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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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GTOI’m fascinated by the rapid decline of the American car industry. 

And given Harley-Davidson’s consideration of closing its main assembly facility in Pennsylvania and moving production elsewhere is it déjà vu all over again?  GM and Chrysler went through the same China and Mexico facility debate to lower cost and cope with sales downturns now H-D wants the same experience?!  Huh?

A couple weeks ago there was an interesting article in “New York Times” on the GTO.  I recall hearing the Ronny & The Daytona’s song, but didn’t truly appreciate the “goats” until several years later when the Pontiac was a sleek ride on the boulevard.  At the time I had no idea that Jaguars were an exclusive make.  I’d see an XKE now and again, but if you wanted a real car, a hot rod, one that sparkled in the sunlight and impressed the girls, you got an American car.

In our family we had an string of American cars.  Trained as an engineer, my dad started off with GM/Chevy.  He purchased a sporty rear-engine Corvair Monza that caught fire on the way home from the dealership, but that’s what the brand stood for, great engineering.  There were several models purchased after, but not before the in-line six cylinder C-10 Chevrolet pickup that we must have drove 89,000 miles.  No matter how hard it was driven it got 9 MPG’s!  I remember a partially dismantled block in the driveway at one point theorizing how to boost the gas mileage with a timing belt change. At the end of the sixties and armed with a premonition of gas station lines my dad purchased a new 1970 Toyota Corona.  A Canary Yellow practical four door for a family of four with a dog.  A 1900cc (1.9L) 4 cylinder (3R-C) engine with a 2-speed Toyoglide automatic transmission.  After that Corona purchase I don’t remember much in the way of American car’s in our family.

My love affair with the automobile was not that much different from what I suspect was many of yours.  I studied “Car and Driver.”  I debated buddies what machines we were going to own.  Had friends with Cuda’s and “Stangs.”  But with the early-70’s oil embargo, Yom Kippur War and then later on with Jimmy Carter inflation and national energy policies… I went foreign and never looked back.   People made fun of that Fire Engine Red Corolla that looked like a thirty year old vehicle, even though it was brand new.  But then almost overnight the Datsun 510, 240Z and Celica converted the masses.  Who knew driving could be so much fun?

The usual suspects at GM have run that outfit into the ground.  And it’s hard not to compare analogies to the current state of the Harley motorcycle business.

Detroit said it was just giving the public what it wanted.  So let’s slap the backs of all those Detroit execs for ignoring the coming rise in the price of oil, the environmental concerns and just sell more SUVs.  It’s taken years.  But the Harley-Davidson world seems to be in a similar place as Detroit.  After years of coasting, it’s collapsing, and it’s not sure what the path out is.   Could it be that the blame lies on the pros who drove the business to the cliff, milking millions all the way, believing they’re entitled to their riches?  Is it union busting or “negotiation tactics?”  Where is the next act that H-D can rally around and declare great?  Not marketing noise.  Or accountant speak….like saying Britney might book revenue, but you’ll have a hard time finding any believer in her music.  Her music is not seen as necessary to most people’s lives.  It’s too discordant, or made for the cash register, not humans.  

Be it GM, H-D or Britney…until they change the product, we’ll remain in the doldrums.  It can be done, but only if the execs stop worrying about their lifestyle and get honest.

Photo courtesy of NYT.

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