Harley To Restructure York Operations

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New Labor Agreement Reached

Harley-Davidson, Inc. is going to restructure its motorcycle operations in York, Pa., now that it has reached an agreement with the union there. The seven-year labor agreement by company employees at York, this week was followed by the decision of Harley’s  board of directors okaying the restructuring plan and related funding.

The new union pact paves the way for Harley’s previously stated goal of cutting nearly half of the 2,000 non-management jobs at the plant. The company expects to employ about 1,000 full-time and “casual” workers at the plant. The operation will also employ about 150 salaried employees, compared to about 270 today. The staff cuts and other concessions were necessary to keep the company viable, said one analyst.

The new long-term agreement keeps Harley and its well-paying jobs in York. The company had been considering pulling out of York and relocating the operations to a new facility in Kentucky.

“A restructured York operation will enable the plant to be competitive and sustainable for the future, and the new labor agreement is critical to making that happen,” said Keith Wandell, president and CEO of Harley-Davidson, Inc., in announcing the company’s plans.

Tim Conder, a senior securities analyst with Wells Fargo Securities, said the decision to stay in York  will speed up the expected $120-$150 million of cost savings over the 2011-14 period, but could limit the upside of the cost savings.

The new York operation will be consolidated under one roof and focused on the core areas of motorcycle assembly, metal fabrication and paint.

When fully operational in 2012, the restructuring is expected to generate about $100 million in annual operating savings compared to the current structure, according to the company.

The company expects to incur approximately $200 million in restructuring charges related to York into 2012, of which about $100 million will be cash charges. The company also expects to make capital expenditures in connection with the York restructuring of about $90 million into 2012.

The state of Pennsylvania has committed approximately $15 million in incentives for capital improvements and training. JD

Contact me with news tips and story ideas at 952/893-6876 or joe@powersportsupdate.com

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