) has recently announced its plan to offer voluntary lay-off to the
hourly workers at three of its plants located in Milwaukee and
Wisconsin. The process will help the company reduce its work force
by almost 26%, reflecting annual savings of up to $50 million
starting from 2013.
The strategic move was first announced in the month of September
last year when Harley-Davidson entered into a new seven-year
contract with about 950 union workers. The company plans to
retrench about 250 workers by April 2012. This will likely
facilitate hiring of more seasonal workers at a much lower
During the last reported quarter, Harley-Davidson's profit
almost doubled to $183.6 million from $93.7 million in the same
quarter a year ago. On a per share basis, profits rose to 78 cents
from 40 cents. Total revenue rose 11% to $1.40 billion, driven by
the rise in motorcycle and related products revenues.
However, gross margin for motorcycle and related products
plummeted to 33.7% from 34.9% in the year-ago period, mainly
because of higher costs. As a result, the company lowered its gross
margin guidance to 33.5%-34.5% for fiscal 2011 from the prior
estimate of 34.0%-35.0%.
The company is currently focused on reducing its expenses and
improving its margins in the near term. The voluntary retrenchments
of workers along with new agreements with the unions reflect the
company's strategy. .
Harley-Davidson commands roughly 50% of the U.S. market,
providing scale advantages over most competitors. Furthermore, the
company maintains an extremely strong franchise. It has a network
of over 680 independent U.S. dealers (over 1,300 worldwide), 55% of
which exclusively market Harley-Davidson branded motorcycles. The
company retains a Zacks #3 Rank on its stock, which translates into
a 'Hold' rating for the short term (1 to 3 months).
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