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Posts Tagged ‘Layoffs’

screen-shot-2017-01-09-at-11-15-09-amPolaris, the MN-based maker of motorcycles and all-terrain vehicles announced today that it’s winding down the Victory brand effective immediately to concentrate on its better-performing Indian Motorcycles business.

Polaris said it will assist dealerships in liquidating inventory and will supply parts for another 10 years and honor warranties in place.  Victory motorcycles are primarily manufactured in Spirit Lake, Iowa.

The first Victory motorcycles rolled out in 1998, yet never took much market share from Harley-Davidson Inc., in the cruiser-bike category. Indian Motorcycles, which Polaris relaunched after a 2011 acquisition, has performed better, however Harley’s market share remains at 48 percent to Indian’s 3 percent.

Polaris Industries Chairman and CEO Scott Wine stated, “This decision will improve the profitability of Polaris and our global motorcycle business, and will materially improve our competitive stance in the industry. Our focus is on profitable growth, and in an environment of finite resources, this move allows us to optimize and align our resources behind both our premium, high performing Indian Motorcycle brand and our innovative Slingshot brand, enhancing our focus on accelerating the success of those brands. Ultimately this decision will propel the industry-leading product innovation that is core to our strategy while fostering long-term growth and increased shareholder value.”

Photo courtesy of Victory/Polaris.

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Brace

News about Harley-Davidson during the month of August has been a bit of a wild ride.

There was the consent decree and $15M settlement with the EPA. Then the announcement that Harley expanded the list of bikes on recall that may have been built with defective hydraulic clutch systems.  Then the biggest engine-product launch for the company since 1988, when the Twin Cam made its debut.

And now today, the day before the Milwaukee Rally kicks off, Harley-Davidson announced that approximately 200 employees will face layoffs starting in October as the company adjusts motorcycle production due to slower sales.

According to various news reports including Rick Barrett, of the Milwaukee Journal Sentinel, the union stated many of the layoffs will take place at Harley’s assembly plant in York, Pa., and some will occur at the engine plant in Menomonee Falls, where the company employs approximately 1,000 people, as well as in Tomahawk.

Given that the Sturgis Motorcycle Rally attendance was down roughly 40% from a year ago (some of which was expected), suggest that some riders are busy doing other things than throttling down rural America’s roads to a rally which makes the launch of its Milwaukee-Eight engine motorcycles key to amp up any new motorcycle sales.

Photo courtesy of Sturgill Simpson Video.

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HDFS_CarsonCityThe eastern slope of the Sierra Nevada mountains offer motorcycle enthusiasts an interesting blend of motorcycle rides and some of the best scenery in the west.

Unfortunately, Northwestern Nevada is also the location of Harley-Davidson Financial Services (HDFS) who took quick action after the parent company, Harley-Davidson, posted disappointing Q2’09 financial results.   More than 100 employees were laid off of which many came from the facility in Carson City, NV.

HDFS provides financing for H-D dealers to buy inventory for their showrooms as well as loans for customers who are buying motorcycles.  The Carson City facility is co-located on the Western Nevada College campus and one of the largest HDFS facilities.  H-D negotiated a $750K tax break with the Nevada Commission on Economic Development and opened the new 100,000 sq-foot-office in 2005.  Laurie Cole (Director of HDFS Communications) stated that HDFS has 770 employees with the largest number based in Carson City and there were now ~300 employees remaining at the Arrowhead Drive office.

The economic changes have been dramatic and it’s a difficult time for the folks who have made this beautiful area their home.  The process of making H-D leaner and more efficient is filled with painful actions effecting really good people.  H-D is a good company that will continue to deliver great products. It may not feel like it today, but motorcycling enthusiasts around the world are counting on you to bring us the products we want and need in the future.

Photo courtesy of H-D and WNC.

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shred_dollarNot to buzz kill the summer riding season, but the current recession is the longest we’ve seen in the post-war period. 

Inclusive of the current downturn, there have been 11 recessions since WWII.  Having officially started in December 2007, this month marks the 19th month of the current “slump.”

As you would expect, cut-backs in consumer spending are visible throughout the economy (see below chart) and Harley-Davidson has felt the weight of the “great recession” too.  The company released its Q2’09 results today and worldwide retail unit sales of new H-D motorcycles were down 30.1% compared to the year-ago quarter. Retail new H-D motorcycle sales in the U.S. were down 35.1% and declined 18.2% in international markets compared to last year’s Q2.  On a “positive” note the company’s earnings were $19.9M on $1.15B revenue and industry-wide retail sales of heavyweight motorcycles in the U.S. declined 48.1% for the same period indicating that H-D performed better than its competition.

In his first quarterly report to the investment community as the new President and CEO Keith Wandell stated:

“While the underlying fundamentals of the Harley-Davidson brand remain strong and our dealers’ retail motorcycle sales declined less than our competitors, it is obviously a very tough environment for us right now, given the continued weak consumer spending in the overall economy for discretionary purchases.”  Wendell went on to say: “We plan to ship fewer Harley-Davidson motorcycles worldwide this year than we anticipate dealers will sell at retail,” which is meant to protect the brand.

consumer_spendingDue to the declines in retail motorcycle sales, the Company has lowered its 2009 shipment expectations by 25-30%.  Because of the lowered shipment volume, H-D announced further headcount reductions of approximately 700 positions in the hourly production workforce and 300 positions in non-production, primarily salaried headcount, including some at HDFS. This is in addition to the previously announced reduction of ~1200 positions bringing the total reduction to approximately 2,200.  H-D started the year with 10,100 employees and of course H-D shares rise on news of the additional layoffs.

