Monday, October 16, 2006

Harley-Davidson won't expand Milwaukee plants

The Business Journal of Milwaukee - 2:07 PM CDT Monday
by Rich Rovito

Harley-Davidson Inc. announced Monday that it will build an additional motorcycle powertrain manufacturing and assembly plant outside of Wisconsin after the union representing hourly workers at the company's Milwaukee-area plants rejected contract concessions.

A new plant is needed to accommodate the expanded production of Milwaukee-based Harley-Davidson's Big Twin motorcycle engines and transmissions, company management said.

The announcement follows a vote Monday by members of Harley-Davidson's largest union, United Steelworkers Local 2-209, not to accept a plan that would have been favorable to expanding production capacity in Milwaukee.

Leaders of the union, which represents about 1,500 employees at Harley's plants in Wauwatosa and Menomonee Falls, had recommended that rank-and-file workers agree to concessions that would have cut pension benefits for existing employees, lowered wages for new hires and resulted in increased health care premiums.

In return, Harley management had vowed to invest $120 million to expand the company's Milwaukee-area factories.

Harley management had advised its international and local unions of the need to add capacity and to do so in a way that would significantly reduce future costs and improve flexibility.

"We're disappointed with the vote, but we need to address capacity, cost and flexibility in tandem," said Rod Copes, vice president and general manager of Harley-Davidson's powertrain operations in Menomonee Falls.

"Harley-Davidson is very successful today and all of us want to keep it that way," Copes said. "That means being good stewards and actively managing costs across the entire organization that could be detrimental to our business over the long term if we don't start to control them now."

Over the past 10 years, Harley-Davidson's shipments of motorcycles containing the Big Twin engines have nearly tripled. Harley invested $175 million in engine production upgrades at Milwaukee-area plants between 2004 and 2006.

Harley introduced the newest generation of Big Twin engine, the Twin Cam 96, in July to what company management has deemed "enthusiastic consumer and dealer response."

Company management said it will meet with representatives from the unions representing Harley-Davidson workers to "find the best possible U.S. location" for a new engine and transmission plant.

The company said the jobs of existing Milwaukee-area production workers are not at risk as a result of the decision to build a new plant elsewhere in the United States.

The company currently has powertrain manufacturing operations in Wauwatosa, Menomonee Falls and Kansas City, Mo., final assembly operations in York, Pa., and Kansas City, and components manufacturing in Tomahawk.

Jim Wheiland, president of Local 2-209, could not be reached for comment.

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