Harley shuts plant as headaches worsen
A DEEPENING slump in US motorcycle demand is spurring more job cuts and a plant closure at Harley-Davidson Inc., a company President Donald Trump has cast as a model American manufacturer.
The Milwaukee-based motorcycle maker will close its factory in Kansas City, Missouri, and consolidate production in York, Pennsylvania. The restructuring will eliminate about 260 US jobs, Chief Executive Officer Matt Levatich said on a conference call. Trump praised the company last year as a “great example” of a business creating jobs and building factories in the country.
Harley is consolidating its US manufacturing presence as its bike sales fall on every continent. And the pain won’t end this year: The company projected global sales will drop as much as 4.9 per cent more in 2018 after a 6.7 per cent decline last year.
US motorcycle ridership has stalled in spite of Levatich’s efforts to introduce models for first-time buyers and teach more Americans how to safely get around on bikes. Harley shares
Harley can’t get younger people into the hobby and the bikes are too big to be transportation in Europe or Asia. That future is really dark. Kevin Tynan, a Bloomberg Intelligence analyst
fell as much as 9.4 per cent in New York, the biggest intraday drop since July.
The issue for investors isn’t the fourth-quarter miss, which was complicated by a number of one-time items, David Beckel, an analyst with Sanford C. Bernstein & Co., said in a note to clients.
“The story is, or continues to be, that Harley is in the throes of a significant secular decline,” he wrote.
Sales in the crucial US market fell 11 per cent in the fourth quarter and 8.5 per cent for the year. Harley executives said they’re drawing more consumers to their brand, but couldn’t say during the call with analysts how many are buying used instead of new bikes.
As bike demand weakens, one of Harley’s rival brands is calling it quits. Polaris Industries Inc., which started winding down its Victory motorcycle operations early last year, projected adjusted profit of as much as US$6.20 a share for 2018, well below analysts’ US$6.99.
The Kansas City plant closing will cost Harley as much as US$200 million through 2019, then result in annual cash savings of US$65 million to US$75 million after 2020. Unions representing Harley workers accused the company in September of trying to “systematically dismantle” its hourly workforce.
Harley reported profit of 5 cents a share in the last three months of the year, well below the 46 cent average analyst estimate.
“Harley can’t get younger people into the hobby and the bikes are too big to be transportation in Europe or Asia,” Kevin Tynan, a Bloomberg Intelligence analyst, said in an email. “That future is really dark.”