Harley needs $120 million in annual cost savings to fuel growth

Company focused on cost of goods, SG&A

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

Last updated on May 14th, 2019 at 05:29 am

Milwaukee-based Harley-Davidson Inc. plans to take up to $550 million in costs out of its business over the next five years to fund its plan to grow revenue by up to $1.5 billion.

John Olin, Harley chief financial officer, said the company would seek to take about $120 million in costs out of the business annually.

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

About 65 percent of those savings will come from reductions in cost of goods sold, Olin said. Specifically, the company will emphasize “design to value” by engineering improved products that cost less, supply chain efficiencies through collaboration with vendors and a new distribution center in China that will cut costs to ship in Asia.

The remaining 35 percent will primarily come from reductions in selling, general and administrative costs. Olin said the reductions would primarily come from corporate services.

A slide presentation detailing Harley’s plans also points to automation and continuous improvement as a source of potential savings.

The $450 million to $550 million the company needs to save to fund its growth plan is on top of a previously announced manufacturing optimization plan launched earlier this year. Harley is in the process of closing its Kansas City assembly facility, shifting the work to York, Pennsylvania.

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Arthur Thomas
Arthur covers manufacturing for 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.