S&P puts Harley-Davidson on watch

Standard & Poor's said it placed the ratings of Harley-Davidson Inc., including the A corporate credit rating, on CreditWatch with negative implications based on the deteriorating outlook for the motorcycle market in the United States.

Harley-Davidson registered revenue growth of 10.8% during the first quarter of 2008 due in large part to a strike at its plant in the first quarter of 2007 that reduced the number of motorcycles shipped to dealers, the agency said; U.S. retail sales of Harley-Davidson motorcycles were actually down 12.8% during the quarter. As a result, Harley-Davidson reduced its full-year 2008 earnings guidance and announced several actions to deal with the difficult market environment including the elimination of 7.8% of its total staff and a decrease in motorcycle shipments of 7.0% to 8.2% from 2007.

S&P said it is encouraged by management's steps to address difficult market conditions, but there is a strong possibility demand could fall further before improving and that further cost-cutting measures will be needed.

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