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RIBCO
Articles of Interest
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2006-10-16
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Harley To Expand If Union Concedes |
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Benefits, new hires' pay would shrink
By AVRUM D. LANK and RICK ROMELL
alank@journalsentinel.com
Posted: Oct. 13, 2006
Harley-Davidson Inc. is calling on its workers to approve lower wages for new hires and reduced benefits for all employees in exchange for a $120 million expansion of the firm's Milwaukee factories.
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Harley will take the project elsewhere if members of United Steel Workers Local 2-209 reject the proposed cuts, company executive Rod Copes said Friday. He wouldn't say how many jobs would be added if the concessions are granted.
The cuts would slash wages for workers hired beginning next year by as much as a third, peel back the current generous health plan and reduce pension benefits.
The 1,500-member union will vote on the deal Monday. Workers first received details on the plan in a memo distributed late Thursday and Friday.
Harley also said the deal depends on state financial assistance. That is already in the works, Gov. Jim Doyle said Friday.
"We have had very good discussions with them," Doyle said. "I feel pretty confident that we have put a package together from the Department of Commerce that they will look at very favorably."
He wouldn't give details.
The expansion would boost production of engines and transmissions for the company's popular larger motorcycles.
It is needed because the company soon expects to need more than the approximately one-quarter million power trains produced at the plants per year, said Copes, vice president and general manager of the company's Pilgrim Road plant in Menomonee Falls.
Existing jobs safe
According to the memo, the expansion would allow the company to meet demand through 2010.
"The project will utilize the existing Capitol Drive and Pilgrim Road facilities," the memo said.
If the concessions are approved, a go-ahead could be given by the end of the year, Copes said. He added that no matter what happens, existing Harley jobs are not threatened by the plans. Harley employs about 4,500 in the Milwaukee area.
Mary P. Burke, secretary of the Wisconsin Department of Commerce, said Harley approached her less than a month ago about the situation. She said if the local plants are not expanded, Harley indicated it would take the project to Missouri or Pennsylvania, where it has assembly operations.
Jim Wheiland, president of Local 2-209, would not comment Friday, calling the issue "an internal matter."
But the memo shows that employees hired after Dec. 31 would get far less pay than their incumbent colleagues. Assemblers, for example, now make $27.27 an hour. Under the contract concessions, new assemblers would make $18.25.
All workers would pay more for health care, though the changes wouldn't affect current employees until July 1, 2008.
Under the existing plan, the company covers the entire cost of premiums, and employees pay no deductible on physician and hospital bills, according to the worker who provided the memo to the Journal Sentinel. He asked not to be named for fear of retribution.
Health plan changes
Replacing the current benefits would be three plans, all requiring employees to pay 10% of in-network medical expenses after deductibles. The deductibles range from a few hundred dollars to thousands of dollars per year under a high-deductible plan that includes a health savings account. One of the plans would require employees to pay part of their premiums.
The proposal also would end the ability of employees hired after Dec. 31 to enhance their pensions through voluntary contributions and additional company matches.
The employee who provided a copy of the memo said he would vote against the proposal.
"It aggravates me that Harley puts it out that they're such a great company and then they do this on the workers' backs," he said.
The man, who said he lost an earlier job when another company relocated, also questioned local manufacturers' complaints that they can't find enough good production employees and that young people are reluctant to go into factory work.
"Now, if you had a kid and you were a factory worker and you'd lost your job and given concessions and stuff, would you recommend to your kid to go to work in a factory?" he asked. "No."
On Thursday, Harley reported record revenue and earnings per share for the quarter that ended Sept. 24.
Thanks in part to savvy marketing and the blessing of an iconic brand that commands fierce loyalty among its customers, the company has been hugely prosperous for more than a decade.
After a $12 million loss in 1993, the company's profits have marched steadily upward. Last year, Harley reported net income of $960 million. The firm is on track to top $1 billion in profit this year.
On Thursday, Harley said it has spent $911 million over the first nine months of the year to repurchase shares of its stock - a strategy companies typically use to boost the price.
Harley has done well in part because it has "very favorable labor relations," said Robert J. Simonson, an analyst who follows the company for William Blair & Co. in Chicago. "They have gone out of their way to include and empower the union officials and union employees."
According to the memo, the union "requested the opportunity to address the company's business requirements in the existing Harley-Davidson facilities."
Simonson said the company is smart enough to know that "in this economy everybody is trying to cut costs," and to work with the union to do so.
Harley also needs the changes to reduce labor costs and have increased manufacturing flexibility, Copes said.
Those are intelligent moves, said Simonson. If the company does not look ahead in making them, it could end up in the same predicament as General Motors Corp., where labor costs are overwhelming the company, he said.
Harley began production in the Menomonee Falls plant in 1997 after purchasing it from the Briggs & Stratton Corp. Harley uses about 470,000 square feet of the 850,000-square-foot facility, and until earlier this year it leased the rest to Briggs. However, Briggs has since ceased using that space, which is available for expansion, said Bob Klein, Harley spokesman. In all, 976 work there, 844 of whom are union members.
The plant on Capitol Drive in Wauwatosa has 460,000 square feet and employs 652, of whom 523 are in the union.
Harley also has a distribution center in Franklin and headquarters operations in Milwaukee.
From the Oct. 14, 2006 editions of the Milwaukee Journal Sentinel
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