With Fourth-Quarter Profit Down 60%, Harley-Davidson Cutting Jobs and Closing/Consolidating Plants

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Researched by Industrial Info Resources (Sugar Land, Texas)--While the majority of the attention in the transportation manufacturing sector has been focused on the struggling Detroit Three, motorcycle makers have also been scrambling to maintain the sales and profit numbers they have become accustomed to seeing on an annual basis. Harley-Davidson Incorporated (NYSE:HOG) (Milwaukee, Wisconsin), a name and brand synonymous with the freedom on the open road associated with motorcycles, has recently announced a dramatic decrease in profit that will result in significant changes throughout its North American manufacturing operations.

Citing a 60% drop in profit during the fourth quarter of 2008, a 20% decrease in U.S. sales and a 6.8% drop in revenue, the motorcycle maker has announced that it will eliminate 1,100 jobs and will be forced to close a distribution center, as well as consolidate operations in Wisconsin and Pennsylvania. The job cuts will include about 800 hourly production positions and 300 nonproduction, or salaried, positions. The majority of the job cuts will occur in 2009, with the rest happening in 2010. About 650 of the jobs will be lost in Wisconsin, 400 will be in Pennsylvania and 85 in Missouri.

A third party will take over distribution of the motorcycles when Harley closes its Franklin, Wisconsin, distribution facility in a cost-saving move. Harley has also announced it will shrink its paint and frame operations at its York, Pennsylvania, plant and consolidate two engine and transmission plants in Milwaukee into its Menomonee Falls, Wisconsin, plant.

The worsening economy and credit crisis have hit Harley hard in recent months. With credit being more and more difficult to obtain, many potential motorcycle purchasers are either canceling plans to buy a motorcycle or postponing them. Harley's financial services division faced an operating loss of $24.9 million in the fourth quarter of 2008 and will require at least $1 billion in funding during 2009. Delinquency rates on Harley loans have been creeping higher in recent months as consumers are struggling to meet loan requirements in the current economy.

While the moves the motorcycle maker is making are distasteful, they are obviously necessary if the manufacturer expects to survive through 2009. Harley, with its image of toughness and independence, will most likely survive its current woes but it may be well into 2010 before stability is once again reached. To achieve profitability, further job cuts and payroll reductions may be necessary down the road, especially if the economy continues its downward trend.

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