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Posts Tagged ‘right-to-work state’

A few weeks ago H-D management were passing out accolades to the Wisconsin legislators who were considering a designation of the H-D motorcycle as the “official motorcycle” of the state.  But, that has since turned into a game of “double-dog-dare-ya” or something along the lines of ‘playing chicken’ as the latest management salvo didn’t sound conciliatory, rather they dropped the bomb about abandoning the state and moving the company.

Huh?  Is the “Ride Home” dead?  Is Wisconsin truly at risk of losing the motorcycle icon or is this more of a psychological ploy than practical?  When ‘playing chicken’ someone is bound to get hurt!

Consider the Boeing Co., a huge part of Washington’s history and the threat of a move out of Seattle back in 2001.  Few believed, especially the Mayor or state representatives in Olympia.  The end result?  Can you spell Chicago?!  Several hundred employees were left behind when the headquarters moved.  It didn’t stop there.  With it’s continuing need to drive down labor costs,  last October Boeing announced it would open a second 787 production line in Charleston, S.C., not Everett which turns out to be more about negotiations with labor not further tax breaks.  Sound familiar to Harley-Davidson?

Wisconsin Tax Burden

Does Wisconsin’s tax structure drive Harley-Davidson business away?  By clicking HERE you can check how each state collects taxes and measures up nationally on tax burden, government spending and user fees.

Fact: Wisconsin ranks 14th in total tax burden.  Fact: Wisconsin ranks 26th in total spending by all levels of state and local government based on the latest figures (as compared with 20th in population, 24th in Gross Domestic Product and 24th in personal income for the same year).  Fact: A Tax Foundation study identified Milwaukee County as 22nd highest on property taxes as a percentage of a median home’s value, out of 775 counties nationwide.  If you’d like more detail, then reporter Dave Umhoefer of the Journal Sentinel researched and wrote a comprehensive article on Wisconsin’s tax burden HERE.

Will Harley-Davidson leave the state?  It’s a complex answer and in the end, H-D selects a location to move or expand into based on a wide range of issues.  One important issue is the balance between public services offered and the taxes levied to pay for those services.  Harley-Davidson management will likely ask two basic questions: 1) are the mix of public goods and services in a given locale right for my business; and 2) am I getting what I pay for with my tax dollar?  If the answer is no, then the state legislators further cutting business taxes will not have the desired result to keep them in the state.

If this is truly about labor costs and it’s tactics to renegotiate or obtain additional concessions from the union then it’s unclear how this riff will shake out.  Further fragmenting their supply chain doesn’t seem like a credible business case, but moving to a state like South Carolina would mean lower taxes, easing regulatory burdens in the state’s tort and workers compensation system and it’s a right-to-work state.  This might be the tipping point to make a change.

Photo courtesy of Double Dog Dare Band; WI tax chart courtesy of the Journal Sentinel.

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York, PA Harley-Davidson Plant

York, PA Harley-Davidson Plant

Harley announced back in May a major restructuring of its operations in York, Pennsylvania and the possible move to another U.S. location.

The two plants in York employ more than 2600 employees.  I previously posted a bit of a tongue-n-cheek letter that was picked up in the local York, PA., press which recommended H-D to consider coming to Oregon, but I never heard back from the company…

At any rate, the reasons cited (my interpretation of reports) for a potential H-D move from York were:

  1. Inefficiencies – it takes too many employees too long to manufacture a motorcycle
  2. Salaries – cost structure is too high, meaning lower wages are needed to reduce the overall cost structure
  3. Economy – declining sales mean further job cuts required as production/output needs to align with sales
  4. IAMAW – in 2007 the York plant went on strike and negotiated a 12% wage increase over 3 years.  H-D received few concessions and lost 16 production days which disrupted other assembly lines. At a time when they need to reduce the cost structure by $100M one of the largest cost contributors (wages) is set to steadily rise.
Arial of Springettsbury Township H-D Plant

Arial of Springettsbury Township H-D Plant

For those of you unfamiliar, the plant in York opened in 1973, however, some of the buildings date back to World War II.   It is the largest H-D manufacturing facility and the Softail factory recently received a $145M upgrade investment. The plants cover 230 acres and have over 1.5 million square feet under roof where the workers assemble the Touring and Softail models as well as “SE” limited production factory-custom motorcycles.  This plant also has the dubious honor of being the most visited by a sitting U.S. President  (Bush and Clinton) who’s administration’s leveraged the plant for free-trade discussions.

It’s been reported that after a week of H-D executives visiting various locations the short list was announced as four possible sites. Drum roll please…… they are:

  1. Shelbyville, Kentucky, located between Louisville and Lexington;
  2. Murfreesboro, Tennessee, located just southeast of Nashville;
  3. Shelbyville, Indiana, located southeast of Indianapolis;
  4. Kansas City, Missouri where Harley already has a major facility

It’s no accident that two of the four states (Tennessee and Indiana) vying for the new factory are right-to-work states and will have offered H-D numerous incentives to relocate.  I would imagine items like Investment Advantages which allows for the waiver on income/excise/sales taxes etc.; Enterprise Zones which provide property tax incentives or abatement; Vocational Rehab Services for employees who need relocation training etc., and the concession list surely goes on.  And at the same time officials in PA., are working feverishly to convince H-D to stay although they don’t have a blank sheet of paper to work from and it may limit what they can offer up.  In 2008, Harley employees paid over $2M in local taxes and should the plant relocate it would be a major budget hit to the municipalities.  The H-D “spin machine” continues to state that staying in Pennsylvania is the preferred option, yet in the same breath they also cite inefficiencies and cost structure issues with the York facility.

You know the mood these days isn’t just about banks or exec bonuses being Public Enemy No. 1.  I think what disturbs Americans of all ideological persuasions is the fear that almost everything, not just government, is fixed or manipulated by some powerful hidden hand, from commercial transactions as trivial as the sales of a Seahawk football ticket to cultural forces in the news media.  What this recession has crystallized for many of us is the sinking sensation that the American game is rigged — that the system is in hock to “the interests of powerful lobbyists or the “wealthiest few” who have run the “system” too long.

It’s hard to avoid the sense that H-D is wasting time trying to appease people who can’t be appeased.  Is H-D really committed to moving the York plant or is this about the art of a negotiation… where they preview and think about taking every new concession.  Isn’t it really just an indicator that any state can be punked?

York Plant photo courtesy of H-D.

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