In an address last Thursday during a meeting at the Harley-Davidson Museum, CEO Keith Wandell said that through a succession of labor agreements over the years, Harley management had lost control of costs.
As an example, he mentioned that employees at the Harley Menomonee Falls Plant were making an average $32 per hour in wages and with all benefits added were costing the company $75 per hour. Wandell made reference to the auto industry, and in particular to General Motors, a company unable to remain profitable under the burden of its payroll, pension and benefit costs. He also agreed that part of the blame is on the management for failing to innovate and produce attractive products at reasonable prices.
Regarding the new 7-year labor agreement recently agreed by Harley Wisconsin Unions and by which the number of workers will be reduced by about 200 and replaced by “casual workers” with lower pay and without benefits, Keith Wandell explained that his company did not ask for wage concessions, but Instead asked for the ability to hire casual employees and to make changes in the medical plan, the same plan offered to management. He said that before his arrival as CEO, management would make its offer to the unions and they would vote no. The company would then offer more, the unions would vote no again, and the company would offer more until the unions agreed to a contract.The key to the labor contracts, Wandell said, is to gain production flexibility that the company needs to deliver bikes on demand. Harley’s business is seasonal, and the current contracts don’t provide the flexibility to address market downturns. He declared that in a tough economy where motorcycle sales have plummeted 40%, Harley had two choices: “Sit by and hope that things change or change whatever can be changed.”
Some union representants reacted angrily to Wandell’s statements. “Something is definitely wrong when the CEO of a troubled company makes more than $6 million a year and then whines about how out of control workers’ wages have become” said Frank Larkin, spokesman for the International Association of Machinists and Aerospace Workers, which represents some Harley workers in Milwaukee. “Once again the workers have stepped up and taken cuts in wages, benefits and working conditions in order to save this company. It’s not our fault that managers can’t manage. The remarks are a slap in the face” said Michael Bolton, United Steelworkers of America District 2 director, which represents most of the Harley plant workers. Maybe Wandell’s statements were a poor timing choice coming so soon after workers concessions.