10-K405

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UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

/x/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2000

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                

Commission file number 1-9183

Harley-Davidson, Inc.
(Exact name of registrant as specified in its charter)

Wisconsin (State of organization)	39-1382325 (I.R.S. Employer Identification No.)
3700 West Juneau Avenue, Milwaukee, Wisconsin (Address of principal executive offices)	53208 (Zip code)

Registrants telephone number: (414) 342-4680

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each Exchange on which registered
COMMON STOCK, $.01 PAR VALUE PER SHARE	NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS	NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: NONE

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such requirements for the past 90 days. Yes /x/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

    Aggregate market value of the voting stock held by non-affiliates of the registrant at March 19, 2001:

$11,342,424,490

    Number of shares of the registrant's common stock outstanding at March 19, 2001:

302,102,923 shares.

    Part III of this report incorporates information by reference from registrant's Proxy Statement for the annual meeting of its shareholders to be held on May 5, 2001.

PART I

Note regarding forward-looking statements

    The Company intends that certain matters discussed are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this note or because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or "estimates" or words of similar meaning. Similarly, statements that describe the Company's future plans, objectives, targets or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 1. Business Summary

    Harley-Davidson, Inc. was incorporated in 1981, at which time it purchased the Harley-Davidson® motorcycle business from AMF Incorporated (currently doing business as Minstar) in a management buyout. In 1986, Harley-Davidson, Inc. became publicly held. Unless the context otherwise requires, all references to the "Company" include Harley-Davidson, Inc., all of its subsidiaries and all of its majority-owned affiliates. The Company operates in two segments: Motorcycles and Related Products and Financial Services. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately based on the fundamental differences in their operations.

    The Motorcycles and Related Products (Motorcycles) segment includes the group of companies doing business as Harley-Davidson Motor Company (Motor Company), which are subsidiaries of H-D Michigan, Inc., and Buell Motorcycle Company (BMC), which was acquired in February of 1998, when the Company purchased substantially all of the remaining shares of BMC it did not already own. The Motorcycles segment designs, manufactures and sells primarily heavyweight (engine displacement of 651+cc) touring, custom and performance motorcycles as well as a complete line of motorcycle parts, accessories and general merchandise. The Company, which is the only major American motorcycle manufacturer, has held the largest share of the United States heavyweight (651+cc) motorcycle market since 1986 and ended 2000 with a domestic market share of 47.4% (Data provided by the Motorcycle Industry Council).

    The Financial Services segment consists of the Company's wholly owned subsidiary, Harley-Davidson Financial Services, Inc. (HDFS). HDFS is engaged in the business of financing and servicing wholesale inventory receivables and consumer retail installment sales contracts (primarily motorcycles). Additionally, HDFS is an agency for certain unaffiliated insurance carriers providing property/casualty insurance and extended service contracts to motorcycle owners. Prior to the sale of the Harley-Davidson Chrome Visa® Card business in March 2000, HDFS was engaged in the business of financing and servicing revolving charge receivables. HDFS conducts business in the United States, Canada and Europe.

    The following table includes quarterly and year to date revenue and operating income by segment, as well as motorcycle units shipped, for each of the three years ended December 31, 2000, 1999 and 1998.

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Harley-Davidson, Inc.
Revenue and Operating Income by Segment
and Motorcycle Shipments
(Dollars in thousands)

		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
2000
Revenue by segment:
	Motorcycles and Related Products	$	681,113		$	754,973		$	714,119		$	756,160		$	2,906,365
	Financial services		n/a			n/a			n/a			n/a			n/a
		$	681,113		$	754,973		$	714,119		$	756,160		$	2,906,365
Operating income by segment:
	Motorcycles and Related Products	$	112,640		$	127,228		$	116,438		$	131,179		$	487,485
	Financial services		3,332			11,282			9,609			12,955			37,178
	Corporate		(3,005	)		(2,259	)		(2,018	)		(2,409	)		(9,691	)
		$	112,967		$	136,251		$	124,029		$	141,725		$	514,972
Units:
	Harley-Davidson® motorcycles		49,057			53,329			48,077			54,129			204,592
	Buell® heavyweight motorcycles		1,847			1,955			227			1,014			5,043
	Buell Blast™ motorcycles		491			1,325			2,404			926			5,146
1999
Revenue by segment:
	Motorcycles and Related Products	$	558,567		$	608,716		$	623,193		$	662,463		$	2,452,939
	Financial services		n/a			n/a			n/a			n/a			n/a
		$	558,567		$	608,716		$	623,193		$	662,463		$	2,452,939
Operating income by segment:
	Motorcycles and Related Products	$	91,477		$	100,140		$	95,907		$	110,077		$	397,601
	Financial services		2,642			9,118			7,514			8,411			27,685
	Corporate		(2,802	)		(2,624	)		(2,024	)		(1,977	)		(9,427	)
		$	91,317		$	106,634		$	101,397		$	116,511		$	415,859
Units:
	Harley-Davidson® motorcycles		41,181			44,771			42,615			48,620			177,187
	Buell® motorcycles		2,013			1,512			1,984			2,258			7,767
1998
Revenue by segment:
	Motorcycles and Related Products	$	466,527		$	517,164		$	517,198		$	563,067		$	2,063,956
	Financial services		n/a			n/a			n/a			n/a			n/a
		$	466,527		$	517,164		$	517,198		$	563,067		$	2,063,956
Operating income by segment:
	Motorcycles and Related Products	$	71,051		$	83,246		$	79,870		$	90,281		$	324,448
	Financial services		2,585			6,355			3,599			7,672			20,211
	Corporate		(2,829	)		(2,362	)		(3,330	)		(2,522	)		(11,043	)
		$	70,807		$	87,239		$	80,139		$	95,431		$	333,616
Units:
	Harley-Davidson motorcycles		34,482			37,753			36,428			42,155			150,818
	Buell motorcycles		1,350			1,497			1,069			2,418			6,334

    See note 12 to the 2000 consolidated financial statements for further information about the Company's business segments.

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Motorcycles and Related Products

    The primary business of the Motorcycles segment is to design, manufacture and sell premium motorcycles, primarily for the heavyweight market. The Company is best known for its Harley-Davidson® motorcycle products, but also offers a line of motorcycles and related products under the Buell® brand name.

    The Company's Harley-Davidson motorcycle products emphasize traditional styling, design simplicity, durability, ease of service and evolutionary change. Studies by the Company indicate that the average U.S. Harley-Davidson motorcycle purchaser is a married male in his mid-forties, with a household income of approximately $77,700, who purchases a motorcycle for recreational purposes rather than to provide transportation and is an experienced motorcycle rider. Over two-thirds of the Company's U.S. sales of Harley-Davidson motorcycles are to buyers with at least one year of education beyond high school, and 30% of the buyers have college degrees. Approximately 9% of the Company's Harley-Davidson U.S. retail motorcycle sales are to female buyers.

    The Company's Buell motorcycle products emphasize innovative design, responsive handling and overall performance. The Buell motorcycle product line has traditionally consisted of heavyweight performance models, powered by the Company's 1200cc V-Twin engine. However, in 2000, the Company introduced the Buell Blast™, a new vehicle designed specifically to attract new customers into the sport of motorcycling. This vehicle is considerably smaller, lighter and less expensive than the existing Buell heavyweight models the Company offers. Instead of utilizing the Company's trademark "V" engine configuration, it offers a single- cylinder engine with a displacement of 492 cc's.

    Company studies indicate that the average U.S. purchaser of the Company's Buell heavyweight motorcycle is a male at the median age of 37 with a median household income of approximately $64,100. Approximately 80% of U.S. Buell heavyweight motorcycle purchasers have some post high school education and 30% have a college education. Approximately 1% of all Buell heavyweight U.S. retail motorcycle sales are to females. The Company's studies indicate that nearly half of Buell Blast purchasers have never owned a motorcycle before, and in excess of 90% of them had never owned a Buell motorcycle before. The median age of Blast purchasers is 38, with over one-half of them being female.

    The motorcycle market is comprised of four segments: standard, which emphasizes simplicity and cost; performance, which emphasizes handling and acceleration; touring, which emphasizes comfort and amenities for long-distance travel; and custom, which emphasizes styling and individual owner customization.

    The Company presently manufactures and sells 24 models of Harley-Davidson touring and custom heavyweight motorcycles, with domestic manufacturer's suggested retail prices ranging from approximately $5,595 to $18,980. The touring segment of the heavyweight market was pioneered by the Company and includes motorcycles equipped for long-distance touring with fairings, windshields, saddlebags and Tour Pak® luggage carriers. The custom segment of the market includes motorcycles featuring the distinctive styling associated with classic Harley-Davidson motorcycles. These motorcycles are highly customized through the use of trim and accessories.

    The standard and performance segments of the market are served by the Company's Buell motorcycle line. The Company manufactures and sells four Buell heavyweight performance motorcycle models, with domestic manufacturer's suggested retail prices ranging from approximately $8,795 to $13,700. The Blast competes in the standard market and has a domestic manufacturer's suggested retail price of $4,395.

    The Company's heavyweight motorcycles are based on variations of five basic chassis designs and are powered by one of four air cooled, twin cylinder engines of "V" configuration, which have

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displacements of 883cc, 1200cc, 1450cc and 1550cc. The Company manufactures its own engines and frames.

    Although there are some accessory differences between the Company's top-of-the line touring motorcycles and those of its competitors, suggested retail prices are generally comparable. The prices for the high-end of the Company's Harley-Davidson custom product line range from being competitive to 50% more than its competitors' custom motorcycles. The custom portion of the Harley-Davidson product line represents the Company's highest unit volumes and continues to command a premium price because of the features, styling and high resale value associated with Harley-Davidson custom products. The Company's smallest displacement custom motorcycle (the 883cc Sportster®) is directly price competitive with comparable motorcycles available in the market. The Company's surveys of retail purchasers indicate that, historically, over three-quarters of the purchasers of its Sportster model either have previously owned competitive-brand motorcycles or are completely new to the sport of motorcycling or have not participated in the sport for at least five years. Since 1988, the Company's research has consistently shown purchasers of Harley-Davidson motorcycles have a repurchase intent in excess of 92%, and the Company expects to see sales of its 883cc Sportster model partially translated into sales of its higher-priced products in the normal two to three year ownership cycle. The Company's worldwide motorcycle sales generated 79.4%, 79.7%, and 79.9% of revenues in the Motorcycles segment during 2000, 1999 and 1998, respectively.

    The major product categories for the Parts and Accessories (P&A) business are replacement parts (Genuine Motor Parts) and mechanical and cosmetic accessories (Genuine Motor Accessories). Worldwide P&A net sales comprised 15.4%, 14.8% and 14.4% of net sales in the Motorcycles segment in 2000, 1999 and 1998, respectively.

    Worldwide net sales of General Merchandise, which includes MotorClothes™ apparel and collectibles, comprised 5.2%, 5.4%, and 5.5% of net sales in the Motorcycles segment in 2000, 1999, and 1998, respectively.

    The Company also provides a variety of services to its dealers and retail customers including service training schools, customized dealer software packages, delivery of its motorcycles, an owners club membership, a rider training program and a motorcycle rental program, available in the U.S. through a limited number of authorized dealers.

    Licensing.  The Company endeavors to create an awareness of the "Harley-Davidson" brand among the non-riding public and provide a wide range of product for enthusiasts by licensing the name "Harley-Davidson" and numerous related trademarks owned by the Company. The Company currently has licensed the production and sale of a broad range of consumer items, including t-shirts, jewelry, small leather goods, toys and numerous other products (Licensed Products). The Company also licenses the use of its name in connection with two cafes located in New York and Las Vegas. Although the majority of licensing activity occurs in the U.S., the Company continues to expand these activities in international markets.

    The Company's licensing activity provides a valuable source of advertising and goodwill. Licensing also has proven to be an effective means for enhancing the Company's image with consumers, and it provides an important tool for policing the unauthorized use of the Company's trademarks, thereby protecting the Harley-Davidson brand and its use. Royalty revenues from licensing, included in motorcycle revenue, were approximately $31 million, $26 million and $24 million during 2000, 1999 and 1998, respectively. While royalty revenues from licensing activities are relatively small, the profitability of this business is relatively high.

    Patents and Trademarks.  The Company owns certain patents that relate to its motorcycles and related products and processes for their production. The Company has increased its efforts to patent its

5

technology and certain motorcycle related designs and to enforce those patents. The Company sees such actions as important as it moves forward with new products, designs and technologies.

    Trademarks are important to the Company's motorcycle business and licensing activities. The Company has a vigorous global program of trademark registration and enforcement to strengthen the value of the trademarks associated with its products and services, prevent the unauthorized use of those trademarks and enhance its image and customer goodwill. The Company believes the HARLEY-DAVIDSON trademark and the Company's Bar and Shield trademark are each highly recognizable by the public and are very valuable assets. The BUELL trademark is well-known in sport bike circles, as is the associated Pegasus logo. The Company is making efforts to ensure that each of these brands will become better known as the Buell business expands. Additionally, the Company uses numerous other trademarks, trade names and logos, which are registered both in the United States and abroad. The following are among the trademarks of H-D Michigan, Inc: Harley-Davidson, Harley, the Bar and Shield Logo, Ultra Classic, Electra Glide, Softail, Deuce, Twin Cam 88, MotorClothes, Rider's Edge, Harley Owners Group, and H.O.G. The HARLEY-DAVIDSON trademark has been used since 1903 and the Bar and Shield trademark since 1907. The following are among the trademarks of Buell Motorcycle Company: Buell, Blast, Lightning, and B.R.A.G. The BUELL trademark has been used since 1984.

    Marketing.  The Company's marketing efforts are divided among dealer promotions, customer events, magazine and direct mail advertising, public relations, and cooperative programs with Harley-Davidson/Buell dealers. In addition, the Motor Company entered into a five-year strategic alliance with Ford Motor Company in 1999, which will bring together resources to focus on a series of technical and marketing ventures. The Company also sponsors racing activities and special promotional events and participates in all major motorcycle consumer shows and rallies.

    The Harley Owners Group®, or "H.O.G.®", currently has approximately 600,000 members worldwide and is the industry's largest company-sponsored motorcycle enthusiast organization. The Company formed this riders club in 1983, in an effort to encourage Harley-Davidson owners to become more actively involved in the sport of motorcycling.

    The Buell Riders Adventure Group, or "BRAG®", was also formed in recent years and has grown to approximately 7,500 members. BRAG sponsors events, including national rallies and rides, across the U.S. for Buell motorcycle enthusiasts.

    The Company's expenditures on worldwide marketing, selling and advertising were approximately $189.8 million, $164.3 million and $135.0 million during 2000, 1999 and 1998, respectively.

    E-Commerce.  The Company established an online catalog featuring its Genuine Motor Accessories and MotorClothes™ product lines in 1999. In April 2000, this online catalog was expanded to include e-commerce capabilities. In addition to browsing, creating wish lists, and using the dealer locator, customers can now make purchases of these products at the web site. Harley- Davidson's e-commerce model is unique in the industry in that, while the catalog is viewed from the Harley- Davidson website, orders are actually distributed to the participating authorized Harley-Davidson dealer that the customer selects. In turn, those dealers fill the order and handle any after- sale services that the customer may require.

    International Sales.  International sales were approximately $585 million, $537 million, and $497 million, accounting for approximately 20%, 22% and 24% of net sales of the Motorcycles segment, during 2000, 1999, and 1998, respectively. In 2000, Japan, Canada, and Germany, in that order, represented the Company's largest international markets and together accounted for approximately 57% of international sales. The Company ended 2000 with a 7.4% share of the European heavyweight (651+cc) market and a 20.5% share of the Asia/Pacific (Japan and Australia)

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heavyweight (651+cc) market. See Note 12 to the consolidated financial statements for additional information regarding foreign operations.

