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Posts Tagged ‘Kentucky’

The WAIT is over.

Sometimes, fame comes to York.  The famous author, John Grisham wrote about York, PA in “The Associate” as it was the main characters hometown.  In fact, many of its residents have gone on to fame.

But, in the case of Harley-Davidson the bleak economy means financial fame in York.

It’s been a rough year for the factory tour capital of the world.  After a reduction of over 600 employees earlier this year the company announced today it will keep its operations in York, after ratifying a new labor agreement with IAMAW which involves nearly a 50% cut in jobs.  Under the new agreement structure, the plant will have about 1,000 hourly workers reduced from the current level of 1,950. Of the 1,000 workers, 700-800 will be full-time unionized workers and about 200-300 will be unionized “casual” staff, who work according to seasonal demand and as managers deem.

H-D expects to have about 150 salaried employees, or a little more than half of the current number.  The company will invest about $90 million in the restructuring of the plant and expects about $200 million in restructuring charges tied to the plant into 2012.  The restructuring is expected to generate about $100 million in annual operating savings compared with the current structure.

Many claimed that H-D employees were out-of-touch with the ‘real’ work world.  But, being faced with the prospect of operations moving to Kentucky they voted to cut their workforce, change their work rules to allow managers to shift workers around to various tasks in the plant and agreed that new hires will earn significantly less.

Sure it’s a positive note in a sea of bad news, but isn’t that just the point, the plethora of bad news?  The companies statement can be read in full HERE.

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York, PA Harley-Davidson Plant

York, PA Harley-Davidson Plant

Harley announced back in May a major restructuring of its operations in York, Pennsylvania and the possible move to another U.S. location.

The two plants in York employ more than 2600 employees.  I previously posted a bit of a tongue-n-cheek letter that was picked up in the local York, PA., press which recommended H-D to consider coming to Oregon, but I never heard back from the company…

At any rate, the reasons cited (my interpretation of reports) for a potential H-D move from York were:

  1. Inefficiencies – it takes too many employees too long to manufacture a motorcycle
  2. Salaries – cost structure is too high, meaning lower wages are needed to reduce the overall cost structure
  3. Economy – declining sales mean further job cuts required as production/output needs to align with sales
  4. IAMAW – in 2007 the York plant went on strike and negotiated a 12% wage increase over 3 years.  H-D received few concessions and lost 16 production days which disrupted other assembly lines. At a time when they need to reduce the cost structure by $100M one of the largest cost contributors (wages) is set to steadily rise.
Arial of Springettsbury Township H-D Plant

Arial of Springettsbury Township H-D Plant

For those of you unfamiliar, the plant in York opened in 1973, however, some of the buildings date back to World War II.   It is the largest H-D manufacturing facility and the Softail factory recently received a $145M upgrade investment. The plants cover 230 acres and have over 1.5 million square feet under roof where the workers assemble the Touring and Softail models as well as “SE” limited production factory-custom motorcycles.  This plant also has the dubious honor of being the most visited by a sitting U.S. President  (Bush and Clinton) who’s administration’s leveraged the plant for free-trade discussions.

It’s been reported that after a week of H-D executives visiting various locations the short list was announced as four possible sites. Drum roll please…… they are:

  1. Shelbyville, Kentucky, located between Louisville and Lexington;
  2. Murfreesboro, Tennessee, located just southeast of Nashville;
  3. Shelbyville, Indiana, located southeast of Indianapolis;
  4. Kansas City, Missouri where Harley already has a major facility

It’s no accident that two of the four states (Tennessee and Indiana) vying for the new factory are right-to-work states and will have offered H-D numerous incentives to relocate.  I would imagine items like Investment Advantages which allows for the waiver on income/excise/sales taxes etc.; Enterprise Zones which provide property tax incentives or abatement; Vocational Rehab Services for employees who need relocation training etc., and the concession list surely goes on.  And at the same time officials in PA., are working feverishly to convince H-D to stay although they don’t have a blank sheet of paper to work from and it may limit what they can offer up.  In 2008, Harley employees paid over $2M in local taxes and should the plant relocate it would be a major budget hit to the municipalities.  The H-D “spin machine” continues to state that staying in Pennsylvania is the preferred option, yet in the same breath they also cite inefficiencies and cost structure issues with the York facility.

You know the mood these days isn’t just about banks or exec bonuses being Public Enemy No. 1.  I think what disturbs Americans of all ideological persuasions is the fear that almost everything, not just government, is fixed or manipulated by some powerful hidden hand, from commercial transactions as trivial as the sales of a Seahawk football ticket to cultural forces in the news media.  What this recession has crystallized for many of us is the sinking sensation that the American game is rigged — that the system is in hock to “the interests of powerful lobbyists or the “wealthiest few” who have run the “system” too long.

It’s hard to avoid the sense that H-D is wasting time trying to appease people who can’t be appeased.  Is H-D really committed to moving the York plant or is this about the art of a negotiation… where they preview and think about taking every new concession.  Isn’t it really just an indicator that any state can be punked?

York Plant photo courtesy of H-D.

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