By Shawn Langlois
SAN FRANCISCO (Dow Jones) -- Harley-Davidson, Inc. shares fell
as much as 19% in early trades Friday after the iconic motorcycle
maker announced 1,100 job cuts and said its fourth-quarter profit
was cut in half as customers tightened their purse strings.
At last check, the stock (HOG) had bounced off the lows of the
session but was still down $1.65 at $10.75, putting its decline in
the past year at 74%.
Harley also disclosed plans to take one-time charges of
approximately $110 million to $140 million over 2009 and 2010. The
effort will produce ongoing annual savings of approximately $60
million to $70 million.
"We have a strong core business anchored by a uniquely powerful
brand, but we are certainly not immune to the current economic
conditions," CEO Jim Ziemer said in a statement.
The cutbacks are expected to result in the elimination of about
800 hourly production positions and 300 non-production, primarily
salaried positions over 2009 and 2010.
About 70% of the workforce reduction will take place this
year.
Harley said earnings for the three months ended Dec. 31 dropped
to $77.8 million, or 34 cents a share, from $186.1 million, or 78
cents a share, a year earlier.
The Milwaukee-based manufacturing firm missed the target of 57
cents a share in a survey of analysts by FactSet Research.
Revenue fell to $1.29 billion from $1.39 billion.
"Some of this report was in line with our expectations ... but
the shocker was the mix shifting so much," Edward Jones analyst
Robin Diedrich said. "The people that are buying are clearly
avoiding the more expensive, higher margin bikes and buying the
cheaper ones.
Harley retail sales in the U.S. dropped 19.6% in the quarter
while the overall heavyweight motorcycle market plunged 25.5%.
Worldwide, Harley sales fell 13.1% despite a near-1% increase in
international markets.
For 2009, Harley is projecting shipments of between 264,000 and
273,000 new motorcycles, marking a 10% to 13% reduction from
2008.
"This slump is largely out of Harley's control at this point,"
Diedrich said. "It comes down to the global economy and we expect
2009 to be very without much of a rebound in the second half of the
year."
To help cope with the downturn, Harley said it'll merge two
plants in the Milwaukee area into another in Menomonee Falls, Wis.
and consolidate paint and frame operations in York, Pa. Harley will
also close its distribution facility in Franklin, Wis.
"We obviously need to make adjustments to address the current
volume declines," Ziemer said. "But we are also determined to do
that in a way that will make us more competitive for the long
term."
Harley's lending unit was also slammed by the credit crisis and
is looking at a "range of options" to obtain the liquidity it needs
to fund loans to customers.
The division said it swung to a loss of $24.9 million -- a $63.5
million turnaround because of write-downs stemming from higher
project credit losses.
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