Harley-Davidson, Inc. (NYSE: HOG) announced that it will move forward with the implementation of a new production system at its Kansas City, Mo. vehicle operations following a vote by the plant's unionized employees ratifying a new seven-year labor agreement.
The new labor agreement with employees represented by the International Association of Machinists and Aerospace Workers (IAM) Local 176 and the United Steelworkers (USW) Local 760 takes effect Aug. 1, 2011 and will be implemented in phases.
Implementation of the Harley-Davidson Operating System -- a new, standardized production operating system being introduced across all company production facilities -- will begin at the onset of the agreement, while the compensation and benefits component generally takes effect starting in August 2012, after the current contract was originally set to expire.
The adoption of a new labor agreement in Kansas City completes a cycle of labor negotiations throughout the Company that has restructured all labor agreements to provide for a more flexible and efficient operating and cost structure. Similar agreements were ratified by employees at the Company's operations in York, Pa. in December 2009 and in Milwaukee and Tomahawk, Wis. in September 2010.
"Together with our unions, Harley-Davidson is making the necessary changes across all our production facilities to succeed in a competitive, global marketplace," said Keith Wandell, President and Chief Executive Officer of Harley-Davidson, Inc.
"The Company is well on its way to building a world-class, sustainable, lean operating structure and I want to thank our employees at Kansas City for their participation in this journey. The ratification of the new contract will help ensure that we can continue to meet and exceed the expectations of our customers."
Harley-Davidson's new production system is expected to provide greater flexibility for seasonal and other volume-related production changes, an enhanced ability to vary product mix in line with customer preferences including the customization of motorcycles at the factory, and greater production efficiency overall.
The operating structure includes the use of flexible workers -- unionized employees who work as required, depending on seasonal and other volume needs and to provide coverage for vacations and other absences.
Upon implementation of the new labor agreements, the Company expects to have about 540 full-time hourly unionized employees at the Kansas City facility, compared to about 685 today. The Company also expects its Kansas City production workforce to include about 145 flexible positions.
The changes at Kansas City are expected to generate annual operating savings of approximately $15 million in 2013, the first full year in which the agreement is fully implemented. The Company expects to incur approximately $15 million in additional restructuring charges through 2012 related to the changes at Kansas City.
When fully implemented, Harley-Davidson expects previously announced company-wide restructuring activities, together with the implementation of the changes at Kansas City, to result in one-time charges of $510 million to $525 million, and annual ongoing savings of $305 million to $325 million.
In 2011 on a combined basis, Harley-Davidson now expects to incur restructuring charges of $95 million to $105 million. The Company continues to expect to realize savings on a combined basis in 2011 of $210 million to $230 million from restructuring activities initiated since early 2009.
A brief summary of this financial information is available online in the Company/Investor Relations/Events and Presentations area on harley-davidson.com.
Click on http://investor.harley-davidson.com/Events.cfm and view the event titled "Harley-Davidson to Implement Production System at Kansas City" dated Feb. 28, 2011.