Harley Davidson, like the rest of the motorcycle industry, is having a difficult time in this economy, as reflected in their 2009 2nd quarter results, and they’re taking more steps to keep the wheels rolling. Shipment projections have been lowered and another 1000 jobs are being eliminated, 700 production and 300 non production.
No one said this would be easy, but the Motor Company is continuing to adapt to the sluggish economy while looking forward to the eventual upturn.
Press release follows:
MILWAUKEE — Harley-Davidson, Inc. reported decreased revenue, net income and diluted earnings per share for the second quarter of 2009 compared to the year-ago period.
Net income of $19.8 million and diluted earnings per share of $0.08 were primarily affected by the planned 27.6 percent reduction in motorcycle shipments compared to the year-ago period and by two non-cash charges related to HDFS: a $72.7 million credit loss provision for a one-time reclassification of motorcycle loan receivables; and a one-time $28.4 million charge to write off the total goodwill associated with HDFS.
Worldwide retail unit sales of new Harley-Davidson(R) motorcycles were down 30.1 percent compared to the year-ago quarter. Retail new Harley-Davidson motorcycle sales in the U.S. were down 35.1 percent and declined 18.2 percent in international markets compared to last year’s second quarter. Industry-wide retail sales of heavyweight motorcycles in the U.S. declined 48.1 percent for the same period.
“While the underlying fundamentals of the Harley-Davidson brand remain strong and our dealers’ retail motorcycle sales declined less than our competitors, it is obviously a very tough environment for us right now, given the continued weak consumer spending in the overall economy for discretionary purchases,” said Harley-Davidson, Inc. President and CEO Keith Wandell.
In light of the decline in retail motorcycle sales, the Company also lowered its 2009 shipment expectations for Harley-Davidson motorcycles. The Company now plans to ship between 212,000 and 228,000 Harley-Davidson motorcycles to dealers and distributors worldwide in 2009, or 25 percent to 30 percent fewer than the 303,479 shipped in 2008. Prior 2009 guidance was for shipments of 264,000 to 273,000 motorcycles. In the third quarter of 2009, the Company expects to ship 52,000 to 57,000 Harley-Davidson motorcycles.
As a result of the lowered shipment volume, the Company will implement a further reduction this year of approximately 700 positions in the hourly production workforce. Harley-Davidson will also be reducing the non-production, primarily salaried headcount by an approximate 300 additional positions, including a reduction at HDFS. The Company plans to offer a voluntary separation incentive package to eligible salaried employees. Earlier this year, the Company had announced workforce reductions totaling about 1,400 to 1,500 hourly production positions in 2009 and 2010 and about 300 non-production, primarily salaried positions.
“We continue to take these difficult actions to manage through the current challenges and we also continue to take major steps in creating the operational effectiveness that is essential to our long-term future,” said Wandell. “We are committed to doing what is required to enable Harley-Davidson to operate as a competitive business and employer over the long haul.”
Strategy for the Current Economic Environment
In early 2009, Harley-Davidson announced a three-part strategy for managing through the global economic downturn and strengthening its operations and financial results going forward. That strategy consists of: 1) investing in the brand; 2) creating the appropriate cost structure; and 3) obtaining funding to support the lending activities of HDFS.
Reductions in Harley-Davidson’s motorcycle shipment plans for 2009 reflect the Company’s intense focus on maintaining brand strength. “When it comes to protecting and enhancing the brand, managing supply in line with demand is one of the most important things we can do. We plan to ship fewer Harley-Davidson motorcycles worldwide this year than we anticipate dealers will sell at retail,” Wandell said.
At the same time, Harley-Davidson continues to make significant investments in product development and marketing, and the Company is more focused than ever on making those investments work harder and smarter, according to Wandell. “We’ve got a great lineup of motorcycles and one of our top priorities is to reduce complexity and improve efficiency throughout our product development and manufacturing processes,” said Wandell.
On July 25, 2009, Harley-Davidson Motor Company introduces 2010 model year motorcycles at its Summer Dealer Meeting in Denver.
The Company earlier this year announced plans to consolidate its two Milwaukee-area powertrain (engine and transmission) plants into one facility; consolidate paint and frame operations at its York, Pa. facilities into one plant; and close its Franklin, Wis. Parts and Accessories distribution center and consolidate those operations with General Merchandise distribution through a third-party logistics company. In April, the Company completed the transition of its U.S. transportation fleet operations to a third-party provider as part of its restructuring initiatives.
Powertrain Consolidation Accelerated. Production shutdowns and line rate adjustments will be implemented at Harley-Davidson powertrain operations in Menomonee Falls and Wauwatosa, Wis., and at motorcycle assembly operations in York, Pa. and Kansas City, Mo., to achieve the newly-announced unit volume reduction. As a result of the volume reduction and production shutdowns, the Company expects to accelerate and substantially complete the planned consolidation of the powertrain operations by mid-2010.
Sportster(R) and V-Rod(R) motorcycle final assembly operations and V-Rod motorcycle powertrain production in Kansas City, and production of Sportster motorcycle powertrains in Wauwatosa will be shut down for approximately 14 weeks in 2009, including the entire fourth quarter. The Company anticipates that other production operations will be shut down for a total of approximately five weeks over the rest of 2009.
On a combined basis, Harley-Davidson now expects the volume reductions and restructuring activities to result in one-time charges of approximately $160 million to $190 million over the course of 2009 and 2010, an increase of $40 million from earlier estimates, including $50.0 million incurred during the first half of 2009. The Company now estimates ongoing annual savings of approximately $140 million to $150 million, or $70 million greater than previously estimated, upon completion of the announced restructuring actions. Savings in 2009 are now estimated to be $70 million to $85 million.
York Study Underway. Since the announcement of the original consolidation plans in January, Harley-Davidson has determined that the Company’s York operations are not currently competitive or sustainable. The Company has undertaken a “two path” study to determine whether major, additional restructuring at York can achieve cost and efficiency targets to make the operations viable, or alternatively, whether the Company will relocate the York operations to another U.S. location. The Company expects to make a decision on the status of the York operations later this year.
Harley-Davidson continues to focus intently on the funding needs of HDFS and, utilizing a variety of funding paths, has provided liquidity for expected HDFS lending activities through the end of this year and into 2010. The Company continues to evaluate additional funding actions to diversify funding sources and balance long-and short-term HDFS debt needs, as well as provide sufficient liquidity for new loan originations.