Harley-Davidson Profits are going up.

Harley-Davidson Inc. said Tuesday it expects the global market for motorcycles to remain challenging this year as more consumers opt for lower-priced used motorcycles instead of new ones.

Chief Executive Officer Keith Wandell said he expects Harley’s shipments to be down 5%-10% from 2009, while the preference for used motorcycles and the weaker world economy have pushed year-to-date retail sales down 40% from the company peak in 2006.

The Milwaukee-based company said it is managing the business to address lower sales and is looking to renegotiate it union contracts to take effect in 2012, in hopes of matching weaker demand for motorcycles.

Harley’s retail motorcycle sales fell 8.4% in the U.S. in the second quarter.

The company is seeing a pickup in Spain, France and Italy, where sales are up about 5% from a year earlier, Chief Financial Officer John Olin said. However, sales of motorcycles in the United Kingdom and Switzerland are still falling.

Harley-Davidson said it plans to add to its dealerships in foreign countries to increase sales, including four new dealerships in China.

The company said the ratio of used-to-new Harley-Davidson on the market is 2 to 1, compared to the more typical 1-to-1 ratio. The surplus of used bikes also has pushed down prices of used bikes. “We will start to move to a more normalized ratio and we will see more new bike growth,” Mr. Olin said.

Harley on Tuesday reported a return to profitability in the second quarter as its financial-services unit righted itself.

The economic slowdown dragged the finance arm to a $90.5 million loss in the year-earlier period. This time around it had a profit of $60.8 million.

Finish Reading At: online.wsj.com


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