    Distribution.  The Company's basic channel of United States distribution for its motorcycles and related products consists of approximately 630 independently owned full-service Harley-Davidson dealerships to whom the Company sells directly. This includes 254 combined Harley-Davidson and Buell dealerships. There are no Buell only dealerships. With respect to sales of new motorcycles, approximately 82% of the U.S. dealerships sell the Company's motorcycles exclusively. All dealerships stock and sell the Company's genuine replacement parts, accessories, and MotorClothes apparel and collectibles, and perform service for the Company's motorcycles. The Company also sells a smaller portion of its parts and accessories and general merchandise through "non-traditional" retail outlets. The "non-traditional" outlets, which are extensions of the main dealership, consist of Secondary Retail Locations (SRL's), Alternate Retail Outlets (ARO's), and Seasonal Retail Outlets (SRO's). SRL's, also known as Harley Shops, are satellites of the main dealership and are developed to meet the service needs of the Company's riding customers. Harley shops also provide replacement parts and accessories and MotorClothes apparel and collectibles and are authorized to sell new motorcycles. ARO's are located primarily in high traffic areas such as airports or popular vacation destinations and focus on selling the Company's MotorClothes apparel and collectibles and Licensed Products. SRO's are located in similar high traffic areas, but operate on a seasonal basis out of temporary locations such as vendor kiosks. ARO's and SRO's are not authorized to sell new motorcycles. Presently, there are approximately 54 SRL's, 48 ARO's, and under 20 SRO's located in the United States.

    In the European Region (Europe/Middle East/Africa), there are currently 359 independent Harley-Davidson dealerships serving 32 country markets. This includes 230 combined Harley-Davidson and Buell dealerships. Buell is further represented by 13 dealerships that do not sell Harley-Davidson motorcycles. In addition, the Company has established 23 ARO's across the 32 European country markets. The Company has an established infrastructure in Europe, based out of its headquarters in the United Kingdom, and operates through a network of independent dealers served by 8 independent distributors and by five wholly owned sales and marketing subsidiaries which are in France, Germany, Italy, The Netherlands and the United Kingdom. The European management team is continuing to focus on the expansion and improvement of distributor and dealer relationships. The Company is achieving this through its dealer development team, specialized training programs, retail financing initiatives, ongoing product development and coordinated Europe-wide and local marketing programs aimed at attracting new customers. Other initiatives include the development of information systems linking European subsidiaries directly with each of the major independent distributors and most of the dealers located in the subsidiary markets.

    In the Asia/Pacific Region, there are currently 213 Harley-Davidson outlets serving 8 country markets of which 80 are combined Harley-Davidson/Buell dealerships, and 28 are service only outlets. In addition there are currently 5 Buell only dealerships. The Company expects the majority of its short-term sales and long-term growth opportunities in the Asia-Pacific Region to come from its existing markets in Japan and Australia. The Company will continue to support its objectives of maintaining and growing its business in Southeast Asia, where markets have begun to stabilize over the last year. The Company remains cautiously optimistic about the long-term opportunities in these and other new markets in the Asia-Pacific Region.

    The Latin American market consists of 16 country markets managed from Milwaukee, Wisconsin. The Latin American market has a diverse dealer network including 33 Harley-Davidson dealerships and 5 ARO's/SRO's focused on selling General Merchandise. The Company plans to continue developing its distribution in Brazil and Mexico, its two biggest Latin American markets, as well as broaden brand management and marketing activities across the entire region.

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    In Canada, there are currently 73 independent Harley-Davidson dealerships, one independent stand-alone Buell dealership, and 3 ARO's, all served by a single independent distributor. This network includes 20 combined Harley-Davidson and Buell dealerships resulting in a total of 21 Buell dealerships in Canada.

    Seasonality.  In general, the Company has not experienced significant seasonal fluctuations in its sales. This has been primarily the result of a strong demand for the Company's Harley-Davidson motorcycles and related products, as well as the availability of floor plan financing arrangements for its North American and European independent dealers. Floor plan financing allows dealers to build their inventory levels in anticipation of the spring and summer selling seasons.

    Retail Customer and Dealer Financing.  The Company believes HDFS and other financial services companies provide adequate retail and wholesale financing to the Company's domestic and Canadian dealers and customers. In Europe, HDFS provides wholesale financing to dealers through a joint venture agreement with Transamerica Distribution Finance Corporation.

    Competition.  The heavyweight (651+cc) motorcycle market is highly competitive. The Company's major competitors generally have financial and marketing resources that are substantially greater than those of the Company. They also have larger overall sales volumes and are more diversified than the Company. In addition to established competitors, a growing segment of competition has recently emerged in the U.S. The new source of competition is driven by new entrants into the domestic heavyweight motorcycle market, offering heavyweight motorcycles with traditional styling. These competitors currently have production and sales volumes much lower than the Company's and do not hold a significant market share.

    Competition in the heavyweight motorcycle market is based upon a number of factors, including price, quality, reliability, styling, product features, customer preference and warranties. The Company emphasizes quality, reliability and styling in its products and offers a one-year warranty for its motorcycles. The Company regards its support of a motorcycling lifestyle in the form of events, rides, rallies and H.O.G.® as a competitive advantage. In general, resale prices for used Harley-Davidson motorcycles, as a percentage of prices when new, are significantly higher than resale prices for used motorcycles of the Company's competitors.

    Domestically, the Company competes most heavily in the touring and custom segments of the heavyweight motorcycle market, which together accounted for 78%, 79%, and 79% of total heavyweight retail unit sales in the U.S. during 2000, 1999 and 1998, respectively. The custom and touring motorcycles are generally the most expensive and most profitable vehicles in the market. During 2000, the heavyweight segment including standard, performance, touring and custom motorcycles represented approximately 51% of the total U.S. motorcycle market (on- and off-highway motorcycles and scooters) in terms of new units registered.

    For the last 13 years, the Company has led the industry in domestic (United States) unit sales of heavyweight motorcycles. The Company's share of the heavyweight market was 47.4% in 2000 compared to 50.2% in 1999. Although the Company's market share decreased slightly in 2000 as a result of the Company's ongoing capacity constraints, this share is still significantly greater than the Company's largest competitor in the domestic market, which had an 18.6% market share in 2000.

    The following chart includes U.S. retail registration data for the Company and its major competitors for 1996 - 2000.

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Market share of U.S. Heavyweight Motorcycles(1)
(Engine Displacement of 651+cc)

		Year Ended December 31,
		2000		1999		1998		1997		1996
New U.S. Registrations (thousands of units):
Total market new registrations		338.0		275.6		227.1		190.2		165.7
Harley-Davidson® new registrations		155.9		134.5		109.1		93.5		79.9
Buell® new registrations		4.2		3.9		3.2		1.9		1.7
	Total Company new registrations	160.1		138.4		112.3		95.4		81.6
Percentage Market Share:
Harley-Davidson motorcycles		46.1	%	48.8	%	48.1	%	49.2	%	48.2	%
Buell motorcycles		1.3		1.4		1.4		1.0		1.0
	Total Company	47.4		50.2		49.5		50.2		49.2
Honda		18.6		16.4		20.3		18.5		18.8
Suzuki		9.4		9.4		10.0		10.1		8.7
Kawasaki		9.1		10.3		10.1		10.4		12.2
Yamaha		8.4		7.0		4.2		5.4		5.9
Other		7.1		6.7		5.9		5.4		5.2
	Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

(1)

Motorcycle registration and market share information has been derived from data published by the Motorcycle Industry Council for the years 1997-2000 and from data published by R.L. Polk & Co. for 1996.

    The Company faces unique competitive challenges in the international markets. The European market is similar in size to the U.S. market, but unlike the domestic market it is comprised of the unique tastes of many individual country markets that together represent the total European market. In addition, 74% of the European heavyweight (651+cc) motorcycle market is comprised of the standard and performance segments. The Company has only recently started to compete in these market segments with its Buell® motorcycles.

    In the Asia/Pacific region, the Company benefited from double-digit market growth during 1997 and 1998, which was driven by a change in licensing requirements in Japan. While total market registrations remained flat in 2000, registrations for the Company's motorcycles continued to grow with a 4.3% increase in 2000 over 1999.

    On a worldwide basis, the Company measures its market share using the heavyweight classification. Although definitive market share information does not exist for many of the smaller foreign markets,

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the Company estimates its worldwide competitive position, using data reasonably available to the Company, to be as follows:

Worldwide Heavyweight Motorcycle Registration Data
(Engine Displacement of 651+cc)
(Units in thousands)

	2000		1999		1998
North America(1)
Total market new registrations	363.4		297.9		246.2
Harley-Davidson® new registrations	164.0		142.1		116.1
Buell® new registrations	4.3		4.0		3.3
Total Company registrations	168.3		146.1		119.4
Total Company market share %	46.3	%	49.0	%	48.5	%
Europe(2)
Total market new registrations	293.4		306.7		270.2
Harley-Davidson new registrations	19.9		17.8		15.7
Buell new registrations	1.9		2.1		1.6
Total Company registrations	21.8		19.9		17.3
Total Company market share %	7.4	%	6.5	%	6.4	%
Japan/Australia(3)
Total market new registrations	62.7		63.1		69.2
Harley-Davidson new registrations	12.2		11.6		10.3
Buell new registrations	.7		.7		.5
Total Company registrations	12.9		12.3		10.8
Total Company market share %	20.5	%	19.6	%	15.6	%
Total
Total new registrations	719.5		667.7		585.6
Harley-Davidson new registrations	196.1		171.5		142.1
Buell new registrations	6.9		6.8		5.4
Total Company registrations	203.0		178.3		147.5
Total Company market share %	28.2	%	26.7	%	25.2	%

(1)

Includes the United States and Canada. Data provided by the Motorcycle Industry Council.

(2)

Includes Austria, Belgium, France, Germany, Italy, The Netherlands, Spain, Switzerland and United Kingdom. Data provided by Giral S.A.

(3)

Data provided by JAMA and ABS.

    Motorcycle Manufacturing.  In an effort to further control costs and maintain quality, the Motor Company has incorporated manufacturing techniques to continuously improve its operations. These techniques, which include employee involvement, just-in-time inventory principles, partnering agreements with the local unions, high performance work organizations and statistical process control, are designed to improve product quality, productivity and asset utilization in the production of Harley-Davidson® motorcycles.

10

    The Motor Company's use of just-in-time inventory principles allows it to minimize its inventories of raw materials and work in process, as well as scrap and rework costs. This system also allows quicker reaction to engineering design changes, quality improvements and market demands. The Motor Company has trained the majority of its manufacturing employees in problem solving and statistical methods.

    The Company believes the worldwide heavyweight (651+cc) market will continue to grow and plans to continue to increase its Harley-Davidson® motorcycle production capacity to have the capacity to sustain its annual double-digit growth rate for units shipped. For 2001, the Company's production target is 227,000 Harley-Davidson units. Matters in this paragraph are subject to the risks and uncertainties discussed with respect to this topic under Item 7, "2000 Compared to 1999—Results of Operations"on page 20.

    The manufacturing techniques employed at BMC, which are similar to those of the Motor Company, are designed to provide cost control and quality products in a lower volume atmosphere. Its product development staff is located in close proximity to the production facilities to assure that new product and model year change activities are coordinated prior to and during launch. The manufacturing techniques employed include employee involvement with an emphasis on a highly flexible and participative workforce.

    The Company continues to invest in its joint venture with Porsche AG of Stuttgart, Germany, formed in 1997, to source and assemble powertrain components for use in potential new motorcycle products.

    The Company operates an assembly operation in Brazil that imports U.S. made components and sub-assemblies for final assembly in Brazil. Assembling imported U.S. made components increases the availability of the Company's Harley-Davidson motorcycles in Brazil, and reduces duties and taxes, making them more affordable to a larger group of Brazilian customers. The facility, which has been operational since mid-1999, assembles select motorcycle models for the Brazilian market with current volumes less than 1,000 units per year.

    Raw Material and Purchased Components.  The Company continues to proceed aggressively to establish long-term, mutually beneficial relationships with its suppliers. Through these relationships, the Company gains access to technical and commercial resources for application directly to product design, development and manufacturing initiatives. This strategy is resulting in improved product technical integrity, application of new features and innovations, reduced lead times for product development, and smoother/faster manufacturing ramp-up of new vehicle introductions.

    The Company purchases all of its raw material, principally steel and aluminum castings, forgings, sheets and bars, and certain motorcycle components, including carburetors, batteries, tires, seats, electrical components and instruments. The Company anticipates no significant difficulties in obtaining raw materials or components for which it relies upon a limited source of supply.

    Research and Development.  The Company believes research and development are significant factors in its ability to lead the market definition of touring and custom motorcycling and to develop products for the performance segment. In recent years, the Company has established a 218,000 square foot Motor Company Product Development Center (PDC) and a 43,000 square foot BMC research and development facility. The innovative design of the PDC brings together employees from styling, purchasing and manufacturing with regulatory professionals and supplier representatives to create a concurrent product and process development methodology. The Company incurred research and development expenses of approximately $75.8 million, $70.3 million and $58.7 million during 2000, 1999 and 1998, respectively.

11

    Regulation.  Federal, state and local authorities have various environmental control requirements relating to air, water and noise pollution that affect the business and operations of the Company. The Company endeavors to ensure that its facilities and products comply with all applicable environmental regulations and standards.

    The Company's motorcycles are subject to certification by the U.S. Environmental Protection Agency (EPA) for compliance with applicable emissions and noise standards and by the State of California Air Resources Board (CARB) with respect to CARB's more stringent emissions standards. Company motorcycles sold in California are also subject to certain tailpipe and evaporative emissions standards that are unique to California. The Company's motorcycle products have been certified to comply fully with all such applicable standards. There will be further reductions in CARB's motorcycle emissions standards in 2003 and 2008, respectively. Additionally, the European Union is also considering further reductions in its motorcycle emissions standards, and is considering possible reductions in its motorcycle noise standards, which already are lower than those of the EPA. Similarly, motorcycle noise and emissions levels are being reduced in Japan, as well as in certain emerging markets. Consequently, the Company will continue to incur some level of research and development and production costs related to motorcycle emissions and noise for the foreseeable future.

    The Company, as a manufacturer of motorcycle products, is subject to the National Traffic and Motor Vehicle Safety Act, which is administered by the National Highway Traffic Safety Administration (NHTSA). The Company has certified to NHTSA that its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related regulations. The Company has from time to time initiated certain voluntary recalls. During the last three years, the Company has initiated 25 voluntary recalls at a total cost of approximately $19.6 million. The Company fully reserves for all estimated costs associated with recalls in the period that the recalls are announced.

    As previously stated, federal, state, and local authorities have adopted various control standards relating to air, water, and noise pollution that affect the business and operations of the Motorcycles segment. Management does not anticipate that any of these standards will have a materially adverse impact on its capital expenditures, earnings, or competitive position. See further discussion of capital expenditures for equipment used to limit hazardous substances/pollutants under Item 7, "Environmental Matters" on page 27.

    Employees.  As of December 31, 2000, the Motorcycles segment had approximately 7,700 employees. Production workers at the motorcycle manufacturing facilities in Wauwatosa, Menomonee Falls, and Tomahawk, Wisconsin and Kansas City, Missouri are represented principally by the Paper Allied- Industrial Chemical and Energy Workers International Union (PACE) of the AFL-CIO, as well as the International Association of Machinist and Aerospace Workers (IAM). Production workers at the motorcycle manufacturing facility in York, Pennsylvania, are represented principally by the IAM. The collective bargaining agreement with the Wisconsin-PACE and IAM will expire on March 31, 2001, the collective bargaining agreement with the Kansas City-PACE and IAM will expire on December 31, 2003, and the collective bargaining agreement with the Pennsylvania-IAM will expire on February 2, 2007.

Financial Services

    HDFS provides financial services programs to Harley-Davidson® and Buell® dealers and consumers in the United States and Canada. HDFS also provides financial services programs for personal aircraft products. HDFS offers wholesale financing to the Company's European motorcycle dealers through a joint venture with another finance company. European retail customers are offered financial services programs by independent finance companies licensed by HDFS.

