Harley-Davidson shut down its American factories on March 18, around the same time automakers in this country were idling their plants as well. Those factories have remain shuttered, while Harley today said that it was making deeper cost cuts as the coronavirus pandemic persists in shutting down the world.
If Harley was in a precarious position before coronavirus hit, they are in a somewhat desperate position after. Harley sales have been down for half a decade now, and now an expensive heavy motorcycle is one of the first things Harley riders—some of whom may have been laid off, almost all of whom are likely carrying a high amount of economic anxiety—will likely be choosing not to buy the longer the pandemic rages.
Fitch, a credit rating agency, thinks the hit to Harley sales will be about 25 percent, according to Reuters, for anyone who has seen car sales absolutely fall off a cliff this past month that feels conservative, if anything.
And Harley knows it, cutting pay for its staff today while confirming a global layoff for its production employees.
In response to the near-term impacts of COVID-19, the company is taking the following actions to lower costs:
- Significantly reducing all non-essential spending
- Temporarily reducing salaries
- CEO and the Board of Directors will forgo salary/cash compensation
- 30 percent reduction for executive leadership
- 10 to 20 percent reduction for most other salaried employees in the United States
- No merit increases for 2020
- Implementing a hiring freeze
Outside of the United States, the company will take similar actions as based on regulations governing each of its operating locations. Salary reductions will be reassessed at the end of the second quarter as the company continues to closely monitor business conditions.
Harley might also soon brush up against some real cash concerns. From Reuters:
Separately, Moody’s expects declining sales to undermine Harley’s liquidity position. At the end of 2019, the Milwaukee-based company had $2.6 billion in cash and committed credit facilities, which the rating agency says would marginally cover the $2.3 billion of debt that is due to mature in the coming twelve months at Harley’s financial arm.
Harley will release its first-quarter sales results on April 28, and while those will probably be bad, they will only account for about two to three weeks of the pandemic, since they encompass the first three months of 2020. A more complete look at the impact of coronavirus won’t be known until second-quarter numbers come out in July, at which point Harley’s current CEO, Jochen Zeitz—who is actually interim CEO following the ouster of Harley’s old CEO in late February—will know just how high this mountain is to climb.