Less Harley Bikes Equal Less Money for HDFS, Analyst Says

canstockphoto38962929Harley-Davidson Inc.’s pullback in motorcycle shipments this year could affect its captive’s income, said Jaime Katz, equity analyst for Morningstar Inc. However, the parent company’s planned layoffs are not expected to “massively impact Harley-Davidson Financial Services in any meaningful way.”

HDFS did not immediately comment on this story.

The Milwaukee, Wis.-based manufacturer lowered its 2016 full-year shipment guidance in July to a range of 264,000 to 269,000 motorcycles, and had previously estimated it would ship 269,000 to 274,000 motorcycles, according to the company’s second-quarter earnings report.

As a result, the company plans to cut 200 jobs across the country — scheduled throughout the fourth quarter, according to a published report.

The pullback in shipment guidance may not impact the number of employees at HDFS, but “it can impact the income, because you are financing fewer bikes than you were going to finance before,” Katz said.

In 2015, Harley-Davidson sold 168,240 motorcycles domestically, according to company earnings. “If you think of that number, they finance something like 60% of bikes,” Katz said. “You can only finance whatever percentage of domestic bike sales you have, and domestic bike sales are not growing as quickly,” she added.

Harley-Davidson’s retail motorcycle sales were down 5.2% in the second quarter to 54,786 units from the same time a year prior, according to the earnings report, due — in part — to intense pricing competition from competitors.

“Lackluster industry sales have had a significant impact on our results and our forward expectations,” Matthew S. Levatich, president and chief executive of Harley-Davidson Inc. said in the 2Q earning’s call. “As a result, we’re taking the prudent step to lower expected 2016 shipments. This is largely due to what we believe will be continued pressure on industry growth in the U.S., coupled with caution, as we consider the potential impact of the macroeconomic uncertainty on sales globally.”

About 115 of the 200 eliminated positions are union jobs at Harley-Davidson’s York Vehicle Operations plant in Pennsylvania, which assembles cruiser models, according to the published report. The York plant houses 829 union employees out of 1,010 total employees.

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