    Harley-Davidson and Buell.  HDFS, operating under the trade name Harley-Davidson Credit and Insurance, provides wholesale financial services to Harley-Davidson and Buell dealers and retail

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financing to consumers. Wholesale financial services include floorplan and open account financing of motorcycles and motorcycle parts and accessories, real estate loans, computer loans, showroom remodeling loans and the brokerage of a range of commercial insurance products. Wholesale financial services are offered by HDFS to all Harley-Davidson dealers in the United States and Canada and during 2000 were utilized by approximately 97% of such dealers. European dealers are serviced by a joint venture with another finance company. The wholesale finance operations of HDFS are located in Plano, Texas.

    Retail financial services include installment lending for new and used Harley-Davidson and Buell motorcycles and the brokerage of a range of motorcycle insurance policies and extended service warranty agreements. HDFS acts as an insurance agent and does not assume underwriting risk with regard to insurance policies and extended service warranty agreements. Prior to the sale of Harley-Davidson Chrome Visa® Card business in March 2000, HDFS financed and serviced revolving charge receivables. HDFS' retail financial services are available through virtually all Harley-Davidson and Buell dealers in the United States and Canada. HDFS' retail finance operations are located in Carson City, Nevada.

    Other Manufacturers.  HDFS also provides wholesale and retail financial services to aircraft dealers and consumers. These programs are similar to programs for Harley-Davidson and Buell dealers and consumers described above. During 1999, HDFS ceased offering retail financial services to consumers of marine and recreational vehicles.

    Funding.  HDFS has been financed by operating cashflow, advances and loans from the Company, asset-backed securitizations, commercial paper, revolving credit facilities, senior subordinated debt, and redeemable preferred stock.

    Competition.  The ability to offer a package of wholesale and retail financial services is a significant competitive advantage of HDFS. Competitors compete for business based largely on price and, to a lesser extent, service. HDFS competes based on convenience, service, strong dealer relations, industry experience, terms, and price.

    During 2000, HDFS financed 21% of new Harley-Davidson motorcycles retailed in the U.S., a decrease of 1% from 1999. HDFS faces minimal national competition for the Company's retail motorcycle finance business. Competitors are primarily banks and other financial institutions providing retail financing to local or regional markets. Competition to provide retail financial services to aircraft consumers include aircraft manufacturers' captive finance companies such as Cessna Finance Corp. and Debis Financial Services and other financial entities including MBNA and 1^st Source Bank. Credit unions, banks, other financial institutions and insurance agencies also compete for retail financial services business in segmented markets.

    HDFS faces little national competition for the Company's wholesale motorcycle finance business. Competitors are primarily regional and local banks and other financial institutions providing wholesale financing to Harley-Davidson and Buell dealers in their local markets. Competition to provide wholesale financial services to aircraft dealers includes aircraft manufacturers' captive finance companies.

    Patents and Trademarks.  HDFS utilizes various trademarks and trade names licensed from the Company. Additionally, HDFS has a registered trademark for the "Eaglemark and Design logo" utilized in aircraft financing programs.

    Seasonality.  In the northern United States and Canada motorcycles are primarily used during warmer months, generally March through August. Accordingly, HDFS experiences significant seasonal variations. Retail customers typically do not buy motorcycles until they can ride them. From mid-March through August, retail financing volume increases and wholesale financing volume decreases as dealers

13

deplete their inventories. From September through mid-March, there is a decrease in retail financing volume while dealer inventories build and turnover more slowly, substantially increasing wholesale financing volume.

    Regulation.  The operations of HDFS are subject, in certain instances, to supervision and regulation by state, federal, and various foreign governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which among other things, (i) regulate credit granting activities, including establishing licensing requirements, if any, in applicable jurisdictions, (ii) establish maximum interest rates, finance charges and other charges, (iii) regulate customers' insurance coverages, (iv) require disclosure to customers, (v) govern secured transactions, (vi) set collection, foreclosure, repossession and claims handling procedures and other trade practices, (vii) prohibit discrimination in the extension of credit and administration of loans, and (viii) regulate the use and reporting of information related to a borrower's credit experience.

    Depending on the provisions of the applicable laws and regulations and the specific facts and circumstances involved, violations of these laws may limit the ability of HDFS to collect all or part of the principal or interest on applicable loans, may entitle the borrower to rescind the loan and any mortgage or to obtain a refund of amounts previously paid and, in addition, could subject HDFS to damages and administrative sanctions.

    The above regulation and supervision could limit the discretion of HDFS in operating its business. For example, state laws often establish maximum allowable finance charges for certain consumer and commercial loans. Noncompliance with applicable statutes or regulations could result in the suspension or revocation of any license or registration at issue, as well as the imposition of civil fines and criminal penalties. No assurance can be given that the applicable laws or regulation will not be amended or construed differently, that new laws and regulations will not be adopted or that interest rates charged by HDFS will not rise to maximum levels permitted by law, the effect of any of which could be to adversely affect the business of HDFS or the results of operations.

    In addition, a subsidiary of HDFS, Eaglemark Bank, N.A., (Eaglemark Bank), is a nationally chartered bank. As such, the activities of this subsidiary are restricted by federal banking laws and are subject to examination by federal examiners. Due to the oversight of federal banking laws, any person or entity seeking to purchase "control" of the Company ("control" as defined by the applicable regulations but generally defined as directly or indirectly owning, controlling, or holding 10% or more of the voting stock) must apply for and obtain the approval of federal banking authorities.

    Employees.  As of December 31, 2000, the Financial Services segment had approximately 480 employees. No employees of HDFS are represented by labor unions.

14

Item 2. Properties

    The following is a summary of the principal properties of the Company as of March 15, 2001.

Motorcycles and Related Products Segment

Type of Facility	Location	Approximate Square Feet	Status
Corporate office	Milwaukee, WI	542,000	Owned
Product Development Center	Wauwatosa, WI	218,000	Owned
Manufacturing	Wauwatosa, WI	422,000	Owned
Manufacturing	Menomonee Falls, WI	479,000	Owned
Manufacturing	Tomahawk, WI	116,000	Owned
Manufacturing	York, PA	1,033,000	Owned
Manufacturing	Kansas City, MO	330,000	Owned
Manufacturing	East Troy, WI	40,000	Lease expiring 2003
Product Development and office	East Troy, WI	43,000	Lease expiring 2003
Distribution Center	Franklin, WI	250,000	Owned
Distribution Center	York, PA	86,000	Lease expiring 2006
Motorcycle Testing	Talladega, AL	24,000	Leases expiring 2004
Office	Ann Arbor, MI	3,000	Lease expiring 2004
Office and Service Area	Morfelden-Waldorf, Germany	22,000	Lease expiring 2005
Office	Brackley, England	3,000	Lease expiring 2005
Warehouse	Brackley, England	1,000	Lease expiring 2005
Office	Windsor, England	10,000	Lease expiring 2006
Office	Liederdorp, The Netherlands	8,000	Lease expiring 2006
Office	Paris, France	6,000	Lease expiring 2005
Office	Arese, Italy	9,000	Lease expiring 2006
Warehouse	Arese, Italy	8,000	Lease expiring 2006
Office	Tokyo, Japan	14,000	Lease expiring 2001
Warehouse	Yokohama, Japan	11,000	Lease expiring 2001
Manufacturing and Office	Manaus, Brazil	35,000	Lease expiring 2001

    The Company has seven facilities that perform manufacturing operations: Wauwatosa and Menomonee Falls, Wisconsin, suburbs of Milwaukee (motorcycle powertrain production); Tomahawk, Wisconsin (fiberglass parts production and painting); York, Pennsylvania (motorcycle parts fabrication, painting and big-twin assembly); Kansas City, Missouri (Sportster® assembly); East Troy, Wisconsin (Buell® motorcycles assembly); Manaus, Brazil (assembly of select models for Brazilian market).

15

Financial Services Segment

Type of Facility	Location	Approximate Square Feet	Status
Office	Chicago, IL	25,000	Lease expiring 2007
Office	Carson City, NV	90,000	Lease expiring 2004
Office	Plano, TX	16,000	Lease expiring 2007

    The Financial Services segment has three office facilities: Chicago, Illinois (corporate headquarters); Carson City, Nevada (retail operations); and Plano, Texas (wholesale operations).

Item 3. Legal proceedings

    The Company is involved with government agencies in various environmental matters, including a matter involving soil and groundwater contamination at its York, Pennsylvania facility (the Facility). The Facility was formerly used by the U.S. Navy and AMF (the predecessor corporation of Minstar). The Company purchased the Facility from AMF in 1981. Although the Company is not certain as to the extent of the environmental contamination at the Facility, it is working with the Pennsylvania Department of Environmental Protection in undertaking certain investigation and remediation activities, including a site-wide remedial investigation/feasibility study. In March 1995, the Company entered into a settlement agreement (the Agreement) with the Navy. The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of future costs associated with investigation and remediation activities at the Facility (response costs). The trust will administer the payment of the future response costs at the Facility as covered by the Agreement. Although substantial uncertainty exists concerning the nature and scope of the environmental remediation that will ultimately be required at the Facility, based on preliminary information currently available to the Company and taking into account the Company's settlement agreement with the Navy, the Company estimates that it will incur approximately $5.4 million of net additional response costs at the Facility. The Company has established reserves for this amount. The Company's estimate of additional response costs is based on reports of environmental consultants retained by the Company, the actual costs incurred to date and the estimated costs to complete the necessary investigation and remediation activities. Response costs are expected to be incurred over a period of approximately 9 years, ending in 2009.

Item 4. Submission of matters to a vote of security holders

    No matters were submitted to a vote of shareholders of the Company in the fourth quarter of 2000.

Executive officers of the registrant

    The following sets forth, as of December 31, 2000, the name, age and business experience for the last five years for each of the executive officers of Harley-Davidson, Inc. Executive officers are defined by the Company as Corporate Officers of Harley-Davidson, Inc. plus all members of the Leadership and Strategy Council (LSC). The LSC, which is comprised of elected members of senior management from various areas within the Company, makes high-level resource decisions, develops policies, and acts as an advisory group to the Chief Executive Officer.

16

Executive Officers

Name	Age
Jeffrey L. Bleustein Chairman and Chief Executive Officer	61
James M. Brostowitz Vice President, Controller and Treasurer	48
Garry S. Berryman Vice President, Materials Management/Product Cost-Motor Company	48
Jon R. Flickinger Vice President, North American Sales-Motor Company	43
John A. Hevey Vice President, General Manager, Asia/Pacific and Latin America Regions-Motor Company	43
Ronald M. Hutchinson Vice President, Parts and Accessories-Motor Company	53
Gail A. Lione Vice President, General Counsel and Secretary	51
James A. McCaslin Vice President, Dealer Services-Motor Company	52
Jerry G. Wilke President and Chief Operating Officer-Buell Motorcycle Company	49
James L. Ziemer Vice President and Chief Financial Officer	50
Donna F. Zarcone President and Chief Operating Officer Harley-Davidson Financial Services, Inc.	43

    The following have not been employed by the Company in an executive officer capacity, as defined above, for more than five years: Garry S. Berryman, Jon R. Flickinger, John A. Hevey, Ronald A. Hutchinson, Gail A. Lione, James A. McCaslin, Jerry G. Wilke and Donna F. Zarcone.

    Mr. Berryman has served as Vice President of Materials Management/Product Cost of the Motor Company since April 1999. He served as Vice President, Purchasing of the Motor Company from September 1997 to March 1999. From July 1995 to August 1997, Mr. Berryman served as Director of Purchasing for the Motor Company.

    Mr. Flickinger has served as Vice President, North American Sales of the Motor Company since April 1999. From July 1997 until March 1999, Mr. Flickinger served as General Sales Manager. From June 1996 until June 1997, Mr. Flickinger served as Field Sales Manager, and from January 1995 until May 1996, Mr. Flickinger served as Director, Field Operations

    Mr. Hevey has served as Vice President, General Manager Asia/Pacific and Latin America Regions of the Motor Company since January 1998. From June 1997 to December 1997, Mr. Hevey served as General Manager Asia/Pacific and Latin America of the Motor Company, and from June 1991 to May 1997, Mr. Hevey served as General Manager Asia/Pacific of the Company.

17

    Mr. Hutchinson has served as Vice President, Parts and Accessories of the Motor Company since May 1996. He served as Vice President, Customer Service and Parts of the Motor Company from 1993 to 1996.

    Ms. Lione has served as Vice President, General Counsel and Secretary since joining the Company in November 1997. From May 1990 to October 1997, Ms. Lione served as General Counsel and Secretary for U.S. News & World Report L.P., the Atlantic Monthly Company and Applied Printing Technologies, L.P. and General Counsel of Applied Graphics Technologies, Inc.

    Mr. McCaslin has served as Vice President, Dealer Services of the Motor Company since April 1999. From October 1997 to March 1999, he served as Vice President, Continuous Improvement for the Motor Company. From 1994 to September 1997, he served as Vice President and General Manager, York Operations of the Motor Company.

    Mr. Wilke has served as President and Chief Operating Officer of Buell Motorcycle Company since July 1997. From 1995 to June 1997, he served as Vice President, Marketing and Sales, the Americas of the Motor Company. From 1994 to 1995, he served as Vice President, Market Development/Sales, the Americas of the Motor Company.

    Ms. Zarcone has served as President and Chief Operating Officer of HDFS, a subsidiary of the Company, since August, 1998. From June 1994 to August 1998, Ms. Zarcone served as Vice President and Chief Financial Officer of HDFS.

18

PART II

Item 5. Market for Harley-Davidson, Inc. common stock and related shareholder matters

    Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange. The high and low market prices for the common stock, reported as New York Stock Exchange Composite Transactions, were as follows:

2000	Low		High
First quarter	$	29.46	$	42.58
Second quarter		33.15		46.54
Third quarter		34.15		50.60
Fourth quarter		34.56		49.84

1999	Low		High
First quarter	$	21.25	$	31.13
Second quarter		25.25		32.03
Third quarter		22.53		31.22
Fourth quarter		24.19		32.03

    The Company paid the following dividends per share:

	2000		1999		1998
First quarter	$	.0225	$	.0200	$	.0175
Second quarter		.0250		.0225		.0200
Third quarter		.0250		.0225		.0200
Fourth quarter		.0250		.0225		.0200
Total year	$	.0975	$	.0875	$	.0775

    The Company has authorization from the Board of Directors to repurchase up to 9,400,000 shares of its common stock. In addition, the Company has continuing authorization from its Board of Directors to repurchase shares of the Company's common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 1998 plus (2) one percent of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock splits.

    During 2000 and 1999, the Company repurchased 3,256,200 and 4,856,000 shares, respectively, of its common stock under the latter authorization.

    As of February 14, 2001 there were 70,942 shareholders of record of Harley-Davidson, Inc. common stock.

