Jeffrey Phelps  /  AP
A Harley-Davidson worker rolls up a poster he had on his motorcycle after voting at the Waukesha Exposition Center in Waukesha, Wi., Monday, Sept. 13, 2010. Union workers ratified a seven-year labor contract. (AP Photo/Jeffrey Phelps)
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updated 9/14/2010 12:49:50 PM ET 2010-09-14T16:49:50

Harley-Davidson Inc. workers approved a seven-year contract that freezes wages and slashes hundreds of jobs in concessions the company said will keep two of its Wisconsin factories open.

The Milwaukee-based motorcycle company had warned that it would move the production to another state if its three state unions rejected the deal. A move would have eliminated about 1,350 jobs.

After reviewing the results of the unions' votes, the board of directors agreed Tuesday to call off the search for replacement sites.

"Change is never easy, and we have asked our employees to make difficult decisions. However, we are pleased to be keeping production operations in our hometown of Milwaukee and in Tomahawk," company President and Chief Executive Keith Wandell said in a statement.

In addition to freezing pay and cutting about 325 full-time staff, the new contract calls for large portions of work to be assigned to part-timers.

Some 1,140 union members from the suburban Milwaukee plant voted, approving the contract by a 55 to 45 percent margin. Almost 300 ballots were cast at the Tomahawk plant in northern Wisconsin, where workers approved the deal by a margin of 73 to 27 percent.

A number of workers who voted to approve the deal said they did so grudgingly, accepting Harley's ultimatum for the sake of saving jobs. Others said they voted against it because the terms were too harsh.

Harley said it had to play hardball because its labor costs at the two plants were too high. The concessions made the costs more manageable, the company said, so it now makes sense to keep the plants open.

Under the previous rules, it could take as long as three months to let go of unneeded workers or recall laid-off workers, Wandell said this summer. Harley's goal was to gain the ability to hire and lay off workers more quickly to better adjust to seasonal business fluctuations, he said.

Harley said the agreements move full-time hourly employees to the same health benefits plan that salaried employees have and maintain a non-contributory defined benefit pension plan at current benefit levels funded entirely by the company.

The company got what it wanted, but it's unclear whether the contract will lead to any lingering animosity.

Mike Masik, the president of the local chapter of the United Steel Workers, said Tuesday it wasn't about wages or medical, but that the company took out language that allowed members more decision-making abilities.

"It's a somber atmosphere today," he said. "Today I do not feel good. I believe that people voted what was right for them. I voted what is was right for me, but it still doesn't feel good. We gave up a lot."

Based on the agreements, the company expects to eliminate about 250 Milwaukee-area jobs when the contracts are implemented in 2012, leaving 700 full-time hourly unionized employees.

In Tomahawk, the company expects to cut about 75 jobs in the next contract, leaving 200 full-time hourly unionized work force. But the company will add 150 to 250 part-time unionized employees on an annual basis to cover seasonal volume spikes, vacations and other absences.

Harley has been dealing with its own share of problems. A shrinking market and an economic downturn have undercut demand for its pricey, chrome-laden bikes. Sales of Harley motorcycles, whose prices range from $7,000 to $25,000 can take a big hit when the economy goes sour.

The company has been focused on cutting costs and streamlining its business. Last year, it announced the shutdown of its Buell sport-bike line. In December, the company and its union at its main motorcycle plant in York, Pa., agreed to a cost-cutting contract that involved layoffs for about half the company's unionized work force there.

The company also told analysts in July it expects to ship 5 percent to 10 percent fewer motorcycles to dealers this year, standing by an earlier forecast.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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