Harley cutting nearly 300 positions company-wide as U.S. sales fall

Up to $25 million planned for employee separation, reorganization

Harley-Davidson headquarters
Harley-Davidson Inc.'s headquarters in Milwaukee.

Milwaukee-based Harley-Davidson Inc. plans to cut 225 salaried employees and 70 contractors as part of an effort to streamline operations in light of continued slower growth in the industry.

Harley-Davidson headquarters
Harley-Davidson Inc.’s headquarters in Milwaukee.

“As we look to become leaner and more focused we will lose some of the contingent workforce that we have working here and unfortunately we will also lose some of our full-time employees,” said John Olin, Harley chief financial officer, during the company’s earnings call.

Spokeswoman Maripat Blankenheim said the cuts would be company wide and she could not quantify how operations in the Milwaukee area would be affected.

The company said it will incur $20 million to $25 million in costs from employee separations and reorganization. Olin said the company does anticipate a savings of $30 million to $35 million in 2017  from the restructuring, which he said would be used to protect Harley’s margins and continue increased spending on marketing to drive demand.

Harley previously announced layoffs for 200 hourly and union workers

Harley reported $114.1 million in net income during the third quarter an 18.7 percent drop compared to the prior year. Earnings were down from 69 cents to 64 cents per diluted share, with about 25 million fewer shares outstanding.

Motorcycle and related products revenue was down 4.3 percent to $1.1 billion, while financial services revenue was up 3.4 percent to $183.2 million.

Worldwide retail sales of motorcycles were down 4.5 percent in the quarter to 68,955, including a 7.1 percent drop in the United States.

“We continue to effectively navigate a fiercely competitive environment and an ongoing weak U.S. industry,” said Matt Levatich, Harley president and chief executive officer. “We are pleased with the positive results and the enthusiasm we’ve seen for our Model Year 2017 motorcycles, featuring the new Milwaukee-Eight engine.”

The company said that after a weak July and August, U.S. sales were up 5 percent in September. The strongest gains were made in the touring models, which include the new engine.

Harley has been challenged in recent years as competitors have discounted their motorcycles in an attempt to take market share. The challenges have been compounded by weakness in the economy, particularly in oil dependent parts of the United States. The company said sales were down 15 percent in those areas during the quarter.

Both Levatich and Olin said the company was pleased with its performance for the quarter.

“We believe we’re on the right course and making prudent decisions for the future,” Levatich said.

Dealer inventory of new motorcycles was up about 9,700 compared to last year, which the company attributed to weak summer sales and the initial delivery of 2017 model year motorcycles.

Olin said the company is seeking to help dealers reduce inventory through financing, extending warranties over the winter and defraying costs as dealers trade motorcycles to meet customer demand.

He also said the company plans to slow production in the fourth quarter so inventories end up flat for the year.

Despite sales being down, the company maintained its full-year guidance calling for shipments of 264,000 to 269,000 motorcycles.

Harley expects international sales will help balance out some losses in the U.S., including the opening of 16 new dealerships and reentering the Indonesian market. The openings would give Harley 36 new international dealerships during the year. The company hopes to add 150 to 200 by 2020.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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