Industryweek 23179 Harley Davidson 0
Industryweek 23179 Harley Davidson 0
Industryweek 23179 Harley Davidson 0
Industryweek 23179 Harley Davidson 0
Industryweek 23179 Harley Davidson 0

Harley-Davidson Layoffs Undercut Trump's Manufacturing Push

July 19, 2017
“Not long ago, President Trump hailed this company as a model of American manufacturing,” Mike Bolton, a district director for the United Steelworkers, said. “Shortly thereafter, management announced plans to open production facilities in Thailand. Now we get word that 180 hard-working Americans will be losing their jobs.”

Harley-Davidson Inc., the motorcycle maker President Donald Trump has praised for its U.S. manufacturing presence, is cutting workers as younger American consumers buy fewer bikes than baby boomers.

CEOr Matt Levatich told analysts on July 18 that the company planned to make hourly employment reductions, without giving details. Harley’s shares plunged the most in more than a year after the company forecast annual motorcycle shipments may decline as much as 8%.

Harley’s layoffs run counter to Trump’s claims he would drive U.S. economic growth by spurring more factories and hiring. The president in February called Harley a “ great example” of successful American manufacturing and said his administration would make it easier for businesses to create jobs and build plants. Instead, slumping demand for pricey bikes has left Harley with too much inventory and needing to pare production at home.

“It’s unfortunate,” said David Beckel, a Bernstein analyst who downgraded the stock last week, citing a lack of demand from younger Americans. “It’s just a symptom of the environment they’re facing,” as competitors cut prices and millennials show less interest in motorcycles than past generations.

Harley shares plunged as much as 12% and closed down 5.9% to $48.95, the biggest daily drop since July 2016. The shares have declined 16% this year.

The United Steelworkers said 180 workers are being laid off in Kansas City, Missouri, and Milwaukee. Katie Whitmore, a Harley spokeswoman, said.  A representative for the International Association of Machinists and Aerospace Workers, which also represents Harley employees, said the union is still gathering information.

“Not long ago, President Trump hailed this company as a model of American manufacturing,” Mike Bolton, a district director for the United Steelworkers, said in an emailed statement. “Shortly thereafter, management announced plans to open production facilities in Thailand. Now we get word that 180 hard-working Americans will be losing their jobs.”

Harley forecast that motorcycle shipments may drop as much as 20 percent in the third quarter compared with the same period a year earlier. The downturn puts the companies factories in Pennsylvania and Wisconsin -- swing states that helped carry Trump to his surprise election victory in November -- at risk.

Harley is caught “in the throes of secular erosion” in the U.S., with younger consumers riding motorcycles at much lower rates than previous generations, Beckel wrote in a report last week. Levatich, who joined union leaders in meeting with Trump at the White House in February, called conditions in the U.S. market challenging and said the company needed to balance supply with demand to protect its brand.

In building a factory in Thailand, Harley will be serving markets in the Asia Pacific region and reduce tariffs on imports, Levatich told analysts. He said the facility will assemble bikes using components shipped from the U.S.

Despite the demand headwinds, Harley’s second-quarter results beat analysts’ estimates. The company reported adjusted earnings per share of $1.48, beating consensus by 10 cents.

Going forward, executives said they expect profit margins will be squeezed by slower volumes and expenses that are slipping at slower rates than revenue.

“Longer-term, it signals that things are getting worse, not better,” Beckel said in a phone interview. While Harley is trying to build the popularity of biking and is helping dealers boost their used-motorcycle business, progress has been slower than planned, he said.

“It’s an unpalatable situation for investors in that the payoff will come much further down the road than people were expecting.”

By Jamie Butters

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