Harley is riding high with lower labor costs

A year after threatening to move work out of Wisconsin and demanding major concessions from its union employees, Harley-Davidson Inc.’s profits are soaring.

The iconic motorcycle manufacturer’s remarkable recovery continued in the third quarter, as the company’s net income grew to $183.6 million, or 78 cents per share, from $88.8 million, or 38 cents per share, in the same period a year ago.

Retail sales of new Harley-Davidson motorcycles grew 5.1 percent worldwide in the third quarter compared with the prior-year period, led by a 5.4 percent rise in the United States.

The company expects to ship 228,000 to 235,000 Harley-Davidson motorcycles to dealers and distributors worldwide in 2011, including 45,500 to 52,500 motorcycles in the fourth quarter.

“We are pleased with our sustained progress and we continue to realize strong momentum in the transformation of our business,” said Keith Wandell, president and chief executive officer of Harley-Davidson.

“Two years ago we embarked on our strategy to focus solely on the Harley-Davidson brand, provide the flexibility required in today’s market and make Harley-Davidson lean, agile and more effective than ever at delivering remarkable products and extraordinary customer experiences. Today, we continue to see the positive results of the course we have charted,” Wandell said. “The changes underway in manufacturing, product development and retail capability will increasingly enable Harley-Davidson to be customer-led like never before. Harley-Davidson’s transformation involves a tremendous amount of highly complex, challenging work across every part of the organization. While much remains to be done, we are well down the road and everyone involved deserves much credit for bringing these changes to life. I continue to be impressed by the willingness of all employees, including the union leadership, to do the necessary things to transform our business to be a world class, sustainable operation.”

Contrast those statements with the ultimatum Wandell gave to Harley’s 1,400 union workers last year: “While we hope to come out of the September 13th vote with ratified contracts, if they are rejected, the board will act the following day on its previous tentative authorization to move and we will immediately move ahead with the process to relocate production operations.”

The members of United Steelworkers of America Local 2-209 in Milwaukee and Local 460 of Tomahawk and members of the International Association of Machinists Lodge 78 approved the company’s “best and final” contract that created a two-tier workforce in Wisconsin. The contract called for the hiring of seasonal employees who will be paid $16.80 an hour, compared with $30.50 (plus benefits) for regular, full-time employees. Regular employees will see no general wage increases in the second, third and fourth years of the contract. In the sixth and seventh years of the contract, wages could be increased commensurate to prevailing wages in the region.

Meanwhile, the company retains the right to terminate the “casual” employees at any time.

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