Iconic American motorcycle company Harley-Davidson Inc. is also feeling the effects of the recession. Today, it announced that it would cut around 1,100 jobs in 2009 and 2010 as it cuts production volumes and restructures. The job cuts amount to 12 per cent of its total workforce, according to its most recent annual report.

As part of the move, Harley will consolidate its two Milwaukee engine and transmission production facilities to its Menomonee Falls location. It will also close its Franklin distribution center, consolidate parts and accessories and conduct general merchandise distribution through a third party. The company will also discontinue its domestic transportation fleet and plans a 10 per cent to 13 per cent reduction in shipments for 2009.

"We have a strong core business anchored by a uniquely powerful brand, but we are certainly not immune to the current economic conditions," said Jim Ziemer, CEO, Harley-Davidson Inc. "We have a clear strategy to not only deal with the economic conditions, but also strengthen our long-term operations and financial results. We are executing that strategy with confidence and conviction."

"We reduced our production levels prudently in 2008, helping our dealers achieve lower inventory levels," said Ziemer, "and we're going to show similar discipline in 2009." The 1,100 jobs to be cut over 2009 and 2010 include about 800 hourly production positions. The job cuts will happen over a period extending into 2010. The group said it expects to take one-time charges of $110 to $140 million and generate annual savings of $60 million to $70 million.

The company is reinforcing its support of the Harley-Davidson brand, accelerating its ongoing marketing efforts to reach out to emerging rider groups, including younger and diverse riders. In addition, the company will continue to focus on product innovations targeted at specific growth opportunities with its strong core customer base and new riders.

In the US, the company said its Sportster motorcycle trade-up program is being well received by dealers and consumers and is generating new floor traffic during the winter months.

The programme lets riders who already own a qualifying Sportster motorcycle, or who buy a new Sportster motorcycle, receive back the original Manufacturer's Suggested Retail Price value when they trade up to a Harley-Davidson Big Twin or VRSC motorcycle at participating dealerships. Outside the US, the company will continue to support the product, dealer development and marketing activities that, during the last several years, have helped drive strong retail sales growth.

"Among other things, the Harley-Davidson brand stands for strength and resilience, and we're managing the business in this economic climate in ways that we believe will build long-term value into the brand," said Ziemer.

The restructuring move is a response to Harley's net income falling by 58 per cent to $77.8 million, or 34 cents per share, from $186.1 million, or 78 cents per share, last year. Sales fell 6.8 per cent to $1.29 billion. Analysts expected earnings of 57 cents per share on sales of $1.29 billion.

Revenue from Harley-Davidson motorcycles was $1.02 billion, a decrease of $95.4 million or 8.5 per cent versus the same period last year. Shipments of Harley-Davidson motorcycles totaled 76,581 units, down 4,625 units or 5.7 per cent compared to last year's fourth quarter.

Revenue from Parts and Accessories (P&A), which consists of Genuine Motor Parts and Genuine Motor Accessories, totaled $152.1 million, lower by $13.1 million or 7.9 per cent compared to the year-ago quarter. Revenue from General Merchandise, which consists of MotorClothes(R) apparel and collectibles, totaled $69.0 million, a decline of $4.4 million or 6.0 per cent from the year- ago quarter.

Gross margin for the fourth quarter of 2008 was 31.6 per cent of revenue compared to 35.7 per cent for the fourth quarter last year. This decrease is primarily due to unfavorable shipment mix versus last year's fourth quarter, higher product costs and the cost of the Sportster motorcycle trade-up promotion. Fourth quarter operating margin decreased to 12.0 per cent from 18.1 per cent in the fourth quarter of 2007, reflecting the impact of lower revenue in the fourth quarter of 2008 compared to the year-ago period.

In-house division Harley-Davidson Financial Services (HDFS) recorded an operating loss of $24.9 million for the fourth quarter, $63.5 million lower than the operating income in the year-ago quarter. The decrease is primarily due to a $35.1 million write-down of retained securitization interests and a $28.4 million write-down to fair value of finance receivables held for sale. The write-downs were due to higher projected credit losses and an increase in the discount rate used for the valuation of receivables.