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Harley shuts plant as woes worsen for Trump's model manufacturer

Engines sit on a rack at the Harley-Davidson Inc. facility in Menomonee Falls, Wisconsin, on Sept. 18, 2017. Bloomberg photo by Daniel Acker.

A deepening slump in U.S. motorcycle demand is spurring more job cuts and a plant closure at Harley-Davidson Inc., a company President Donald Trump has cast as a model American manufacturer.

The Milwaukee-based motorcycle maker will close its factory in Kansas City, Missouri, and consolidate production in York, Pennsylvania, according to a statement Tuesday. The restructuring will eliminate about 260 U.S. jobs, Chief Executive Officer Matt Levatich said on a conference call. Trump praised the company last year as a "great example" of a business creating jobs and building factories in the country.

Harley is consolidating its U.S. manufacturing presence as its bike sales fall on every continent. And the pain won't end this year: The company projected global sales will drop as much as 4.9 percent more in 2018 after a 6.7 percent decline last year.

U.S. motorcycle ridership has stalled in spite of Levatich's efforts to introduce models for first-time buyers and teach more Americans how to safely get around on bikes. Harley shares fell as much as 9.4 percent in New York, the biggest intraday drop since July.

The issue for investors isn't the fourth-quarter miss, which was complicated by a number of one-time items, David Beckel, an analyst with Sanford C. Bernstein & Co., said in a note to clients.

"The story is, or continues to be, that Harley is in the throes of a significant secular decline," he wrote.

Sales in the crucial U.S. market fell 11 percent in the fourth quarter and 8.5 percent for the year. Harley executives said they're drawing more consumers to their brand, but couldn't say during the call with analysts how many are buying used instead of new bikes.

As bike demand weakens, one of Harley's rival brands is calling it quits. Polaris Industries Inc., which started winding down its Victory motorcycle operations early last year, projected adjusted profit of as much as $6.20 a share for 2018, well below analysts' $6.99 a share average estimate. The Medina, Minnesota-based company's stock plunged as much as 17 percent, the biggest drop since November 2008.

The Kansas City plant closing will cost Harley as much as $200 million through 2019, then result in annual cash savings of $65 million to $75 million after 2020. Levatich declined to say how much production capacity will be reduced. At the same time, the company is building a factory in Thailand that will assemble bikes using components shipped from the U.S.

Unions representing Harley workers accused the company in September of trying to "systematically dismantle" its hourly workforce. A spokesman for the International Association of Machinists and Aerospace Workers said the union didn't have an immediate comment Tuesday.

Harley reported profit of 5 cents a share in the last three months of the year, well below the 46 cent average analyst estimate. The company reported a $53.1 million charge related to the U.S. tax bill and a $29.4 million charge for a product recall.

"Harley can't get younger people into the hobby and the bikes are too big to be transportation in Europe or Asia," Kevin Tynan, a Bloomberg Intelligence analyst, said in an email. "That future is really dark."