Harley-Davidson to Start Flexible Production at K.C. Plant

March 2, 2011
New labor agreement completes manufacturers effort to establish flexible work rules company-wide

With approval from the union workforce, Harley-Davidson Inc. is planning to implement a new production system at its vehicle assembly and powertrain plant in Kansas City, Mo. Members of the International Association of Machinists and Aerospace Workers and United Steelworkers of America unions recently approved a new seven-year labor agreement that will be phased in beginning on August 1.

Full-time hourly employment at the Kansas City plant will decline from 685 to 540.

Workers wage and benefit adjustments will not begin until August 2012, the original expiration date of the current labor contract. The contract with the Kansas City workers completes Harley’s current cycle of negotiations. Workers at Harley-Davidson plants in York, Pa., and Milwaukee and Tomahawk, Wis have ratified similar agreements.

The Harley-Davidson Operating System is a new, standardized operating system that the motorcycle builder is introducing at all its plants. At Kansas City, it will involve using about 145 flexible workers in addition to the full-time hourly workers. The flexible workers will be union members who are assigned seasonally or as required by product-volume demands to provide coverage during vacations and other absences.

Harley-Davidson indicates the new system will allow it to work more flexibly as product demand changes. While there will be related charges of approximately $15 million in 2012, the company stated that the changes at the Kansas City plant will generate annual operating savings of $15 million in its first full year (2013.) Also, it will allow the company to vary its product mix in line with customer preferences, including factory customization of motorcycles. Overall production efficiency also will be improved, the manufacturer stated in its release.

Across the company, Harley-Davidson expects the restructuring to result in one-time charges of $510 million to $525 million, but to generate ongoing annual savings of $305 million to $325 million.

"Together with our unions, Harley-Davidson is making the necessary changes across all our production facilities to succeed in a competitive, global marketplace," stated Harley-Davidson Inc. president and CEO Keith Wandell.

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