Harley-Davidson Incorporated, the leading American motorcycle manufacturer, and Polaris Industries Incorporated, the company behind Victory Motorcycles and Harley’s best capitalized competitor in the heavyweight motorcycle market, both announced significant layoffs Friday.
In a cautiously worded statement, Harley said it will eliminate 1,100 jobs. The motor company also announced it will close two engine plants near Milwaukee and its parts and accessories distribution center in Franklin, Wisconsin.
Polaris announced it will cut 460 jobs. About 300 of the layoffs will affect part-time and temporary employees. Most of the fulltime employees who are being furloughed work at the Roseau, Minnesota plant that makes Ranger off road vehicles. Polaris builds Victory motorcycle engines in Osceola, Wisconsin and assembles the bikes at a plant in Spirit Lake, Iowa.
Polaris is obviously tightening its belt but the company is clearly not in trouble. Scott Wine, the Polaris Chief Executive Officer, released a statement in which he called the layoffs, “necessary in light of the external environment and will better enable us to remain competitive in the future.”
The company remains profitable. Thursday, Polaris announced it was increasing its regular, quarterly cash dividend by three percent.
Harley-Davidson is undeniably a company in distress. Investors, as opposed to motorcycle enthusiasts, think Harley has over-estimated the value of its brand. Last week, the company was quietly looking for a new advertising agency.
The financial arm of the motor company, called Harley-Davidson Financial Services (HDFS), has become increasingly unprofitable. Last week, Harley fired Sy Naqvi, who ran HDFS. Harley is widely rumored to be trying to unload HDFS.
Also last week, Senator Bob Casey, of Pennsylvania asked the Federal Deposit Insurance Corporation (FDIC) to make Harley-Davidson eligible for the next Federal bank bailout. Harley expects to need an astounding $1 billion to continue to finance loans for consumers and dealers in 2009.
Harley’s fourth quarter profit fell by almost 60 percent. Harley’s Chief Executive, Jim Ziemer, said yesterday that the Harley brand is so strong it can even survive the mess George Bush has made of the American economy. “We have a strong core business anchored by a uniquely powerful brand,” Ziemer said. But Ziemer obviously does not believe the brand is strong enough for him to bother sticking around. Last month, Ziemer announced that he intended to leave the company.
Harley expects sales to continue to decline by at least another 13 percent in 2009. The company expects to lose somewhere between $110 million and $140 million just to pay for the current downsizing.
The people who run the money business in America remain at least slightly skeptical that Harley-Davidson will survive.
“We are concerned,” an international “global financial services” company named RBC Capital Markets Corporation told its investors Friday, that Harley’s estimates of its future profitability “might not be conservative enough.”