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Item 6. Selected financial data

			2000			1999			1998			1997			1996
			(In thousands, except per share amounts)
Income statement data:
	Net sales		$	2,906,365		$	2,452,939		$	2,063,956		$	1,762,569		$	1,531,227
	Cost of goods sold			1,915,547			1,617,253			1,373,286			1,176,352			1,041,133
	Gross profit			990,818			835,686			690,670			586,217			490,094
	Operating income from financial services			37,178			27,685			20,211			12,355			7,801
	Selling, administrative and engineering			(513,024	)		(447,512	)		(377,265	)		(328,569	)		(269,449	)
	Income from operations			514,972			415,859			333,616			270,003			228,446
	Gain on sale of credit card business			18,915			—			—			—			—
	Interest income, net			17,583			8,014			3,828			7,871			3,309
	Other, net			(2,914	)		(3,080	)		(1,215	)		(1,572	)		(4,133	)
	Income from continuing operations before provision for income taxes			548,556			420,793			336,229			276,302			227,622
	Provision for income taxes			200,843			153,592			122,729			102,232			84,213
	Income from continuing operations			347,713			267,201			213,500			174,070			143,409
	Income from discontinued operations, net of tax			—			—			—			—			22,619
	Net income		$	347,713		$	267,201		$	213,500		$	174,070		$	166,028
	Weighted-average common shares:
		Basic		302,691			304,748			304,454			303,300			301,366
		Diluted		307,470			309,714			309,406			307,896			305,850
	Earnings per common share from continuing operations:
		Basic	$	1.15		$	.88		$	.70		$	.57		$	.48
		Diluted	$	1.13		$	.86		$	.69		$	.57		$	.47
	Dividends paid		$	.10		$	.09		$	.08		$	.07		$	.06
Balance sheet data:
	Working capital		$	799,521		$	430,840		$	376,448		$	342,333		$	362,031
	Current finance receivables, net			530,859			440,951			360,341			293,329			183,808
	Long-term finance receivables, net			234,091			354,888			319,427			249,346			154,264
	Total assets			2,436,404			2,112,077			1,920,209			1,598,901			1,299,985
	Short-term debt, including current
		Maturities of long-term debt		—			—			—			—			2,580
	Long-term debt, less current maturities			5,145			10,078			14,145			20,934			25,122
	Short-term finance debt			89,509			181,163			146,742			90,638			8,065
	Long-term finance debt			355,000			280,000			280,000			280,000			250,000
	Total debt			449,654			471,241			440,887			391,572			285,767
	Shareholders' equity			1,405,655			1,161,080			1,029,911			826,668			662,720

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Item 7. Management's discussion and analysis of financial condition and results of operations

2000 COMPARED TO 1999

OVERALL

    Net sales for 2000 totaled $2.91 billion, a $453.5 million, or 18.5%, increase over 1999. Net income and diluted earnings per share for 2000 were $347.7 million and $1.13 compared to $267.2 million and $.86 for 1999, increases of 30.1% and 31.1%, respectively. Net income in 2000 includes a one-time after tax gain of $6.9 million, which resulted from the sale of the Harley-Davidson® Chrome Visa® Card business. Excluding the one-time gain, net income and diluted earnings per share for 2000 increased 27.6% and 28.5%, respectively, over last year.

    The Company increased its quarterly dividend payment in June 2000 from $.0225 per share to $.025 per share, which resulted in a total year payout of $.0975 per share.

RESULTS OF OPERATIONS

Motorcycle Unit Shipments and Net Sales
(Dollars in millions)

			2000		1999		Increase (Decrease)			%Change
Motorcycle Unit Shipments
Harley-Davidson® motorcycle units				204,592		177,187		27,405		15.5	%
Buell® motorcycle units				10,189		7,767		2,422		31.2
	Total motorcycle units			214,781		184,954		29,827		16.1	%
Net Sales
	Harley-Davidson motorcycles		$	2,246.4	$	1,890.9	$	355.5		18.8	%
	Buell motorcycles			58.1		63.5		(5.4	)	(8.5	)
		Total motorcycles		2,304.5		1,954.4		350.1		17.9
	Motorcycle Parts and Accessories			447.9		362.6		85.3		23.5
	General Merchandise			151.4		132.7		18.7		14.1
	Other			2.6		3.2		(.6	)	(18.7	)
Total Motorcycles and Related Products			$	2,906.4	$	2,452.9	$	453.5		18.5	%

    The Motorcycles and Related Products (Motorcycles) segment recorded an 18.5% increase in net sales driven by a 15.5% increase in Harley-Davidson unit shipments. During 2000, the Company produced and shipped approximately 205,000 Harley-Davidson motorcycle units, approximately 27,400 units more than in 1999. These increases were driven by the Company's ongoing success with its manufacturing strategy combined with strong retail demand for the Company's Harley-Davidson motorcycles.

    The Company's ongoing manufacturing strategy is designed to increase capacity, improve product quality, reduce costs and increase flexibility to respond to changes in the marketplace. Based on the results achieved in 2000, the Company has increased its 2001 annual production target to 227,000 Harley-Davidson units.(1)

    In 2000, Buell® motorcycle revenue was down $5.4 million from 1999 on 2,422 additional unit shipments. The average revenue per unit was down from prior year as a result of a shift in the mix of units sold to the new lower priced Buell Blast™. The Blast was introduced during the first quarter of 2000 as a smaller motorcycle targeted at new motorcycle riders. The Company shipped 5,146 Blast

21

models and 5,043 Buell® V-Twin models during 2000. The Company has set a 2001 Buell motorcycle production target of 10,000 units.(1)

    The Company's ability to reach the 2001 targeted production levels and to attain growth rates in other areas will depend upon, among other factors, the Company's ability to (i) continue to realize production efficiencies at its production facilities through the implementation of innovative manufacturing techniques and other means, (ii) successfully implement production capacity increases in its facilities, (iii) successfully introduce new products, (iv) avoid unexpected P&A or general merchandise supplier backorders, and (v) sell all of the motorcycles it has the capacity to produce. In addition, the Company could experience delays in making changes to facilities as a result of risks normally associated with the operation of manufacturing facilities, including delays in the delivery of machinery and equipment or difficulties in making such machinery and equipment operational, work stoppages, difficulties with suppliers, natural causes or other factors. These risks, potential delays and uncertainties regarding the costs could also adversely impact the Company's capital expenditure estimates (see "Liquidity and Capital Resources" section).

    During 2000, the worldwide heavyweight (651+cc) motorcycle market grew 7.8%, while retail registrations for the Company's motorcycles grew 13.8%, resulting in a worldwide market share (Harley-Davidson® and Buell) of 28.2% compared to 26.7% in 1999 (worldwide information is derived from the individual market information, page 10).

    Industry registrations of domestic (United States) heavyweight motorcycles were up 22.7% (data provided by the Motorcycle Industry Council) over 1999, while domestic retail registrations for the Company's motorcycles (Harley-Davidson and Buell) increased 15.7%. The Company ended 2000 with a domestic market share of 47.4% compared to 50.2% in 1999. The Company believes the loss of market share was due to the shortage of supply of its products in the market as a result of the Company's ongoing capacity constraints.

    International revenues totaled $585.6 million during 2000, an increase of $48.3 million, or 9.0%, over 1999. The Company exported approximately 22.4% of its Harley-Davidson motorcycle shipments in 2000 compared to 23.5% during 1999. In order to support the continued strong demand in the U.S. market, the Company expects to allocate a similar percentage of unit shipments to international customers in 2001(1).

    In Europe, the Company ended 2000 with a 7.4% share of the heavyweight (651+cc) market, up from 6.5% in 1999 (data provided by Giral S.A.). The European market decreased 4.3% in 2000, while retail registrations for the Company's motorcycles (Harley-Davidson and Buell) were up 9.4%. 2000 marks the second consecutive year that the Company has increased its market share in Europe. The positive results can be attributed to the continuing efforts to grow in this market, which have included accelerated dealer development, new product introductions and focused marketing programs.

    Asia/Pacific (Japan and Australia) data for 2000 (provided by JAMA and ABS) showed the Company with a 20.5% share of the heavyweight (651+cc) market, up from 19.6% in 1999. In 2000, retail registrations for the Company's motorcycles (Harley-Davidson and Buell) increased 4.3%, while registrations for the Asia/Pacific market in total decreased 0.7%.

    During 2000, Parts and Accessories (P&A) sales totaled $447.9 million, up $85.3 million, or 23.5%, compared to 1999. The increase in P&A sales was driven by strong motorcycle shipments and was led by higher sales for performance parts, custom paint, controls and electrical parts. The Company expects that the long-term growth rate for P&A sales will be slightly higher than the growth rate for Harley-Davidson motorcycle units.(1)

    General Merchandise sales for 2000, which include clothing and collectibles, of $151.4 million were up $18.7 million, or 14.1%, compared to 1999. The Company expects that the long-term growth rate for General Merchandise sales will be slightly lower than the growth rate for Harley-Davidson motorcycle units.(1)

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Gross Profit

    Gross profit in 2000 of $990.8 million was $155.1 million, or 18.6%, higher than gross profit in 1999. The increase in gross profit is primarily related to the increase in net sales. The gross profit margin was 34.1% in both 2000 and 1999. Although unchanged from the prior year, gross profit margin was positively impacted in 2000 by favorable motorcycle mix and model year price increases. These factors, however, were offset primarily by the negative effect of weaker European currencies during 2000.

Operating Expenses
(Dollars in Millions)

	2000		1999		Increase (Decrease)		%Change
Motorcycles and Related Products	$	503.3	$	438.1	$	65.2	14.9	%
Corporate		9.7		9.4		.3	3.2
Total operating expenses	$	513.0	$	447.5	$	65.5	14.6	%

    Total operating expenses for 2000 increased $65.5 million, or 14.6%, over 1999 and were 17.7% and 18.2% of net sales in 2000 and 1999, respectively. Operating expense consists of selling, administrative and engineering expense, which increased $25.5 million, $21.5 million and $18.5 million, respectively, over 1999. During 2000, the Company continued to invest in its future growth as it increased spending in areas such as marketing, product development and other initiatives.

Operating Income from Financial Services

    The Financial Services segment reported operating income of $37.2 million for 2000, an increase of $9.5 million, or 34.3%, over 1999. Growth was particularly strong during 2000 in wholesale lending where Harley-Davidson Financial Services, Inc. (HDFS) experienced increases in both market share and profitability. Increased volumes and amounts outstanding in the retail installment lending business and commission revenue growth from the insurance agency business also contributed to increased operating income in 2000.

Gain on Sale of Credit Card Business

    In the first quarter of 2000, the Company sold its Harley-Davidson® Chrome Visa® Card business, which consisted of approximately $142 million of revolving charge receivables. The sale resulted in a pre-tax gain of approximately $18.9 million after a $15 million write-down of goodwill, which related to the portfolio sold. Net of taxes, the transaction resulted in a gain of approximately $6.9 million. The majority of the proceeds from the sale have been used to reduce finance debt.

Other

    Other expense was $2.9 million and $3.1 million in 2000 and 1999, respectively.

Interest Income

    2000 interest income was higher than in the prior year primarily due to higher interest rates and higher levels of cash available for short-term investing when compared to 1999.

Consolidated Income Taxes

    The Company's effective income tax rate was 36.6% and 36.5% for 2000 and 1999, respectively. The increase in the tax rate for 2000 was due to the $15 million non-deductible write-off of goodwill

23

recorded in connection with the sale of the Harley-Davidson®—Chrome Visa®—Card business in the first quarter of 2000. This increase was partially offset by a lower tax rate implemented in the second quarter of 2000 as a result of various tax minimization programs implemented by the Company.

1999 COMPARED TO 1998

OVERALL

    Net sales for 1999 totaled $2.45 billion, a $388.9 million, or 18.8%, increase over 1998. Net income and diluted earnings per share for 1999 were $267.2 million and $.86 compared to $213.5 million and $.69 for 1998, increases of 25.2% and 25.0%, respectively.

    The Company increased its quarterly dividend payment in June 1999 from $.02 per share to $.0225 per share, which resulted in a total year payout of $.0875 per share.

RESULTS OF OPERATIONS

Motorcycle Unit Shipments and Net Sales
(Dollars in millions)

		1999		1998		Increase (Decrease)			%Change
Motorcycle Unit Shipments
Harley-Davidson® motorcycle units			177,187		150,818		26,369		17.5	%
Buell® motorcycle units			7,767		6,334		1,433		22.6
	Total motorcycle units		184,954		157,152		27,802		17.7	%
Net Sales
Harley-Davidson motorcycles		$	1,890.9	$	1,595.4	$	295.5		18.5	%
Buell motorcycles			63.5		53.5		10.0		18.6
	Total motorcycles		1,954.4		1,648.9		305.5		18.5	%
Motorcycle Parts and Accessories			362.6		297.1		65.5		22.0
General Merchandise			132.7		114.5		18.2		15.9
Other			3.2		3.5		(.3	)	(8.6	)
Total Motorcycles and Related Products		$	2,452.9	$	2,064.0	$	388.9		18.8	%

    The Motorcycles segment recorded an 18.8% increase in net sales driven primarily by a 17.5% increase in Harley-Davidson unit shipments. During 1999, the Company increased its Harley-Davidson motorcycle unit shipments and production to almost 177,200 units, approximately 26,400 units higher than in 1998. This production increase was accomplished while executing an extensive model year 2000 product launch that included a completely redesigned Softail® family and the new Twin Cam 88B™ counterbalanced engine.

    In 1999, Buell motorcycle revenue was up $10.0 million over 1998 on 1,433 additional unit shipments. The average revenue per unit, however, was down slightly from prior year as a result of the high demand for Buell's lower priced M2 Cyclone model.

    During 1999, the worldwide heavyweight (651+cc) motorcycle market grew 14.0%, while retail registrations for the Company's motorcycles grew 20.9%, resulting in a worldwide market share (Harley-Davidson and Buell) of 26.7% compared to 25.2% in 1998 (worldwide information is derived from the individual market information, page 10).

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    Industry registrations of domestic (United States) heavyweight motorcycles were up 21.3% (data provided by the Motorcycle Industry Council) over 1998, while domestic retail registrations for the Company's motorcycles (Harley-Davidson® and Buell®) increased 23.2%. The Company ended 1999 with a domestic market share of 50.2% compared to 49.5% in 1998.

    International revenues totaled $537.3 million during 1999, an increase of $39.9 million, or 8.0%, over 1998. The Company exported approximately 23.5% of its Harley-Davidson motorcycle shipments in 1999 compared to 26.5% during 1998.

    In Europe, the Company ended 1999 with a 6.5% share of the heavyweight (651+cc) market, up from 6.4% in 1998 (data provided by Giral S.A.). The European market grew at a 13.5% rate in 1999, while retail registrations for the Company's motorcycles (Harley-Davidson and Buell) were up 15.4%.

    Asia/Pacific (Japan and Australia) data for 1999 (provided by JAMA and ABS) showed the Company with a 19.6% share of the heavyweight (651+cc) market, up from 15.6% in 1998. In 1999, retail registrations for the Company's motorcycles (Harley-Davidson and Buell) increased 14.2%, while registrations for the Asia/Pacific market in total decreased 8.8%.

    During 1999, Parts and Accessories (P&A) sales totaled $362.6 million, up $65.5 million, or 22.0%, compared to 1998. Key factors that contributed to the strong growth in P&A included custom painted motor parts, which were offered in limited quantities, new accessories offered in connection with the redesigned Softail family, and strong chrome accessory sales.

    General Merchandise sales for 1999, which include clothing and collectibles, of $132.7 million were up $18.2 million, or 15.9%, compared to 1998. General Merchandise sales have been positively impacted by a significant number of independent dealer upgrades and relocations during 1999.

Gross Profit

    In 1999, gross profit was $145.0 million, or 21.0%, higher than gross profit in 1998. The increase in gross profit is primarily related to the increase in net sales. The gross profit margin was 34.1% in 1999 compared to 33.5% in 1998. The increase in gross profit margin resulted from a combination of items, including a higher percentage of shipments to domestic customers, a higher average revenue per unit related to a modest price increase and the absence of facilities start up costs incurred in the prior year. These items were partially offset by the negative impact of additional costs related to the extensive model year 2000 product launch and a higher proportion of lower margin Sportster motorcycle sales in 1999.

Operating Expenses
(Dollars in Millions)

	1999		1998		Increase (Decrease)			%Change
Motorcycles and Related Products	$	438.1	$	366.2	$	71.9		19.6	%
Corporate		9.4		11.0		(1.6	)	(14.6	)
Total operating expenses	$	447.5	$	377.2	$	70.3		18.6	%

    Total operating expenses for 1999 increased $70.3 million, or 18.6%, over 1998 and were 18.2% and 18.3% of net sales in 1999 and 1998, respectively. Operating expenses in 1999 were higher than the same period a year ago primarily in the areas of sales, marketing and product development. Operating expenses in 1999 also included a $7.6 million charge related to a recall of Buell motorcycles.

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Operating Income from Financial Services

    The Financial Services segment reported operating income of $27.7 million for 1999, an increase of $7.5 million, or 37% over 1998 levels. This increase was due to growth in all business lines during 1999. The growth was particularly strong in retail installment lending where HDFS experienced increases in both market share and profitability. During 1999, HDFS financed 22% of new Harley-Davidson® motorcycles retailed in the U.S., up from 21% in 1998. Additionally, increased volumes and outstandings in the wholesale lending business and commission revenue growth from the insurance agency business contributed to increased operating income in 1999.

