Harley-Davidson has decided to discontinue its sales and manufacturing operations in India, as part of restructuring actions that the company refers to as 'The Rewire' strategy. On Thursday, Harley-Davidson informed its employees of additional restructuring costs amounting to $75 million in 2020, which includes discontinuing the iconic American brand's operations in India. Total costs associated with 'The Rewire' strategy outlined by Jochen Zeitz, President, Chairman and CEO of Harley-Davidson amount to $169 million this year. The motorcycle brand expects to complete the restructuring actions from August to be completed within the next 12 months, which will include optimising its global dealer network, exiting certain international markets and discontinuing its sales and manufacturing operations in India. In India, Harley-Davidson will reduce the workforce by approximately 70 employees.
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Jochen Zeitz, Harley-Davidson's CEO has outlined 'The Rewire' strategy to focus on markets where there is potential growth, and India doesn't seem to be on that list
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In a statement to the United States Securities and Exchange Commission, Harley-Davidson outlined the development, adding some details about the restructuring costs.
"As a result of the actions approved from August 6, 2020 through September 23, 2020, the Company expects to incur restructuring expenses of approximately $75 million in 2020, of which approximately 80% are expected to be cash expenditures, including one-time termination benefits of approximately $3 million, non-current asset adjustments of approximately $5 million, and contract termination and other costs of approximately $67 million. Full implementation of these Rewire actions may require the Company to commit additional funds for additional contract termination and other costs. Including previously disclosed restructuring charges, the Company expects total restructuring expenses associated with Rewire restructuring actions approved through September 23, 2020 of approximately $169 million in 2020. The Company expects to complete the restructuring activities approved through September 23, 2020 within the next 12 months. Announcements associated with additional actions under The Rewire are expected to occur, some of which will likely result in additional restructuring charges," Harley-Davidson said.
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Harley-Davidson's big heavyweight cruisers didn't quite receive the response in India in terms of volumes
Harley-Davidson India has responded with a press statement saying that the company is "evaluating options" to continue to serve its customers. While H-D India has said that the manufacturing facility in Bawal will be closed down, and the sales office in Gurugram will be significantly reduced in size, there is still no concrete announcement on how the brand will support its existing customer base in India. All Harley-Davidson India has said is that the dealer network will continue to serve customers through the contract term. Harley-Davidson has 33 dealerships across India, and each dealership will have a different contract term, but how existing customers will be served in terms of spares and service in future is still not clear. In fact, with the closure of the manufacturing facility in India, the Harley-Davidson Street 750 range will likely be discontinued, as will be assembly operations. But there's still some hope that the brand will continue to have some presence, importing models from its facility in Thailand, and with India's Free Trade Agreement, that may work out to be cost effective as well.
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Harley-Davidson has been struggling with sales volumes across several markets
Harley-Davidson has been under pressure in recent years, with sales of the American motorcycle brand slowing down in several markets around the world. And India seems to be one such market, where Harley-Davidson has been present since 2009, and where the first Harley dealership came up in July 2010. Harley-Davidson still led premium motorcycle sales in India over the last few years, led by the made-in-India Street 750 models. Harley-Davidson also had assembly operations in India at its plant in Haryana, assembling several models from completely knocked down (CKD) kits. In the last financial year, Harley-Davidson sold fewer than 2,500 units in India, and between April-June 2020, only about 100 Harleys were sold in India, making it one of the worst performing international markets. And just about 10 years since the iconic brand set up shop in the world's largest motorcycle market, it's now time to wind up manufacturing and sales.
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The Harley-Davidson Street 750 has been the brand's best-selling offering in India
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Earlier this year, Jochen Zeitz replaced former CEO Matt Levatich as President, Chairman and CEO of Harley-Davidson. Levatich was in Harley-Davidson for 26 years, and with increasingly slowing sales in recent years, his exit was seen as a move to give new strategic vision to revive the brand internationally. 'The Rewire' plan outlined by Zeitz intends to re-look Harley-Davidson's product strategy, as well as focus on about 50 markets, mainly in North America, Europe and parts of Asia Pacific, that represent the "majority of the company's volume and growth potential." And India, the world's largest motorcycle market, seems to have been given the miss from those important markets where Harley-Davidson sees potential growth.
