York factory to feel Harley cutbacks

The Baltimore Sun

Harley-Davidson Inc. said yesterday that it will cut 1,100 jobs over two years, close some facilities and consolidate others as it grapples with a slowdown in motorcycle sales.

The Milwaukee-based company also reported its fourth-quarter profit fell nearly 60 percent to $77.8 million, and said it is slashing motorcycle shipments this year to cope with reduced demand.

The motorcycle maker said it will consolidate two engine and transmission plants in Milwaukee into a suburban facility there. It will shrink its paint and frame operations at its York, Pa., plant and close its distribution facility in Franklin, Wis., whose duties will be handled by a third party.

Harley also is ending its domestic transportation operation - its fleet of long-haul truckers who transport parts between manufacturing facilities - and outsourcing duties to a third party. The cuts make up slightly more than 10 percent of the company's total work force.

"Harley-Davidson is not immune to the current economic conditions," Jim Ziemer, the company's outgoing chief executive, said in a conference call. "We're going to show great discipline in protecting the value of the brand."

The company said the cuts include 800 hourly production positions and 300 nonproduction, mostly salaried positions. It said 70 percent of the job cuts will occur this year and the rest in 2010.

"Right now, it's more fear than anything else, and consumer confidence" that's hurting demand, Ziemer said.

Harley has been stung by the rapid downturn in motorcycle demand. The economic recession has prompted many consumers to put off purchases of its high-end bikes, while the credit crunch has kept some would-be customers from obtaining financing.

List prices for Harleys range from $6,999 to $35,499. It's the world's largest seller of cruisers, models for leisure riding that are often equipped with engines 1000cc or larger, chrome exhaust pipes and 1950s styling.

"It's industrywide," said Robin Diedrich, senior consumer analyst for Edward Jones. "It's the global economy that's impacting discretionary items, especially something that's as discretionary as a motorcycle."

Meanwhile, Harley-Davidson remains in the midst of a shake-up among top management.

Chief executive Ziemer said last month that he would retire this year, and the company remains in the process of finding a successor. Sy Naqvi, head of Harley's troubled financial services arm, resigned earlier this month. Chief Financial Officer Tom Bergmann has taken on Naqvi's old duties until a replacement is found.

Ziemer said the board of directors remains on track in its search for his successor, adding that he is committed to staying on the job until the search is complete.

Harley said worldwide retail sales fell 13.1 percent in the fourth quarter, with sales in the United States - its biggest market - falling nearly 20 percent. International sales crept higher, though, and overall heavyweight motorcycle sales fell 25.5 percent in the quarter, Harley said.

For the full year, worldwide retail sales fell 7.1 percent.

Harley-Davidson said it is slashing new motorcycle shipments in 2009 to between 264,000 and 273,000 to cope with the down market. That would be a drop of 10 percent to 13 percent from a year earlier.

In 2008, Harley said it shipped 303,479 new motorcycles, down 8 percent from 330,619 new motorcycles in 2007.

Shares of Harley dropped 90 cents, or 7 percent, to $11.50 yesterday, after hitting a 52-week low of $10.07 earlier in the session. The stock is down 69 percent for the past 52 weeks.

The Associated Press and Bloomberg News contributed to this article

job cuts

Harley-Davidson Inc., the biggest U.S. motorcycle maker, said it will cut 1,100 jobs and close three facilities to save at least $60 million a year. Among the cuts:

* 400 jobs will be lost at its York, Pa., facility, where its transportation operation is also based.

* 650 of the cuts will be in Wisconsin, where the company is headquartered and has engine and transmission plants.

* 85 cuts will be made at a motorcycle plant in Kansas City, Mo.

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