Harley-Davidson's 2025 financial results, released this week, confirmed what anyone watching the motorcycle industry already knew. Sales dropped. Revenue fell. Operating income decreased compared to 2024's already weak performance. The company moved 124,500 motorcycles last year and generated $387 million in operating income against $4.5 billion in revenue. Those numbers tell a story about a company built for demand that no longer exists.
CEO Artie Starrs, who took over on October 1, 2025, told investors he's "confident there's a clear path to put Harley-Davidson back on the right trajectory." According to reports from RideApart and the Milwaukee Business Journal, that path involves substantial layoffs.
During the earnings call, Starrs explained the situation bluntly. "We are conducting a rigorous, end-to-end review of our cost base and operating expenses, supported by third-party specialists. Our current corporate overhead, manufacturing capacity and overall operating expenses are built for materially higher volumes than today's demand, and we will be addressing this mismatch head-on."
The mismatch is significant. Harley's production peaked approximately twenty years ago when the company regularly shipped over 300,000 motorcycles annually. The infrastructure, workforce, and fixed costs were sized for that volume. Today's 124,500 units represent less than half of peak capacity. Running factories, maintaining overhead, and employing staff for production that doesn't exist burns money that operating income can't cover indefinitely.
A Harley-Davidson spokesperson confirmed to the Milwaukee Business Journal that cost reductions "will be in headcount reduction." A spokesperson for the local steelworkers union told the paper they were aware of impending layoffs, though not all workers losing jobs will be blue collar. Corporate positions are on the chopping block as well.
The fundamental problem is straightforward. Harley-Davidson sells large, expensive motorcycles aimed primarily at middle-aged American working-class buyers. That demographic has been economically squeezed for over a decade. Inflation, stagnant wages, rising housing costs, and general economic difficulty don't create ideal conditions for selling non-essential durable goods that cost twenty to forty thousand dollars.
This hasn't been a new problem. According to Jalopnik, Harley's difficulties stretch back to the 2008 housing crisis. The company hasn't experienced smooth sailing since then, with each year bringing incremental deterioration rather than recovery. The only reason Harley survived this long is its finance arm, which continues turning profits even when motorcycle sales don't.
Harley Financial Services generates revenue through financing, licensing deals, and merchandise. The bar and shield logo remains one of the most recognizable brands globally. Even when the company sells bikes at a net loss, it recovers money on the back end through loan interest and licensing royalties. That business model works as long as some bikes keep moving and the brand maintains cultural relevance.
But relying on financing to offset manufacturing losses has limits. If bike sales continue declining, eventually there won't be enough financing revenue to subsidize production. The trajectory suggests Harley is approaching that point, hence the layoffs and cost restructuring.
LiveWire, Harley's electric motorcycle division, compounds the financial pressure. The brand shipped 653 bikes in 2025 after slashing prices significantly across its lineup. That represented 7% more units than 2024, yet revenue still dropped 3%. LiveWire lost approximately $75 million for the year. Jalopnik noted that despite genuinely good products, LiveWire has never been profitable for Harley-Davidson, Inc.
The electric motorcycle market faces similar demographic challenges as traditional Harleys. Electric bikes cost even more than combustion models, targeting the same squeezed middle-class buyers who can't afford the gas versions. LiveWire's low volume and high losses make it a likely candidate for divestment if Starrs needs to cut deeper.
The broader American motorcycle industry faces existential challenges. Zero Motorcycles moved production to China. Indian Motorcycle sold to private equity. Harley-Davidson is announcing layoffs and capacity reductions. A century of American motorcycle manufacturing is fading fast, replaced by imports and offshore production.
Harley's challenge is that it can't easily pivot to cheaper bikes. The brand's identity is built on big cruisers and touring motorcycles. Attempts to expand into smaller segments have failed repeatedly. The Street series didn't gain traction. Adventure bikes couldn't compete with established European brands. Sport bikes never found an audience. Harley's customer base wants what Harley does best, and what Harley does best costs money that fewer customers have.
The company could theoretically cut costs by reducing quality or features, but that risks destroying the brand value that keeps the financing and licensing businesses viable. Harley's reputation is built on quality manufacturing and American production. Offshore cheap bikes would undermine the brand identity without necessarily attracting new customers who already have access to less expensive imported alternatives.
Starrs faces an impossible optimization problem. Cut too much and you destroy production capability needed if demand recovers. Cut too little and you bleed money maintaining excess capacity during sustained decline. There's no clear answer because the fundamental issue isn't operational efficiency. It's that the market for expensive American cruisers is shrinking.
The Milwaukee Business Journal's reporting suggests local workers understand what's coming. Union representatives acknowledged awareness of layoffs, and the company confirmed headcount reductions are part of the restructuring plan. The exact numbers haven't been disclosed, but given the gap between current production and peak capacity, substantial cuts are inevitable.
Harley-Davidson has survived worse. The company nearly went bankrupt in the 1980s before a management buyout and quality improvements turned things around. But that turnaround happened because demand existed once quality improved. Today's problem is demand itself, not product quality or manufacturing execution.
The finance arm buys time, but it doesn't solve the underlying mismatch between who can afford expensive motorcycles and who Harley needs to sell them to. Layoffs reduce costs temporarily, but they don't create customers. The hard questions remain unanswered. Who buys $30,000 motorcycles in 2026? How many of them exist? And does that number support a company built for triple the current production volume?
Starrs has confidence there's a path forward. The market will determine if he's right. Meanwhile, workers in Milwaukee are waiting to find out if they're part of the right trajectory or the headcount reduction.
