Harley-Davidson Inc. is starting its 115th anniversary year by announcing it will close its Kansas City assembly plant and consolidate the work in a similar facility in York, Pennsylvania.
The Milwaukee-based motorcycle maker announced the move as part of a manufacturing optimization plan that will include upwards of $200 million in restructuring costs, require $75 million in capital investment and cut around a net of around 450 positions.
Matt Levatich, Harley-Davidson president and chief executive officer, said the Kansas City plant would “leave a legacy of safety, quality, collaboration and manufacturing leadership.”
“The decision to consolidate our final assembly plants was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment,” Levatich said.
The 456,000-square-foot Kansas City plant had historically assembled the company’s cruiser and middleweight models while the 571,000-square-foot York plant produced touring and trike models. Just last year Harley announced it would move 118 jobs from York to Kansas City to bring all cruiser production under one roof.
Levatich said the decision to close the plant would eliminate about 800 jobs in Kansas City and result in the addition of about 450 positions in York.
He said the decision would reduce Harley’s overall capacity but should leave the company’s manufacturing footprint in a good position for the next decade.
“We’re investing in York, not just closing Kansas City,” Levatich said.
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Harley is also closing its wheel production facility in Adelaide, Australia, eliminating about 100 positions there.
The restructuring plan will generate $65 million to $75 million in annual savings after 2020 and a total of $70 million to $80 million over the next three years.
After shipping 241,498 motorcycles worldwide last year, the company is projecting it will ship 231,000 to 236,000 this year, a 2 percent to 4 percent drop. The company shipped nearly 350,000 motorcycles in 2006 and the most recent peak of 270,000 came in 2014.
“We don’t expect a reprieve from the challenges in the U.S. motorcycle industry,” Levatich said.
The company is expecting an uptick in international sales this year after seeing a decline in 2017.
Harley reported a 10.7 percent increase in overall revenue for the fourth quarter of 2017, reaching $1.23 billion. Shipments of motorcycles were up by 11.3 percent to 47,198, but retail sales were down 9.6 percent. Net income was down from $47.2 million to $8.3 million after a $53.1 million tax write down related to tax reform.
While Harley’s fourth quarter revenue showed improvement over last year, motorcycle and related product revenue was down 6.7 percent for the year to $4.92 billion. The decline marked the third straight year of motorcycle revenue decline and the first time the segment dipped below $5 billion since 2012.
Financial services continued a trend of increased revenue in recent years, but it was only enough to offset the decline by about $7 million
Net income for the year was down nearly 25 percent to $521.8 million.