Key developments
- S&P Global Ratings cut Harley-Davidson Inc.'s corporate rating to BB+ from BBB- and lowered the issue-level rating on unsecured debt to BB+ from BBB-.
- The ratings agency assigned a recovery rating of 3 to Harley's senior unsecured notes and removed all ratings from CreditWatch, where they had been placed with negative implications on February 11, 2026.
New guidance from S&P reflects skepticism that Harley-Davidson will return to the double-digit EBITDA-margin levels it has targeted in the near term. S&P projects the company’s adjusted EBITDA margin will sit at approximately 5% to 6% in 2026, as Harley prioritizes expanding market share through lower-priced product introductions rather than maximizing unit profitability. The agency expects operating income and margins to remain under pressure through at least 2027.
S&P's action follows Harley-Davidson's "Back to Bricks" strategic plan, unveiled in May, which centers on bringing more affordable motorcycles to market in an effort to attract new riders while pursuing improved dealer profitability. The plan includes the reintroduction of the Sportster model and the launch of a new Sprint model. According to company guidance cited by S&P, the Sportster will be positioned at around $10,000 and Sprint will be priced lower; commercial availability is slated to begin in late 2026 and continue into 2027.
As part of the transition, Harley has announced cost-reduction measures with a target of $150 million in savings. Despite that goal, S&P notes 2026 operating income will face headwinds from restructuring expenses tied to these changes. Harley reported $15 million in restructuring charges in the first quarter related to headcount reductions and employee termination benefits.
Tariff pressures are also factored into the ratings agency's outlook. S&P expects tariff-related costs on steel and aluminum to total between $75 million and $90 million in 2026, a narrower range than an earlier company forecast of $75 million to $105 million. Management anticipates the peak impact from tariffs in 2026, with the potential for relief thereafter as trade policy shifts and new exemptions for certain motorcycle parts take effect.
S&P highlighted the erosion of Harley's U.S. market share over recent years. Measured by total motorcycle registrations, the company’s U.S. market share fell to 34.5% in 2025 from 49.1% in 2019. The ratings agency projects that successful new product introductions could lift market share back toward the mid-40% range, but it did not assume such a recovery will be rapid enough to restore margins immediately.
On profitability targets, Harley-Davidson has set a medium-term goal for its operating subsidiary of 25% to 30% gross margins and 10% to 12% EBITDA margins over the next three to five years. S&P noted those targets remain below the company’s 2022 and 2023 results, when gross margin exceeded 30% and EBITDA margin was above 16%.
The ratings action also affected Harley Davidson Financial Services Inc. (HDFS). S&P lowered HDFS's short-term rating to B from A-3 and reduced the issue-level rating on HDFS medium-term notes to BB+ from BBB-.
Liquidity remains a supporting factor in S&P's assessment. Harley reported $1.8 billion in cash and cash equivalents as of March 31, 2026, and had in excess of $2 billion available under various commercial paper programs. The ratings agency cited the company's liquidity position and its commitment to keeping captive-adjusted leverage low as reasons for a stable outlook despite the downgrade.
Overall, S&P's downgrade frames a period in which Harley-Davidson seeks to trade some near-term margin performance for broader market reach through lower-priced models and dealer-focused initiatives, while managing tariff costs and restructuring charges that will weigh on 2026 results.