Harley-Davidson is one of the world’s largest manufacturer of heavyweight motorcycles. And one of the great things about Harleys is that nearly all of them are built right here in the United States. Unlike a lot of other bikes on the market, they aren’t first made elsewhere and then imported into the country.
However, the majority of its sales and revenue comes from the sale of its motorcycles in the domestic US market. And it shouldn’t come as a surprise to anyone that the industry isn’t in the best of shape for the past few years.
For years, the North American heavyweight motorcycle industry grew at double-digit rates due to low interest rates, a strong economy, a rising stock market and … the baby boomers. However in recent years, and going forward, we expect a much slower growth pattern for the U.S. motorcycle industry.”
And 2017 was no exception to the norm. Despite a higher revenue of $1.23bn, up from the previous year’s $1.1bn, Harley’s net income fell sharply. 82% to be precise, for the fourth fiscal quarter, down to $8.3mn. Earning per share dropped to 5 cents, from 27 cents a year earlier!
While Harley’s international sales declined by 3.9%, the domestic sales took a hit by 8.5%, resulting in a net worldwide dip of 6.7%.
It’s no surprise, Harley HAS to cut down now!
Decisions have to be made, no matter how hard they are, and that’s what the company has done. It has decided to shift the operations of the Kansas City Plant to its plant in New York. This closure will cut as many as 800 jobs directly in Kansas City!
“The decision to consolidate our final assembly plants was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment. Our Kansas City assembly operations will leave a legacy of safety, quality, collaboration and manufacturing leadership.”
The entire exercise of movement is pegged to cost the company somewhere between $170-200mn over the course of next 2 years. However, after 2020, with the movement complete, Harley expects to make a saving of about $65-75mn of outgoing cash every year!
As absurd as it may sound, but the more the dollar is valued against other countries, the tougher it becomes for Harley. This is because the manufacturers who’re getting their motorcycles made from outside now need to pay lesser dollars to get that same thing. Consequently, they’re able to offer discounts, which Harley just can’t!