Citing a drop in U.S. motorcycle sales, in addition to shifting demand across its lineup, Harley-Davidson has announced that it will close its Kansas City, Missouri, plant by July 2019, eliminating 800 jobs. It will shift operations to its York, Pennsylvania, plant, adding 450 “full-time, casual and contractor” jobs to that location, for a net loss of around 350 jobs.
In a letter to local York station FOX43, Harley explains:
“We are launching a significant, multi-year manufacturing optimization initiative that is anchored in the consolidation of our Kansas City, Mo. final assembly operations into our York, Pa. final assembly plant. This decision was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment. We are constantly evaluating capacity and our current U.S. capacity exceeds U.S. demand.
We anticipate an increase of approximately 450 full-time, casual and contractor positions will be added at our York facility, which will be expanded to support additional production. Specific details on expansion are still being developed.”
It’s no secret that the U.S. motorcycle industry is in a downturn right now; industry-wide Q4 sales are down 6.5 percent compared to 2016, with Harley alone down 11.1 percent. Heavyweight, cruiser and touring bike sales have taken a big hit, thanks to aging Baby Boomers and a lack of interest from younger generations.
As the market contracts and demand drops, Harley is doing what it has to do in order to remain competitive.
The Kansas City plant was built in 1998 and produces the Sportster, Dyna and Street lines. The Dyna line was killed off and rolled into the new Softail family, while Street line sales have been soft. Closing the plant will cost an estimated $170 to $200 million over the next two years, but is expected to save the Motor Company $65 to $75 million per year after 2020.
In an official statement, Harley CEO Matt Levatich said, “This decision was extremely difficult but necessary under the circumstances. The Kansas City operation–and our employees there–have an impressive tradition of safety, quality, collaboration, and manufacturing leadership. I have profound respect for the men and women in that facility and I thank them and the Kansas City community for their years of support and contribution to serving Harley-Davidson–our dealers–and most importantly, our riders.”
According to its Q4 earning report, which was released this morning, Harley’s net income fell 82 percent in the fourth quarter of 2017, compared with a year earlier. Revenue, however, was up, from $1.11 billion to $1.23 billion. The drop in net income was attributed in part to a charge associated with the 2017 Tax Cuts and Jobs Act and a $29.4 million charge due to its voluntary recall of 57,000 motorcycles earlier in 2017, due to a faulty oil line clamp.