Harley-Davidson reports 4th-qtr loss, its first quarterly deficit in 16 years

Harley-Davidson posts 4Q loss, first in 16 years

NEW YORK — Harley-Davidson Inc. reported a fourth-quarter loss Friday, its first quarterly deficit in 16 years, as restructuring costs and the sluggish economy wore on the motorcycle maker.

Harley-Davidson has come under pressure over the last year as the tight credit markets and the weak economy led consumers to shun purchases of its high-end, heavyweight motorcycles. The company has been reorganizing its business through layoffs, factory closures and shuttering or selling unwanted brands.

“As we look at the year in front of us, we expect 2010 to continue to be challenging,” Chief Executive Keith Wandell told investors during a conference call.

In a sign the Milwaukee-based company is trying to change direction, the company’s earnings report coincided with the unveiling of a new bike at a major motorcycle show in New York. The motorcycle, called the “Forty-Eight,” features a sleek, all-black design and is aimed at younger riders.

“I like it,” said Mike Maher, a 31-year-old construction worker from Staten Island. “I like the design a lot.”

Elsewhere at Harley, the news has been less cheerful. Last month, it announced it would close one of its two factories in York, Pa., and lay off nearly half the unionized work force there of about 1,950. The York facility is Harley’s main motorcycle production center, manufacturing its Touring and Softail bikes.

The company got a new, seven-year labor agreement out of the York facility that it said gives it greater flexibility and lower costs.

Harley is also consolidating its vehicle test facilities from three locations in Alabama, Arizona and Florida to one site in Arizona.

Last autumn, Harley said it would sell the Italian premium sport-bike maker MV Agusta, which it acquired in 2008 for about $109 million. It also said it would discontinue its Buell line of sport bikes, saying it wanted to focus solely on its namesake motorcycles, on which it generates better returns.

Harley, whose customer base is primarily baby boomers, has been looking to broaden the appeal of those namesake bikes by reaching out to younger riders like Maher, as well as to women riders and minorities. In an interview, Wandell said newer bikes like the Forty-Eight — so named because its retro design contains elements first introduced in 1948 — are part of that strategy.

“The bikes that we have introduced over the last few years to outreach more to younger riders are lower price-point bikes” geared toward young riders, Wandell said.

The Forty Eight, which goes on sale later this year, starts at $10,499 — pricey compared with offerings from Japanese manufacturers like Honda and Suzuki, but cheaper than most other Harley bikes, some of which run $30,000 or more.

Harley said shipments of its bikes to dealers in 2009 fell 27 percent to 223,023. For 2010, Harley said it expects shipments to fall another 5 to 10 percent to between 201,000 and 212,000 Harley-Davidson motorcycles.

One bright spot for Harley-Davidson has been its performance in international markets, where its brand has strong appeal. Last year, it announced plans to enter the fast-growing Indian motorcycle market and will introduce 12 models there this year.

Harley said its U.S. sales decline, however, outpaced the broader industry’s last quarter. Harley’s fourth-quarter retail sales fell 28 percent, compared with 21 percent among other heavyweight bike makers. As a result, it lost nearly 5 percentage points in market share for the quarter, though it gained market share for the entire year.

Chief Financial Officer John Olin blamed the market share decline on aggressive discounts by competitors. Harley is not interested in discounting its bikes because it weakens the brand, Olin said in an interview.

“You gotta pay full price for a Harley,” Olin said.

Harley-Davidson said it lost $218.7 million, or 94 cents per share, during the fourth quarter. That marks its first three-month loss since the fourth quarter of 1993 and contrasts with a profit of $77.8 million, or 34 cents per share, a year ago.

Its loss from continuing operations amounted to 63 cents per share.

Quarterly revenue tumbled 40 percent to $764.5 million from $1.28 billion a year ago.

Analysts surveyed by Thomson Reuters, whose results typically excluding one-time items, were expecting a loss of 32 cents per share on $764.4 million in revenue.

Harley shares fell $2.32, or 9.1 percent, to $23.26 in afternoon trading.

The company said it expects to take restructuring charges into 2012. All told, its restructuring efforts could reach $460 million. For 2010 alone, the cost could be up to $195 million.

Harley said it expects the restructuring to lead to annual savings of between of up to $260 million once finished. In 2010, it will save up to $155 million.

The company said 28 dealerships closed in 2009, the company said, and another 15 dealers could close in the next three months.

For all of 2009, Harley-Davidson lost $55.1 million, or 24 cents per share. It earned $654.7 million, or $2.79 per share, the previous year.

Yearly revenue fell by more than a fifth to $4.29 billion from $558 billion a year earlier.