IN the 39 years that Jim Ziemer has worked at Harley-Davidson he has had his fair share of ups and downs - not only because his first job at the motorcycle maker was working a cargo lift.

He had wanted to work for Harley since watching test riders putting bikes through their paces near his home in Milwaukee when he was eight.

He never joined the ranks of the Harley test pilots, but the 58-year-old has done better than that. He runs the company. The only problem is that these days, being in the saddle is perhaps not the most comfortable place to sit.

In the first quarter of this financial year, Harley-Davidson saw worldwide sales drop 5.6% - a decline particularly acute in its home market, where the fall in revenues was near 13%. It is only overseas, in Europe and Japan, that kept the Harley engine ticking over. In April the group said earnings per share would be 15% to 20% lower this year than indicated.

Harley-Davidson, founded in 1903, has always aroused strong feelings. Celebrities who owned the famous marque include Sylvester Stallone, Viscount Linley and Billy Idol. Today it could do with a few more celebrity devotees. Harley is taking drastic measures to tackle its sales decline, cutting production and laying off staff in assembly lines and head office, with 730 jobs likely to go. Shares in the group, which floated in 1987, are just above a 12-month low of $34.10.

Things may not be as bad as the dark days of the mid1980s, when the business came mighty close to bankruptcy, having been acquired by management from owner AMF, best known as a ten-pin bowling operator.

Harley’s turnround was helped by the introduction of tariffs on Japanese bikes and, having avoided bankruptcy, it had 20 years of record growth. Today, the US company has annual sales of $5.7 billion.

As the dominant player in the US motorcycle scene, it means the shock of having to lay people off and downsize is more painful, and Ziemer - proud owner of three Harleys - refuses to predict when things might recover. “The US is in some trying times right now,” he said, “and there’s nothing that we see that would change that in 2008. I’m not going to predict how 2009 will be. We don’t look for any change - better or worse - than 2008.”

Analysts who follow the motorbike maker are braced for the worse. Harley executives are careful to avoid sharing the market’s pessimism. Tom Bergmann, chief financial officer and head of strategy, said: “We have taken 25,000 units out from our production, but we’ll still ship around 300,000 motorcycles this year.”

If there is one bright spot, it is the growth in sales outside America. Overseas revenue accounts for about 30% of all turnover, up from 20% or so only three or four years ago.

In Japan, its biggest market outside the US, sales have been growing for 22 years. Europe is beginning to catch up, with sales growth of 15% to 20%.

China represents the biggest opportunity. There is just one roadblock that not even the nippiest of Harley’s bikes could navigate. There is, in effect, a ban on riding motorbikes in 170 Chinese cities. Licences are heavily restricted and costly.

“In the long term, China will be a good market,” said Ziemer. “We have a great appeal in China. Over time we will find a way to do this, but it will be a slow process.”

Any changes will not happen quickly enough to compensate for the slide in domestic sales. The group is finding other ways to compete, splitting marketing into two, one concentrating on traditional, more mature Harley customers, as epitomised in last year’s Hollywood movie Wild Hogs, and the other aiming at young men and women riders.

Bergmann said: “We know the next generation of riders is coming through. A lot of the product lately is meant to capture that generation.”

Harley-Davidson could use that generation right now.

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