Harley Davidson 2012 Annual Report Download - page 17

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damage to the Company's reputation, affect its relationships with customers, lead to claims against the Company and
ultimately harm the Company's business. In addition, the Company may be required to incur significant costs to
protect against damage caused by these disruptions or security breaches in the future.
• The Company’s Motorcycles segment is dependent upon unionized labor. Substantially all of the hourly
production employees working in the Motorcycles segment are represented by unions and covered by collective
bargaining agreements. Harley-Davidson Motor Company is currently a party to five collective bargaining agreements
with local affiliates of the International Association of Machinists and Aerospace Workers and the United Steelworkers
of America. Current collective bargaining agreements with hourly employees in Pennsylvania, Missouri and
Wisconsin will expire in 2017, 2018 and 2019, respectively. Collective bargaining agreements generally cover wages,
healthcare benefits and retirement plans, seniority, job classes and work rules. There is no certainty that the Company
will be successful in negotiating new agreements with these unions that extend beyond the current expiration dates or
that these new agreements will be on terms that will allow the Company to be competitive. Failure to renew these
agreements when they expire or to establish new collective bargaining agreements on terms acceptable to the
Company and the unions could result in the relocation of production facilities, work stoppages or other labor
disruptions which may have a material adverse effect on customer relationships and the Company’s business and
results of operations.
• The Company’s operations may be affected by greenhouse emissions and climate change and related
regulations. Climate change is receiving increasing attention worldwide. Many scientists, legislators and others
attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant
legislative and regulatory efforts to limit greenhouse gas emissions. Congress has previously considered and may in
the future implement restrictions on greenhouse gas emissions. In addition, several states, including states where the
Company has manufacturing plants, have previously considered and may in the future implement greenhouse gas
registration and reduction programs. Energy security and availability and its related costs affect all aspects of the
Company’s manufacturing operations in the United States, including the Company’s supply chain. The Company’s
manufacturing plants use energy, including electricity and natural gas, and certain of the Company’s plants emit
amounts of greenhouse gas that may be affected by these legislative and regulatory efforts. Greenhouse gas regulation
could increase the price of the electricity the Company purchases, increase costs for use of natural gas, potentially
restrict access to or the use of natural gas, require the Company to purchase allowances to offset the Company’s own
emissions or result in an overall increase in costs of raw materials, any one of which could increase the Company’s
costs, reduce competitiveness in a global economy or otherwise negatively affect the Company’s business, operations
or financial results. Many of the Company’s suppliers face similar circumstances. Physical risks to the Company’s
business operations as identified by the Intergovernmental Panel on Climate Change and other expert bodies include
scenarios such as sea level rise, extreme weather conditions and resource shortages. Extreme weather may disrupt the
production and supply of component parts or other items such as natural gas, a fuel necessary for the manufacture of
motorcycles and their components. Supply disruptions would raise market rates and jeopardize the continuity of
motorcycle production.
• New regulations related to conflict minerals may force the Company to incur additional expenses. The SEC
recently adopted additional disclosure requirements related to certain minerals sourced from the Democratic Republic
of Congo and surrounding countries, or "conflict minerals", that are necessary to the functionality of a product
manufactured, or contracted to be manufactured, by an SEC reporting company. The minerals that the final rules
cover are commonly referred to as "3TG" and include tin, tantalum, tungsten and gold. Implementation of the new
disclosure requirements could affect the sourcing and availability of some of the minerals that the Company uses in the
manufacture of its products. The Company's supply chain is complex, and if it is not able to conclusively verify the
origins for all conflict minerals used in its products or that its products are "conflict free", then the Company may face
reputational challenges with customers or investors. Additionally, as there may be only a limited number of suppliers
offering "conflict free" minerals, the Company cannot be sure that it will be able to obtain necessary metals from such
suppliers in sufficient quantities or at competitive prices. Accordingly, the Company could incur significant costs
related to the compliance process, including potential difficulty or added costs in satisfying the disclosure
requirements.
• The Company must detect issues with the Company’s motorcycles or manufacturing processes to avoid recall
campaigns, increased warranty costs or litigation, and delays in new model launches. The Company must also
complete any recall campaigns within cost expectations. The Company must continually improve and adhere to
product development and manufacturing processes to ensure high quality products are shipped to dealers. If product
designs or manufacturing processes are defective, the Company could experience delays in new model launches,
product recalls, conventional warranty claims, and product liability or unconventional warranty claims, which may