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Indiana's shot at Harley-Davidson

August 24, 2009
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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