Harley-Davidson to keep production plant in York, Pa.

Harley-Davidson Inc. on December 3 announced it will keep its motorcycle operations in York, Pa., and move forward with plans to restructure those operations.

The announcement follows the December 2 ratification of a new seven-year labor agreement by company employees at York, represented by International Association of Machinists and Aerospace Workers (IAM) Local Lodge 175, and the December 3 decision by the Harley-Davidson board of directors to approve the restructuring plan and related funding.

"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 chief executive officer 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 new York operation will be consolidated under one roof and focused on the core areas of motorcycle assembly, metal fabrication and paint.

The operation will have a smaller, more flexible workforce, corresponding to the scale and scope of the operations, with about 1,000 hourly employees compared to about 1,950 today. The workforce will consist of about 700 to 800 full-time unionized production and maintenance employees and, on an annualized basis, approximately 200 to 300 unionized "casual" employees. Casual employees work as needed, depending on seasonal production and volume needs and to provide coverage for vacations and other absences. The operation will also employ about 150 salaried employees, compared to about 270 today.

When fully operational in 2012, the restructuring is expected to generate about $100 million in annual operating savings compared to the current structure.

The company expects to incur approximately $200 million in restructuring charges related to York into 2012, of which about $100 million will be cash charges. The company also expects to make capital expenditures in connection with the York restructuring of about $90 million into 2012.

On a combined basis, the Company expects previously announced restructuring activities, together with the additional restructuring of the York operations approved today, to result in one-time charges of $415 million to $445 million into 2012, and to produce annual ongoing savings of $240 million to $260 million upon completion of all announced company-wide restructuring activities. In 2010 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.

The financial impact of the York restructuring reflects approximately $15 million in incentives that the Commonwealth of Pennsylvania has committed for capital improvements and training.

"I want to acknowledge and thank Pennsylvania Gov. Rendell and his team for their support of the changes we are embarking on at York. They have been terrific to work with throughout our decision-making process," said Wandell.

The decision to remain in York concludes a two-path assessment that began in May to determine whether the York operations could be restructured to be cost-competitive and sustainable, or alternatively whether the company would relocate those operations elsewhere in the U.S. In recent weeks, the Company identified Kentucky as the focus of its alternative site assessment.

"We also thank Kentucky Governor Beshear and his team for their tremendous efforts, as well as the many Kentucky state and local officials who have been so helpful and gracious and who have devoted significant time and attention to our possible relocation," said Wandell.