Continuing hard times at Harley-Davidson came to something of a head Thursday with the announcement that the company was killing its Buell line of sport bikes almost immediately and actively looking for a buyer for its MV Agusta and Cagiva machines.
Harley, which is based in Milwaukee, also disclosed continuing losses at its finance unit and a decline in sales of its heavyweight Harley-Davidson motorcycles. Overall, Harley’s net income for the third quarter plunged by 84 percent from last year, which was also a down year for the company.
The Buell brand, based in East Troy, Wis., will shut down later this month, although Harley will continue to supply replacement parts and honor warranty claims. About 180 workers will lose their jobs. (Buell has provided an online page for customers here.)
Just last month, Buell won the American Motorcyclist Association’s coveted SportBike championship – the first for an American motorcycle maker since 1986. But Harley had struggled to make a sales success of the innovative sport bikes; earlier this summer Harley announced that it would drop plans to build a $10 million Buell factory.
Larry W. Smith for The New York Times An MV Agusta F4 on display at a Harley-Davidson dealership in Topeka, Kan.
The Buell decision is expected to saddle Harley with about $125 million in costs associated with the shutdown. The bottom line in the MV Agusta divestiture will not be known until the brand is sold, but Harley said it had already taken a “goodwill impairment charge” of $18.9 million related to the brand in the third quarter.
Harley raised eyebrows in the industry with its $109 million acquisition just 16 months ago of MV Agusta, a boutique line of very expensive sport bikes manufactured in Italy.
Throughout its operations during the recent economic downturn, Harley had already cut more than 1,000 jobs and trimmed production forecasts by at least 30 percent. The company said it was also considering what to do with its under-utilized assembly plant in York, Pa., and would make announcements about its fate later in the year.
In announcing these changes, Harley said it would refocus its business model solely on its core Harley-Davidson brand.
As bleak as the announcement was for Buell and MV Agusta, Harley said sales of its cruiser motorcycles dropped 21.3 percent worldwide in the third quarter, better than the industry average decline of 35.9 percent.
(reprinted from the New York Times October 15, 2009)
And from the Harley Davidson Website
Details of Buell and MV Agusta Actions
The Company will discontinue production of Buell motorcycles. Remaining inventories of Buell motorcycles, accessories and apparel, while they last, will continue to be sold through authorized dealerships. Warranty coverage will continue as normal for Buell motorcycles and the Company will provide replacement parts and service through dealerships.
The decision will result in a reduction over time of about 80 hourly production positions and about 100 salaried positions at Buell. Employment will end for a majority of Buell employees Dec. 18, 2009.
Harley-Davidson, Inc. expects to incur approximately $125 million in one-time costs related to the discontinuation of the Buell product line. The Company expects to incur approximately $115 million of that amount this year.
Relative to MV Agusta, the Company will immediately commence efforts to sell the business, which is based in Varese, Italy.
In the third quarter, Harley-Davidson, Inc. recorded a one-time fixed-asset impairment charge of $14.2 million related to Buell and a goodwill impairment charge of $18.9 million related to MV Agusta.
“Buell and MV Agusta are great companies, with proud brands, high-quality exciting products and passionate enthusiasm for the motorcycle business. Buell has introduced many innovative advancements in motorcycle design and technology over the years and MV Agusta is known in Europe for its premium, high-performance sport motorcycles. However, our strategy to focus on the Harley-Davidson brand reflects the fact that we believe our investments in that brand are a better utilization of overall company resources,” said Wandell.
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