Based on all the issues various members are having trying to get warranty work done, I suspect there is something else as far as the relationship between HD and the dealerships that we are not aware of.
For example, in my case, HD says it's up to the dealer to tell them they need to replace the gauge. If the dealer tells them the gauge needs replacing, they can make the call and do it. The dealership says HD has to ok the warranty before they can help me. A classic catch 22. But here's what I don't understand:
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The person you're talking to at H-D Customer Disservice is obviously a peon who is just reading from a script, or is a peon with chit for brains. The dealers don't "tell" the manufacturer what is warrantable and what is not. The warranty is from, and is controlled by, the manufacturer, not the dealer. That is true at H-D, it is true at FoMoCo where I worked for 35 years, and it is true at any company I can think of on this planet.
As for the reason why a dealer doesn't just go with whatever the customer wants, it has a lot to do with the REAL story, which is that Harley can and does refuse to pay claims after the fact. They have dealers return parts for analysis, and charge back claims where they say the part wasn't defective. It works the same way in those auto companies btw. Dealers that have a higher number of claims than the average, or higher repair costs per vehicle sold, are subject to closer scrutiny by the manufacturer. For instance, when I worked with dealerships for FoMoCo the ones that exceeded the average by a particular percentage or more were placed on "prior approval" status. They were required to get approval from their zone manager for certain repairs prior to making that repair. If I had reason to suspect fraud or just lousy diagnostics (replace a costly assembly versus find the real problem with a ten dollar sensor for instance), I could force them to wait until I went by and checked it out in person. Rumor has it that both Harley and CNA (the ESP company) are doing a lot more of this prior approval stuff these days.
While it really shouldn't even fog up, many of Harley's gauges will do that and then the fog will dissipate fairly rapidly as drier air flows through the gauge. That doesn't appear to be what's happening in the photo you posted. You have actual liquid sitting in the gauge, and that isn't going to dissipate in a short amount of time. What it will do, however, is lead to corrosion and staining of the gauge, and could ultimately cause the gauge to fail. There are folks on this site that have had major corrosion problems with gauges that Harley originally said were "normal". While poor quality is "normal" at H-D, it isn't "acceptable".
Jerry