Looking forward, the company will introduce its 2010 models on July 25th at its Summer Dealer Meeting in Denver.  I wonder if it’s time again for import duties or a Motorcycle Czar?  For now let’s just hope for a great lineup of motorcycles that will create some riding buzz and motorcycle passion!

Photo and chart courtesy CEA.

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amf-hdThis year marks a couple of interesting historical points on the Harley-Davidson calendar.  It’s coincidental that 2009 marks the first time a non-motorcycle riding enthusiast (CEO, Keith Wendell) was hired to run the company, and this occurred exactly 40 years after Harley-Davidson merged with American Machine and Foundry Company (AMF).  I don’t know if that is ironic or just business karma?!

At any rate, back in 1965 Harley-Davidson went public when the two families decided to give up control and put the company’s shares on the market.  Four years later, in January 1969 it merged with AMF.  The AMF merger started in 1968 when HD was looking for someone to buy the company.  In May of that year Bangor Punta (BP)** stepped in with an offer of $27 per share.  The HD board was skeptical of BP’s reputation and tenacity in pursuing acquisitions.  They continued to shop the company around.  In October they announced that AMF had struck a deal (at $29) and then a bidding war erupted.  Finally on December 18, 1968 there was a shareholder’s meeting to vote on the AMF merger at $40 per share which was $9 less than the BP offer.  The HD board like AMF’s motorcycle fanboy, Rodney C. Gott, and believed AMF had better alignment.  It was approved and in January 1969 the acquisition became final. 

hd-cartAt the time of the AMF merger, Harley-Davidson was producing 14,000 motorcycles per year.  AMF used the merger as a marketing opportunity to slap the Harley logo on many non-motorcycle-related things they produced, such as their golf carts. Management at HD was overrun by AMF personnel and they streamlined production, and slashed the workforce. The tactic resulted in a labor strike and lower quality motorcycles. The bikes were expensive and inferior in performance, handling, and quality to Japanese motorcycles. Sales declined, quality plummeted, and the company almost went bankrupt.

The marriage between motorcycles and one-time tobacco production equipment company lasted but 12 years.  The 1981 recession severely threatened HD’s share of the market for heavyweight bikes and AMF began to lose interest in keeping the struggling business afloat.  Then Vaughan Beals – who had joined HD in 1975 as VP – and a group of 13 HD exec’s raised $100M and bought the company for $81.5M from AMF on June 16, 1981 and restored the company to an independent status. The marketing phrase “The Eagle Soars Alone” became a rallying cry.  In 1986, HD again went public.

Given that HD is laying off and previously asked the union to approve wage cuts and reduced benefits for everyone in exchange of factory expansion… it’s easy to draw a parallel toward the AMF days?  What do you think?  Will HD roll strikes during this economic recession or gutter balls?

**Bangor Punta Corporation (abbreviated BP and was traded on the NYSE under BNK) was an American conglomerate and Fortune 500 Company from 1964 to 1984. It owned a number of well-known companies primarily in the pleasure craft, firearms and general aviation industries.

Photo courtesy HD.

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In what seems like the year of voting…I’ve been debating with myself over the last couple days whether or not I should write this post and then I saw some news on Harley sales. Obviously, I outvoted myself and wrote it!

This week the Pope is in Washington, DC., and since the Catholic Church is partly based on symbolism, it’s only fitting that one of America’s most iconic rides – the Harley motorcade – be symbolized too. As thousands of people greet Pope Benedict XVI and he’s schmoozed by President George W. Bush – the Police “Motorcycle Team” always stands ready as a precision motorcycle-cade team made up of officers from all the various Enforcement Groups there to Protect and Serve the dignitaries.  Canada has a similar team.

Given all the symbolism, I found it so very ironic that Harley Davidson decides today is the perfect time to announce that it will cut its work force by 8 percent and trim bike shipments by thousands since domestic sales fell nearly 13 percent in Q1.  These announced layoffs are dramatic and the first of this magnitude in 20+ years! 

It’s no surprise that Harley CEO Jim Ziemer might have something to say about the difficult economy…ya, think Jim?  Could that housing market implosion have anything to do with people no longer pulling equity out of their homes to finance Harley’s over priced “Surrender Your Inner Badness” or “March Badness” hype?!!  Two carnies and a pygmy pony could stomp out better marketing slogans than that.

I’m not sure about you, but I think a new $21K motorcycle (plus another $5K to make it run “nice”) is something people think twice or three times about.  I’ve blogged about arrogant dealers in the past who think people fall over themselves to spend that kind of cash, but with that easy equity cash bucket from the house gone, I think people will either hold on to their current bike for a little while longer or just wait out the “R” (recession thrash-n-crash) until the economy warm up a bit.

I read in several reports that Harley-Davidson has approx 5,600 production workers and 3,500 non-production workers.  Eight percent is approx 800 people impacted by this “downsize” decision and I truly feel sorry for each and every one of those cuts.  I work in an industry that routinely whacks-n-hacks a few thousand heads before morning smoke break so, I know the feeling….

It’s a difficult economic time my friends, but hang in there.

 

Photo courtesy of Philliefan99

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