Thursday, July 22, 2010

Harley's second-quarter income up 317% over 2009
Updated: 07/20/2010 09:25:25 AM EDT

Harley-Davidson credits cost-saving restructuring efforts such as those under way at its York manufacturing plant for boosting second-quarter income by 317 percent over last year’s numbers.

The motorcycle maker, in releasing the numbers on Tuesday, also talked about plans to spread its efficiency-increasing cuts to factories in other states.

Workforce reductions and restructuring, which started last year, could result in one-time charges of as much as $195 million in 2010, while also yielding a savings of as much as $155 million, the company said. It estimates Harley will save as much as $260 million per year after all the restructuring is completed in 2012.

York’s role in that savings meant the loss of about 1,000 jobs and other cuts the union consented to during contract negotiations last year, after the company threatened to relocate to somewhere cheaper if a deal couldn’t be reached.

The company is scheduled to begin negotiations this week with the unions representing its Wisconsin production employees, whose contract expires in April 2012.

Déjà vu: In what might seem like déjà vu to Yorkers, the company said Tuesday it plans to “close large cost gaps in its Milwaukee-area and Tomahawk production operations and improve flexibility to meet seasonal and other customer-driven production needs.

“If Harley-Davidson is unable to achieve
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those objectives through agreement with the unions by mid-September 2010, the company has said it will move Wisconsin production operations to another U.S. location,” according to the earnings report.

York plant spokesman Michael DiMauro said the changes in York are “going as well or better than we’ve hoped for.”

The staff cuts and an overhaul of the production model are proceeding on schedule, he said.

The York facility started the year with about 1,900 production employees, and that number is being whittled to between 700 and 800 by next July, DiMauro said. The York restructuring is expected to be complete by 2012.

He said he couldn’t comment on whether York’s plant is being used as a model for other facilities, but “what we’re doing here we expect will carry throughout the organization.”

Results: For stockholders, the 317 percent increase in income means earnings-per-share increased from 14 cents to 59 cents, as income increased from $33.4 million to $139.3 million.

The motorcycle maker is also beating 2009’s numbers for the first six months of the year, with income increasing 29 percent, to $208 million or 89 cents per share.

The company said the performance at its lending arm, Harley-Davidson Financial Services, contributed to the positive numbers.

HDFS reported second-quarter operating income $60.8 million, compared to an operating loss of $90.5 million for the same period of 2009.

But while the company’s making more money, worldwide retail sales of new motorcycles fell 5.5 percent in the quarter.

Pleased: President and CEO Keith Wandell said executives are pleased with the numbers because they show a moderation in the rate of decline from the prior four quarters.

For the first six months of the year, retail sales fell 10.7 percent. Wandell said conditions “will remain challenging” for sales this year, so the company will have to focus on managing supply and demand.

The company reiterated its expectation to ship between 201,000 and 212,000 motorcycles in 2010, a reduction of 5 to 10 percent from 2009.

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