Harley-Davidson locks out workers

Harley-Davidson Inc. locked out employees at its largest plant Thursday after workers authorized a strike that could start today.

The company suspended production of Touring and Softail motorcycles at the York, Pa., factory, where the union representing 2,798 workers is fighting a contract proposal that would cut wages for new hires and change health benefits.

A strike in York would be Harley-Davidson’s first in 16 years. A walkout may cost the Milwaukee-based company 1 cent a day in per-share net income if lost production can’t be recouped later, UBS Securities estimated in a report Thursday.

Harley-Davidson’s five-year contract with Local 175 of the International Assn. of Machinists and Aerospace Workers expired at 12:01 a.m. today. The union called the lockout “a betrayal.”

Shares of Harley-Davidson rose 49 cents to $68.76.

A strike at the York factory, one of only two assembly plants for Harley-Davidson motorcycles, may please some investors who have voiced concerns about rising inventory. The company shipped 349,196 motorcycles in 2006.

Harley last month reported record net income of $1.04 billion, or $3.93 a share, for 2006. Per-share profit will grow 11% to 17% a year through 2009, Chief Executive Jim Ziemer said.

The contract changes sought in York are aimed at controlling “future costs that could be detrimental to our business over the long term,” Fred Gates, the plant’s manager, said Thursday.

“Harley-Davidson has no business behaving like they’re on the brink of bankruptcy,” machinists union President Tom Buffenbarger said. “Instead, this company’s management is risking a successful 26-year partnership for a few cents more in profits. It’s incredibly stupid.”

Harley-Davidson is “obviously disappointed” by the union’s strike vote, Gates said. The company’s last strike, in 1991, was also at York and lasted two weeks.

Harley-Davidson said it offered 4% annual wage increases in a three-year contract. Half of the boost depends on the union accepting health benefit changes that would save money for the company.

Under the proposed contract, union workers could choose to have the same health plan as salaried employees or find their own for the same price.