Other

    Other expense for 1999 was $1.9 million higher than in 1998. Included in 1998 other expense is a $1.8 million one-time benefit related to a rebate of harbor maintenance fees. The levy of these fees was found unconstitutional by the U.S. Supreme Court and related to fees collected over the previous five years. Other non-operating expense items, including foreign currency exchange losses, remained consistent from 1998 to 1999.

Interest Income

    1999 interest income was higher than in the prior year primarily due to higher levels of cash available for short-term investing when compared to 1998.

Consolidated Income Taxes

    The Company's effective tax rate was 36.5% in 1999 and 1998.

Other Matters

Accounting Changes

    In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and for Hedging Activities," which in its amended form is effective for fiscal years beginning after June 15, 2000. The statement will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value will either be offset against the change in fair value of hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a hedge's change in fair value will be immediately recognized in earnings. The Company anticipates it will continue to use derivatives to reduce the impact of fluctuations in exchange rates and interest rates. The Company intends for the derivatives to qualify as cash flow hedges in accordance with SFAS 133. The Company also intends that the net gain or loss on the derivative instruments designated and qualifying as cash flow hedges will be reported in comprehensive income. The adoption of SFAS 133 will not have a material impact on the Company's statement of income.

26

Environmental Matters

    The Company's policy is to comply with all applicable environmental laws and regulations, and the Company has a compliance program in place to monitor and report on environmental issues. The Company has reached a settlement agreement with the U.S. Navy regarding groundwater remediation at the Company's manufacturing facility in York, Pennsylvania and currently estimates that it will incur approximately $5.4 million of net additional costs related to the remediation effort.(1) The Company has established reserves for this amount. The Company's estimate of additional response costs is based on reports of environmental consultants retained by the Company, the actual costs incurred to date and the estimated costs to complete the necessary investigation and remediation activities. Response costs are expected to be incurred over a period of approximately 9 years, ending in 2009. See Note 7 of the notes to condensed consolidated financial statements.

    Recurring costs associated with managing hazardous substances and pollution in on-going operations have not been material.

    The Company regularly invests in equipment to support and improve its various manufacturing processes. While the Company considers environmental matters in capital expenditure decisions, and while some capital expenditures also act to improve environmental compliance, only a small portion of the Company's annual capital expenditures relate to equipment which has the sole purpose of meeting environmental compliance obligations. The Company anticipates that capital expenditures for equipment used to limit hazardous substances/pollutants during 2001 will approximate $1.8 million. The Company does not expect that these expenditures related to environmental matters will have a material effect on future operating results or cash flows.(1)

Liquidity and Capital Resources

    The Company's main source of liquidity is cash from operating activities which consists of net income adjusted for non-cash operating activities and changes in other current assets and liabilities such as accounts receivable, inventory, prepaid expenses and accounts payable.

    The Company generated $565.5 million of cash from operating activities during 2000 compared to $431.6 million in 1999. The largest component of cash from operating activities is net income adjusted for non-cash items, including the gain on sale of the credit card business, depreciation, tax benefit of stock options and credit losses. This was approximately $507.9 million in 2000 compared to $414.4 million in 1999.

    Changes in other current assets and liabilities increased operating cash flows by approximately $49.6 million and $12.5 million in 2000 and 1999, respectively. Changes in working capital during 2000 and 1999 consisted of the following (in millions):

	Twelve months ended
Working capital item	2000			1999
Accounts receivable, net	$	8.1		$	11.7
Inventories		(18.6	)		(13.0	)
Prepaid expenses		(3.3	)		(3.5	)
Accounts payable and accrued expenses		63.4			17.3
Total	$	49.6		$	12.5

    The increase in accounts payable and accrued expenses in 2000 is due primarily to higher accounts payable resulting from the increase in production and higher fourth quarter capital expenditures, combined with higher accrued income taxes (related to the timing of tax payments).

27

    Capital expenditures amounted to $203.6 million and $165.8 million during 2000 and 1999, respectively. The Company has continued to focus its capital expenditures on capacity expansion at its new and previously existing facilities, but has also focused on other areas such as product development, systems development and continuing operations. The Company estimates that capital expenditures required in 2001 will be in the range of $200 to $250 million.(1) The Company anticipates it will have the ability to fund all capital expenditures in 2001 with internally generated funds and short-term financing.(1)

    The Company (excluding HDFS) currently has nominal levels of long-term debt and has available lines of credit of approximately $45.0 million, of which approximately $36.9 million remained available at year-end.

    HDFS is financed by operating cash flow, asset-backed securitizations and the issuance of commercial paper, revolving credit facilities, senior subordinated debt, and redeemable preferred stock. During 2000, HDFS securitized and sold with limited recourse approximately $724 million of retail installment loans. Approximately $347 million of commercial paper was outstanding at December 31, 2000. Subject to limitations discussed below, HDFS may issue up to $700 million of short-term commercial paper with maturities up to 270 days.

    HDFS has a $350 million revolving term loan due in 2005 and a $350 million 364-day revolving credit facility due September 2001 with approximately $68 million outstanding at December 31, 2000. The Company expects the $350 million credit facility expiring in September 2001 will be renewed and believes that suitable alternatives exist(1). The primary uses of the credit facilities are to provide liquidity to the unsecured commercial paper program and to fund business operations. Commercial paper outstanding cannot exceed liquidity support provided by the unused portion of the combined $700 million credit facilities. Accordingly, at December 31, 2001, HDFS has $285 million of availability under the commercial paper program. In addition, HDFS also has $30 million of senior subordinated notes expiring in 2007, outstanding at December 31, 2000.

    During 2000, HDFS entered into a $50 million uncommitted credit facility at market rates of interest. HDFS did not borrow under this facility in 2000.

    In connection with various debt agreements, HDFS has met various operating and financial covenants and remains in compliance at December 31, 2000. The Company has a support agreement with HDFS whereby, if required, the Company agrees to provide HDFS with certain financial support in order to maintain certain financial covenants. Support may be provided at the Company's option as capital contributions or loans. Accordingly, certain debt covenants may restrict the Company's ability to withdraw funds from HDFS outside the normal course of business.

    At December 31, 2000, unused lines of credit extended to the HDFS' wholesale finance customers totaled $373 million.

    The Company expects future activities of HDFS will be financed from internally generated funds, advances or loans from the Company, revolving credit facilities, and continuation of its subordinated debt, redeemable preferred stock, commercial paper and securitization programs.

    The Company has authorization from its Board of Directors to repurchase up to 9,400,000 shares of the Company's outstanding common stock. In addition, the Company has continuing authorization from its Board of Directors to repurchase shares of the Company's outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (i) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 1998 plus (ii) one percent of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split. The Company repurchased 3,256,200 and 4,856,000 shares of its common stock during 2000 and 1999, respectively, under this authorization.

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Item 7a. Quantitative and qualitative disclosures about market risk

    The Company is exposed to market risk from changes in foreign exchange and interest rates. To reduce such risks, the Company selectively uses financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for trading purposes. Sensitivity analysis is used to manage and monitor foreign exchange and interest rate risk.

    A discussion of the Company's accounting policies for derivative financial instruments is included in the Summary of Significant Accounting Policies in the notes to the consolidated financial statements, and further disclosure relating to financial instruments is included in Note 11, Fair Value of Financial Instruments.

    The Company's earnings are affected by fluctuations in the value of the U.S. dollar against foreign currencies, predominately in European countries and Japan, as a result of the sales of its products in foreign markets. Forward foreign exchange contracts are used to hedge against the earnings effects of such fluctuations. At December 31, 2000 and 1999, these contracts represented a combined U.S. dollar equivalent of approximately $117.5 million and $4.0 million, respectively, and have maturities of less than one year. A uniform 10% strengthening in the value of the dollar relative to the currencies underlying these contracts would have resulted in a decrease in the fair market value of the contracts of approximately $18.5 million and $1 million at December 31, 2000 and 1999, respectively. As noted above, the Company's policy prohibits the trading of financial instruments for profit. It is important to note that the loss indicated above would be offset by gains on receivables originating from the firm commitments for the sale of products to foreign customers. In addition, the Company's foreign currency exposure to the Japanese yen is somewhat mitigated by the existence of a natural hedge, which is sustained through offsetting yen cash inflows from sales with yen cash outflows for motorcycle component purchases and other operating expenses.(1)

    HDFS' earnings are affected by changes in short-term interest rates as a result of its securitization transactions, its borrowings under a bank credit facility and the issuance of commercial paper. HDFS utilizes interest rate swap and treasury rate lock agreements to reduce the impact of fluctuations in interest rates. The differential paid or received under the agreements is recognized as an adjustment to interest expense or securitization income, as applicable. At December 31, 2000, HDFS had no interest rate swap or treasury rate lock agreements outstanding. Based on 1999 year-end balances, it was estimated that a 1% increase in short-term interest rates would not have had a material impact on interest expense or income before taxes.(1) This analysis does not take into effect other changes that might occur in the economic environment as a whole due to such changes in short-term interest rates.

(1) Note regarding forward-looking statements

    The Company intends that certain matters discussed are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or "estimates" or words of similar meaning. Similarly, statements that describe the Company's future plans, objectives, targets or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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Item 8. Consolidated financial statements and supplementary data

		Page
Report of Ernst & Young LLP, independent auditors		31
Consolidated statements of income		32
Consolidated balance sheets		33
Consolidated statements of cash flows		34
Consolidated statements of shareholders' equity		35
Notes to consolidated financial statements		36
Supplementary data
	Quarterly financial data (unaudited)	54

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and
Shareholders
Harley-Davidson, Inc.

    We have audited the accompanying consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2000 and 1999, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the index at item 14(a). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harley-Davidson, Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Milwaukee, Wisconsin
January 17, 2001

31

HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2000, 1999 and 1998
(In thousands, except per share amounts)

	2000			1999			1998
Net sales	$	2,906,365		$	2,452,939		$	2,063,956
Cost of goods sold		1,915,547			1,617,253			1,373,286
Gross profit		990,818			835,686			690,670
Operating income from financial services		37,178			27,685			20,211
Selling, administrative and engineering		(513,024	)		(447,512	)		(377,265	)
Income from operations		514,972			415,859			333,616
Gain on sale of credit card business		18,915			—			—
Interest income, net		17,583			8,014			3,828
Other, net		(2,914	)		(3,080	)		(1,215	)
Income before provision for income taxes		548,556			420,793			336,229
Provision for income taxes		200,843			153,592			122,729
Net income	$	347,713		$	267,201		$	213,500
Basic earnings per common share	$	1.15		$	.88		$	.70
Diluted earnings per common share	$	1.13		$	.86		$	.69
Cash dividends per common share	$	.10		$	.09		$	.08

The accompanying notes are an integral part of the consolidated financial statements.

32

HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(In thousands, except share amounts)

			2000			1999
ASSETS
Current assets:
	Cash and cash equivalents		$	419,736		$	183,415
	Accounts receivable, net			98,311			101,708
	Current portion of finance receivables, net			530,859			440,951
	Inventories			191,931			168,616
	Deferred income taxes			28,280			29,434
	Prepaid expenses			28,147			24,870
Total current assets				1,297,264			948,994
Finance receivables, net				234,091			354,888
Property, plant, and equipment, net				754,115			681,741
Goodwill, net				54,331			55,408
Other assets				96,603			71,046
			$	2,436,404		$	2,112,077
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	169,844		$	137,660
	Accrued and other liabilities			238,390			199,331
	Current portion of finance debt			89,509			181,163
Total current liabilities				497,743			518,154
Finance debt				355,000			280,000
Other long-term liabilities				81,707			65,093
Postretirement health care benefits				80,666			75,719
Deferred income taxes				15,633			12,031
Commitments and contingencies (Note 7)
Shareholders' equity:
	Series A Junior participating preferred stock, none issued			—			—
	Common stock, 321,185,567 and 318,586,144 shares issued in 2000 and 1999, respectively			3,210			3,184
	Additional paid-in capital			285,390			234,948
	Retained earnings			1,431,017			1,113,376
	Accumulated other comprehensive income (loss)			308			(2,067	)
				1,719,925			1,349,441
	Less:
		Treasury stock (19,114,822 and 15,863,518 shares in 2000 and 1999, respectively), at cost		(313,994	)		(187,992	)
		Unearned compensation		(276	)		(369	)
Total shareholders' equity				1,405,655			1,161,080
			$	2,436,404		$	2,112,077

The accompanying notes are an integral part of the consolidated financial statements.

33

HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998
(In thousands)

			2000			1999			1998
Cash flows from operating activities:
	Net income		$	347,713		$	267,201		$	213,500
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		133,348			113,822			87,422
		Gain on sale of credit card business		(18,915	)		—			—
		Tax benefit of stock options		35,876			15,504			12,663
		Provision for credit losses		9,919			17,919			10,338
		Deferred income taxes		1,363			11,393			1,190
		Long-term employee benefits		4,631			(8,480	)		5,302
		Other		1,945			1,781			3,180
		Net changes in current assets and current liabilities		49,609			12,502			(2,870	)
	Total adjustments			217,776			164,441			117,225
		Net cash provided by operating activities		565,489			431,642			330,725
Cash flows from investing activities:
	Net capital expenditures			(203,611	)		(165,786	)		(182,770	)
	Finance receivables acquired or originated			(3,556,195	)		(3,321,382	)		(2,722,768	)
	Finance receivables collected			2,727,746			2,616,857			2,105,684
	Finance receivables sold			723,928			574,997			469,653
	Net proceeds from sale of credit card business			170,146			—			—
	Purchase of Italian distributor			(18,777	)		—			—
	Other, net			(14,269	)		(4,308	)		(9,952	)
		Net cash used in investing activities		(171,032	)		(299,622	)		(340,153	)
Cash flows from financing activities:
	Net decrease in notes payable			—			—			(773	)
	Net (decrease) increase in finance debt			(16,654	)		34,421			56,104
	Dividends paid			(30,072	)		(26,996	)		(24,153	)
	Purchase of common stock for treasury			(126,002	)		(130,284	)		(15,175	)
	Issuance of common stock under employee stock plans			14,592			9,084			11,133
		Net cash (used in) provided by financing activities		(158,136	)		(113,775	)		27,136
Net increase in cash and cash equivalents				236,321			18,245			17,708
Cash and cash equivalents:
	At beginning of year			183,415			165,170			147,462
	At end of year		$	419,736		$	183,415		$	165,170

The accompanying notes are an integral part of the consolidated financial statements.

