Economy driving Harley-Davidson cuts

January 24, 2009 at 12:00a.m.

By DAN STRUMPF

Job cuts include 800 hourly production and 300 nonproduction positions.

NEW YORK — Harley-Davidson said Friday 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 and said it is slashing motorcycle shipments in 2009 to cope with reduced demand.

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

Harley also is exiting 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,” said Jim Ziemer, the company’s outgoing chief executive, 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.

In an interview, Ziemer said about 650 of the cuts will be in Wisconsin, and more than 400 jobs will be lost at its facility in York, where its transportation operation is also based. About 85 cuts will be made at the company’s motorcycle plant in Kansas City, Mo., he said.

“Right now, it’s more fear than anything else, and consumer confidence” that’s hurting demand, Ziemer said.

The job cuts will result in one-time charges of $110 million to $140 million over 2009 and 2010, Harley said. Once they are finished, the cuts will save between $60 million and $70 million per year.

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.

Meanwhile, Harley-Davidson remains in the midst of a shake-up among top management. Chief Executive Jim Ziemer said last month he would retire in 2009, and the company remains in the process of finding a successor. Sy Naqvi, the 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.

Harley said worldwide retail sales fell 13.1 percent in the fourth quarter, with sales in the U.S. — its biggest market — falling nearly 20 percent. International sales crept higher, though, and the overall heavyweight motorcycle sales fell 25.5 percent in the same period, Harley said. For the full year, worldwide retail sales fell 7.1 percent.

Harley 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.