Harley-Davidson Inc.: An 'Excruciating' First Quarter

May 7, 2008
Company cuts workforce to cope with declining sales.

The sluggish economy had Harley-Davidson Inc. sputtering during the first three fiscal months of 2008. The Milwaukee-based motorcycle manufacturer and 2007 IW 50 Best Manufacturer said it would cut 730 jobs after profit dropped from the year-earlier period along with a planned second-quarter shipment decline of 23,000 to 27,000 units.

The company expects total shipments to be between 303,500 and 307,500 units for the year. The job cuts will result in 370 fewer union employees over the next few months and a reduction of 360 nonproduction workers.

CEO James Ziemer called the decision to cut jobs "excruciating," according to an Associated Press story.

"We've said on a number of occasions that we would closely monitor the retail environment and regularly assess our wholesale shipment plans, and we remain committed to shipping fewer Harley-Davidson motorcycles to our worldwide dealer network than we expect they will sell this year," Ziemer said when earnings were announced in April.

The Associated Press later reported that the job losses would result in the company paying out $20 million to $25 million in severance costs.

Profit for the quarter was $187.6 million compared with $192.3 million during the year-ago period. Earnings per share increased 6.8% to 79 cents compared with 74 cents per share last year. Revenue totaled $1.31 billion, a 10.8% increase from first-quarter 2007.

U.S. retail motorcycle sales dropped 12.8% during the quarter, while heavyweight motorcycle sales decreased 14% in the United States. Worldwide retail sales dipped 5.6%. But overseas, the company is faring much better. Sales in international markets alone increased 16.8% in the quarter. The company was particularly successful in Latin America where sales increased 53.3% and Canada where sales rose 31.1% over the year-earlier period.

Harley-Davidson Inc.
At A Glance

Harley-Davidson Inc.
Milwaukee, Wis.
Primary Industry: Motor Vehicles
Number of Employees: 9,000
2006 In Review
Revenue: $6.1 billion
Profit Margin: 16.86%
Sales Turnover: 1.12
Inventory Turnover: 14.7
Revenue Growth: 9.02%
Return On Assets: 19.85%
Return On Equity: 33.83%

"We are optimistic about our long-term business prospects, and we will continue to invest in marketing, product development and our international business to drive future growth," said Ziemer.

The company will continue to focus on product development to stay ahead of the curve when the economy strengthens, Ziemer said in an earnings call transcript.

"The economic downturn will end, and when it does we want to make sure we haven't lost time or momentum in our product development efforts," he said. "We intend to be well positioned to capture future growth opportunities."

Harley-Davidson shares closed 53 cents higher on May 6 at $39.22.

Editor's Note: This marks the final Leadership Insight From the IW 50 for 2007. IndustryWeek will release the 2008 list of IW 50 Best Manufacturers next week. Stay on top of the latest IW 50 news by subscribing to the Leadership Insight newsletter at www.industryweek.com/newsletters.aspx.

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