(Adds Harley's comments)
By Rajesh Kumar Singh
CHICAGO, April 2 (Reuters) - Harley-Davidson Inc's workers in Milwaukee and Tomahawk, Wisconsin, have rejected the motorcycle maker's proposal for a five-year contract, their union said on Tuesday, citing non-financial issues such as temporary workers and job security.
The current seven-year contract had been set to expire on April 1. But Harley and the United Steelworkers (USW) union, which represents more than 1,000 hourly employees at the two facilities, said they had agreed to extend the contract through April 14.
The union is pressing the Milwaukee-based company to address issues related to temporary workers, job security, scheduling, and seniority and temporary workers rights.
A USW official told Reuters the union wants to protect full-time workers from layoffs. While it is asking for a road map that would allow temporary workers to become full-time workers, it is opposed to the company using temporary workers to pull work away from full-time employees.
Patricia Sweeney, corporate media relations manager at Harley, said a flexible workforce enables the company to staff efficiently during the peak motorcycle demand season, helping it manage its cost structure and remain competitive.
"This enables us to effectively manage the seasonality of our business," Sweeney told Reuters. "It's a practice we've had in place for the past seven years."
Earlier, the company said it was disappointed with the union's decision to reject a "competitive" offer. Harley, however, said production would continue as usual at all of its facilities.
Under the proposed agreement, Harley's employees would have received a 14 percent wage increase during the contract period as well as a $2,250 signing bonus.
The proposal also included no changes to healthcare and significant pension enhancements for current employees, along with a retirement incentive for those eligible to retire, Harley said.
The average wage for current, regular full-time employees under the first year of the agreement was proposed to be over $25 an hour in Tomahawk and over $33 per hour in the Milwaukee area.
The statement did not quantify the financial impact of the proposal for a company that has been struggling to revive demand in the United States, which accounts for nearly 60 percent of total bike sales.
Adding to its troubles, it is estimated that a tariff war waged by U.S. President Donald Trump will cost the company between $100 million and $120 million in 2019 and contribute to a 6-percentage-point drop in operating margins in the quarter that just ended.
To avoid fallout from the tariff war, Harley is spending $15 million to expand a facility in Thailand to serve European markets.
A decision to shift production out of the United States for European markets was announced last summer after the EU slapped tariffs on U.S. imports in response to Trump's duties on steel and aluminum imports from the trading bloc.
Trump had blasted Harley's decision and publicly backed a boycott of the company. (Reporting by Rajesh Kumar Singh, editing by G Crosse, Tom Brown and Jonathan Oatis)