H-D will move forward with plans to build an additional U.S. manufacturing and assembly plant.

October 31, 2006

U.S. - Harley-Davidson Motor Company will move forward with plans to build an additional U.S. manufacturing and assembly plant outside of Wisconsin for expanded production of Big Twin motorcycle engines and transmissions, in support of the Company’s future needs.
The announcement follows an Oct. 16 vote by members of Harley-Davidson’s largest Milwaukee union, the United Steelworkers (USW), not to accept a plan that would have expanded capacity in Milwaukee, tied to cost reductions and improved manufacturing flexibility.

The Company said that the jobs of current Milwaukee production workers are not at risk in the plan to build a new plant elsewhere in the U.S.

In keeping with its normal practice, Harley-Davidson had advised its international and local unions of the need to add capacity and to do so in a way that would significantly reduce future costs and improve flexibility. The USW subsequently asked the Company to identify the specific wage, benefit and work rule changes that would be needed to keep the expansion in Milwaukee, so that it could consider whether to seek the additional work.

Among other things, those wage and benefit changes would have included a reduced wage rate for new union workforce hires, and migrating union employees to a health care plan that achieves cost savings while still providing a premium level of service.

“We’re disappointed with the vote but we need to address capacity, cost and flexibility in tandem,” said Rod Copes, Vice President and General Manager of Harley-Davidson’s Pilgrim Road Powertrain Operations in Menomonee Falls. “The proposal the union voted on would have made expansion here comparable to what we can achieve in a new unionized plant in some other part of the U.S.”

“Harley-Davidson is very successful today and all of us want to keep it that way. That means being good stewards and actively managing costs across the entire organization that could be detrimental to our business over the long term if we don’t start to control them now,” said Copes.

The Company and representatives from the international unions will now work together to find the best possible U.S. location for the new engine and transmission plant.

In the last 10 years, the Company’s annual shipments of models containing Big Twin engines have nearly tripled. The last significant investment in V-Twin production in the Milwaukee area was $175 million between 2004 and 2006. In July 2006, Harley-Davidson introduced the newest generation Big Twin engine – the Twin Cam 96 – to enthusiastic consumer and dealer response.

The Company currently has powertrain manufacturing operations at Wauwatosa, and Menomonee Falls, Wis. and Kansas City, Mo.; final assembly operations at York, Pa. and Kansas City Mo.; and components manufacturing at Tomahawk, Wis.