Harley took 10,000 bikes out of their planned '05 production. Some of those were bikes dealers already had on order, XL's and V-Rod's, and some were bikes that had yet to be allocated. If a dealer lost XL's that were on order they received a percentage back in big twins and a v-rod that was on order was replaced with a dyna. For example, if a dealer had 4 sportsters cancelled they received an additional big twin. Again, when it all washed out their total for '05 was reduced 10,000 units from prior plans.
They also stated their previous projections to build 400,000 for the 2007 model year may not be met. They will produce more for '06 model year than the '05 model year, but have not yet announced the increase.
They fully realize producing too many bikes thus leading to dealer discounts and/or factory incentives, like the auto industry, is something they never want to see happen. They also recognize that harley's holding their value over time is part of their mystique.