AP
Analysts: Harley Strike Will Be Short
Friday February 9, 12:05 am ET
By Emily Fredrix, AP Business Writer
Analysts: Harley Davidson Strike Will Be Short, Won't Hurt Co.; Will Lose $11 Million Per Day
MILWAUKEE (AP) -- Analysts estimate a strike at Harley-Davidson Inc.'s main assembly plant is costing the motorcycle maker up to $11 million a day in sales, but predict it will be short-lived and have little effect on the company's performance this year.
The Milwaukee-based motorcycle maker said Thursday that a nearly weeklong strike in York, Pa., will cause it to miss shipment guidance for the first quarter.
Harley had expected to ship between 82,000 and 84,000 bikes during the first three months of the year. But a strike by 2,800 union workers at the plant, where top-selling, heavyweight Touring and Softail bikes are made, means it will come up short.
The company also warned that the strike may force it to temporarily lay off as many as 740 employees at two Wisconsin plants as early as Monday. The plants in the Milwaukee area and the north central town of Tomahawk make parts such as engines and windshields. The layoffs would begin voluntarily but could become forced, the company said.
Harley declined to provide updated shipment guidance for the first quarter and would not say whether the strike will have an effect on full year financial guidance.
First quarter shipments were likely to be at least 5,500 short because of the strike, Banc of America Securities analyst Michael Savner wrote in a research note.
Considering that the York plant makes about 60 percent of Harley's motorcycles, the loss in revenue from the strike could be up to $11 million a day, said Tim Conder, a leisure analyst with AG Edwards & Sons.
UBS analyst Robin Farley wrote in a research note that each day of the strike means earnings per share will be down roughly 1 cent for the first quarter of the year.
But analysts don't think the strike, which began last week, will have a significant effect on earnings or the full-year performance because they expect it to last only two weeks.
Union workers in York overwhelmingly rejected the company's contract proposal last week. The three-year proposal offered annual raises of 4 percent, but it would have reduced pay rates for new hires, required employees to begin paying part of their health insurance premiums and forced pension concessions.
Messages left with union officials were not immediately returned Thursday.
Union leaders need to be realistic when looking at the proposal, Conder said. Harley is faring well relative to others in the automotive industry, where record losses and layoffs are common, he said. Last year, Harley's revenue rose 8.6 percent to $5.8 billion
The new contracts are trying to rein in costs for the future, Conder said.
"Any good company over time will control your rate of cost growth because you can't bank on the fact that it's going to be good all the time," he said.
The company and the International Association of Machinists and Aerospace Works Local 175 held federally mediated negotiations on Tuesday and Wednesday, though nothing was resolved, Harley spokesman Bob Klein said. No further meetings are planned, he said.
"We think that the contract proposal was extremely fair and generous," Klein said.
Harley also informed the union that it would cancel its workers' health and life insurance on Monday, a normal action during strikes, Klein said. Workers affected by layoffs in Wisconsin will not lose benefits, he said.
Roughly 450 nonunion workers in York continue to work, Klein said.
In November, 1,600 union workers in the Milwaukee area approved contract concessions that Harley demanded to proceed with a $120 million plant expansion. Members of United Steelworkers of America Local 2-209 initially rejected the proposals, which included lower wages for workers hired after Jan. 1 and a decrease in health insurance, pensions and cost-of-living adjustments for all workers.
Harley shares fell 64 cents to close at $69.36 on the New York Stock Exchange.
Harley-Davidson:
http://www.harleydavidson.com
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Topic: Roughly 450 nonunion workers in York continue to work (Read 3609 times)