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Harley-Davidson seeks federal bailout

Pennsylvania Senator backs program

By Staff, Jan. 21, 2009
Harley–Davidson is awaiting news in regards to whether the Federal Deposit Insurance Corporation will designate the company as eligible for federal funding under a bank bailout program.

Sen. Bob Casey, D-Pa., wrote a letter January 16 to Federal Deposit Insurance Corp. chairman Sheila Blair, saying Harley-Davidson recently inquired whether its financing company and subsidiaries, Harley-Davidson Credit Corp. and Eaglemark Savings Bank, are eligible for the Temporary Liquidity Guarantee Program, or TLGP.

Casey said he supports Harley's request for eligibility and wants the FDIC to make a decision on the company's eligibility, ideally ahead of the company’s fourth-quarter earnings report due out Friday. "Without access to TLGP, Harley-Davidson may be forced to make tough decisions that will impact workers in Pennsylvania, jeopardize the local economy, and negatively impact the state economy," Casey wrote in the letter.

The TLGP guarantees unsecured corporate debt against default, which would cover the bills of Harley-Davidson's internal financial entities if they were unable to pay bills themselves. H-D employs nearly 3,000 people at its plant in York County, PA., and another 1,500 work at dealerships in the state.

Against an industry wide slowdown, analysts expect Harley sales to be down 20 percent for the fourth quarter, and Raymond James analyst Joseph D. Hovorka said in a client note that sales among 55 dealers surveyed were "the softest reading ever for our survey." Sales are expected to slide another 20 percent to 30 percent this year as consumers cut purchases of luxury goods.

Four analysts — Goldman Sachs, Standard & Poor's, RBC and Raymond James — have downgraded Harley shares in as many weeks, and the company’s former HDFS president, Sy Naqvi, left the company early this month. H-D’s stock price has dropped from $80-plus per share in December 2006 to $13.70 this week.