Good morning. My name is [Stephanie] and I will be your conference operator today. At this time I would like to welcome everyone to the fourth quarter 2008 earnings conference call. (Operator Instructions) Ms. Guiffre, Director of Investor Relations, you may begin your conference.

Thank you very much, Stephanie, and good morning, everyone. Welcome to Harley-Davidson fourth quarter 2008 conference call. We are speaking with you today from Washington, D.C., where our dealers from around the world are gathered for the biannual Harley-Davidson business meeting. Today, Harley-Davidson CEO Jim Ziemer will provide comments on our business and the current global economy. Harley-Davidson CFO and Interim President of Harley-Davidson Financial Services Tom Bergmann will share the financial results for the fourth quarter. At the close of our prepared comments, we will open the call for questions. Before we begin, please note that this call is being webcast live on Harley-Davidson.com and will be available for replay throughout the next several weeks before being archived. It can also be accessed until January 30 by calling 706-645-9291 or 800-642-1687 in the U.S. The PIN number is 78326907#. Our comments today will include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Harley-Davidson disclaims any obligation to update the information in this call. Now I'll turn the call over to CEO of Harley-Davidson, Inc., Jim Ziemer. Jim?

Good morning. Thank you for calling in. Today we announced three pieces of news our 2008 results, our expectations for 2009, which includes a reduction in shipments in the range of 10% to 13%, and our three-part strategy to deal with the current environment, which includes work force reductions to address the slowdown in volume. To state the obvious, we are in very challenging times and Harley-Davidson is not immune to the current economic conditions. But while our 2008 revenue, net income and EPS declined, we remained profitable, and I want to acknowledge the efforts of everyone in the Harley-Davidson family of employees, dealers and suppliers. They are working hard to make the most out of a difficult business climate. Entering 2009, the company must continue to responsibly manage the business in one of the most difficult economic periods in decades. But Harley-Davidson has a strong core business, anchored by a uniquely powerful brand. We have a clear strategy to not only deal with the current economic conditions but also strengthen our long-term operations and financial results, and we are executing that strategy with confidence and conviction. Our strategy is focused on three critical areas - investing in the Harley-Davidson brand, getting our cost structure right, and obtaining funding for HDFS to help our dealers sell motorcycles and our retail customers to buy them. Let's look at each of these elements, starting with investing in the brand. We all know that consumer demand is the lifeblood of our company and thus it's critical that we continue to stimulate demand in this economy. To do so, we're going to continue to invest in the long-term health of the brand globally. We know that great brands require consistent support through both the good times and the bad. Yes, we'll focus even more…

Great. Thanks, Jim. Good morning, everyone. Our planned volume reduction and restructuring actions are clearly an important part of the strategy we are undertaking to manage through the economic environment. The objectives of our strategy are to reduce excess capacity, focus on our core business operation, and take a step toward a fundamental adjustment to our cost structure. Our current fixed cost structure, which I've talked to many of you about, is too high, especially in this environment. When these restructuring activities are fully implemented, we expect to be a stronger, more focused operation with a lower ongoing cost structure. Let me give you some details around the motorcycle volume reduction and our planned restructuring actions. There are four main components to the restructuring plan. First, we plan to close our capital drive power train facility and consolidate power train operations into our Pilgrim Road facility just outside of Milwaukee. The 430,000 square foot capital drive facility will continue to manufacturer Sportster and Buell power trains through the second half of this year. At that time, we plan to integrate these activities into our new 868,000 square foot Pilgrim Road facility. The second component of our restructuring is the planned consolidation of certain operations at our York, Pennsylvania manufacturing campus. We plan to consolidate the York paint and frame operations for our touring and soft tail families into the existing soft tail operation on that site in order to improve efficiencies. Third, we plan to consolidate our parts and accessories and general merchandise distribution and warehousing. Currently, P&A distribution is managed through a company owned facility in Franklin, Wisconsin and general merchandise is handled through a third-party firm. By the end of the year our objective is to close our P&A facility in Franklin and turn distribution over to a…

