This is how I see it. Big cruiser MC market is shrinking. Fewer bikes purchased each year. Lots of reasons for that, what is important here is: do not foresee a reversal of that downward trend. Not sure where the "bottom" is for sales numbers. HD has extra capacity and/or inefficiencies in maintaining 2 assembly plants. Consolidating those operations into one plant increases cost ($200 million) in the short term and requires $150 million capital investment over the next 2 years at York. After 2020 they project they will save $75 million a year by doing so. ROI after 2020 is about 5 years, if projections are accurate. Reasonable expenditure. Sadly, KC employees (800) will lose their jobs for the most part. York will hire 450 more. Net decrease of 350 employees.
HD must cut costs to survive in a shrinking sales market. If they fail to do so, they will bleed red ink until they go bankrupt. Production capacity is determined by overall sales - the numbers must not be there to support both KC & York. Perspective from an old guy who used to mange distribution centers & shipping: Shipping costs usually average better from a central US location - KC, Memphis, etc. Freight cost must not have been enough to move the assembly to KC when combined with the capital expenditure required to move the York operation there.
I have worked in a "declining" industry. Each year, when overall sales are flat or decreased some cost must be eliminated. The companies that fail to do so eventually are bought out or cease to exist usually. The best scenario is for sales to increase and companies expand as a result. HD enjoyed that scenario for years, but as most companies who have been in business for many years have done they have survived sales decreases in the past.
I would rather see HD survive as a company than watch it spiral out of existence like so many others have. Others have opinions that differ from mine as to HD's survival tactics & the good & bad of these tactics. Sure I would prefer to see HD selling more, building more plants, and lowering the costs of the bikes they sell
. Not happening.
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Topic: Harley Announces Kansas City Plant Closing (Read 5609 times)