MILWAUKEE — Harley-Davidson’s sales fell sharply in 2017 and the company will move ahead with a plan to consolidate manufacturing operations, including the closure of its Kansas City, Mo. plant.
The world’s largest maker of heavyweight motorcycles has struggled to reverse a four-year sales slide, with growth overseas somewhat helping offset a decline in the U.S. bike market.
The Milwaukee-based company said its net income fell 82% in its fiscal fourth quarter to $8.3 million, compared with a year earlier. Earnings per share were 5 cents, down from 27 cents a year earlier. Revenue was $1.23 billion, up from $1.11 billion.
The earnings drop came in part because of a charge associated with President Trump’s tax cut and a $29.4 million charge for a voluntary product recall.
Harley-Davidson worldwide retail motorcycle sales fell 6.7% in 2017 compared to 2016. The company’s U.S. sales fell 8.5% and international sales were down 3.9%.
Harley has taken steps to counter what’s been a prolonged downturn, including tightening motorcycle inventories.
“Our actions to address the current environment, through disciplined supply and cost management, position us well as we drive to achieve our long-term objectives to build the next generation of Harley-Davidson riders globally,” Matt Levatich, president and CEO, said in a statement.
The company’s manufacturing consolidation includes plans to shift production from Kansas City, Mo. into its plant in York, Pa. About 800 jobs in Kansas City will be cut.
Harley expects restructuring and other consolidation costs of $170 million to $200 million over the next two years.
It expects ongoing annual cash savings of $65 million to $75 million after 2020.
“The decision to consolidate our final assembly plants was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment. Our Kansas City assembly operations will leave a legacy of safety, quality, collaboration and manufacturing leadership,” Levatich said.
Levatich did not make any mention of the company’s Wisconsin operations, including its large manufacturing plant in Menomonee Falls and a smaller plant in Tomahawk.
Harley and other makers of cruiser and touring motorcycles have seen their sales tumble as the economy has weakened in some areas and interest in motorcycling, overall, hasn’t been as strong.
“For years, the North American heavyweight motorcycle industry grew at double-digit rates due to low interest rates, a strong economy, a rising stock market and … the baby boomers. However in recent years, and going forward, we expect a much slower growth pattern for the U.S. motorcycle industry,” said analyst Robin Diedrich with Edward Jones Co.
“As safety becomes a concern for aging baby boomers, domestic sales for the heavyweight motorcycle industry should slow. We expect certain international markets, particularly in Asia and South America, to have higher growth rates in heavyweight motorcycles than the U.S.,” Diedrich said.
Harley’s foreign competitors have benefited from a strong U.S. dollar, as their overseas operations have made it more profitable to sell bikes in the U.S. at lower prices.
In some cases, Diedrich said, prices of Japanese motorcycles have come down 25% and discounts ranged up to $3,000 per bike.
“Harley is seeing significant pricing pressure, hurting profitability and sales,” she said.