Harley Davidson Sales Decline, Motorcycle Manufacturer Closing Kansas City Assembly Plant

Harley Davidson Sales Decline
iStock.com/JordiDelgado

Slumping U.S. motorcycle sales have resulted in more job cuts and a plant closure at Harley-Davidson Inc (NYSE:HOG). The Milwaukee-based motorcycle manufacturer announced it will close its manufacturing plant in Kansas City, Missouri, eliminating around 800 jobs. The company announced its latest restructuring plan after reporting disappointing financial results for fiscal 2017, with worldwide retail motorcycle sales declining 6.7%.

Harley Davidson said it will close the Kansas City plant in the fall of 2019, consolidating operations into its plant in York, Pennsylvania. The company expects to incur restructuring and other associated costs of $170.0 million to $200.0 million and capital investment of approximately $75.0 million over the next two years. After 2020, Harley Davidson expects the move to result in annual savings of $65.0 million to $75.0 million.

Commenting on the layoffs and closures, President and CEO Matt Levatich said, “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.”

Harley Davidson’s 2017 Revenue Falls 6.7% Year-Over-Year

The most recent restructuring at Harley Davidson comes amidst a sharp decline in motorcycle sales in all of its markets. In 2017, worldwide motorcycle sales at Harley Davidson fell 6.7% year-over-year to 242,788 vehicles.

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In the U.S., motorcycle sales tumbled 8.5%; in Latin America, sales were down 2.6%; in Europe, the Middle East, and Africa, motorcycle sales fell 2.0%; and in Asia Pacific, sales plunged 7.7%.

Lower sales results in weaker full-year revenue and earnings. Full-year revenue was $5.65 billion, a 5.8% decrease over the $6.0 billion reported in 2017. Full-year net income was $521.8 million, or $3.02 per share, a 24% decrease over the $692.2 million, or $3.83 per share in fiscal 2016.

And Harley Davidson isn’t going to turn a corner anytime soon. The company expects global sales to fall by as much as 4.9% in 2018. The outlook beyond 2018 isn’t spectacular; Harley Davidson is having difficulty connecting with younger riders and its bikes are seen as being too big for roads in Europe and Asia.

It’s not just Harley-Davidson feeling the highway blues. Polaris Industries Inc. (NYSE:PII), a one-time rival of Harley-Davidson, started winding down its “Victory” motorcycle operations in early 2017.

 

Sources:

Harley shutting down Missouri plant amid sales decline,” Financial Post, January 30, 2018.

Harley-Davidson Announces Fourth Quarter, Full-Year 2017 Results,” Harley-Davidson Inc, January 30, 2018.

Polaris Industries To Wind Down Victory Motorcycles Operations Strengthening Its Position In The Powersports Industry,” Polaris Industries Inc., January 9, 2017.

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