In 1903, William Harley (21), a designer, and his friend Arthur R. Davidson, began experimenting with ideas for designing and building their own motorcycles. They were joined by Arthur's brothers, William, a machinist, and Walter, a skilled mechanic. The Harley-Davidson Motor Company began in a 10 x 15 foot shed in the Davidson family's backyard in Milwaukee, Wisconsin. This case was prepared by Professor Patricia A. Ryan of Colorado State. This case was edited for 5MBP and Cases in 5MBP-9th and 10th edition. The copyright owners are solely responsible for the contents of the file. Copyright @2002 and 2005 by Patricia A. Ryan and Thomas L. Wheelen. Reprint permission is granted only to the publisher, Prentice Hall, for the books Strategic Management and Business Policy-10th Edition (and the international version of this book) and Cases in Strategic Management and Business Policy-10th Edition by the holders copyright, Patricia. A. Ryan and Thomas L. Wheel. Any other publication of the matter (translation, any electronic form or other media) or sold (any form of partnership) to another publisher will be in violation of copyright law, unless Patricia A. Ryan and Thomas L. Wheelen has not granted additional authorization. written permission to reprint. In 1903, three motorcycles were built and sold. Production increased to eight in 1904. The company then moved to Juneau Avenue, where the company's current offices are located. In 1907 the company was incorporated. In 1969, AMF, Inc., a leisure and industrial products conglomerate, acquired Harley-Davidson. The management team increased production from 15,000 motorcycles in 1969 to 40,000 motorcycles in 1974. The AMF prioritized short-term profits over investing in research and development and retooling. Meanwhile, Japanese competitors continued to improve the quality of their motorcycles, while Harley-Davidson began producing machines that were noisy, leaking oil, heavily vibrating, poorly finished, and difficult to handle. AMF ignored Japanese competition. In 1975, Honda Motor Company introduced its Gold Wing, which became the standard for large touring motorcycles. Harley-Davidson had controlled this segment of the market for years. There was a $2,000 price difference between Harley's high-end motorcycles and Honda's comparable Gold Wing. This caused American motorcycle buyers to turn to Japanese motorcycles. Japanese companies (Suzuki and Yamaha) from this time until the mid-1980s continued to enter the customized heavy-duty truck market with Harley lookalikes. During AMF's ownership of the company, motorcycle sales were strong, but profits were low. The company experienced serious problems due to poor manufacturing and strong Japanese competition. In 1981, VaughnBeals, then head of the Harley division, and 13 other executives completed a leveraged buyout of the company for $65 million..