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Strike halts H-D production – February 12, 2007

February 12, 2007
Filed under Features

Production of two Harley-Davidson motorcycles, the Touring and Softail, stopped in early February at Harley-Davidson’s York, Pa., plant in the wake of a labor dispute.
It’s the first time since 1991 the company has experienced a work stoppage in one of its plants.
Roughly 2,800 workers, who are represented by the International Association of Machinists and Aerospace Workers Local 175, voted by an overwhelming 98 percent margin to strike, after rejecting H-D’s contract offer Jan. 31.
The two sides are at odds over a two-tier wage system H-D wants to install that would pay new workers $18.25 per hour in the first year of their contract, compared to the $20.78 current first-year assembly workers are receiving. Besides the 12 percent wage decrease, H-D also wants employees to contribute toward health insurance premiums and concessions.
H-D shut down the York plant Feb. 1 in anticipation of the strike, and workers began picketing outside the company’s facility at 12:01 a.m.
In a prepared statement, H-D expressed disappointment at the union vote.
“The proposed contract was structured to help manage future costs that could be detrimental to our business over the long term,” said Fred Gates, general manager of H-D’s operations in York. “While Harley-Davidson is a strong company today, we don’t want to find ourselves in 10 years in the same position that the Detroit auto industry is in now.”
A High Stakes Standoff
Industry experts anticipate the strike to be short-lived, as the two bikes produced at the York plant are H-D’s highest margin products and account for roughly 60 percent of all the units the company makes.
“In my estimation, every day the York facility remains closed costs H-D roughly $11 million in sales, and nearly a penny per share of profit,” said Michael Savner, an analyst at Bank of America Equity Research.
Harley had planned for a short strike when it issued its first-quarter shipment guidance in January. The company said it produced enough bikes during the fourth quarter to meet consumer demand during the off-season sales period.
Besides the two-tiered wage system, the proposed contract provided for a 4 percent wage increase in each of the three contract years. Two percent of the increase was dependent on the union accepting the company’s salaried health care plan or another plan that would save H-D an equal amount of money. The proposal also would have doubled H-D’s 401(k) contribution match and would have provided a special monthly retirement supplement for certain employees who retire during the contract period.
Union members say they feel the latest contract offer by H-D is a step backwards.
“We’ll still keep building first-rate bikes,” said Nevin Bechtel, who works in the plant’s painting department, “but my fear is that once a two-tiered wage system is in place that morale in this place is going to take a big hit, and then perhaps the quality of production will slip. Nobody wants to see that.”
Other union members feel that considering how profitable H-D is, it isn’t fair the company is trying to squeeze its employees. H-D reported $1.04 billion in net income in 2006, an 8.7 percent increase over 2005.
“This company is very profitable,” said union member Russell Aldinger, “and for us to have to take concessions when we were absolutely earning that money with the quality of work we put into those bikes, I feel it’s ridiculous.”
At press time, there was no indication that either side had plans to continue negotiations. H-D faces similar contract expirations in its Kansas City plant later this summer and its Milwaukee plant early next year. psb

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