Going Wholly Hog

Company profits slid 84-percent in the third quarter.

Harley-Davidson drops Buell line to focus on its namesake cycles

DETROIT (AP) — With motorcycle sales still sluggish, Harley-Davidson Inc. said Thursday it is leaving the sport-bike market in a back-to-basics strategy that focuses on its core lineup of heavyweight bikes.

The company, which reported an 84-percent slide in third-quarter profits, said it will discontinue its Buell motorcycle line and sell its MV Agusta brand in order to focus on its namesake motorcycles.

The decision to sell MV Agusta marks an about-face for Harley, which bought the Varese, Italy-based company last year for $109 million. At the time, Harley touted the purchase as an expansion into the premium sport-bike segment. Now, the company will focus on its roots: big, noisy, heavyweight hogs.

“The return that we generate from a sale of an MV Agusta or even a Buell, it’s far less than the return we get on a Harley-Davidson,” CEO Keith Wandell told The Associated Press.

The Milwaukee-based company will sell off its remaining Buell stock, including motorcycles, accessories and apparel, through its dealerships. Dealers will continue to offer replacement parts, warranties and service for Buell bikes. The line’s closing will likely result in a $125 million one-time cost, with about $115 million of that amount this year.

About 100 salaried workers and about 80 hourly positions will be eliminated from winding down Buell, with most of the cuts by Dec. 18. That comes on top of 2,400 to 2,500 job cuts announced earlier in the year. The company did not offer a timetable for selling MV Agusta.

Chief Financial Officer John Olin said Harley expects losses in the next several quarters. He said profits should be restored when the riding season begins next spring.

Shares rose $1.43, or 5 percent, to $27.69. Investors often respond favorably to restructuring moves.

Harley-Davidson earned $26.5 million, or 11 cents per share, for the period ended Sept. 27, down from $166.5 million, or 71 cents per share, a year earlier.

Third-quarter sales dropped 21 percent to $1.12 billion, but its retail motorcycle sales decline of 21.3 percent was not as steep as the previous quarter’s decline.

Results included a $14.2 million, one-time fixed- asset impairment charge for Buell and an $18.9 million goodwill impairment charge from its plan to sell off MV Agusta, which is known for its sport motorcycles.

Analysts surveyed by Thomson Reuters, whose estimates typically exclude one-time items, forecast profit of 21 cents per share on revenue of $1.1 billion.

Wandell said a bright spot for the company will be sales in emerging markets like India and China, where newly wealthy riders are looking for bigger, better bikes. Harley recently announced it plans to start selling motorcycles in India in 2010.

Harley-Davidson’s lending unit — which has been slammed by the credit crunch — posted an operating loss of $31.5 million for the quarter as it set aside more money for loan losses.

Wandell said the company plans to decide the fate of its York, Pa., manufacturing facility in December. The company has said that the plant, which employs 2,300 people, isn’t competitive. It’s considering new sites in Kentucky, Indiana and Tennessee.