Harley sees layoffs, output cuts; blames strike

BOSTON/CHICAGO (Reuters) - Harley-Davidson Inc. (HOG.N) plans to lay off up to 740 workers and cut production at two sites because of a strike at its largest motorcycle plant, the company said.

Negotiators for the company and the strikers planned to meet with a federal mediator today, Harley said. No details on the meeting were made public.

Nearly 2,800 workers at Harley's York, Pennsylvania, plant, which makes some of the company's most profitable motorcycles, walked off the job on February 2 after their contract expired. Harley is seeking a variety of concessions from the workers.

In a statement posted on its Web site, dated February 5, Harley said it would reduce production of engines, transmissions and components at two plants that supply parts to the York facility. That will mean the temporary layoff of about 740 workers at the plants in Menomonee Falls and Tomahawk, Wisconsin, it said.

"The toe bone's connected to the foot bone and the foot bone's connected to the ankle bone," said Bob Simonson, an analyst at William Blair & Co. "There are inter-relationships here."

A spokesman for the Federal Mediation and Conciliation Service confirmed the meeting between the two sides today but declined to provide further details. Union officials were not available for immediate comment. The workers are represented by the International Association of Machinists and Aerospace Workers.

PENNY PER SHARE PER DAY

Analysts estimate the strike could reduce the company's earnings by about 1 cent per share per day. Analysts on average expect Harley to earn 98 cents per share in the first quarter.

In a note to clients, RBC Capital Markets analyst Edward Aaron said that dealers who carry the motorcycles -- an icon for the nation's aging baby boomers -- view the strike as a positive in its early days, as it will provide them an opportunity to sell down existing inventory.

"This can only be a positive event if Harley has been over-producing motorcycles," Aaron wrote. "To acknowledge that Harley has been over-producing is to acknowledge that Harley has been over-earning."

Simonson said, "If they can't resolve it in a reasonable amount of time, there will be impacts that will be greater two weeks from today than they are today on a monetary basis, and a heck of a lot greater two months from today than they are two weeks from now."

Worker concessions sought by Milwaukee, Wisconsin-based Harley include a two-tier wage-and-benefit plan. The company says it is trying to avert a cost crunch like the one that has hammered Detroit automakers.

Investor reaction to the strike in its early days has been muted. Harley shares were up 44 cents at $69.60 in midday trade on the New York Stock Exchange. The shares have risen about 4 percent since their February 1 close, the day before the strike.