S&P Global Ratings on Wednesday downgraded the long-term credit rating of Harley-Davidson (NYSE: HOG) from the investment-grade BBB- to BB+, formally placing it into "junk" territory. The agency also lowered the company's unsecured debt rating from BBB- to BB+ and removed it from the negative CreditWatch list, assigning a stable outlook.
The direct trigger for this downgrade was the "Hardwire" strategic plan announced by Harley in May. This plan involves launching a series of more affordable models, including the returning Sportster and a new model called the Sprint, with entry-level prices around $10,000 and lower. The goal is to attract new riders and recapture steadily eroding market share. Data shows Harley's share of U.S. motorcycle registrations has plummeted from 49.1% in 2019 to 34.5% in 2025.
Analysts Express Profitability Concerns
S&P expressed deep concern about the profitability of this strategy. The rating agency projects that, as the company currently prioritizes market share over per-unit profits, its adjusted EBITDA margin will remain at a low level of 5% to 6% in 2026 and may take several years to recover to near 10%. For comparison, this metric exceeded 16% in both 2022 and 2023. The company's own three-to-five-year targets are also only for a 10% to 12% EBITDA margin and a 25% to 30% gross margin, both significantly below prior levels.
Mounting Financial Pressures
Furthermore, multiple financial pressures are converging. To achieve its $150 million annual cost-reduction target, the company recorded approximately $15 million in restructuring charges related to layoffs in the first quarter. Concurrently, cost pressures from steel and aluminum tariffs are expected to reach $75 million to $90 million by 2026. However, management believes the tariff impact will peak in 2026 and is expected to gradually ease thereafter.
CEO Artie Starrs, who took office last October, is leading this transformation. The strategy aims to boost sales through more accessible pricing, subsequently relying on a larger vehicle fleet to drive the higher-margin parts and accessories business, thereby repairing overall profitability.
Liquidity Remains Strong
Despite the rating downgrade, Harley's liquidity position remains robust. As of the end of March 2026, the company held approximately $1.8 billion in cash and cash equivalents and has access to over $2 billion in credit facilities. The stable outlook reflects this ample liquidity.
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