On Wednesday, S&P Global Ratings announced it has downgraded the long-term credit rating of American motorcycle manufacturer Harley-Davidson (HOG.US) from the investment-grade BBB- to BB+, placing it in junk territory.
The agency also lowered its ratings on the company's unsecured debt, its financial subsidiary, and its medium-term notes, while removing all ratings from the "CreditWatch with negative implications" list where they had been placed on February 11, 2026. The outlook for the rating is stable.
What prompted the downgrade?
The immediate catalyst for the downgrade was the "Back to Bricks" strategic plan unveiled by Harley in May of this year. This plan involves launching a series of lower-priced models, including the returning Sportster and a new Sprint model, with entry prices around $10,000 and lower. These models, expected to hit the market by late 2026 to 2027, aim to attract new riders and recapture lost market share.
Data shows Harley's share of U.S. motorcycle registrations has fallen sharply from 49.1% in 2019 to 34.5% in 2025. S&P estimates that if the new products succeed, the share could recover to around 45%.
Concerns over future earnings
However, S&P expressed deep concern over the profitability implications of this strategy. The rating agency expects that as the company prioritizes market share over per-unit profit, its adjusted EBITDA margin will remain at a low 5% to 6% in 2026 and may take "several years" to recover to levels approaching 10%. For comparison, this metric exceeded 16% in 2022 and 2023.
The company's own three-to-five-year targets are only 10% to 12% for adjusted EBITDA margin and 25% to 30% for gross margin, both significantly below prior levels.
Additional financial pressures
Multiple financial pressures are also converging. S&P noted that restructuring costs and tariff expenses will weigh on profits in the near term. In pursuit of a $150 million annual cost-reduction target, the company recorded approximately $15 million in restructuring charges related to layoffs in the first quarter.
Meanwhile, the cost impact from steel and aluminum tariffs is expected to reach $75 million to $90 million in 2026, though this is lower than the prior estimate of $75 million to $105 million. Management believes tariff impacts will peak in 2026 and could ease thereafter as trade policies adjust and new exemptions are secured for some motorcycle components.
CEO Artie Starrs, who took the helm in October last year, is leading this pricing strategy shift. The goal is to boost sales volume with more accessible prices and then leverage the larger vehicle base to drive higher-margin parts, accessories, and customization businesses, thereby restoring overall profitability.
Liquidity remains a strength
Despite the downgrade, Harley's liquidity position is seen as robust. As of the end of March 2026, the company held about $1.8 billion in cash and cash equivalents and had access to over $2 billion in commercial paper program capacity. Its long-term net debt stood at approximately $1.63 billion.
S&P stated that the stable outlook reflects the company's ample liquidity and its commitment to maintaining a low level of organic leverage.
Other rating agencies currently hold a more favorable view of Harley. Moody's rating is one notch higher than S&P's, while Fitch's is two notches higher, with both maintaining investment-grade ratings.
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