Thanks, Tom. To wrap it up today, we have laid out our strategy to deal with the recession and to strengthen our long-term operations and financial results by investing in the brand, getting the cost structure right, and obtaining funding for HDFS. The reason we can execute on this three-part strategy is because Harley-Davidson is fundamentally resilient, with a solid foundation built on a set of unique assets. We have a powerful brand. A strong brand is important in good economic times, but even more so in downturns. In fact, a tough environment often accentuates the competitive advantages of a brand. We have a distinctive experience. That experience is built on a truly distinctive product. The competition can try to copy our motorcycles, but they can never become the original nor can they replicate the richness of the complete Harley-Davidson experience. We have a history of resilience. We have faced other, even more challenging times in our 106 years. That allows us to maintain a great perspective in stressful times. Our history instills a deep inner belief that we have a powerful durability, and also it's taught us great lessons about the boldness, decisiveness and passion required to emerge from the current economic climate strongly positioned for the future. And we have a strong and experienced management team and it is highly focused on providing the leadership to see Harley-Davidson through the current environment and over the long term. That includes HDFS, where our CFO, Tom Bergmann, is serving as Interim President. Obviously, HDFS is a top priority for us, and it's appropriate to have someone of Tom's skills engaged in the hands-on management of that business until a successor is named. In terms of the CEO search at Harley-Davidson, Inc., the Board search process is on track. Until a search process and a full transition has been completed, I am committed to leading Harley-Davidson. I joined Harley-Davidson 40 years ago and it's personally very important to me that we manage our business through these challenging times in a way that will ensure we have a strong and growing company 40 years from now. Our strategy is designed to protect the long-term value of Harley-Davidson, and I can assure you our team is executing with a sense of urgency that's appropriate for this environment. And on that note, I'll open it up for questions.

(Operator Instructions) Your first question comes from Timothy Conder - Wachovia Capital Markets, LLC.

Tom, on the revised $1 billion needed by HDFS for funding, that I would anticipate excludes the $500 million in the commercial paper conduit facility that'll be needed to be rolled over at the end of March?

Yes, Tim, the decrease to the $1 billion, that does exclude the rolling of the conduit at the end of March which we're currently working with a group of banks to go ahead and extend that and increase the size of that facility. So it does exclude that amount.

Okay. And some additional color, maybe, on the credit losses - are you seeing any years where those losses are continuing to trend higher versus other years, I guess, if you looked at the '05, '06, '07 and '08, can you kind of give us a little more color from that perspective?

Yes, thanks for the question, Tim. I think I'd start by saying we've been for the last year plus now at HDFS continually looking at the portfolio and changing our underwriting standards and enhancing them across the entire portfolio. That you can go back and point to the fact we only had a 14 basis point increase in delinquencies I think tells you a lot about the actions we've been taking on the underwriting side as well as on the operations and collections side to improve the portfolio. I'm not going to get into specific years and vintages of losses and so forth, but I think it is interesting to note the improved delinquency performance and the other point that in 2008, if you look at our new originations, 75% to 80% of them were in the prime category compared to overall the portfolio's been in that 70% to 75% category. So clearly we're trying to balance credit quality while still making credit available out there for our riders.

And then last question on HDFS and then two other clarifications - TALF restrictions, I mean, you said that you're still studying that. Any restrictions that you're aware of at this point that it would place on the company that are currently not, either on HDFS or Harley-Davidson, Inc.?

Not aware of any restrictions, Tim. I think if you go back last fall, we've been working together with many parties and we were successful in getting retail motorcycle loans included in it, so I think that was a very good and important step forward. It's really too early to tell exactly how that program may benefit us, but so far, given the success of having retail motorcycle loans included and giving ongoing dialogue with our banking group and underwriters, we're still continuing to study it and think it'll be helpful in having it open up access back to the ABS market at some point.

And then, again, the last two clarifications here, gross margin guidance includes the restructuring charges or not? And then a clarification on the large increase in receivables and inventories on the balance sheet.

Restructuring charges will be on a separate line in the P&L, so restructuring charges will not be in the gross margin line. Ultimately, as we realize the benefit from these restructuring activities, they will show up in gross margin and SG&A, but that does not include any restructuring charges in 2009. The increase on the balance sheet of receivables and inventory, the receivables increase is primarily due to moving receivables from Harley-Davidson Financial Services in Europe over to Harley-Davidson Motor Company in Europe. I've been talking about this every quarter, that before those receivables used to show up in held for investment; now they show up in accounts receivable because of that movement. We consolidated our collection activities there and it was a nice productivity benefit that we got by taking that action. So it's really a shifting from one line to another line what's causing that increase in receivables. The increase in inventory is made up of a few things - one is the acquisition of MV Agusta, as we're carrying about $25 million or so of additional inventory at MV Agusta. And then the rest of it is related to the increase in some of the international markets as we're continuing to support the growth there. So we've got a slight increase in the international market; the MV Agusta additional inventory accounts for most of those increases.

