Harley-Davidson Announced Reorganization Plan Due to Declining Profits

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Harley-Davidson Inc (NYSE:HOG), which holds around 50% share of the larger motorbike section, announced its reorganization plan to reduce jobs and cut costs after reporting slipping sales and profits.

In the third quarter, sales of Harley reached $1.27 billion, with revenue of motorcycles and related products dropping to $1.09 billion from the $1.14 billion in the same period last year. Harley also reported profits of $114.1 million for the third quarter, which was $140.3 million last year. As for earnings per share, the company reported that earnings per share in the third quarter dropped to $0.64 per share from $0.69 last year. Gross margin also decreased to 33.6% from 34.6%. The company explained that the decrease was due to the decline to of high-end motorbike market.

Due to the drop in sales and profits, Harley planned to reorganize to reduce labor force and cut costs in the final quarter of 2016 to keep inventory in control. According to the company, Harley will first lay off temporary hourly wage workers, and the reductions will cost $20 million to $25 million. The company didn’t mention the amount of jobs that would be affected.

“We continue to effectively navigate a fiercely competitive environment and an ongoing weak U.S. industry,” said Matt Levatich, the CEO of Harley-Davidson. “We are pleased with the positive results and the enthusiasm we’ve seen for our model-year 2017 motorcycles, featuring the new Milwaukee-Eight engine. We are confident that the entire line-up will drive retail sales growth for the remainder of 2016 and position us well heading into the spring riding season next year.”

Harley also planned to ship between 44,200 and 49,200 bikes in the final quarter, and for the full year, the company expected to ship 264,000 and 268,000 bikes.

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