34

HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998
(In thousands, except share amounts)

			Common Stock
						Additional paid-in capital		Retained earnings			Other comprehensive income(loss)			Treasury Balance			Unearned compensation
			Issued Shares	Balance																Total
Balance December 31, 1997			314,482,882	$	3,144	$	185,608	$	683,824		$	(2,835	)	$	(41,959	)	$	(1,114	)	$	826,668
Comprehensive income:
	Net income		—		—		—		213,500			—			—			—			213,500
	Other comprehensive income—
		Foreign currency translation adjustment, net of taxes of ($2,278)	—		—		—		—			3,963			—			—			3,963
Comprehensive income																					217,463
Dividends			—		—		—		(24,153	)		—			—			—			(24,153	)
Repurchase of common stock			—		—		—		—			—			(15,175	)		—			(15,175	)
Acquisition of Buell Motorcycle Company			—		—		996		—			—			1			—			997
Amortization of unearned compensation			—		—		—		—			—			—			315			315
Exercise of stock options			2,328,286		24		11,109		—			—			—			—			11,133
Tax benefit of stock options			—		—		12,663		—			—			—			—			12,663
Balance December 31, 1998			316,811,168	$	3,168	$	210,376	$	873,171		$	1,128		$	(57,133	)	$	(799	)	$	1,029,911
Comprehensive income:
	Net income		—		—		—		267,201			—			—			—			267,201
	Other comprehensive income (loss):
		Foreign currency translation adjustment, net of tax benefit of $355	—		—		—		—			(618	)		—			—			(618	)
		Change in net unrealized gains on investment in retained securitization interests, net of taxes of ($1,562)	—		—		—		—			2,900			—			—			2,900
		Minimum pension liability adjustment, net of tax benefit of $3,606			—		—		—			(5,477	)		—			—			(5,477	)
Comprehensive income																					264,006
Dividends			—		—		—		(26,996	)		—			—			—			(26,996	)
Repurchase of common stock			—		—		—		—			—			(130,284	)		—			(130,284	)
Cancellation of nonvested stock			—		—		—		—			—			(575	)		230			(345	)
Amortization of unearned compensation			—		—		—		—			—			—			200			200
Exercise of stock options			1,774,976		16		9,068		—			—			—			—			9,084
Tax benefit of stock options			—		—		15,504		—			—			—			—			15,504
Balance December 31, 1999			318,586,144	$	3,184	$	234,948	$	1,113,376		$	(2,067	)	$	(187,992	)	$	(369	)	$	1,161,080
Comprehensive income:
	Net income		—		—		—		347,713			—			—			—			347,713
	Other comprehensive income (loss):
		Foreign currency translation adjustment, net of tax benefit of $2,412	—		—		—		—			(4,383	)		—			—			(4,383	)
		Change in net unrealized gains on investment in retained securitization interests, net of taxes of ($3,759)	—		—		—		—			6,981			—			—			6,981
		Minimum pension liability adjustment, net of tax benefit of $120	—		—		—		—			(223	)		—			—			(223	)
Comprehensive income																					350,088
Dividends			—		—		—		(30,072	)		—			—			—			(30,072	)
Repurchase of common stock			—		—		—		—			—			(126,002	)		—			(126,002	)
Amortization of unearned compensation			—		—		—		—			—			—			93			93
Exercise of stock options			2,599,423		26		14,566		—			—			—			—			14,592
Tax benefit of stock options			—		—		35,876		—			—			—			—			35,876
Balance December 31, 2000			321,185,567	$	3,210	$	285,390	$	1,431,017		$	308		$	(313,994	)	$	(276	)	$	1,405,655

The accompanying notes are an integral part of the consolidated financial statements.

35

HARLEY-DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 2000

1. Summary of significant accounting policies

    Principles of consolidation and basis of presentation—The consolidated financial statements include the accounts of Harley-Davidson, Inc. and all of its subsidiaries (the Company), including the accounts of the group of companies doing business as Harley-Davidson Motor Company (HDMC), Buell Motorcycle Company (BMC) and Harley-Davidson Financial Services, Inc. (HDFS).

    The Company operates in two principal business segments: Motorcycles and Related Products (Motorcycles) and Financial Services. All intercompany accounts and transactions are eliminated, with the exception of certain intersegment transactions occurring between the Motorcycles and Financial Services segments. The uneliminated intersegment transactions that occur between HDMC and HDFS relate to interest and fees on wholesale finance receivables; see further discussion of these items in Note 4.

    Use of estimates—The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

    Cash and cash equivalents—The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

    Revenue recognition—In accordance with the contract terms between the Company and its independent dealers and independent distributors, revenue is recorded by the Company when products are shipped and title passes to the customer. Provisions for sales incentive programs are recognized as sales reductions at the time of revenue recognition.

    Finance receivables income recognition—Interest income on finance receivables is recorded as earned and is based on the average outstanding daily balance for wholesale and retail receivables. Accrued interest is classified with finance receivables. Loan origination payments made to dealers for certain retail installment sales contracts are deferred and amortized over the estimated life of the contract. Fees earned on revolving charge transactions are recognized upon assessment. Insurance commissions are recognized as received and commissions on the sale of third party extended service contracts are recognized when the contract is written.

    Finance receivables credit losses—The provision for credit losses on finance receivables is charged to income in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover the losses of principal and accrued interest in the existing portfolio. HDFS' wholesale and other large loan charge-off policy is based on a loan-by-loan review. Retail revolving charge receivables are charged off at the earlier of 180 days contractually past due or when otherwise deemed to be uncollectible. Retail installment receivables are generally charged off at 120 days contractually past due. Repossessed inventory is recorded at net realizable value at time of repossession and any deficiency is charged off at that time.

    Receivable Securitizations—The Company sells retail installment loans through securitization transactions retaining interest-only strips, servicing rights, and a cash reserve account, all of which are retained interests in the securitized receivables. Gain on sale of the receivables depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair value at the date of transfer. Retained interests are evaluated periodically for impairment based on fair value. Market quotes are generally not

36

available for retained interests, therefore the Company estimates fair value based on the present value of future expected cash flows using management's best estimates of the key assumptions for credit losses, prepayment speeds and discount rates commensurate with the risks involved.

    Investment in retained securitization interests consists of interest-only strip receivables and reserve account deposits and are included in finance receivables. Interest-only strip receivables represent the present value of the projected future cash flows arising after the investors in the securitization have received the cash flows for which they have contracted, taking into consideration estimated prepayments, defaults, and servicing costs. The receivables are reported at fair value and the unrealized gains and losses on those receivables, is reported net of tax, as a component of other comprehensive income. Unrealized gain as of December 31, 2000 and 1999 was $15.2 million and $4.5 million, or $9.9 million and $2.9 million, net of taxes, respectively.

    Reserve account deposits with trustees represent interest-earning cash deposits required under the terms of the securitization operating agreements. The funds collateralize estimated future cashflows of the securitization pool. The funds are not available for use by the Company until such time as required reserve account balances exceed specified thresholds or the specific securities are liquidated.

    Inventories—Inventories are valued at the lower of cost or market. Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories totaling $49.3 million in 2000 and $40.9 million in 1999 are valued at the lower of cost or market using the first-in, first-out (FIFO) method.

    Depreciation—Depreciation of plant and equipment is determined on the straight-line basis over the estimated useful lives of the assets. Accelerated methods are used for income tax purposes.

    Product warranty—Product warranty costs are charged to operations based upon the estimated warranty cost per unit sold.

    Research and development expenses—Research and development expenses were approximately $75.8 million, $70.3 million and $58.7 million for 2000, 1999 and 1998, respectively.

    Internal-Use Software—Costs incurred in connection with developing or obtaining software for internal-use of $13.9 million, $15.2 million and $9.1 million were capitalized during 2000, 1999 and 1998, respectively.

    Goodwill—Goodwill represents the excess of the acquisition cost over the fair value of the net assets purchased. Goodwill is amortized on a straight-line basis over a 15-20 year period.

    Reclassifications—Certain prior year amounts have been reclassified in order to conform to current year presentation.

    Derivative financial instruments—The Company uses forward foreign exchange contracts to mitigate the adverse impact of fluctuations in currency exchange rates. The Company has exposure to exchange rate fluctuations in its foreign cash flows resulting from its firm commitments for the sale of products to foreign customers. Realized and unrealized gains and losses on forward foreign exchange contracts resulting from changes in the spot exchange rate are deferred and recognized at the time the hedged transaction is settled.

    HDFS enters into various interest rate contracts including interest rate swap agreements to reduce the impact of fluctuations in interest rates. The credit risk is the amount of uncollected interest related to these agreements. The differential paid or received under these agreements is recognized as an adjustment to interest expense.

    In connection with the securitization of retail receivables, HDFS enters into various interest rate contracts, including treasury rate lock agreements, to reduce the impact of fluctuations in interest rates.

37

The credit risk is the amount of uncollected interest related to the agreements. The differential paid or received under the agreement is recognized as an adjustment to securitization income.

    The fair values of interest rate swap agreements, treasury rate lock agreements and forward foreign exchange contracts are discussed in Note 11.

    Accounting for Derivative Instruments and for Hedging Activities—In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and for Hedging Activities," which in its amended form is effective for fiscal years beginning after June 15, 2000. The statement will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value will either be offset against the change in fair value of hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a hedge's change in fair value will be immediately recognized in earnings. The Company anticipates it will continue to use derivatives to reduce the impact of fluctuations in exchange rates and interest rates. The Company intends for the derivatives to qualify as cash flow hedges in accordance with SFAS 133. The Company also intends that the net gain or loss on the derivative instruments designated and qualifying as cash flow hedges will be reported in comprehensive income. The adoption of SFAS 133 will not have a material impact on the Company's statement of income.

2. Additional balance sheet and cash flows information

    Balance sheet information is as follows (in thousands):

		December 31,
		2000		1999
Accounts receivable:
	Domestic	$	10,208	$	12,455
	Foreign		88,103		89,253
		$	98,311	$	101,708

    Domestic motorcycle sales are generally floor planned by the purchasing dealers. Foreign motorcycle sales are sold on open account, letter of credit, draft and payment in advance or floor planned by the purchasing dealers.

38

    The allowance for doubtful accounts deducted from accounts receivable was $1.8 million at December 31, 2000 and 1999.

				December 31,
				2000		1999
Inventories:
	Components at the lower of FIFO cost or market:
		Raw materials and work in process		$	73,065	$	61,893
		Motorcycle finished goods			37,851		29,977
		Parts and accessories and general merchandise			99,840		97,422
					210,756		189,292
			Excess of FIFO over LIFO cost		18,825		20,676
				$	191,931	$	168,616

		December 31,
		2000		1999
Property, plant and equipment, at cost:
	Land and land improvements	$	14,181	$	13,828
	Buildings and improvements		227,063		216,575
	Machinery and equipment		1,000,171		893,129
	Construction in progress		183,146		112,618
			1,424,561		1,236,150
Less accumulated depreciation			670,446		554,409
		$	754,115	$	681,741

		December 31,
		2000		1999
Accrued and other liabilities:
	Payroll, performance incentives, and related expenses	$	87,743	$	77,764
	Warranty/recalls		24,301		18,011
	Dealer incentive programs		29,022		40,322
	Product liability		3,178		4,521
	Income taxes		52,180		26,460
	Other		41,966		32,253
		$	238,390	$	199,331

39

    Supplemental cash flow information is as follows (in thousands):

		2000			1999			1998
Net changes in other current assets and current liabilities:
	Accounts receivable	$	8,051		$	11,709		$	(8,606	)
	Inventories		(18,569	)		(13,000	)		(33,888	)
	Prepaid expenses		(3,277	)		(3,527	)		(3,295	)
	Accounts payable and accrued liabilities		63,404			17,320			42,919
		$	49,609		$	12,502		$	(2,870	)

    Cash paid during the period for interest and income taxes is as follows (in thousands):

Interest	$	30,270	$	28,803	$	23,795
Income taxes	$	138,417	$	122,535	$	89,493

    Interest paid includes the interest payments of HDFS which are included in operating income from financial services. No interest was capitalized in 2000, 1999 or 1998.

3. Businesses acquired or sold

    In October 2000, the Company acquired the net assets of the Harley-Davidson/Buell motorcycle distribution business of Numero Uno, S.r.l. (located near Milan, Italy), the sole distributor of the Company's products in Italy. The new wholly-owned subsidiary distributes the Company's products through a network of independent dealers in Italy. The total purchase price was approximately $20.4 million, of which $18.8 million was paid in 2000 with the remaining amount to be paid in September 2001. The transaction was accounted for under the purchase method and resulted in approximately $16.5 million of goodwill.

    In March 2000, the Company sold its Harley-Davidson® Chrome Visa® Card business, which included approximately $142 million of revolving charge receivables. The sale resulted in a pre-tax gain of approximately $18.9 million after a $15 million write-off of goodwill, which related to the business sold. Net of taxes, the transaction resulted in a net gain of approximately $6.9 million. Proceeds from the sale have been used to reduce finance debt.

    In 1999, the Company acquired all of the remaining common stock of HDFS from its minority shareholders. The purchase of the minority interest was completed with cash on hand and resulted in an increase in goodwill of approximately $7.5 million.

4. Harley-Davidson Financial Services, Inc.

    HDFS is a wholly-owned subsidiary of the Company engaged in the business of financing and servicing wholesale inventory receivables and consumer retail installment sales contracts (primarily motorcycles). HDFS is responsible for all credit and collection activities for the Motorcycles segment's domestic dealer receivables. Additionally, HDFS is an agency for certain unaffiliated insurance carriers providing property/casualty insurance and extended service contracts to motorcycle owners. HDFS conducts business in the United States, Canada and Europe.

40

    The condensed statements of operations relating to the Financial Services segment for the years ended December 31, were as follows (in thousands):

		2000		1999		1998
Interest income		$	71,414	$	78,502	$	65,203
Securitization and servicing fee income			42,257		36,378		24,380
Other income			26,464		17,861		13,339
	Total income		140,135		132,741		102,922
Interest expense			30,354		28,686		24,008
Provision for credit losses			9,919		17,919		10,338
Operating expenses			62,684		58,451		48,365
	Total expenses		102,957		105,056		82,711
Operating income from financial services		$	37,178	$	27,685	$	20,211

    Certain transactions between the Motorcycles and Financial Services segments are not eliminated and are reflected in the condensed statements of operations above. Included in interest income is approximately $9.2 million, $6.3 million and $5.3 million of interest on wholesale finance receivables paid by HDMC to HDFS in 2000, 1999, and 1998, respectively. This interest is paid on behalf of HDMC's independent dealers as an incentive to hold inventory during the winter months. Included in other income is approximately $1.8 million, $1.5 million and $1.3 million of fees HDMC paid to HDFS for credit and collection activities on receivables purchased from HDMC during 2000, 1999, and 1998, respectively. The offsetting transactions recorded by HDMC are included in selling, administrative and engineering in the consolidated statement of operations.

    Finance receivables, included in the current and non-current sections of the consolidated balance sheets, originated or purchased by HDFS and owned at December 31, were as follows (in thousands):

	2000		1999
Wholesale	$	456,926	$	358,052
Retail		218,534		228,433
Retail revolving charge		—		149,818
Investment in retained securitization interests		100,437		73,481
		775,897		809,784
Allowance for credit losses		10,947		13,945
	$	764,950	$	795,839

    Finance receivables include wholesale loans to dealers and retail loans to consumers. Wholesale loans to dealers are generally secured by financed inventory or property. Consumer loans consist of secured installment sales contracts and revolving charge receivables. Title to vehicles financed by installment sales contracts are held by HDFS. HDFS owns finance receivables originated in the United States and Canada.

    Wholesale finance receivables, related primarily to motorcycles and related parts and accessories sales, are contractually due within one year. Retail finance receivables are primarily related to sales of

41

motorcycles, aircraft and watercraft. On December 31, 2000, contractual maturities of finance receivables were as follows (in thousands):

2001	$	530,859
2002		47,836
2003		36,591
2004		31,780
2005		30,449
Thereafter		98,382
Total	$	775,897

    The allowance for credit losses is comprised of individual components relating to wholesale and retail finance receivables. Changes in the allowance for credit losses for the year ended December 31 are as follows (in thousands):

	2000			1999			1998
Balance at beginning of year	$	13,945		$	9,978		$	6,867
Provision for credit losses		9,919			17,919			10,338
Charge-offs		(7,282	)		(13,952	)		(7,227	)
Sale of allowance related to revolving charge receivables		(5,635	)		—			—
Balance at end of year	$	10,947		$	13,945		$	9,978

    The allowance for credit losses pertaining to revolving charge receivables sold during 2000 was reversed and included in the calculation of gain on the sale.

    During 2000, 1999 and 1998, the Company sold $724.0 million, $575.0 million and $450.0 million, respectively, of its retail motorcycle installment loans through securitization transactions. The Company retains servicing rights and has limited recourse in the sale transactions. In conjunction with these sales, HDFS has recorded an asset of $100.4 million representing its retained securitization interests. The Company also receives annual servicing fees approximating one percent of the outstanding balance. HDFS serviced with limited recourse $1.1 billion and $.8 billion of retail installment loans as of December 31, 2000 and 1999, respectively.

