Production ramps up to meet year-end goals. Harley-Davidson Production Stoppage Print this page. Share on Facebook Share on Twitter Email a FriendDennis Chung July 29, 2022 In May, Harley-Davidson announced that it would temporarily halt motorcycle production as a result of a "regulatory compliance matter" pertaining to an unidentified part from a third-party supplier. In the beginning, Harley-Davidson estimated that the strike would last two weeks. However, it ended up lasting 19 days before production resumed on June 6.
Due to the fact that the stoppage only affected Harley-Davidson's gas-powered motorcycles and not the electric LiveWires, some speculated that the issue was related to the powertrains. At the time, we thought that was unlikely because we sensed that powertrain production had also been halted to prevent a backlog of idle engines awaiting motorcycle installation.
During its report on the second quarter of 2022, Harley-Davidson provided the final clarification today. Harley-Davidson's chief executive officer and board chair, Jochen Zeitz, began his portion of the investor conference call by explaining that non-compliant brake lines were to blame for the production shutdown.Zeitz explains, "The decision we took to temporarily close our production facilities and suspend vehicle shipments was taken out of an abundance of caution and related to a regulatory compliance issue with the brake hoses provided by a Tier 2 to our Tier 1 suppliers." This decision was made in response to a problem with the brake hoses.
A company that supplies brake lines to the Tier 1 supplier would be the Tier 2 supplier, whereas the Tier 1 supplier would be the company that supplies the braking systems for the majority of Harley-Davidson models. Zeitz did not specify either supplier, but given that Brembo supplies braking systems for numerous Harley-Davidson models, we believe Brembo to be the Tier 1 supplier. Even though Brembo makes LiveWire's braking systems, we can assume that its hoses were not affected by the same issue.
Zeitz did not go into specifics about the problem with the brake hoses other than to say that it was a regulatory one.
Although Harley-Davidson claims that it has increased production to make up for the shortfall, the production stoppage had a negative impact on the company's Q2 results because it fell short of production targets for the quarter.
Before the shutdown, Harley-Davidson, according to chief financial officer Gina Goetter, produced approximately 4,500 units per week on average. The 19-day delay resulted in a loss of 10,000 to 12,000 motorcycles in production. Goetter claims that production has increased to over 4,500 units per week since production resumed, allowing Harley-Davidson to meet its initial production goals for the year.
According to Goetter, "in terms of how we feel confident in the back half, that 4,500 unit run rate, we are producing over that now." As a result, we are producing at a rate higher than that output rate as we attempt to recover and sort of get the shipments into this crucial Q3 window. As a result, our confidence in our ability to confirm our guidance is based on that.
In comparison to the same period last year, Harley-Davidson's motorcycle segment (including related products) generated $1.266 billion in revenue in the second quarter. The number of motorcycles shipped in the second quarter decreased by 15% to 48,200, down from 56,700 in the same period in 2021. The decline in retail sales was 23%, with a 28% decrease in North American sales.
However, Harley-Davidson's motorcycles and related products business saw an increase in operating income of 3% to $192 million, up from $186 million, despite the decrease in overall revenue.
Harley-Davidson reported overall revenues of $1.469 billion, down 4 percent from the previous year, and operating income of $278 million, down 1 percent from the previous year. Earnings per share rose from $1.33 to $1.46 in the second quarter, representing a 5 percent increase from $206 million.
Additionally, Harley-Davidson provided an update on LiveWire and the company's upcoming merger with Kymco and AEA-Bridges Impact Corp. According to Zeitz, LiveWire is anticipated to go public on September 26, just in time for the beginning of the fourth quarter. In the middle of September, AEA-Bridges will hold its shareholder meeting to vote on the transaction.
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