HD Finance is definitely in deep doo doo, as is much of the financial sector.
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Head of Harley-Davidson’s finance arm resigns
MILWAUKEE - Harley-Davidson Inc. said Thursday the head of its financial services unit resigned and its chief financial officer will lead the division on an interim basis.
The Milwaukee-based motorcycle maker said in a news release that Sy Naqvi made a personal decision to resign from Harley-Davidson Financial Services, which he joined as president in February 2007.
The company said Tom Bergmann, Harley’s chief financial officer, will take on the added responsibility as president of HDFS, while it seeks a full-time replacement.
Chief Executive Jim Ziemer said he was confident in Bergmann’s ability to lead HDFS.
“In the current economic environment, HDFS is an especially important priority for us and Tom has been highly involved in guiding that business,” he said, according to the statement.
Bergmann, who became Harley’s CFO in 2006, had been chief executive of USF Corp., a $2.5 billion publicly traded transportation and logistics company.
He also has worked as corporate controller and vice president of finance for financial services at Sears, Roebuck and Co., and in senior level positions at The St. Paul Companies Inc. and Johnson & Johnson.
The motorcycle maker is facing slumping sales as consumers cut spending. On Wednesday, Raymond James analyst Joseph D. Hovorka downgraded the company and estimated its fourth-quarter U.S. sales will decline by a percentage in the low- to mid-20s, a bigger drop than the third-quarter’s, of 15.5 percent.
Last month Harley said in a Securities and Exchange filing that it received a one-time advance of $500 million for HDFS, which makes loans to consumers and offers wholesale lending to the company’s dealers.
Source: businessweek.com
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CHICAGO (Reuters) — Harley-Davidson (HOG) said Friday that it will cut nearly 12% of its workforce and close several plants as the global pullback in consumer spending crushed its earnings even worse than Wall Street had expected.
The quarterly results, which were also pulled down by a big loss at the motorcycle maker's in-house finance unit, sent Harley's already battered shares sharply lower.
Manufacturers of discretionary items like motorcycles, boats and recreational vehicles have been especially hard hit by the confluence of economic problems.
The contraction in U.S. house prices, the Wall Street meltdown, loss of consumer confidence have relegated the industry's pricey products to the bottom of most households' to-buy lists.
The breakdown in the credit markets and surge in unemployment have only added to the industry's problems.
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Analysts at Goldman Sachs think Harley's sales in the United States — its largest and most important market — will tumble 30% this year, the largest decline since the early 1970s.
Harley said it is taking several actions to cut costs, including plant closures that would result in the elimination of 1,100 jobs. The company employs about 9,000 workers, according to its most recent annual report.
Its fourth-quarter net income fell 58% to $77.8 million, or 34 cents a share, from a year earlier.
That was well below the 57-cents-a-share profit analysts had expected the company to report, according to Reuters Estimates.
Edward Aaron, an analyst at RBC Capital Markets, called the results "a big miss."
During the fourth quarter, worldwide retail sales of Harley motorcycles fell 13.1%, pulled down by a 19.6% drop in the U.S. But sales also fell in once-robust overseas markets, including Latin America, which saw a 28% decrease.
In response to the slowdown, Harley said it would slash its production of motorcycles in 2009 as much as 13%.
"We reduced our production levels prudently in 2008, helping our dealers achieve lower inventory levels," said Jim Ziemer, the outgoing chief executive, "and we're going to show similar discipline in 2009."
But Aaron at RBC isn't sure. "It's not clear to us that this cut will be sufficient."
Along with the production cuts, Harley said it would combine its two engine and transmission plants, consolidate paint frame operations into one facility, and close its parts and accessories distribution center. In the future, Harley said it would use a third party to distribute those products.
The 1,100 jobs to be cut over 2009 and 2010 include about 800 hourly production positions. Harley said most of the layoffs would occur this year.
The contraction in consumer spending on bikes, boats, all-terrain vehicles and RVs isn't the only problem dogging Harley.
Over the past six weeks, the company has announced the departure of two top executives, adding boardroom uncertainty to its challenges.
In mid-December the company said that Ziemer, 58, would retire as CEO sometime in 2009 after only four years at the helm.
Then, in early January, it announced that Saiyid Naqvi, the head of its critical in-house finance unit, had resigned and left the company less than two years after joining it from the world of mortgage lending.
Naqvi's abrupt departure from Harley Davidson Financial Service was the latest trouble at the in-house lending unit, which helps more than half of Harley's customers finance the purchase of their bikes.
That unit, which accounted for about 15% of Harley's operating profit of $1.4 billion last year, relies on a healthy securitization market for both its operations and profits — and that market has been largely paralyzed as a result of the credit crisis.
The economic downturn has added to its problems. In the fourth quarter, higher projected credit losses at the unit forced Harley to take write-downs of $35.1 million on retained securitization interests and $28.4 million on finance receivables held for sale.
The company's shares have lost 75% of their value since September.
Copyright 2009 Reuters Limited.
