidson’s long and tumultuous history.
Only history will tell us the true tale of how this will all play out.
Photos: Carlos Barria via Reuters (Header)/ Harley-Davidson (Body)
Join the HD Forums now!