Your next question comes from Craig Kennison - Robert W. Baird & Co., Inc. Craig Kennison - Robert W. Baird & Co., Inc.: My first question is on Harley-Davidson Financial Services. It was a great business when the cost of capital was lower and capital was widely available. With that fact seemingly changing, does it make sense long term to be in that business or might you find a different way to structure your finance operations?

Well, Craig, I'd start by saying it still is a great business and, you know, we still generated $80 some million of operating profit this year, strong market share in the low to mid-50%, a very strong relationship with the Harley-Davidson dealer network, so there's still a lot of great aspects of the HDFS business as well as the strategic value it brings to helping facilitate the sale of Harley-Davidson motorcycles. So strategically I think it's an important asset. Clearly, the reality of the capital markets and how access to funding and the cost of that funding has changed because of the events of the last few months, we anticipate that the cost of capital will be higher as we look forward in HDFS. We're going to have to look carefully at how we can find ways to cost effectively access capital, how we can offset some of that increased cost with other operational savings or other ways to look at the business model. So we'll need to continue to evaluate and look at all kinds of alternatives to see what makes sense going forward and how we can make sure we continue to get appropriate returns in that business going forward. Craig Kennison - Robert W. Baird & Co., Inc.: I guess the reason I asked the question is if you look at the stock where it trades today, the market appears to ascribe a negative value, a meaningfully negative value, to HDFS despite the fact that it is profitable and that it does have $3 or $4 in book value per share. Where do you think the disparity is or where could you be more transparent to help the market recognize that value? And then the last question is just maybe comment on your dividend plans.

I think the market will ultimately value the company appropriately. Right now I think there's a lot of focus to your point on HDFS, but as we come through and successfully raise the funding we need, I think we'll get the appropriate valuation in the marketplace and that'll sort itself out. Regarding the dividend plans, as I've said for a number of months, we always review the dividend on an ongoing basis and we'll continue to review the dividend. We did that in December and the Board of Directors decided to pay the December dividend. We realize the dividend is a priority for many of our long-term shareholders and we'll continue to evaluate paying that dividend as we go forward. So we realize that we need to be prudent with our cash flows and we'll continue to evaluate and look at it on an ongoing basis, just like we've been doing for the last several months.

There's no doubt that looking at the market value of the company that we've certainly been beat up by the market, but I don't think we're alone in that perspective. I think the market has - you know, many of the companies that are listed on the stock exchange, their values gone down greatly in the last four or five, six months. And although we will continue to look at our business model and see what makes sense, some of that does happen to do with the capital markets and the fear they have.

Your next question comes from James Hardiman - FTN Midwest Securities Corp.

First in terms of the reduction of shipments in 2009, how comfortable are you with current inventory levels that you're essentially going to be shipping in line with where you think retail would be? The last couple of years you've basically made the promise that you're going to ship fewer bikes into the channel than are sold out of the channel. It doesn't sound like you're making that promise this year. Is that because you feel pretty comfortable with where inventory levels are and you think those two numbers will essentially be in line or where do you stand with that?

As Tom mentioned earlier in the conference call, during 2008 we did reduce inventories in the dealer network in the U.S. by more than 12,000 units and we were comfortable where we ended the year. We'll continue to monitor that. We also said during the conference call that we'll use and apply the same discipline we applied in 2008 and if the market so dictates and the economy remains soft or failing, we may take action to certainly reduce inventory, but I don't see inventory increasing in our current look at the 2009 year.

And then on HDFS, just the timing of the writedowns. I mean, we've seen a few million here and there, but nothing ever on this scale. Tom, if you had sort of been in charge of HDFS all year long, do you think that some of these writedowns would have taken place a little earlier on or did credit losses really get that much worse during the fourth quarter?

No. The credit losses we recorded, we do an evaluation, James, every single quarter, and I'm involved in that valuation work, so these losses that we recorded and the write-offs we recorded in the portfolio were appropriately booked during the fourth quarter. I think it's really important to put it in perspective, so if you take the write-off of the held-forsale portfolio and the retained interests, it totals about $63.5 million, and $36.4 million of that is due to the change in the discount rate from 12% to 18%. So the bulk of the write-off is really due to the change in the discount rate. The remaining $27 million is due as we looked across the portfolio and made adjustment to our credit loss assumptions.

Can you tell us anything about what type of wiggle room you have going forward? Is there any? You know, obviously the discount rates are completely out of your control, but is there any level of confidence that you can give us that at least on the credit loss portion of the writedowns that we won't see anything of this magnitude in 2009?

