Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation and Other Claims – The Company is subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.

Supply Matter – During the second quarter of 2022, the Company received information from a third-party sub-supplier concerning a potential regulatory compliance matter relating to the sub-supplier’s brake hose assemblies. As a result, out of an abundance of caution, the Company suspended all vehicle assembly and shipments (excluding LiveWire models, which did not utilize the brake hose assemblies at issue) for approximately two weeks during the second quarter of 2022. Since then, the Company has been working through the regulatory compliance matter with the sub-supplier, the Company’s relevant Tier-1 suppliers, and the National Highway Traffic Safety Administration (NHTSA), which is the agency responsible for brake hose assembly compliance in the United States.

In connection with this matter, in July of 2022, the sub-supplier notified NHTSA of a population of brake hose assemblies that were potentially non-compliant with select NHTSA laboratory test standards. Based on that filing, in August, the Company notified NHTSA of the corresponding population of Harley-Davidson motorcycles containing those brake hose assemblies. In October, the sub-supplier submitted an amendment to NHTSA expanding its population of potentially non-compliant brake hose assemblies to include units produced by the sub-supplier for use in the Company’s motorcycles beginning as early as model year 2008. In December, the Company supplemented its August notification, expanding the population of motorcycles to include all Harley-Davidson motorcycles that contained the newly identified brake hose assemblies. No LiveWire motorcycles are included in these populations.

As permitted by federal law, both the sub-supplier and the Company leveraged NHTSA’s standard process to petition the agency for a determination that the potential non-compliance is inconsequential to motor vehicle safety. If NHTSA grants the Company’s inconsequentiality petition, the Company will be exempt from conducting a field action or a recall of its motorcycles related to this matter.

In its inconsequentiality petition, the Company presented NHTSA with: (1) extensive independent, third-party and internal testing demonstrating that the brake hose assemblies at issue are robust to extreme conditions - which far exceed maximum expected motorcycle lifetime demands - with no impact to brake performance; and (2) real-world field safety data showing no documented crashes or injuries attributable to the laboratory test potential non-compliance at issue. The Company believes its petition is closely comparable to inconsequentiality petitions NHTSA has granted in the past. The Company is also confident that it has presented a strong position that the potential noncompliance is inconsequential to motor vehicle safety and, therefore, no field action or recall is necessary.

Based on its expectation that its petition will be granted, the Company does not expect that this matter will result in material costs in the future and no such costs have been accrued to date. However, it is possible that a recall or field action could be required that could cause the Company to incur material costs. There are several variables and uncertainties associated with any potential recall or field action that are not yet known including, but not limited to, the population of brake hose assemblies and motorcycles, the specific field or recall action required, the complexity of the required repair, and the number of motorcycle owners that would participate. Based on the Company’s information and assumptions, it estimates the cost of a potential recall or field action, if it were to occur, could range from approximately $200 million to $400 million, and the Company would seek full recovery of that amount.