Susquehanna Valley Harley-Davidson has seen sales of Sportster models rise with the price of gas, but a fuel crisis isn’t enough to save the jobs of some workers at the motorcycle maker’s York County plant.
Too much production capacity and a weak economy trump the Sportster’s 60 miles per gallon on the highway and $6,695 price tag.
U.S. sales of Harley-Davidson motorcycles were down 12.8 percent during the first quarter. For that reason, Milwaukee-based Harley-Davidson Inc. announced in April that it planned to let 370 unionized workers and 360 nonproduction workers go nationwide.
About 300 of those jobs will come from the company’s plant in Springettsbury Twp.
The move is an effort to right supply with demand.
The company wants to ship fewer bikes than it sells. That would be a return to the business model that served the company well during the late ’90s and the earlier part of this decade, when people were waiting as long as six months for a Harley.
One step toward that production correction will include a temporary plant closure.
The plant will close between June 30 and July 3, an annual event meant to allow the production line to be switched over to the newer models, said company spokeswoman Rebecca Bortner.
But the company is now saying the plant will need to shut production for an additional week, starting Monday.
With the nation’s economic state, Stefanie Veon, who sells Harley-Davidsons at the Susquehanna Valley dealership in Lower Paxton Twp., sees the logic behind the company’s move. The economy has everybody cutting back, she said.
“I myself wonder if they are not trying to get back to the way it used to be — people having to wait and order motorcycles,” she said. “They massed-produced so much the value didn’t hold as well.”
Charles Trzcinka, a finance professor at the Kelley School of Business at Indiana University in Bloomington, has a different theory: “A Harley is sort of a luxury good.”
He likened Harley-Davidson to piano-maker Steinway & Sons. Wall Street investors look at Steinway when the economy slows. The pianos are expensive and discretionary goods. Sales tend to drop when the economy sours, he said.
The U.S. is not officially in a recession. But the national unemployment rate, a measure of the economy’s health, increased to 5.5 percent in May.
Pennsylvania released its latest unemployment figures on Thursday. Its unemployment rate increased 0.2 percent to 5.2 percent.
Trzcinka, who works with MBA students at the university managing the Reese Fund, said the students decided in February to sell the 1,000 shares of Harley stock it had in the fund’s portfolio.
It wasn’t because the stock was bad, but because the students thought other companies could do better.
It seems the students were on to something.
Shares of Harley-Davidson Motor Co. stock, which trades on the New York Stock Exchange under the symbol HOG, closed at $38.34 on Thursday. A year ago it closed at $58.95.
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