Well, as I said on the conference call, a couple of things. I think we've been taking good underwriting actions and have been making good improvements in the portfolio. The overall credit quality of it went up during 2008, and I think we're taking the prudent steps. However, we are facing a lot of headwinds out there in the macro economy and at the consumer level with rising unemployment levels, so I do anticipate we'll still experience higher credit losses in 2009 and we're planning for that. So I think we're doing the right things to appropriately manage the portfolio, but just given all the macro concerns and conditions, I still think we'll end up with higher credit losses as we go forward.

So is the bottom line with HDFS, obviously you're not going to give guidance on HDFS, but presumably interest income's going to be up pretty meaningfully. The cost of funds, that is going to be up pretty meaningfully. Credit losses are going to be up. When you look at 2009, do you think that's going to be up, down or flat just generally? Is it the assumption that HDFS will see another down year in 2009?

You're right, we're not going to give any specific guidance around HDFS, and we do have some of those headwinds around higher credit losses and higher financing costs coming at us. Do put in perspective we had a comp this year of securitization gains from the prior year that we will not have in 2008 since we did not record any gains on securitization during 2008 - we actually recorded a $5.4 million loss - so we don't have that comp to overcome. So there are some plusses and minuses as we look forward in the 2009 HDFS plan.

How much of the restructuring savings that you talked about - I think you said $10 to $20 million for 2009 in terms of restructuring, actually benefits that you're seeing from that - how much of that is going to come on the gross margin line and how much is in SG&A and what else can you tell us about the puts and takes of SG&A during '09?

The majority of that $10 to $20 million, the great majority of that will come through the SG&A line as we implement the restructuring activities here in the first quarter and first half of the year.

And, I mean, ultimately, you know, sort of sales aside, SG&A have been trending up on an absolute basis. Do you think that you'll be able to get that under control and that we'll see even flat SG&A in '09?

I think if you look at what we've been doing on the SG&A front, last year in April we eliminated about 360 salaried jobs and have really been working diligently on reducing our SG&A costs in noncustomer interfacing areas, so we're still continuing to make good investments in the marketing areas and in our international dealer development areas and so forth. So this will be another opportunity for us to take costs out of SG&A. I do think SG&A dollar spending in 2009 will be down versus 2008, but we are going to continue to make some of these important investments as we're reaching out to new customers and investing in product and so forth. But as a result of the strong actions we're taking here proactively, we should see a decrease in overall SG&A spending in 2009.

And again, as I pointed out earlier in the conference call and Tom just said, we will continue to invest in marketing, in the brand, in product development because we are a unique company and when things come back we should be on top of things. So, I mean, although we'll be controlling SG&A, I think the dollars spent per unit will be slightly higher in those particular areas.

Your next question comes from Edward Aaron - RBC Capital Markets.

I'm still trying to get my head around the HDFS funding plan. You laid out three different priorities. You have the TALF part, which we don't really know about yet, the unsecured debt markets, which seem like they're currently not open, and then on the asset-backed commercial paper line, I thought you said in response to Tim's question that if you rolled that it wouldn't count against that $1 billion. So I guess I'm trying to understand how you have comfort that we're going to be able to get the financing that we need through the year and in the interim, until it becomes more clear, are there any adjustments that you might make in terms of willingness to make retail motorcycle loans?

As I said, we are working those three paths and, as you know, the capital markets are extremely volatile right now. And we're going to continue to pursue along those three paths because we think it's in the best interests of our shareholders to work aggressively as we can on those three alternatives. So that's where the primary focus is. There is no doubt we are being very prudent with the managing of cash in the company if you look at the actions we're taking to focus our cash resources. You know, the example I gave is at HDFS we had a small general aviation aircraft portfolio. We decided to discontinue that, to pool our cash and resources to support our dealers and retail loans. At the motorcycle company, we're reducing our capital expenditures next year and we can closely monitor the timing of some of those expenditures. So I can assure you we're doing a number of actions to make sure we're prudently managing our cash position as we go forward here. So I said those are preferred paths because that's really where I want to focus the effort. At the same time, we have filed the shelf registration in December that does give us additional options and additional flexibility to pursue other paths in the event that we need to.

Last quarter you talked about selling some of the wholesale receivables. Why did that come out of the list?

We looked at the potential of doing that and there really wasn't a strong market appetite out there for any type of transaction in the wholesale receivable market or the price that it would be done at wasn't attractive. So I don't see that as one of the preferred routes at this point in time.

Does the cash on the balance sheet, can that count - substantially all of that count - towards that $1 billion of funding needs if need be? And then secondly, with the restructuring plans that you announced today, would you have done anything different if you had a non-union work force or I guess the question is did that affect any of the changes that you ended up making?

