Harley-Davidson continues to misfire, will cut 1,000 more jobs
The company reported earnings of only $0.08 a share for the quarter, down from $0.95 a year ago, when the wheels were already starting to come off the corporation. It has dropped its projected sales for the year from 264-273,000 to 212-228,000. The company shipped 349,196 bikes in 2006.
Harley has also announced a further reduction in its workforce, as another 1,000 will join the 425 cut in January and 90 in April. Widespread temporary shutdowns are scheduled throughout the company this fall and winter, as well.
New CEO Keith Wandell is also engaged in a dance with the union at the company's York, Penn. complex, which he says may or may not close. One determining factor is the willingness of workers to compromise on issues such as inflexible overtime rules. The union contract is up early next year, and Wandell is looking for $100 million in cost savings from the York operations overall. I think the handwriting is on the wall, and it isn't a joyful message for York workers.
The company has already taken steps to consolidate other operations, especially in its home state of Wisconsin. Troubling for other HOG workers is the prospect that the company may outsource the manufacture of some parts currently made in-house. Harley suffers a competitive disadvantage here from its strong identification as an American machine. Jobbing out large parts of the bike manufacturing to China or other lower-cost locations is not an option the way it is for Honda, Yamaha, Kawasaki and Suzuki.
The company had hoped to move some iron this spring by pushing its introductory model, the Sportster, with a guarantee to take it back at full value as a trade-in later for a more expensive model. Apparently, despite the economy, riders weren't interested in an Econo-Hog.
Harley-Davidson Financial Services took a huge hit this quarter, writing off $28.4 million in loans and taking a $72.7 million credit loss provision to re-classify motorcycle loan receivables.
Harley is also handcuffed by a narrow line of bikes, virtually all heavyweight cruisers with the exception of the weak Buell brand of sport bikes. It has no presence in the off-road and motocross markets.
Harley's dealer network must be very unhappy as well. In the past ten years, at Harley's insistence, its dealers have upgraded facilities and established Rider's Edge motorcycle training classes. Consequently, many now carry a much higher overhead that in the days of the neighborhood shop.
And yet, the stock has been gradually creeping up from its 52-week low of $7.99 to $18.73 on Friday morning. Go figure. The company changed CEOs recently in hopes of turning the company around; at the moment, however, prosperity continues to grow smaller in its rear-view mirror.
Tom Barlow is a former Membership Development Director for the American Motorcyclist Association. He owns a tiny, tiny piece of H-D.