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 life in a 10x15 foot shed in the Davidson family's backyard in Milwaukee, Wisconsin. This case was prepared by Colorado State Professor Patricia A. Ryan. This case has been modified for 5MBP and Cases in 5MBP-9th and 10th editions. Copyright holders are solely responsible for the content of the case. Copyright @2002 and 2005 by Patricia A. Ryan and Thomas L. Wheelen. Reprint permission is granted exclusively 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 copyright holders , Patricia A. Ryan and Thomas L. Wheel it. Any other publication of the case (translation, any form of electronic or other media) or sold (any form of partnership) to another publisher will violate copyright law, unless Patricia A. Ryan and Thomas L. Wheelen have granted a further written permission to reprint. In 1903, three motorcycles were built and sold. Production rose 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., an industrial and recreational products conglomerate, acquired Harley-,/Davidson. The management team expanded production from 15,000 in 1969 to 40,000 motorcycles in 1974. AMF prioritized short-term profits instead of investing in research, development, and retooling. During this period, Japanese competitors continued to improve the quality of their motorcycles, while Harley-Davidson began producing machines that were noisy, oil-leaking, highly 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 that market segment for years. There was a $2,000 price difference between Harley's top-of-the-line motorcycles and Honda's comparable Gold Wing. This caused American motorcycle buyers to begin switching to Japanese motorcycles. Japanese companies (Suzuki and Yamaha) from this period through the mid-1980s continued to enter the custom heavyweight market with Harley lookalikes. During AMF's period of ownership of the company, motorcycle sales were strong, but profits were weak. The company had serious problems with poor quality production and strong Japanese competition. In 1981, VaughnBeals, then head of the Harley division, and 13 other managers conducted a leveraged buyout of the company for $65 million..