The back and forth between Harley-Davidson and New York-based investment firm H Partners Management continues as both organizations seek the favor of shareholders.
In a Monday letter to shareholders, H Partners shared what led to the resignation of former Harley-Davidson board member Jared Dourdeville, along with a behind-the-scenes recounting of the current CEO search process.
H Partners launched a campaign against Harley-Davidson leadership earlier this month aimed at getting shareholders to withhold the re-election of three Harley board members: CEO Jochen Zeitz, board member Sara Levinson, and board member Tom Linebarger.
H Partners, which owns a 9.1% stake in Harley, is also calling on the board to immediately remove Zeitz as CEO and install a senior leader to the position temporarily.
In Monday’s letter, H Partners said Rehan Jaffer, managing partner of the firm, met with Zeitz in Milwaukee last July to discuss the company’s “deteriorating sales.”
“H Partners pressed Mr. Zeitz to share his views on the company’s marketing strategy, the execution and performance of the commercial team, and dealer inventory levels, among other matters,” according to the letter. “Mr. Zeitz acknowledged the weak sales trends but stated that he was pleased with the company’s strategy and execution and blamed the company’s weak sales trends almost exclusively on macroeconomic issues. Mr. Zeitz stated that he remained committed to seeing the company through this difficult period.”
Jaffer later met with both Zeitz and Linebarger in September in Santa Monica, according to the letter.
During this meeting, Zeitz allegedly told Jaffer he intended to step down as CEO in July 2025 and that he planned to “orchestrate the succession” of Jonathan Root, chief financial officer, to the role of CEO to complete Zeitz’s Hardwire strategy.
“Upon hearing this, Mr. Jaffer told Mr. Zeitz that the company needed an active leader on the ground to see the business through this difficult period, and that if he was no longer committed to being the long-term CEO of the company, then he should immediately resign as CEO,” according to H Partners’ letter. “Mr. Zeitz abruptly arose and exited the meeting at this point. Following Mr. Zeitz’s departure, Mr. Jaffer requested to Mr. Linebarger that the company initiate a CEO search process immediately. Mr. Linebarger refused, citing his personal promise to Mr. Zeitz to delay the search process until January 2025.”
Jaffer attended additional meetings with Zeitz in September and Linebarger in October to discuss concerns about inventory levels and company leadership.
During a separate December meeting, H Partners presented a possible CEO candidate due to the “ongoing crisis at the company.”
“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,” according to H Partners. “Mr. Linebarger also refused to accelerate the start of a CEO search process and told Mr. Jaffer that if he disagreed, that Mr. Jaffer should ‘run a proxy fight against me.'”
On March 28, Harley-Davidson’s board met to consider three CEO candidates. H Partners claims three of the four members of the CEO search committee voted to extend an offer to their candidate, but the board itself was split four to four.
“We are disappointed that H Partners has chosen to take this self-serving action targeting members of our board after that firm’s preferred CEO candidate failed to receive majority support from the board’s independent directors,” said a Harley spokesperson in a previously released statement. “H Partners has chosen to put its own interest ahead of the interests of other shareholders by attempting to disrupt the board’s rigorous and thoughtful CEO transition process, creating uncertainty for and putting Harley-Davidson’s future and shareholder value at risk. The board is committed to acting in the interests of all of Harley-Davidson’s shareholders by continuing to strengthen the company’s foundation for the future and selecting the right CEO to lead Harley-Davidson into its next chapter.”
Shareholders will vote on Harley-Davidson’s board members during the company’s annual meeting, which is scheduled for May 14.
Harley-Davidson is recommending Lori Flees, president and CEO of Valvoline, to fill the seat vacated by Dourdeville. This is in addition to the company recommending the re-election of Zeitz, Linebarger and Levinson.
Past campaign
This isn’t the first time H Partners has launched a campaign aimed at changing what it describes as “failed leadership” within a company.
In 2015, H Partners was able to successfully convince stockholders of Lexington, Kentucky-based Tempur Sealy International to vote against re-electing stockholders during the company’s 2015 annual meeting. H Partners owns a nearly 10% stake in Tempur Sealy, according to Reuters.
H Partners and Tempur Sealy reached an agreement that called for the immediate termination of the CEO, the resignation of the three targeted directors, board representation for H Partners, one additional director recommended by H Partners, and an H Partners representative leading the CEO search.
“While we had hoped to avoid taking such dire actions at HOG, the board’s unwillingness to address the systemic issues plaguing the company has compelled us to take our concerns directly to shareholders,” said H Partners in its Monday letter to shareholders.
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