William Harley and Arthur Davidson, both in their early twenties, built their first motorcycle in 1903. During their first year, the company’s entire output was only 1 motorbike; however, by 1910, the company had sold 3,200. Movies such as Easy Rider made Harleys a cultural icon and soon the company attracted people who loved its bad-boy mystique, powerfulness, rumbling voice, distinctive roar, and toughness. It sounded like nothing else on the road, and even Elvis Presley and Steve McQueen longed to ride one.
The Harley-Davidson Motor Company has had its ups and downs, and at times, the downs seemed as if they would end in bankruptcy. In the sixties, Honda, Kawasaki, and Yamaha invaded the American market, and when sales at Harley-Davidson dropped drastically due to decreasing quality and increasing competition, the company began to look for buyers and was finally sold. However, the new owners of Harley Davidson knew little about how to restore profitability. The quality became so bad that dealers had to place cardboard under bikes in the showroom to absorb the oil leaking.
Daniel Gross, in Forbes Greatest Business Stories of all Times, recounts how in 1981, with the aid of Citibank, a team of former Harley-Davidson executives began negotiations to reacquire the company and rescue it from bankruptcy. Among these executives was William Davidson, the grandson of the founder Arthur Davidson. In a classic leveraged buyout, they pooled $1 million in equity and borrowed $80 million from a consortium of banks lead by Citibank.