    The value of the retained interest is subject to credit, prepayment, and interest rate risks on the $1.1 billion of securitized retail installment loans. Key assumptions used in measuring the fair value of the retained interests as of December 31, 2000, which were consistent with those used during the year, were as follows:

Prepayment speed (Single Monthly Mortality)	2.50	%
Weighted-average life (in years)	1.93
Expected cumulative net credit loss rate	1.89	%
Residual cash flows discount rate	12.00	%

    The change in the current fair value of the retained interests, relative to an immediate 10 percent and 20 percent adverse or favorable change in the key assumptions, would not be material to the Company's financial statements.

    As of December 31, 2000, the $1.2 billion of managed motorcycle retail installment loans, of which $1.1 billion are securitized, includes approximately $19.4 million which were 60 days or more past due. Approximately $8.7 million of net credit losses have been recognized on these loans during the year ended December 31, 2000.

42

    Loans 60 days or more past due are based on end of period total managed motorcycle loans, excluding those loans reclassified as repossessed inventory. Net credit losses are charge-offs net of recoveries and are based on managed motorcycle loans outstanding.

    HDFS' debt as of December 31, consisted of the following (in thousands):

	2000		1999
Commercial paper	$	346,703	$	373,212
Revolving credit facility		67,806		57,951
Senior subordinated notes		30,000		30,000
Total finance debt	$	444,509	$	461,163

    HDFS may issue commercial paper of up to $700 million. Maturities may range up to 270 days from the issuance date. Outstanding commercial paper may not exceed the liquidity support provided by the unused portion of the Credit Facilities noted below. The weighted average interest rate on outstanding commercial paper balances was 6.57% and 6.01% at December 31, 2000 and 1999, respectively.

    Prior to December 31, 2000, HDFS entered into agreements with a group of financial institutions providing bank credit facilities (Credit Facilities) of $700 million. The Credit Facilities consist of a $350 million, 364-day revolving loan due September 2001 and a $350 million, five-year revolving loan due September 2005. At December 31, 1999, HDFS had Credit Facilities of $600 million. The primary uses of the Credit Facilities are to provide liquidity to the unsecured commercial paper program and to fund foreign business operations. Subject to certain limitations, HDFS has the option to borrow in various currencies. Interest is based on London interbank offered rates (LIBOR) or other short-term rate indices, depending on the type of advance.

    At December 31, 2000, and 1999, HDFS had $30 million of 6.79% Senior Subordinated Notes (Notes) outstanding due in 2007. The Notes provide for semi-annual interest payments, and principal at maturity. HDFS has met various operating and financial covenants and remains in compliance at December 31, 2000.

    During 2000, HDFS entered into a $50 million uncommitted credit facility at market rates of interest. HDFS did not borrow under this facility in 2000.

    Long-term finance debt included on the balance sheet at December 31, 2000 consists of $325 million of commercial paper borrowings and the $30 million senior subordinated notes. The $325 million of commercial paper borrowings has been excluded from current liabilities (under the ability provided by the Credit Facilities) because the Company intends that at least that amount would remain outstanding for an uninterrupted period extending beyond one year from the balance sheet date. At December 31, 1999, long-term finance debt consisted of $250 million of commercial paper borrowings and the $30 million senior subordinated notes.

    The Company and HDFS have entered into a support agreement wherein, if required, the Company agrees to provide HDFS certain financial support to maintain certain financial covenants. Support may be provided either as capital contributions or loans at the Company's option.

5. Notes payable and letters of credit

    As of December 31, 2000 and 1999, the Company had unsecured lines of credit totaling approximately $45.0 million and $41.3 million, respectively, of which approximately $36.9 million and $41.2 million, respectively, remained available.

43

    At December 31, 2000 and 1999, the Company had outstanding letters of credit of $5.2 million and $7.5 million, respectively. The letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions.

6. Income taxes

    Provision for income taxes consists of the following (in thousands):

		2000			1999			1998
Current:
	Federal	$	171,405		$	117,612		$	99,567
	State		19,345			15,890			13,325
	Foreign		8,730			8,697			8,647
			199,480			142,199			121,539
Deferred:
	Federal		1,088			9,899			979
	State		329			1,788			282
	Foreign		(54	)		(294	)		(71	)
			1,363			11,393			1,190
	Total	$	200,843		$	153,592		$	122,729

    The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate due to the following items:

	2000		1999		1998
Provision at statutory rate	35.0	%	35.0	%	35.0	%
Goodwill write-off/amortization	1.1		.3		.3
Foreign income taxes	0.4		.6		.8
Foreign tax credits	(0.4	)	(.6	)	(.8	)
State taxes, net of federal benefit	1.7		2.8		2.9
Foreign sales corporation	(0.7	)	(.9	)	(.7	)
Other	(0.5	)	(.7	)	(1.0	)
Provision for income taxes	36.6	%	36.5	%	36.5	%

44

    Deferred income taxes result from temporary differences between the recognition of revenues and expenses for financial statements and income tax returns. The principal components of the Company's deferred tax assets and liabilities as of December 31 include the following (in thousands):

		2000			1999
Deferred tax assets:
	Accruals not yet tax deductible	$	41,493		$	37,470
	Pension and postretirement health care benefit obligation		35,402			32,298
	Other, net		2,387			120
			79,282			69,888
Deferred tax liabilities:
	Depreciation, tax in excess of book		(36,141	)		(31,567	)
	Pension obligation		(7,005	)		(10,460	)
	Other, net		(23,489	)		(10,458	)
			(66,635	)		(52,485	)
Net deferred tax asset		$	12,647		$	17,403

7. Commitments and contingencies

    The Company is involved with government agencies in various environmental matters, including a matter involving soil and groundwater contamination at its York, Pennsylvania facility (the Facility). The Facility was formerly used by the U.S. Navy and AMF (the predecessor corporation of Minstar). The Company purchased the Facility from AMF in 1981. Although the Company is not certain as to the extent of the environmental contamination at the Facility, it is working with the Pennsylvania Department of Environmental Protection in undertaking certain investigation and remediation activities, including a site-wide remedial investigation/feasibility study. In March 1995, the Company entered into a settlement agreement (the Agreement) with the Navy. The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of future costs associated with investigation and remediation activities at the Facility (response costs). The trust will administer the payment of the future response costs at the Facility as covered by the Agreement. Although substantial uncertainty exists concerning the nature and scope of the environmental remediation that will ultimately be required at the Facility, based on preliminary information currently available to the Company and taking into account the Company's settlement agreement with the Navy, the Company estimates that it will incur approximately $5.4 million of net additional response costs at the Facility. The Company has established reserves for this amount. The Company's estimate of additional response costs is based on reports of environmental consultants retained by the Company, the actual costs incurred to date and the estimated costs to complete the necessary investigation and remediation activities. Response costs are expected to be incurred over a period of approximately 9 years, ending in 2009.

    Under the terms of the sale of the Commercial Vehicles Division in 1996, the Company has agreed to indemnify Utilimaster Corporation, until 2008, for certain claims related to environmental contamination present at the date of sale, up to $20 million. Based on the environmental studies performed as part of the sale of the Transportation Vehicles segment, the Company does not expect to incur any material expenditures under this indemnification.

    The Company self-insures its product liability losses in the United States up to $2.5 million per occurrence. Catastrophic coverage is maintained for occurrences in excess of $2.5 million up to $100 million ($25 million before June 1998). Outside the United States, the Company is insured for product liability losses up to $100 million ($25 million before June 1998) per occurrence and in the

45

aggregate. The Company accrues for claim exposures which are probable of occurrence and can be reasonably estimated.

8. Employee benefit plans and other postretirement benefits

    The Company has several noncontributory defined benefit pension plans covering substantially all employees of the Motorcycles segment. Benefits are based primarily on years of service and, for certain plans, levels of compensation. The Company also has unfunded supplemental executive retirement plan (SERP) agreements with certain executive officers which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993.

			Pension and SERP Benefits						Postretirement Health Care Benefits
			2000			1999			2000			1999
			(In thousands)
Change in benefit obligation:
	Benefit obligation, beginning of year		$	291,185		$	253,620		$	70,597		$	60,942
	Service cost			15,554			12,215			3,480			2,921
	Interest cost			23,054			19,763			5,516			4,774
	Plan amendments			36,287			—			12,550			—
	Actuarial losses			6,855			19,682			7,510			5,086
	Plan participant's contributions			4,218			3,875			—			—
	Benefits paid			(9,619	)		(17,970	)		(3,587	)		(3,126	)
Benefit obligation, September 30				367,534			291,185			96,066			70,597
Change in plan assets:
	Fair value of plan assets, beginning of year			264,160			187,205			—			—
	Actual return on plan assets			101,280			51,095			—			—
	Company contributions			12,802			39,955			3,587			3,126
	Plan participant contributions			4,218			3,875			—			—
	Benefits paid			(9,619	)		(17,970	)		(3,587	)		(3,126	)
Fair value of plan assets, September 30				372,841			264,160			—			—
Funded status of the plans:
	Benefit obligation (under) over plan assets			(5,307	)		27,025			96,066			70,597
	Unrecognized transition asset			—			131			—			—
	Unrecognized prior service (cost)benefit			(55,670	)		(22,051	)		(11,138	)		1,650
	Unrecognized net gain (loss)			49,295			(21,889	)		(3,313	)		4,291
	Minimum pension liability:
		Intangible asset		23,715			2,992			—			—
		Accumulated other comprehensive income		9,672			9,083			—			—
(Prepaid) accrued benefit cost, September 30				21,705			(4,709	)		81,615			76,538
	Fourth quarter contributions			—			—			(949	)		(819	)
(Prepaid) accrued benefit cost, December 31			$	21,705		$	(4,709	)	$	80,666		$	75,719
Amounts recognized in the Statement of Financial Position, December 31:
	Accrued benefit liability		$	36,816		$	17,423		$	80,666		$	75,719
	Prepaid benefit cost			(15,111	)		(22,132	)		—			—
Net amount recognized			$	21,705		$	(4,709	)	$	80,666		$	75,719

46

    The fair value of pension plan assets was $331,160 thousand at December 31, 2000. The variation in the fair value of pension plan assets from September 30, 2000, to December 31, 2000, is primarily the result of changes in the market value of the underlying investments.

    Amounts applicable to the Company's pension and SERP plan(s) with accumulated benefit obligations in excess of plan assets (in thousands):

	2000		1999
Projected benefit obligation	$	148,923	$	21,266
Accumulated benefit obligation	$	133,287	$	15,166
Fair value of plan assets	$	104,177	$	112

    Components of net periodic benefit costs (in thousands):

		Pension and SERP Benefits									Postretirement Health Care Benefits
		2000			1999			1998			2000			1999			1998
Service cost		$	15,554		$	12,215		$	9,954		$	3,480		$	2,921		$	2,438
Interest cost			23,054			19,763			17,449			5,516			4,774			4,261
Expected return on plan assets			(25,102	)		(19,457	)		(16,864	)		—			—			—
Amortization of unrecognized:
	Net transition asset		(131	)		(336	)		(349	)		—			—			—
	Prior service cost		2,668			2,668			2,664			(238	)		(238	)		(238	)
	Net (gain) loss		1,862			4,563			421			(94	)		(362	)		(624	)
Net periodic benefit cost		$	17,905		$	19,416		$	13,275		$	8,664		$	7,095		$	5,837
Weighted-average assumptions as of September 30:
	Discount rate		8.0	%		8.0	%		8.0	%		8.0	%		8.0	%		8.0	%
	Expected return on plan assets		10.5	%		10.3	%		10.3	%		n/a			n/a			n/a
	Rate of compensation increase		5.0	%		5.0	%		5.0	%		n/a			n/a			n/a

    Included in the pension plan assets are 1,273,592 shares of the Company's common stock at December 31, 2000 and 1999. The market value of these shares at December 31, 2000 and 1999 was $50.6 million and $40.8 million, respectively. Dividends paid on shares of the Company's stock were approximately $127,000 and $111,000 during 2000 and 1999, respectively.

    The Company has several postretirement health care benefit plans covering substantially all employees of the Motorcycles segment. Employees are eligible to receive benefits upon attaining age 55 after rendering at least 10 years of service to the Company. The Company's postretirement health care plans are currently funded as claims are submitted. Some of the plans require employee contributions to offset benefit costs.

    The weighted average health care cost trend rate assumption used in determining the accumulated postretirement benefit obligation of the health care plans was 6.0% in 2000, which is the trend rate going forward. This assumption can have a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects (in thousands):

	1-Percent Increase		1-Percent Decrease
Total of service and interest cost components in 2000	$	1,551	$	1,337
Postretirement benefit obligation as of September 30, 2000	$	10,085	$	9,447

47

    The Company has various defined contribution benefit plans which in total cover substantially all full-time employees. Employees can make voluntary contributions in accordance with the provisions of their respective plan, which includes a 401(k) tax deferral option. The Company accrued $3.3 million, $3.2 million and $2.9 million for matching contributions during 2000, 1999 and 1998, respectively.

9. Capital stock

    On February 17, 2000, the Company's Board of Directors approved a two-for-one split of the Company's common stock effective for shareholders of record on March 22, 2000, and payable on April 7, 2000 (Stock Split). The Company has 800 million authorized shares of $.01 par value common stock. All share and per share data included in this report have been adjusted to reflect the Stock Split.

    The Company has continuing authorization from its Board of Directors to repurchase shares of the Company's outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 1998 plus (2) one percent of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split. The Company repurchased 3,256,200 and 4,856,000 shares of its common stock during 2000 and 1999, respectively, under this authorization.

    In addition, the Board of Directors has also separately authorized the Company to repurchase up to 16 million shares of the Company's outstanding common stock. To date, the Company has repurchased 6,600,000 shares of its common stock, and as a result, the Company has 9,400,000 shares available to repurchase under this authorization.

    The Company has designated .5 million of the 2.0 million authorized shares of preferred stock as Series A Junior Participating preferred stock (Preferred Stock). The Preferred Stock has a par value of $1 per share. Each share of Preferred Stock, none of which is outstanding, is entitled to 10,000 votes per share (subject to adjustment) and other rights such that the value of a one ten-thousandth interest in a share of Preferred Stock should approximate the value of one share of common stock.

    The Preferred Stock is reserved for issuance in connection with the Company's outstanding Preferred Stock purchase rights (Rights). On February 17, 2000, the Board of Directors of the Company declared a dividend of one Right for each outstanding share of common stock payable upon the close of business on August 20, 2000 to the shareholders of record on that date. Under certain conditions, each Right entitles the holder to purchase one ten-thousandth of a share of Preferred Stock at an exercise price of $175, subject to adjustment. The Rights are only exercisable if a person or group has (i) acquired 15% or more of the outstanding common stock or (ii) has announced an intention to acquire 25% or more of the outstanding common stock (either (i) or (ii), a "Triggering Event"). If there is a 15% acquiring party, then each holder of a Right, other than the acquiring party, will be entitled to purchase, at the exercise price, Preferred Stock having a market value of two times the exercise price.

48

    In addition, prior to the acquisition of 50% or more of the outstanding common stock by an acquiring party, the Board of Directors of the Company may exchange the Rights (other than the Rights of an acquiring party which have become void), in whole or in part, at an exchange ratio of one share of common stock or one ten-thousandth of a share of Preferred Stock (or a share of the Company's preferred stock having equivalent rights, privileges, and preferences) per Right, subject to adjustment. The Rights expire upon the close of business on August 20, 2010, subject to extension.

    The Company has a nonvested stock plan under which plan participants are entitled to cash dividends and voting rights on their respective shares. Restrictions generally limit the sale or transfer of shares during a restricted period, not exceeding ten years. Participants may vest in certain amounts of the nonvested stock upon death, disability or retirement as described in the plan.

    Unearned compensation was charged for the market value of the nonvested shares on the date of grant and is being amortized over the restricted period or reversed upon cancellation. The unamortized unearned compensation value is shown as a reduction of shareholders' equity in the accompanying consolidated balance sheets.

