Indiana's shot at Harley-Davidson

August 24, 2009
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Who would have thought Indiana ever stood a chance of cranking out Harley-Davidsons alongside Chevy pickups, GE refrigerators and recycled steel? Until news broke earlier this month that officials from the Milwaukee company toured sites in Shelbyville, not many.

Now, though, the odds are reasonably good.

Harley-Davidson said in May it is considering moving production away from a longtime location in York, Penn., and that it would make a decision before the end of the year. The company also said it’s considering locations in Kentucky and in Kansas City, where it operates a fairly new facility. However, officials said reorganizing the York operations is the preferred option.

What’s difficult to gauge is whether Harley is only using the announcement as leverage as it prepares to negotiate a new contract with the International Association of Machinists and Aerospace Workers. Relations aren’t rosy; next month, the union is voting whether to authorize a strike.

The company seems intent on cutting costs, partly because young people are less interested in the iconic motorcycles than boomers. Does the union get this? Execs might think they don’t.

The Pennsylvania site has other problems. The scattered batch of buildings, some of which date to World War II, are inherently inefficient.

Harley could start fresh elsewhere by offering to let workers, many of whom are near retirement, move to the new location, but knowing few would accept.

Nate Feltman, who led the Indiana Economic Development Corp. until early this year, suspects Kansas City likely has the inside track due to the existing location, which has vacant land available for an expansion. Tacking on an addition would be relatively hassle-free. When Indiana landed the Honda plant in Greensburg two years ago, the biggest obstacle was Honda’s familiarity with Ohio.

Kentucky would be a strong contender based on taxes and regulations, Feltman says.

But Feltman, who emphasizes he has no inside knowledge of Harley-Davidson discussions, thinks Indiana has “as good a chance as anybody.”

Distribution networks are convenient. And plenty of people, many with deep manufacturing experience, would jump at the jobs and work for cheap.

Indiana also has a balanced budget, which dramatically lowers chances for a surprise tax increase.

Feltman says Indiana has one ace in the hole few have considered: Gov. Mitch Daniels owns not one but two of the motorcycles.

That tie to the company isn’t material. But don’t dismiss it, Feltman advises. There’s nothing quite like having a governor with personal fondness for a prospective expansion.

What are your thoughts? What will Harley-Davidson decide?
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  • Vroom, Vroom - Ride on My Man Mitch, the new Easy Rider.......

    Perhaps I'm way off base here, but I wonder why that new facility planned for Chrysler, now in mothballs, up by Tipton wouldn't be a gem for them??? Or, are they looking at a previously used facility, much like what Carbon Motors did, to snap up at a bargain price?
  • If what Heikens says here is true, and Harley-Davidson really is becoming almost exclusively an indulgence of the boomers, the company may need to start investing in R&D to help rebrand their image for the younger, green generation. Boomers may snort at this, but they aren't going to be vrooming around on Harleys forever, and the younger generation may put greater emphasis on sleekness or efficiency over the purr and the rumble. That is, unless, the younger crowd starts gravitating toward Harley's as they enter their own mid-life crises.

    I hope the state doesn't exhaust itself in trying to lure the Harley name this way through tax incentives.
  • I think first and foremost this is a threat to the unions. They are powerful. For Harley to be competitive, they have to make major shifts in the work rules. I also think they are scaring the Pennsylvania lawmakers into upping some cash. So far I have read they have been offered $15 million from the State. Not near enough. Expect the money offered to H-D to be more like $60 mil or around $50,000 a job. Seems a good average number for recent economic money. If that is the case, Indiana may have the best shot because with a balanced budget and cash reserves, we have room to make a solid offer.

    I do not think H-D is wanting a used building. They want something designed just for them. In the long run they will save big time money having everything the way they want it.
  • I will mention that I don't think there is an exisiting structure in Northwest Shelby County where they would move into an exisiting building.

    Right near the border is Pleasant View Park - something that has just been put into development that is just land right now. Having been from Shelby County, there are industrial parks at Northwest city limits of Shelbyville, but it looks like they would be building a brand new building on land as no current 'shell' building exists!

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