I'll handle the first one, the cash on the balance sheet. There are a few hundred million dollars of that that is available to count against the funding plan, so yes, there are some resources there.

I'll answer the question on the restructuring and would we do it different if we had a nonunion work force and the answer would be absolutely not. We've got a great relationship, working relationship, with the union, and in fact that relationship will get us through what we have to do in terms of consolidating the plants both in Wisconsin, York, Pennsylvania, and the activities of going to a third-party provider on our distribution center. So, I mean, that relationship has gotten us through many tough times in the past. We've been working with them currently right now. We'll continue to work with them to help solve some of these issues and get it done on time and as efficiently and effectively as possible. So that relationship is going to help us.

Your last question comes from Robin Farley - UBS.

I have a couple of quick clarifications. One is I think you said HDFS, what market share of bikes sold that HDFS has for the full year. Can you tell us what it was for Q4?

Robin, I'll see if I can find it quick. I only have the full year number here of 53.5%. We may have to circle back with you. I don't know if I have that right here with me.

Okay, just wondering because obviously, with the market share increase in Q4 in terms of total sales, I'm just wondering if that was related to the HDFS market share.

I don't remember the specific number, but there was nothing unusual in market share during the fourth quarter than previous quarters during 2008.

The other thing, I mean, there's two things actually. The first nine months of this year much of our competition was heavily discounting prior year product that they'd overproduced and they were giving ungodly rebates to the dealer, the customer and then zero percent financing to [pull] through prior year products. That's number one and it certainly had implications on market share in the first nine months. Number two, our product, although seasonal, is less seasonal than a lot of our competition, so we typically experience a stronger fourth quarter and market share gain in every single year.

And then a couple of other little clarifications. One is I don't think you've said what is the effective interest rate on that $500 million conduit. I know what was in the filing, it talked about different options and that there would be spreads on top of rates, but what is your effective interest rate on that?

It's in the ballpark of about 6%.

And then I don't know if you said the dollar amount of aviation loans roughly that you did in the last year just to get a sense of how much that potentially frees up?

It's about a $300 million portfolio with $100 or so million of originations in a year.

And the shipment increase in Q1, despite the full year being down, is that to just sort of get ahead of maybe some disruption as you go through the restructuring? Is that why Q1 is up?

Yes, as we looked at implementing it, this was the most - as we looked at implementing the shipment reduction for the full year, this was the most efficient way to go about it to make sure we have the appropriate motorcycles available for the spring selling season. It's also up due to the timing of some of the shipments into the international markets.

Actually, as you look at the first quarter, the first quarter is very similar in shipments to the fourth quarter. Our production rate really doesn't change between the two quarters.

And then you mentioned in your comments about used bike sales, and I think you said an 8% increase. Is that in volume or in price? I just want to get a little more color around what that used bike increase was.

Yes. We track the industry data, used Harley motorcycle sales, so that's an industry number. So it's the number of units of used Harley-Davidsons sold and registered in total, not through the dealership.

Because you've talked about the used bike prices increasing as well. Do you have any color on is that in the fourth quarter? Were the used bike prices were still up in Q4 or has that softened a bit?

We did data on a little bit of a lag. As we've said before, we had strong used bike performance throughout the first 10 months of the year. We did see a little softening in November and December. Again, though, we've got to be a little careful because of seasonality and the number of units that are sold during the last couple months of the year. But still strong overall, but we did see a slight softening of used prices in the last couple months of the year.

And then my last question is you announced the Sportster promotion where you're guaranteeing [inaudible] NSRP, you announced just the last couple of days in Q4, but it looks like it impacted the margin. Basically, are you recognizing upfront all of the expense that you think will be associated with that or will some of that promotional - most of the promotion happening in '09, will all the expense of it be now here in Q4 or will we see it again later in '09 as well?

We've made an estimate of what we think the take rate will be on that program and recorded the expense of that program - it's actually a contra revenue account that we've had to record it as during the fourth quarter. So the great majority of that expense, assuming our assumptions are right on the utilization of it will have been recorded in the fourth quarter.

We're going to end the Q&A right here. I want to thank you for your time this morning. I appreciable your interest and your investment in Harley-Davidson, and now I'll turn it back over to Amy for some final logistics.

Thanks, Tim. If you would like to hear a replay of this conference, call 7066459291 and enter PIN number 78326907# until January 30th, or access the conference at Harley-Davidson.com. If you have any questions, please contact Harley-Davidson's Office of Investor Relations at 4143438002. Thanks and have a great day.

This concludes today's conference call. You may now disconnect.