Missouri - Harley-Davidson, Kansas City Union Sign 7-Year Labor Deal

OFF THE WIRE
John Kell
 foxbusiness.com
Harley-Davidson Inc. (HOG) said it would move forward with the implementation of a new production system at its Kansas City, Mo., vehicle operation after the plant's unionized employees ratified a new seven-year labor agreement.
The new labor agreement in Kansas City completes a cycle of labor negotiations throughout the company's operations that has restructured all labor agreements. The company said those moves provide "a more flexible and efficient operating and cost structure." The motorcycle maker has been recreating itself as a smaller manufacturer, aiming to increase its presence outside the U.S. as economic weakness has curbed demand for its high-end motorcycles.
Upon implementation of the Kansas City agreement, Harley said it expects to have about 540 full-time hourly unionized employees at the facility, compared to about 685 as of Monday. The production work force will also include about 145 flexible positions. A company representative wasn't immediately able to provide more details about how those positions would be shuffled.
The changes are expected to generate annual operating savings of about $15 million in 2013, which is the first full year the agreement is implemented. The company expects to incur about $15 million in additional restructuring charges through 2012 related to the changes.
Similar agreements were ratified by employees in York, Pa., in late 2009 and in Milwaukee and Tomahawk, Wis., in September 2010.
The pact in Pennsylvania resulted in an agreement to cut nearly 50% of jobs, more work-rule flexibility and an unusually long labor deal, in exchange for the company's commitment to invest $90 million in the plant. Harley had threatened to move the jobs from York to a new plant in Kentucky if the union rejected the contract. Meanwhile, workers in Wisconsin agreed to a new contract that would reduce headcount there by one-quarter.
On Monday, Harley said the new labor agreement in Kansas City would be implemented in phases. Implementation of a new, standardized production operating system being introduced across the company would begin at the onset of the deal, while the compensation and benefits component will generally take effect starting in August 2012, after the current contract was originally set to expire.
In total, Harley expects company-wide restructuring activities to result in one-time charges of $510 million to $525 million, and annual ongoing savings of $305 million to $325 million.
Last month, Harley reported its fourth-quarter loss narrowed sharply on sharply lower restructuring expenses and as its financial services business returned to profitability.
Harley's shares were recently down a penny at $40.86. The stock is up 18% this year.