Harley to cut 1,100 jobs as profit falls

Harley-Davidson Inc said Friday it will cut 1,100 jobs over two years, close some facilities and consolidate others as it grapples with a slowdown in motorcycle sales.

The Milwaukee-based company also reported its fourth-quarter profit fell nearly 60 per cent, and said it is slashing motorcycle shipments in 2009 to cope with reduced demand.

The iconic motorcycle maker said it will consolidate two engine and transmission plants in Milwaukee into its facility in Menomonee Falls, Wis. It will shrink its paint and frame operations in its York, Pennsylvania, plant and close its distribution facility in Franklin, Wisconsin, whose duties will be handled by a third party.

Harley also said it will end its domestic transportation fleet operation.

The company said the cuts include 800 hourly production positions and 300 non-production, mostly salaried positions. It said 70 per cent of the job cuts will occur this year and the rest in 2010.

The cuts will result in one-time charges of $110 million to $140 million over 2009 and 2010, Harley said. Once they are finished, the cuts will save between $60 million and $70 million per year.

Harley has been stung by the rapid downturn in motorcycle demand. The economic recession has prompted many consumers to put off purchases of its high-end bikes, while the credit crunch has kept some would-be customers from obtaining financing.

Meanwhile, the company remains in the midst of a shake-up among top management. Chief Executive Jim Ziemer said last month he would retire in 2009, and the company remains in the process of finding a successor. Sy Naqvi, the head of Harley's troubled financial-services arm, resigned earlier this month. Chief Financial Officer Tom Bergmann has taken on Naqvi's old duties until a replacement is found.

Harley said worldwide retail sales fell 13.1 per cent in the fourth quarter, with sales in the U.S. _ its biggest market _ falling nearly 20 per cent. International sales crept higher, though, and the overall heavyweight motorcycle sales fell 25.5 per cent in the same period, Harley said.

For the full year, worldwide retail sales fell 7.1 per cent. Harley said it is slashing new motorcycle shipments in 2009 to between 264,000 and 273,000 to cope with the down market. That would be a drop of 10 per cent to 13 per cent from a year earlier.

In 2008, Harley said it shipped 303,479 new motorcycles, down 8 per cent from 330,619 new motorcycles in 2007.

Agencies

Oil falls to below $42 a barrel in Asia

Oil prices fell below $42 a barrel Friday in Asia after Russia and Ukraine said a dispute over natural gas payments wouldn't affect shipments to Western Europe.

Light, sweet crude for February delivery fell $3.05 to $41.55 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Singapore. Trading was closed Thursday for New Year's Day.

The contract rose $5.57 on Wednesday, the last trading day of 2008, to settle at $44.60 after Russia threatened to cut off natural gas supplies to Ukraine. Russia followed through with that threat Thursday, though both countries pledged they would keep supplies to the rest of Europe flowing.

Russia's gas monopoly Gazprom shut off gas supplies after talks broke down over Ukraine's payments for past shipments and a new price contract for 2009. Gazprom said it had boosted natural gas deliveries through other pipelines to Western Europe.

The European Union depends on Russia for about a quarter of its gas, with some 80 per cent of that delivered through pipelines controlled by Ukraine.

Concerns that the week-old conflict between Israel and Hamas in Gaza could disrupt supplies in the oil-rich Middle East helped keep prices from falling further. Israeli troops massed on the Gaza border Thursday in preparation for a possible ground offensive.

Oil prices began 2009 the same way they spent the most of the second half of 2008 _ going down. Crude peaked at $147.27 a barrel in July before plummeting to as low as $33.87 on Dec. 19.

Prices fell 54 per cent last year after soaring 57 per cent in 2007.

Investors remain focused on the slowing global economy and its impact on crude demand. The Department of Energy said earlier this week that U.S. fuel consumption fell 3.7 per cent in the four weeks ended Dec. 26 from a year earlier.

In other Nymex trading, gasoline futures fell 3.55 cents to $1.03 a gallon. Heating oil dropped 3.55 cents to $1.41 a gallon while natural gas for February delivery slid 2.2 cents to $5.60 per 1,000 cubic feet.

In London, February Brent crude fell $3.31 to $42.28 a barrel on the ICE Futures exchange.

Source: Agencies