Harley-Davidson announced this week that it was able to come to an agreement with its York, Pennsylvania plant employees and union members, thus allowing the plant to remain open and producing motorcycles. The move wasn’t easy though as half of the plant’s employees will lose their jobs in order to keep the Shield & Bar in the Springettsbury Township area.
“A restructured York operation will enable the plant to be competitive and sustainable for the future, and the new labor agreement is critical to making that happen,” said Keith Wandell, President and CCEO of Harley-Davidson, Inc. “On behalf of the Company, I want to thank the employees at York for their vote to make the changes necessary to create a more flexible and efficient operation, and we look forward to moving ahead together to achieve that goal.”
The restructuring of the York plant was endorsed by 89% of the voters, and will allow the Milwaukee based company to consolidate more of its operations under one roof. It is not clear at this time if York will continue to produce the touring and softail models in Harley-Davidson’s line, but the move will save $100 million annually in operation costs. However, it will also cost Harley-Davidson an immediate $200 million capital expenditure, with another $90 million expected by 2012.
Across the whole company, Harley-Davidson plans to invest between $415 million and $445 million to streamline its business operations over the next three years. This will yield an overall $240 million to $260 million in annual saving for the company in the long-run. In 2010 alone and on a combined basis, Harley-Davidson expects to incur restructuring charges of $175 million to $195 million, and related savings of approximately $135 million to $155 million.
If you’ve ever heard the addage, you have to spend money to make money, this would be the case in point. The move will save Harley-Davidson substantial amounts of money in the long-term, and will virtually break even or make money by the 2012 reorganization date. However, it’s the three years leading up to 2012 that will test the company the most.