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Posts Tagged ‘Springettsbury Township’

Humpty Dumpty Prevention Program

Most chief executives are entering 2011 with big decisions to make—especially how to revive sales.

But, some have deeper problems to address.  Facing down “significant cost, efficiency and production flexibility gaps” as well as fierce competition for some, such as Harley-Davidson who last November told Kansas City union officials that it might move operations to Harley’s Springettsbury Township plant if a contract wasn’t ratified by early March.

Well it’s March and their “no blink” management style resulted in the members of the International Association of Machinists and Aerospace Workers Local 176 and United Steelworkers Local 760 not letting “Humpty Dumpty” fall.  They ratified a contract by a vote of 467 to 185 and the new labor agreement takes effect in August.

The “fall prevention program” has been implemented and proven to be an effective tool in the loss of all jobs in Kansas City.  Congrats to Local 176 and Local 760.  The new contract is a 7-year deal that, when implemented, will result in the Kansas City plant having about 540 full-time, hourly unionized employees compared with about 685 today.  Yes, it’s a loss, but it does keep many high-paying manufacturing jobs in Kansas City and brings all H-D plants under one umbrella for production flexibility.  The company stated that the new contract, which will be implemented in phases, will result in about $15M in annual savings starting in 2013.

To all the folks who railed on my public union previous blog post, you see private unions have to adjust to economic conditions.  Unlike the Wisconsin public union members who have protested for days because they have been ask to pare back their benefits, Harley-Davidson has budgetary constraints that can’t be fixed by raising taxes. If we used the public union mentality I suspect they would ask Harley-Davidson to respond by raising prices and demand that motorcycle enthusiasts just pay more for a scooter instead of buying something else?

And if all that wasn’t enough… this item falls into the “what were they were thinking” category… I read that in Minnesota a local pipefitters union has purchased the Hillcrest Golf Club in St. Paul, paying $4.3M – yes, you read that correct at $4.3M – for the private club and vowing to keep it private for at least two years.  That does a lot for the unions  being frugal perception…

Photo courtesy of NYTimes.

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H-D announced a recall order that according to the National Highway Traffic Safety Administration (NHTSA) could affect up to 111,569 motorcycles.

Touring motorcycles are manufactured in York County, PA at the Springettsbury Township plant which has been under a lot of pressure to ratify a new labor agreement.  More information HERE on the approval of that agreement.  In addition, H-D announced this week that effective December 16, 2009 Ed Magee would be general manager of the plant replacing Fred Gates who will retire in 2010.

The NHTSA Campaign ID number is 09V457000 and the component effected is the gasoline storage tank assembly/mounting.  The front fuel tank mounts may distort in reaction to severe frame damage from a frontal collision which in turn may cause a fuel leak at the weld of the front bracket to the tunnel.  The result could lead to a fire.  Dealers will install a left and right brace which is intended to reduce front mount distortion during certain crash conditions.  The repair is free of charge and the safety recall is expected to begin on or about December 14, 2009.  Owners can contact H-D at (414)343.4056 or the NHTSA at (888)327.4236.

The models effected are:

  1. All 2009 – 2010: FLHP; FLHPE; FLHR; FLHR SHRINE; FLHRC; FLHT; FLHTC; FLHTCU; FLHTCU SHRINE; FLHTCU W/SC; FLHTCUTG; FLHTP; FLHX;
  2. All 2010 – FLHXXX; FLHTCUSE5; FLHTK
  3. All 2009 – FLTR; FLTR3-CVO; FLTRSE3; FLHTCU4-CVO; FLHTCUSE4

In 2008, H-D announced recalling nearly 47,500 touring vehicles because of a fuel-filter shell issue.  More information available HERE on that recall.  Then earlier this year they announced a 2009 CVO Road Glide recall HERE.

Photo courtesy of H-D

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money_stackBarack said yesterday that I should sacrifice, but I need to ask myself to what extent am I willing to go.  And as it turns out the ultimate discretionary item — Harley-Davidson — is in the same situation…determining how willing they are to sacrifice or jeopardize their company! 

I previously blogged about Harley’s inability to securitize motorcycle loans HERE the delinquency rates HERE and the five quarter earnings decline HERE.  Obviously not good times for the company.

But, like a lot of things these days related to financial issues they change weekly.  On behalf of Harley-Davidson, Sen. Bob Casey Jr. (D-Pa.,) wrote a letter on Jan. 16th to the Federal Deposit Insurance Corp. chairman Sheila Blair, saying Harley-Davidson recently inquired whether its financing company and subsidiaries — Harley-Davidson Credit Corp. and Eaglemark Savings Bank — are eligible for the Temporary Liquidity Guarantee Program (TLGP).  The TLGP guarantees a corporation unsecured debt against defaultA bailout?

The Harley Springettsbury Township plant is the largest of the company’s manufacturing facilities and employs more than 2,800 workers as well as supports approximately 1,500 jobs at Harley dealerships in Pennsylvania.  It’s easy to see why Sen. Casey is supporting the eligibility for TLGP due to the potential negative impact to his state’s economy.  And it’s “pile on” season in reference to the challenging economic environment, lower consumer confidence and banking sector meltdown so why not jump on board.

Demonstration Against UK Gov Bailout

Demonstration Against UK Gov Bailout

This sounds a bit like the ‘ol… “It’s not my fault” redirect the blame to the economy trick?  Do you think this a problem of people not being able to get loans to buy motorcycles?  I have no insider information, but I’m inclined to believe it has more to do with delinquency rates and processing bad loans on the part of Harley-Davidson Financial Services (HDFS).  Sure the economy and financial markets being reluctant to fund higher risk loans contributed, but don’t forget about the MV Augusta acquisition which has been described as an over reach by the company execs. 

Also we should not forget the sudden “personal” decision of Sy Naqvi (HDFS President) two weeks ago to immediately resign.  Mr. Naqvi was HDFS president for 23 months when Harley announced that Tom Bergmann (CFO Harley-Davidson) would assume the the additional responsibilities of HDFS president.  Naqvi joined HDFS from DeepGreen Financial, Inc., an online home equity lender, where he was CEO.  DeepGreen was acquired by Lightyear Capital and had a somewhat sorted history with operations in Cleveland while Naqvi worked out of Chicago.  Efforts to turn DeepGreen into a brick and mortar bank failed.  Is HDFS next?

But let’s think positive.  If Harley obtains eligibility status from the FDIC it (really taxpayers) will guarantee unsecured corporate debt against default.  In addition, Harley would get federal funds if a customer defaulted on his or her motorcycle loan.  Nice!  How do I sign up?

It will be hard to calculate Naqvi’s impact on/at HDFS or what role if any he played in its current set of troubles.  I wonder if the company is “positioned appropriately” for the faltering economy or if it’s another bailout on the list of so many?

Harley-Davidson is expected to report fourth-quarter results this Friday and I’m not hopeful of Q4’08 results.

Photo courtesy Flickr.

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