Harley Davidson 2015 Annual Report Download - page 8

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standards. Because the Company expects that environmental standards will become more stringent over time, the Company
will continue to incur research, development and production costs in this area for the foreseeable future(1).
The Company, as a manufacturer of motorcycle products, is subject to the U.S. National Traffic and Motor Vehicle Safety
Act, which is administered by the U.S. National Highway Traffic Safety Administration (NHTSA). The Company has certified
to NHTSA that its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related
regulations. The Company has from time to time initiated certain voluntary recalls. During the last three years, the Company
has initiated 27 voluntary recalls related to Harley-Davidson motorcycles at a total cost of $58.1 million. The Company
reserves for all estimated costs associated with recalls in the period that management approves and commits to the recall.
Employees – As of December 31, 2015, the Motorcycles segment had approximately 5,700 employees.
Approximately 2,400 unionized employees at the manufacturing facilities are represented as follows:
• York, Pennsylvania - represented by International Association of Machinist and Aerospace Workers (IAM), and the
collective bargaining agreement will expire on October 15, 2022
• Kansas City, Missouri - represented by United Steelworkers of America (USW), and IAM and the respective collective
bargaining agreements will expire on July 31, 2018
• Menomonee Falls, Wisconsin - represented by USW, and IAM and the respective collective bargaining agreements
will expire on March 31, 2019
• Tomahawk, Wisconsin - represented by USW, and the collective bargaining agreement will expire on March 31, 2019
Financial Services Segment
HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans,
primarily for the purchase of Harley-Davidson motorcycles. HDFS is an agent for certain unaffiliated insurance companies
providing motorcycle insurance and protection products to motorcycle owners. HDFS conducts business principally in the
United States and Canada. The Company’s independent dealers and their retail customers in EMEA, Asia-Pacific and Latin
America are not financed by HDFS, but have access to financing through other third-party financial institutions, some of which
have licensing or branding agreements with the Company or HDFS.
Wholesale Financial Services – HDFS provides wholesale financial services to Harley-Davidson dealers, including
floorplan and open account financing of motorcycles and motorcycle parts and accessories. HDFS offers wholesale financial
services to Harley-Davidson dealers in the United States and Canada, and during 2015, 100% of such dealers utilized those
services at some point during the year. HDFS also previously offered financial services to the Harley-Davidson distributor in
Canada. The wholesale finance operations of HDFS are located in Plano, Texas.
Retail Financial Services – HDFS provides retail financing to consumers, consisting primarily of installment lending for
the purchase of new and used Harley-Davidson motorcycles. HDFS’ retail financial services are available through most Harley-
Davidson dealerships in the United States and Canada. HDFS’ retail finance operations are principally located in Carson City,
Nevada and Plano, Texas.
Insurance Services – HDFS operates as an agent for certain unaffiliated insurance companies offering point-of-sale
protection products through most Harley-Davidson dealers in both the U.S. and Canada, including motorcycle insurance,
extended service contracts, credit protection and motorcycle maintenance protection. HDFS also direct-markets motorcycle
insurance and extended service contracts to owners of Harley-Davidson motorcycles. In addition, HDFS markets a
comprehensive package of business insurance coverages and services to owners of Harley-Davidson dealerships. The HDFS
insurance operations are located in Carson City, Nevada and Chicago, Illinois.
Licensing – HDFS has licensing arrangements with third-party financial institutions that issue credit cards bearing the
Harley-Davidson brand. Internationally, HDFS licenses the Harley-Davidson brand to local third-party financial institutions
that offer products to the Company’s retail customers such as financing and insurance.
Funding – The Company believes a diversified and cost effective funding strategy is important to meet HDFS’ goal of
providing credit while delivering appropriate returns and profitability. Financial Services operations have been funded with
unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank
facilities, term asset-backed securitizations and intercompany borrowings.
Competition – The Company regards its ability to offer a package of wholesale and retail financial services in the U.S.
and Canada as a significant competitive advantage. Additionally, as the predominant lender to sub-prime customers for the
purchase of motorcycles in the U.S. and Canada, HDFS enables retail sales of Harley-Davidson motorcycles with very
attractive financial returns. Competitors in the financial services industry compete for business based largely on price and, to a