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Posts Tagged ‘Manufacturing’

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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New Castalloy workers Martin Parker, Edward Fern and managing director Michael Tamasi celebrate the Harley-Davidson news.

New Castalloy workers Martin Parker, Edward Fern and Michael Tamasi celebrate the news.

I blogged back in December 2011 (HERE) that Harley-Davidson made a decision to shift wheel and hub manufacturing from Adelaide-based New Castalloy to China.

The plant was set for closure by mid-2013.

This news hit the Australian Workers Union State Secretary and union workers just prior to the Christmas holiday and resulted in some name calling and bad blood with the motor company.

Jump ahead a 1.5 years and New Castalloy had shed approximately 90 of the 212 workers, but there was some good news this week!  Harley-Davidson reversed the decision to shutter the plant and struck a 4-year deal, on both an extension to the plant’s lease and a new wage-agreement were obtained.

It would seem logical to assume that New Castalloy greatly improved its cost structure as they are now viewed as competitive at producing low-volume, high finish wheels.  The Australian government, which owns the Mooringe Ave. plant waived rent at the site to help secure the deal.

Congrats!  I’m sure the nice folks in Adaelaid feel good knowing they’ll continue to help H-D riders around the world express their own style of freedom.

Photo courtesy of Dylan Coker.

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“It’s disgraceful, but how about the heartless timing for Christ’s sake.”  — Australian Workers Union State Secretary Wayne Hanson said to reporters.

It’s not well known, but the majority of cast wheels and hubs for Harley-Davidson motorcycles are produced in Australia and shipped to Milwaukee.  Harley acquired Adelaide-based New Castalloy in 2006 when continuity of wheel supply was an issue.  The Australian subsidiary is New Castalloy and was a long-time supplier that was on the verge of bankruptcy of its then parent company, Ion.

Now Harley-Davidson plans to shift the manufacturing to China (according to South Australian Trade Minister Tom Koutsantonis) where it will save the motor company about $9 million a year.  The decision to cease operations  at New Castalloy will effect 183 employees and 29 contract workers. Harley expects to complete the transition to “outsourcers” by mid 2013.  The company estimated the related restructuring costs at $30 million, of which $10 million will be recorded in 2011 and $20 million in 2012.

South Australian Trade Minister Tom Koutsantonis said to reporters, “To tell a group of workers before Christmas they may not have a job is insensitive and I think quite silly.”  Mr Koutsantonis also stated that the motor company had given no indication to the government of the closure and as a result were unable to provide any assistance.  The South Australian Employment Minister Tom Kenyon stated that workers would get between $3K – $5K each in job training, but he was rather candid in that there was no place for them once we’ve got them through the right training.

The Australian manufacturing sector is bearing the brunt of global uncertainty (read layoffs) and high Australian dollar.  Ever the politically correct, President and Chief Operating Officer Matt Levatich said,  “The company’s decision on wheel production follows a review of the long-term fit and competitiveness of the New Castalloy business with our strategy and was not made lightly.”

As we know and have read many times, Harley has been recreating itself as a premium brand and smaller manufacturer while trying to grow its market share outside the U.S.

Made cheaper in China might be the new corporate mantra and correct decision based on pure Wall Street math, but there can’t be much pride in that choice.

UPDATE: July 10, 2013 — Harley-Davidson reverses decision to shutter the Adelaid plant (HERE)

Photo courtesy of H-D and New CastAlloy

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Productivity.

It’s the manufacturing mantra of the corporate world.  It’s about making X number of  “widgets” an hour and reducing unplanned absences to maintain plant productivity.

Harley-Davidson’s CEO and President, Keith Wandell, told analyst during the Q4 2009 revenue results that the company intends to enhance profitability through continuous improvement in manufacturing, product development and business operations.

I would submit that H-D doesn’t have a productivity problem.  They have an absenteeism problem!  If a worker calls in sick that is considered an unplanned absent which brings down manufacturing productivity.  In fact, a company document indicates the motor company incurred some 382,000 hours of missed work time during 2009 which was worth about $13 million.  The document doesn’t state whether that number refers to the company as a whole or some other subset of operations, but we do know that one of the major considerations cited for moving the York Vehicle Operations from PA. to another state was the excessive absenteeism at the Springettsbury Township plant.

As a result of the concessions to keep the plant in York, changes in work culture and a new attendance policy was negotiated as part of the multi-year restructuring process.  A point system was created and the new policy gives an employee points or partial points for failure to appropriately report an absence in addition to the actual absence.  Now there are reports the Union (IAM) is whining about unilateral policy changes and trying to move the debate from absenteeism to policy.

Many would debate that unions cripple companies.  The debate often centers around how they are anti-technology, anti-productivity and pro-wage growth.  It’s like they live in a virtual reality world where price points, product-market pressures, and capital returns don’t matter.  The net-net is that unions are adept at demanding the highest dollar for the least amount of time worked.  And as worker costs escalate firms cut back on technology, plant investments and business process improvements.  Sound familiar?

Still don’t believe me that H-D has an absenteeism issue?  Well let’s look at the numbers.

H-D has about 9000 employees worldwide.  Taking H-D supplied numbers of 382,000 hours and divide it by the total number of employees (9000) equals 42.44 hours of unplanned absence per employee.  That’s more than one work week of absenteeism for each and every employee!  This in addition to the 15 work days of annual leave (vacation + holidays) employees typically receive in U.S. based companies.  Wow, talk about “iron-clad” benefits!  Yet, it’s actually worse because to correctly analyze the absenteeism number you need to take into account standard manufacturing practices which are based on the number of Full Time Equivalents (FTE) and available work hours a year (1928 hours) per FTE.  Calculating absence using this method means there were 198 employees (FTE) absent all year during 2009.

I don’t know if this situation is an accurate reflection of the mental state of the H-D work force or if it’s an edge case due to issues like H1N1?  However, an absenteeism rate which effects ~20% of your work force is a systemic issue and without a doubt one of the most significant factors to affect quality in an assembly line along with negatively effecting employee morale.  Let’s hope they get a handle on this issue.

Photo courtesy of Scribd.

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