Harley considers moving work to Kansas City

Deep in union contract talks, Harley-Davidson Inc. confirmed Friday it could move its Milwaukee-area manufacturing to Kansas City, Mo., if it cannot get a labor agreement that cuts millions of dollars in local production costs.
It's one scenario that Harley is considering as the company gets closer to deciding whether it will keep about 1,700 manufacturing jobs in Wisconsin or move them elsewhere. The decision, according to the company, hinges on the outcome of nfl jerseys negotiations that are taking place with the United Steelworkers of America and the International Association of Machinists and Aerospace Workers.
Harley-Davidson has told union members it wants to slash about $54 million a year in production costs here and have a more flexible workforce that can respond quickly to the seasonal demand for motorcycles and changes in the economy.
Should the negotiations fail, Harley could move its powertrain operations - which manufacture motorcycle engines and transmissions - to a company plant in Kansas City that currently assembles motorcycles and makes some engines.
Then, motorcycle assembly work would be moved from Kansas City to an existing Harley-Davidson plant in York, Pa.
The company has a short list of alternate sites for the powertrain operations if it can't get a labor agreement, said spokesman Bob Klein.
"I can tell you that Kansas City is one of those scenarios," Klein said. He did not name any others.
The company expects to make its decision by mid-September. It is negotiating with the unions for a combined contract that would take effect April 1, 2012.
Harley-Davidson has plants in Menomonee Falls and Tomahawk that are affected by the current negotiations. Under the scenario described by Klein, the powertrain operations in Menomonee Falls would move to Kansas City. Harley's headquarters would remain in Milwaukee, according to the company.
The United Steelworkers did not return Journal Sentinel calls. But an International Association of New York Jets jersey Machinists official in Kansas City said he hopes the unions in Wisconsin can reach an agreement with Harley-Davidson.
"My first choice is not to try and pull work from the Milwaukee union employees," said Tony Wilson, president of Local Lodge 176 in Kansas City. "But obviously if the company chooses to leave the Milwaukee area, we would do whatever we could to move the work into our plant - should the company make that decision. We have to try and support our own members and the local economy here in Kansas City."
Harley-Davidson has operated its 358,000-square-foot plant in Kansas City since 1998. The plant employs about 700 people who assemble motorcycles and build some engines. It also has about 100 salaried employees.
It's too early to gauge how the Kansas City plant would be affected by gaining the powertrain operations and losing assembly work, according to union officials.
"I don't know enough about the company's plan to say whether it would be a screwed-up mess or not," Wilson said.
Union officials say the scenario sounds familiar, given that the company successfully used a similar strategy last year in Pennsylvania to achieve labor concessions in York. Under duress, the International Association of Machinists accepted a seven-year contract that eliminated almost 1,000 jobs in York but kept the factory from being moved to Kentucky.
Companies across America are using similar tactics, said Frank Larkin, an IAM spokesman.
They are taking advantage of a sour economy to do radical restructuring, Larkin said.
In 2009, Kansas City was eliminated from a list of cities where Harley-Davidson might have built a factory to replace the York operations.
The current threat to Milwaukee may be a bargaining ploy, but it's still a plausible scenario, said Phil Gorham, an industry analyst with Morningstar Research.
"A feasible alternative strengthens the company's hand," Gorham said.
Analysts say the company would benefit from tighter manufacturing operations and a more flexible workforce.
It has a good bargaining position, given the lackluster economy and cities' clamoring for jobs, said George Van Horn, senior analyst for IBIS World Inc., an economic research organization.
The established workforce is in a very difficult situation, Van Horn said.
But moving manufacturing operations isn't simple. It can take a company years to iron out the wrinkles and get the benefits.
"It's not like moving a baseball team, where you put all of New York Giants jersey the equipment on a truck and head to the next town," Van Horn said.
State officials have said they would offer incentives to keep Harley-Davidson from pulling its manufacturing from Wisconsin. The company says its focus, for now, is on lowering production costs and getting a more flexible workforce.
"If we can't reach an agreement here, we would need to move the production operations," Klein said.