Harley changes gear in Kansas City motorcycle plant

In the ongoing attempt to make its motorcycle production more cost effective, Harley-Davidson is changing the way it builds bikes in Kansas City.

The motorcycle manufacturer has announced it will move forward with the implementation of a new production system at its Kansas City, Mo. vehicle operations following a vote by the plant’s unionized employees ratifying a new seven-year labor agreement.

The Kansas City plant, which was the first brand-new facility built by Harley-Davidson for manufacturing since the historic Juneau Ave, assembles all Dyna, Sportster and VRSC family motorcycles as well as producing powertrains for V-Rod motorcycles.

The new labor agreement with employees represented by the International Association of Machinists and Aerospace Workers (IAM) Local 176 and the United Steelworkers (USW) Local 760 takes effect August 1st, 2011 and will be implemented in phases.

Implementation of the Harley-Davidson Operating System, a new, standardized production operating system being introduced across all company production facilities will begin at the onset of the agreement, while the compensation and benefits component generally takes effect starting in August 2012, after the current contract was originally set to expire.

The changes at Kansas City are expected to generate annual operating savings of approximately $15 million in 2013, the first full year in which the agreement is fully implemented. The Company expects to incur approximately $15 million in additional restructuring charges through 2012 related to the changes at Kansas City.

When fully implemented, Harley-Davidson expects previously announced company-wide restructuring activities, together with the implementation of the changes at Kansas City, to result in one-time charges of $510 million to $525 million, and annual ongoing savings of $305 million to $325 million. In 2011 on a combined basis, Harley-Davidson now expects to incur restructuring charges of $95 million to $105 million. The Company continues to expect to realize savings on a combined basis in 2011 of $210 million to $230 million from restructuring activities initiated since early 2009.

"The Company is well on its way to building a world-class, sustainable, lean operating structure and I want to thank our employees at Kansas City for their participation in this journey,” Wandell noted, “the ratification of the new contract will help ensure that we can continue to meet and exceed the expectations of our customers."