About 800 workers will lose their jobs when Harley-Davidson Inc. closes its Kansas City motorcycle assembly plant in the fall of 2019
Tuesday’s announcement to investors was a complete surprise to employees, three fourths of whom are represented by one of two unions.
“They didn’t even give us a call ahead of time,” said Joe Capra, directing business agent for Local 778 of the International Association of Machinists & Aerospace Workers. “It is real devastation for these people who work here and work hard in the Kansas City area.”
The plant’s production is being shifted from the factory near Kansas City International Airport to one in York, Pa.
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Layoffs are expected to begin mid-year, the company said. Laid-off salaried workers will receive severance and outplacement support information. Hourly employees are covered under the collective-bargaining agreements.
The company cited market conditions as the reason for the shutdown.
“This decision was made after very careful consideration of our manufacturing footprint and the appropriate capacity given the current business environment,” the company said in a written statement. “We are constantly evaluating capacity and our current U.S. capacity exceeds U.S. demand.”
The company expects to add 450 full-time, casual and contractor positions to its York facility, which will be expanded to support additional production.
Consolidation is expected to begin immediately, the company said.
The announcement came as Harley-Davidson reported its fourth quarter and year-end financial results. The motorcycle manufacturer said its worldwide retail motorcycle sales were down 6.7 percent in 2017 when compared to the previous year.
The drop was more pronounced in this country, with U.S. sales down 8.5 percent, compared with a 3.9 percent drop overseas.
Percentage drops in the fourth quarter were even worse, with overall sales down 9.6 percent U.S. retail motorcycle sales down 11.1 percent.
Harley-Davidson stock fell 8 percent on the news to close at $50.84 per share.
The company said it is closing the Kansas City plant to improve manufacturing operations and cost structure.
“This was a decision we did not take lightly,” the company said. “The Kansas City plant has been assembling Harley-Davidson motorcycles since 1997, and our employees will leave a great legacy of quality, pride and manufacturing leadership. We are grateful to them and the Kansas City community for their many years of support and their service to our dealers and our riders.”
It is a stunning end to what was at the time a glorious beginning when Harley announced in 1996 that it was putting down roots here.
Kansas City beat out 30 other cities in 10 states in a months-long competition.
Then-Mayor Emanuel Cleaver called it “a once-in-a-century catch for Kansas City.”
It came at an opportune moment. The Kansas City area was then in the midst of a several years of disappointments that would see the area lose the headquarters of the NCAA, the Big 12 athletic conference headquarters and the annual FFA convention.
Winning the Harley plant mitigated the blows somewhat.
But that success did not come cheap. Area leaders said the $85 million to $100 million assembly plant was well worth the initial $6.4 million-incentive package that the state, city and Platte County offered. Those tax credits and other subsidies would over time grow by tens of millions of dollars.
The plant went onto produce the Softail, Sportster and Street motorcycles.
The first motorcycle, a 95th anniversary edition of the XL 1200 Custom, rolled out of the nearly 400,000-square-foot plant on Dec. 22, 1997, followed by a grand opening two weeks later attended by more than 200 employees and their families.
The first Harley Sportster was given to Harley’s top officials to take to the company’s Milwaukee headquarters. The second one, signed by all the employees, was presented to Cleaver and put on display at the visitors area of the plant.
Cleaver, now a congressman representing the Kansas City area, issued a statement Tuesday afternoon saying he was sad to hear the factory was closing.
“I remember aggressively seeking and fighting for the motorcycle assembly plant to set up in Kansas City when I was mayor.” he said. “Now, to see it close and the reported 800 people out of work or making the difficult decision to relocate, is disappointing. Kansas City is still a vital economic hub and sought out by many for its technology sector. I have no doubt it will continue to attract lucrative businesses to replace those lost jobs.”
In November, the company announced the plant was producing the company’s newest motorcycle to hit the market — its Sport Glide model.
At the time of that announcement, the company said the addition of the Sport Glide in Kansas City would not change the size of the workforce, then at 748.
The decision to close the plant comes at a time when Harley is at odds with its unions.
Tensions began growing several years ago when the company adopted a more traditional management approach that lessened the independence that employee groups had when the Kansas City plant first opened.
“We were a self-directed workforce,” said Greg Tate, a business agent at the Independence sub-district office of the United Steelworkers District 11. “We managed our own quality somewhat and our own overtime.”
Tate said that ended when the current contract took effect in 2011, which included a five-year wage freeze.
This past September, Harley-Davidson’s unions ended a two-decade long nationwide partnership agreement with the company.
Union leaders criticized management’s handling of seasonal staffing and were concerned when the company announced last May that it was building a plant in Thailand.
Emil Ramirez, the director of the regional office of the United Steelworkers for the territory that includes Kansas City, referenced the Thailand factory in a written statement about the plant closing:
“We cannot speculate about how the company plans to replace this production or to what extent these good-paying, family-supporting, American jobs will be outsourced to facilities the company has opened in Asia and other parts of the world,” he said.
The company has said it is not shipping jobs overseas. Rather, the plant in Thailand as well as plants in Brazil and India serve those markets and were built because tariff barriers make it cost-prohibitive to ship American-made bikes to those markets.
Local union representatives had been gearing up to negotiate a new contract in Kansas City but are now set to enter talks about the terms of a shutdown.
Tate said he doubts that the upcoming labor talks had anything to do with the company’s decision to move production to Pennsyvlania.
“Labor costs are more expensive in York,” he said. “That’s why it is so surprising.”
The Machinists represents roughly 400 Kansas City Harley-Davidson workers, and the Steelworkers represent about 200, Tate said.
The company said restructuring and other consolidation costs of $170 million to $200 million and capital investment of $75 million during the next two years.
The company expects ongoing annual cash savings of $65 million to $75 million after 2020.