By Rick Barrett
Milwaukee Journal Sentinel
MILWAUKEE — Harley-Davidson Inc. is eliminating about 180 production jobs at its U.S. plants, union officials said Tuesday, with plants in suburban Milwaukee and Kansas City expected to be hit the hardest.
The permanent job cuts are coming in the next couple of months as the Milwaukee-based company throttles back production.
Temporary furloughs also are expected this fall.
“It’s not looking too good at this point,” said Ross Winklbauer, a sub-district director for the United Steelworkers union, which represents Harley workers.
Earlier Tuesday, Harley said net income fell 7.7 percent to $258.9 million, or $1.48 per share, in the second quarter that ended June 25, from $280.4 million, or $1.55 per share, a year earlier.
Revenue from motorcycles and related products fell to $1.58 billion from $1.67 billion.
Harley said its worldwide motorcycle sales were down 6.7 percent from a year earlier and U.S. sales were down 9.3 percent.
The company, which previously forecast “flat to down modestly” full-year bike shipments, said it now expects to ship 241,000 to 246,000 motorcycles in 2017 — down 6 percent to 8 percent from 2016.
The new projection includes a 10 percent to 20 percent decline in production in the third quarter.
CEO Matt Levatich said workforce cutbacks would be announced to employees starting Tuesday. No further details were immediately available.
“Lower expected shipments means we will need to reduce plant production, and this has an implication for our manufacturing facilities, our people and our financial performance. This action will require an hourly workforce reduction at some of our U.S. manufacturing plants. We will be sharing details with employees beginning today,” Levatich said.
He described the second-quarter earnings as disappointing and said the company would be aggressively managing its motorcycle inventory.
The earnings beat Wall Street expectations. The average estimate of nine analysts surveyed by Zacks Investment Research was for earnings of $1.37 per share.
The company said it now expects its full-year operating margin to be down approximately 1 percentage point compared with 2016.
“Given U.S. industry challenges in the second quarter and the importance of the supply and demand balance for our premium brand, we are lowering our full-year shipment and margin guidance,” Levatich said.
Harley said its U.S. market share for the quarter was 48.5 percent in the heavyweight motorcycle category.
Harley and other makers of cruiser and touring motorcycles have seen their U.S. sales fall as the economy has faltered in some states.
Also, the company has faced pressure from Japanese and European motorcycle manufacturers, as well as rival Indian Motorcycle Co., based in Minnesota.
Harley-Davidson shares have declined 11 percent since the beginning of the year, while the Standard &Poor’s 500 index has climbed nearly 10 percent. The stock has increased 8 percent in the last 12 months.
After Tuesday’s announcement, Harley shares were down about 9 percent, trading at $47.49.