Analyst reflects on layoffs at Harley-Davidson plant

Here’s a portion of a research note provided to Powersports Business by Wells Fargo Securities analyst Tim Conder following Harley-Davidson’s announcement that it will lay off 169 employees at its Kansas City, Mo., plant, effective May 11, with layoffs expected through Sept. 30:

“While the layoffs represent a significant portion of the 750-person plant workforce, we believe a portion are concentrated in surge/seasonal employees suggesting lower production needs. HOG manufactures Sportster and Custom (Dyna, Softail, V-Rod) motorcycles at the KC facility along with assembling Street product (from India sourced components) for North America. This corroborates our previous assumptions … that the primary products produced in Kansas City (Sportster, Dyna, Softail, and V-Rod) will likely be lower yr/yr in terms of shipments/retail while Touring (Road Glide) and Street drive global shipment/retail growth. We believe management is focusing on controlling inventory levels in these slower selling product families ahead of needed product refreshes, which we think is likely in August for MY2016 for the Sportster family and some of the Custom family skus. We applaud HOG’s inventory discipline, but this action will likely be perceived as a short-term negative by investors and result in share weakness until Q215 retail sales clarity begins to emerge.”

As a follow-up to the research note, Conder adds:

“While Harley-Davidson has issued no official press release, our just completed call-back conversation with management indicates the layoffs were related to materials handling outsourcing, similar to what has previously been done at the Pennsylvania facility. This had been planned and was accrued for in Q4 2014. Management further indicated that this action has no bearing on production plans or rates.”