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Harley Profit Drops 58%, 1,100 Jobs Cut; Shares Fall (Update2)
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By Alan Ohnsman and Mike Ramsey
Jan. 23 (Bloomberg) --
Harley-Davidson Inc., the biggest U.S. motorcycle maker, said fourth-quarter profit fell 58 percent, missing analysts’ estimates, after demand plunged amid the recession.
The company plans to cut 1,100 jobs and close at least three facilities to save at least $60 million a year, it said today in a statement. Revenue fell 6.8 percent to $1.29 billion, the Milwaukee-based manufacturer said. The company wouldn’t project 2009 earnings and said it would reduce shipments by as much as 13 percent to prevent excess inventory.
“We are concerned” that the “production cut might not be conservative enough,” said
Ed Aaron, an analyst at RBC Capital Markets Corp. in Denver in a note to investors. He rates the shares “sector perform.”
The stock fell $1.25, or 10 percent, to $11.15 at 9:35 a.m. in New York Stock Exchange composite trading after dropping as much as 27 percent in electronic trading before the exchange opened. Per-share earnings trailed the average estimate of 57 cents from 17 analysts in a
Bloomberg survey.
Sales at Harley, the maker of Fat Boy and other cruisers, tumbled through 2008 as the U.S. economy slowed and access to consumer credit tightened. List prices for Harleys range from $6,999 to $35,499. Harley is the world’s largest seller of cruisers, models for leisure riding that are often equipped with engines 1000cc or larger, chrome exhaust pipes and 1950s styling.
Low on the Hog
“We have a strong core business anchored by a uniquely powerful brand, but we are certainly not immune to the current economic conditions,” Chief Executive Officer
Jim Ziemer said in the statement.
Net income fell to $77.8 million, or 34 cents a share, from $186.1 million, or 78 cents, a year earlier, when sales totaled $1.48 billion.
The company expects to spend $110 million to $140 million this year and next to cover the job cuts and make adjustments for falling demand. About 70 percent of the
job cuts will take place this year and the rest in 2010.
The company will close two engine and transmission plants near Milwaukee and move work to a plant in Menomonee Falls, Wisconsin. It will consolidate paint and frame operations at its York, Pennsylvania, assembly plant, close a distribution facility in Franklin, Wisconsin, and stop its domestic transportation fleet operation.
Harley also is looking at options to increase capital funding to its finance unit to help improve sales to customers. The finance unit had a $24.9 million operating loss in the quarter.
Harley’s
debt rating was cut two grades on Jan. 16 to BBB+ from A by Standard & Poor’s, which cited “concerns about the motorcycle market in the near-to-intermediate term against the backdrop of the recession.’‘
To contact the reporters on this story:
Alan Ohnsman in Los Angeles at
aohnsman@bloomberg.net;
Mike Ramsey in Southfield, Michigan, at
mramsey6@bloomberg.net.
Last Updated: January 23, 2009 09:39 EST