Lean, Mean, Robotic Harley

September 24, 2012

All Posts, News

Over the weekend The Wall Street Journal used Harley-Davidson as an example of America’s new, “lean” model of manufacturing. The term “lean” means what you probably already think it means. Lean means fewer hourly workers, reduced job security, more robots, higher profits and bigger bonuses for executives. Lean does not mean better or cheaper motorcycles.

This manufacturing model is sometimes called just-in-time manufacturing. It is largely the creation of an American statistician named W. Edwards Deming who went to Japan after the Second World War and helped reinvent Japanese manufacturing. Sometimes lean manufacturing is called “The Toyota Model.”

Keith Wandell

Harley is now leaner because of Chief Executive Keith Wandell. One of Wandell’s first decisions was that the York Assembly Plant, opened in 1973, was “obsolete.” At the time, the York plant employed about 2,400 workers who each made about $23 an hour, or about $45,000 a year. Wandell threatened to fire all those workers, close the plant and build a new one in Shelbyville, Kentucky. The workers’ union, the International Association of Machinists and Aerospace Workers, had virtually no leverage in the negotiations. The union could save some York jobs or lose them all. So, union members voted to save what they could.

The plant now has five job classifications instead of 62. The breadth of collective bargaining has been reduced. The old contract was 136 pages long. The current contract is less than half that. The York plant now employs about 1,000 hourly workers and a tenth of them are “casual” employees without job security. Robots and modern presses now do much of the work that used to be done by human beings.

Last year Wandell made $7,232,147.

Big Bang Transformation

Ed Magee, the York Plant Manager told the Journal “This is a big bang transformation.”

A key idea in Harley’s new, lean relationship with its workers is to make the company better prepared to survive the next wave of economic recession expected in 2013. Harley sold about 350,000 motorcycles in 2006, about 230,000 bikes in 2011 and is on track to sell about 220,000 motorcycles this year. At the company’s peak six years ago, most new Harley’s sold in America were financed with home equity loans. Now many of those mortgages are either underwater or have been foreclosed. Harley has adjusted to the impoverishment of its traditional customers by concentrating on marketing to women, ethnic and racial minorities and young people, although Wandell told the Journal that this years sales “partly reflect ‘pent-up demand’ as some customers who held off during the recession finally returned to the market.”

Harley-Davidson’s net profit margin is now almost 16 percent. The company’s profit margin was about 12.5 percent when Wandell took over. The margins are notable. By way of contrast grocery stores have an average profit margin of about one percent. Movie studios average profit margins of about 10 percent. Service businesses usually have higher margins than manufacturers and other hard businesses. Physicians enjoy profits of about 13 percent. Law firms average profit margins in the Harley-Davidson range – around 17 percent.


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55 Responses to “Lean, Mean, Robotic Harley”

  1. corrupt Says:

    Rambler, in answer to your question “If this Wandell cat only made say $3 million last year, how many employees could have been kept at $23 an hour.” The answer is not many.

    If Wandell had gotten only 3 Million instead of $7.2 something an additional $4.2 million would have been available. $4.2 Million / 6600 permanent full time workers / 2080 hours per year comes out to about $.30 an hour. Not really significant in the grand scheme of things.

  2. Snow Says:

    Heads up, if any readers here ride a 2012 Harley, you may want to head to your dealer, there is a voltage regulator problem that needs to be addressed. The faulty ones will overcharge and cook your battery. Ask about product campaign #0912.

  3. Dirty Dingus McGee Says:

    @ Snow

    I didn’t take that you were singling me out as a “greedy bastard’ ( but at heart, I am to some extent). I’m just offering a perspective that was only voiced by 1 other commenter.

    @ Glenn S

    Hate that you got screwed over by a couple of smaller business’s. I in the past have worked for both also. To me, they each offered a unique experience. Not all good for either one, but I learned from both. As for where I’m at now, we don’t have the total income to offer ANYONE a great retirement plan, a “Cadillac” health plan, or weeks worth of paid holidays. We have however done without paychecks, beyond living expenses, to ensure that the employees would still get one(and they receive union scale wages). If there is no paying work on the books, they come to the shop and clean, paint, etc. At the big corporations, no work usually meant a lay-off. I came to appreciate the small company, over the big, for the way I was taken care of, my input and ideas seemed important to them and I WAS treated as tho I was family. We try to run our company the same way.

    I guess we had different experience’s, but neither one is better than the other’s. Just preference I guess.

  4. Base Says:

    The truth is out there,,seek and you shall find.

    Yes, many are seeking a free ride. Hell, just look at how the last couple of administrations have uped entitlement’s. Especially the latest one. Think it’s up to 47% of the country (USA) on some sort of assitance. Go to any welfare office and watch people on welfare talking on I-phones driving newer modle cars. I know, there are those that need it. And don’t have issue with that. But it has gotten way out of hand. I remeber seeing one news report some guy standing there smoking a stoggy, with I-phone in hand claiming “I’m here to get some Obama money!” No, not a quote but close.

    Lazy work force.

    Oh yeah, many of the younger crowd just do not know how to work for their means. Some are so used to Dad/Mom/whoever paying thier way. And loyalty? FOGETABOUTIT! It’s more about trends. But at the same time, there are plenty of other elder workers just as lazy and have a sense of entitlement also.

    Viable worker…

    Oviously there are many more that are not afraid of or willing to put in the work, young & old alike, how else would these companies keep the doors open. The American work force is alive and kicking, and there are folks out there that are worth their weight in gold and should be afforded the benefits & rewards that their efforts deserve.

    A problem.

    When “managment/coperations” lump everyone into the lazy,entitlment category and decide all are undeserving and start pulling back, istead of handling non-performers because of the PC police, then rewarding the good workers, there for investing in their employees & comapny as a whole.Happy employees = more production & higher quality= mo money mo money,,,

    No, not everyone gets a trophy for showing up!


    shipping jobs out to countrys with appauling human rights records and build huge sweat shops. All for mo money. To all you I-pad lovers, did you know the factories in china have some of the highest safety violations in all the world? They have suicide nets strung around the buildings? Their employees work 12 to 16 hour shifts, meals consist of boilded rice & are dormed on site living in slum conditions all for 2 bucks an hour? Yeah Steve jobs was a genius. Wonder if any of those over worked,underpaid, suicidial people even knew who he was. Think about that next time you boot up.

    India is not any better HD,,,,

    Hell our goverment should lighten up on it’s citizens and crack down on companies that run these sweat shops. No matter what country they are located in. Thats if they wish to sell their wares within our boarders. But thats where the lobbiest come in. High paid lawyers paid by coperations to help keep the money flowing in. So what that people suffer. Mo Money, Mo Money….

    Coperate greed,,,,

    I do understand about profit margins,, but c’mon. A person comes into a company with a golden parachute and will recieve that regardless of perfomance, the big heads come together making decisions that drives stock down,Intentionally or mistake? Makes ya wonder, then start pounding the oh shit drum and take away benefits from employees. Then the big heads start patting each other on the back how they saved the company hand one another big checks for being such hero’s stay with company on average 6 years then move onto another with the bonus & parachute. Not a bad gi!

    Mean while an employee works 30 years is loyal and made company millions a gets a underperforming 401, some minor company match and what ever they are able to invest from the 30 to 60 G a year pay check. The American dream…..

    Sitting here thinking could go on and on pros and cons, but just do not have the time,,,,,

    Ya’ll stay safe out there, just lost a solid friend to some ass wipe in a cage, the ol left turn into path of travel and was told texting on the cagers part was involved probably a I-phone,,,

    Keep your head on a swivel,,,,,

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