    Information with respect to the nonvested shares of stock outstanding, and the market value of those shares on the date of grant, is as follows:

	2000		1999		1998
Outstanding at beginning of year at $6.74 to $8.77 per share	240,000		305,600		305,600
Nonvested shares cancelled at $8.77 per share	—		(65,600	)	—
Nonvested shares vested at $6.74 per share	(80,000	)	—		—
Total shares outstanding at end of year at $6.74 to $8.77 per share	160,000		240,000		305,600

    Income (expense) recognized in 2000, 1999 and 1998 in connection with this nonvested stock plan was $(.1) million, $.1 million and $(.3) million, respectively.

    The Company has a Stock Option Plan under which the Board of Directors may grant to employees nonqualified stock options with or without appreciation rights. The options have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a four year period with the first 25 percent becoming exercisable one year after the date of grant. The options expire ten years from the date of grant. The number of shares of common stock available for future grants under such plans were 6.8 million and 8.2 million at December 31, 2000 and 1999, respectively.

49

    The following table summarizes the transactions of the Stock Option Plan for the three-year period ended December 31, 2000:

	2000					1999					1998
	Options			Exercise Price(1)		Options			Exercise Price(1)		Options			Exercise Price(1)
Options outstanding at beginning of year		11,516,560		$	10.62		12,107,606		$	7.93		12,484,802		$	6.12
Options granted		1,495,740			33.67		1,507,140			25.82		2,060,122			14.63
Options exercised		(2,599,423	)		5.54		(1,774,976	)		4.80		(2,328,286	)		4.02
Options cancelled		87,722	)		22.66		(323,210	)		13.02		(109,032	)		10.59
Options outstanding at end of year		10,325,155			15.12		11,516,560			10.62		12,107,606			7.93
Weighted-average fair value of options granted during the year	$	13.72				$	10.23				$	5.64
Number of options exercisable at end of year		6,524,006		$	9.53		7,557,454		$	7.03		7,047,260		$	5.43

(1)

Represents a weighted-average exercise price.

    Options outstanding at December 31, 2000:

Price range	Weighted-Average Contractual life	Options	Weighted-Average Exercise Price
$2.56 to $10	3.8 years	4,157,992	$	6.85
$10.01 to $20	6.7 years	3,234,075	$	12.58
$20.01 to $30	8.1 years	1,479,480	$	25.73
$30.01 to $40	9.1 years	1,443,008	$	33.59
$40.01 to $50	9.6 years	10,600	$	44.28
		10,325,155

    As is permitted under Statement of Financial Accounting Standards (SFAS) 123, "Accounting for Stock-Based Compensation," the Company elected to continue to account for employee stock compensation (e.g., nonvested stock and stock options) in accordance with APB Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." Under APB 25, the total compensation expense recognized is equal to the difference between the award's exercise price and the underlying stock's market price at the measurement date. SFAS 123 calculates the total compensation expense to be recognized as the fair value of the award at the date of grant for effectively all employee awards.

    For purposes of pro forma disclosures under SFAS 123, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information is as follows (in thousands, except per share amounts):

	2000		1999		1998
Pro forma net income	$	338,457	$	260,459	$	207,857
Pro forma earnings per share
Basic	$	1.12	$	.85	$	.68
Diluted	$	1.10	$	.84	$	.67

    In determining the effect of SFAS 123, the Black-Scholes option pricing model was used with the following weighted-average assumptions for 2000, 1999 and 1998: risk-free interest rate of approximately 7%, 6% and 6%, respectively; dividend yield of .3%, .3% and .5%, respectively; expected

50

common stock market volatility factor of .4; and a weighted-average expected life of the options of two years from the vesting date. Forfeitures are recognized as they occur. These pro forma calculations only include the effects of grants made in 1995 and thereafter.

10. Earnings per share

    The following table sets forth the computation of basic and diluted earnings per share In thousands, except per share amounts):

	Year Ended December 31,
	2000		1999		1998
Numerator
Net income used in computing basic and diluted earnings per share	$	347,713	$	267,201	$	213,500
Denominator
Denominator for basic earrings per share—Weighted-average common shares		302,691		304,748		304,454
Effect of dilutive securities—employee Stock options and nonvested stock		4,779		4,966		4,952
Denominator for diluted earnings per share—Adjusted weighted-average shares outstanding		307,470		309,714		309,406
Basic earnings per share	$	1.15	$	.88	$	.70
Diluted earnings per share	$	1.13	$	.86	$	.69

11. Fair value of financial instruments

    The Company's financial instruments consist primarily of cash and cash equivalents, trade receivables, finance receivables, debt, interest rate swaps, treasury rate locks and forward foreign exchange contracts. The book values of cash and cash equivalents, trade receivables and finance receivables are considered to approximate their respective fair values.

    None of the Company's debt instruments have readily ascertainable market values; however, the carrying values are considered to approximate their respective fair values. See Note 4 for the terms and carrying values of the Company's various debt instruments.

    The Company enters into forward foreign currency exchange contracts to hedge against sales transactions denominated in European currencies and Japanese yen. At December 31, 2000, the Company had forward foreign exchange contracts that required it to convert these foreign currencies, at a variety of rates, into U.S. dollars. These contracts represented a combined U.S. dollar equivalent commitment of approximately $117.5 million and $4.0 million at December 31, 2000 and 1999, respectively. All current contracts have maturities of less than one year. Unrealized gains and losses on these forward foreign exchange contracts, which were not material at December 31, 2000 or 1999, are deferred and recognized at the time the hedged transaction is settled.

    HDFS has utilized interest rate swap and treasury rate lock agreements to reduce the impact of fluctuations in interest rates. At December 31, 2000, HDFS had no interest rate swaps or treasury rate locks outstanding. At December 31, 1999, HDFS had approximately $28 million of interest rate swaps outstanding. The fair value of the swaps at December 31, 1999, if HDFS would have terminated the agreements, would not have been material.

51

12. Business segments and foreign operations

(a)

Business segments

    The Company operates in two business segments: Motorcycles and Related Products and Financial Services. The Company's reportable segments are strategic business units that offer different products and services. They are managed separately based on the fundamental differences in their operations.

    The Motorcycles and Related Products (Motorcycles) segment consists primarily of the Company's wholly-owned subsidiary, H-D Michigan, Inc., its wholly-owned subsidiaries doing business as Harley-Davidson Motor Company and Buell Motorcycle Company. The Motorcycles segment designs, manufactures and sells primarily heavyweight (engine displacement of 651+cc) touring, custom and sport motorcycles and a broad range of related products which include motorcycle parts and accessories and riding apparel. The Company, which is the only major American motorcycle manufacturer, has held the largest share of the United States heavyweight motorcycle market since 1986. The Company holds a smaller market share in the European market, which is a larger market than the United States, and in the Japanese market, which is a smaller market than the United States.

    The Financial Services segment consists of the Company's wholly owned subsidiary, Harley-Davidson Financial Services, Inc. HDFS is engaged in the business of financing and servicing wholesale inventory receivables, consumer retail installment sales contracts (primarily motorcycles) and revolving charge receivables. Additionally, HDFS is an agency for certain unaffiliated insurance carriers providing property/casualty insurance and extended service contracts to motorcycle owners. HDFS conducts business in the United States, Canada and Europe.

    Information by industry segment is set forth below (in thousands):

	2000			1999			1998
Net sales:
Motorcycles and Related Products	$	2,906,365		$	2,452,939		$	2,063,956
Financial Services(1)		n/a			n/a			n/a
	$	2,906,365		$	2,452,939		$	2,063,956
Income from operations:
Motorcycles and Related Products	$	487,485		$	397,601		$	324,448
Financial Services(1)		37,178			27,685			20,211
General corporate expenses		(9,691	)		(9,427	)		(11,043	)
	$	514,972		$	415,859		$	333,616

52

    Information by industry segment is set forth below (in thousands):

	Motorcycles And Related Products		Financial Services		Corporate		Consolidated
2000
Identifiable assets	$	1,158,813	$	856,961	$	420,630	$	2,436,404
Depreciation and amortization		127,085		6,012		251		133,348
Net capital expenditures		199,306		4,177		128		203,611
1999
Identifiable assets	$	1,058,934	$	868,711	$	184,432	$	2,112,077
Depreciation and amortization		107,737		5,813		272		113,822
Net capital expenditures		162,071		3,565		150		165,786
1998
Identifiable assets	$	1,010,640	$	743,585	$	165,984	$	1,920,209
Depreciation and amortization		80,663		6,488		271		87,422
Net capital expenditures		178,444		4,202		124		182,770

(1)

The results of operations for the financial services subsidiary are included as operating income from financial services in the statements of operations. See Note 4.

(b)

Geographic information

    Included in the consolidated financial statements are the following amounts relating to geographic locations (in thousands):

		2000		1999		1998
Revenues(1):
	United States	$	2,320,991	$	1,915,631	$	1,566,559
	Canada		93,352		80,271		73,908
	Germany		92,534		88,814		84,436
	Japan		148,684		135,589		102,245
	Other foreign countries		250,804		232,634		236,808
		$	2,906,365	$	2,452,939	$	2,063,956
Long-lived assets(2):
	United States	$	856,746	$	775,764	$	722,854
	Other foreign countries		27,844		8,948		6,676
		$	884,590	$	784,712	$	729,530

(1)

Revenues are attributed to geographic regions based on location of customer.

(2)

Long-lived assets include all long-term assets except those specifically excluded under SFAS No. 131 such as deferred income taxes and financial instruments, including finance receivables.

53

SUPPLEMENTARY DATA

Quarterly financial data (unaudited)
(In millions, except per share data)

		1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
		2000		1999		2000		1999		2000		1999		2000		1999
Net sales		$	681.1	$	558.6	$	755.0	$	608.7	$	714.1	$	623.2	$	756.2	$	662.5
Gross profit			231.3		189.1		257.1		213.0		239.6		204.7		262.8		228.9
Net income			80.2		59.0		90.6		68.6		83.0		65.4		93.9		74.2
Earnings per common share:
	Basic	$	.26	$	.19	$	.30	$	.22	$	.27	$	.21	$	.31	$	.25
	Diluted	$	.26	$	.19	$	.29	$	.22	$	.27	$	.21	$	.31	$	.24

PART III

Item 10. Directors and executive officers of the registrant

    The information included or to be included in the Company's definitive proxy statement for the 2001 annual meeting of shareholders, which will be filed within 120 days after the close of the Company's fiscal year ended December 31, 2000 (the Proxy Statement), under the captions "1-Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated by reference herein.

Item 11. Executive compensation

    The information included or to be included in the Proxy Statement under the caption "Executive Compensation" (except the information from and after the caption "Board of Directors Human Resources Committee Report on Executive Compensation") is incorporated by reference herein.

Item 12. Security ownership of certain beneficial owners and management

    The information included or to be included in the Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners and Management" is incorporated by reference herein.

Item 13. Certain relationships and related transactions

    The information included or to be included in the Proxy Statement under the caption "Certain Transactions" is incorporated by reference herein.

54

Item 14. Exhibits, financial statement schedules, and reports on Form 8-K

(a)	1.	Financial statements—The financial statements listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedules are filed as part of this annual report and such Index to Consolidated Financial Statements and Financial Statement Schedules is incorporated herein by reference.
	2.	Financial statement schedules—The financial statement schedule listed in the -accompanying Index to Consolidated Financial Statements and Financial Statement Schedules is filed as part of this annual report and such Index to Consolidated Financial Statements and Financial Statement Schedules is incorporated herein by reference.
	3.	Exhibits—The exhibits listed on the accompanying List of Exhibits are filed as part of this annual report and such List of Exhibits is incorporated herein by reference.

55

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
[Item 14(a) 1 and 2]

		Page
Consolidated statements of operations for each of the three years in the period ended December 31, 2000		32
Consolidated balance sheets at December 31, 2000 and 1999		33
Consolidated statements of cash flows for each of the three years in the period ended December 31, 2000		34
Consolidated statements of shareholders' equity for each of the three years in the period ended December 31, 2000		35
Notes to consolidated financial statements		36
Consolidated financial statement schedules for each of the three years in the period ended December 31, 2000
	II—Valuation and qualifying accounts	60

    All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules.

56

LIST OF EXHIBITS
[Items 14(a)(3) and 14(c)]

Exhibit No.	Description
3.1	Restated Articles of Incorporation
3.2	By-Laws
4.1	Form of Rights Agreement between the Registrant and Firstar Bank, N.A. dated February 17, 2000
4.2	Form of Rights Agent Agreement between the Registrant and Computershares Investor Services, LLC
10.1*	Form of Employment Agreement between the Registrant and Mr. Bleustein
10.2*	1988 Stock Option Plan as amended through August 20, 1997
10.3*	1990 Stock Option Plan as amended through December 9, 1998
10.4*	1995 Stock Option Plan as amended through December 8, 1999
10.5*	1998 Director Stock Plan
10.6*	Form of Transition Agreement between the Registrant and each of Messrs. Berryman, Bleustein, Brostowitz, Hevey, Hutchinson, McCaslin, Wilke, Ziemer and Ms. Lione and Ms. Zarcone.
10.7*	Deferred Compensation Plan
10.8*	Form of Life Insurance Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Hutchinson, McCaslin, Wilke and Ziemer and Ms. Lione
10.9*	Harley-Davidson, Inc. Corporate Short Term Incentive Plan
10.10*	Form of Restricted Stock Agreement between the Registrant and Mr. McCaslin
10.11*	Form of Severance Benefits Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Hevey, Hutchinson, McCaslin, Wilke and Ziemer and Ms. Lione
10.12*	Form of Supplemental Executive Retirement Plan Agreement between the Registrant and each of Mssrs. Bleustein, Ziemer and McCaslin.
10.13*	Harley-Davidson Pension Benefit Restoration Plan
10.14*	Description of post-retirement life insurance equivalent
10.15*	1998 Stock Option Plan
10.16*	Employment Agreement between the Registrant and Ms. Zarcone
10.17*	2001 Stock Option Plan
21	List of Subsidiaries
23	Consent of Ernst & Young LLP, Independent Auditors

*

Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.

57

Schedule II

HARLEY-DAVIDSON, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2000, 1999 and 1998
(In thousands)

Classification			Balance at beginning of year		Additions charged to expense		Deductions(1)			Balance at end of year
Accounts receivable—
	Allowance for doubtful accounts:
		2000	$	1,796	$	454	$	(471	)	$	1,779
		1999	$	1,866	$	16	$	(86	)	$	1,796
		1998	$	1,548	$	481	$	(163	)	$	1,866
Finance receivables—
	Allowance for doubtful accounts(2):
		2000	$	13,945	$	9,919	$	(12,917	)	$	10,947
		1999	$	9,978	$	17,919	$	(13,952	)	$	13,945
		1998	$	6,867	$	10,338	$	(7,227	)	$	9,978
Inventories—
	Allowance for obsolescence and loss(3):
		2000	$	10,668	$	3,378	$	(4,258	)	$	9,788
		1999	$	8,301	$	4,887	$	(2,520	)	$	10,668
		1998	$	3,758	$	5,190	$	(647	)	$	8,301

(1)

Deductions represents amounts written off to the reserve, net of recoveries.

(2)

The finance receivables allowance for doubtful accounts includes a $5.6 million deduction, in 2000, related to the sale of the Harley-Davidson® Chrome Visa® Card business.

(3)

Stated in last-in, first-out (LIFO) cost.

58

SIGNATURES

    Pursuant to the requirements of Section 13, or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 30, 2001.

HARLEY-DAVIDSON, INC.
By:	/s/ JEFFREY L. BLEUSTEIN Jeffrey L. Bleustein Chairman and Chief Executive Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 30, 2001.

Name	Title
/s/ JEFFREY L. BLEUSTEIN Jeffrey L. Bleustein	Chairman, Chief Executive Officer and Director (Principal executive officer)
/s/ JAMES L. ZIEMER James L. Ziemer	Vice-President and Chief Financial Officer (Principal financial officer)
/s/ JAMES M. BROSTOWITZ James M. Brostowitz	Vice-President/Controller and Treasurer (Principal accounting officer)
/s/ BARRY K. ALLEN Barry K. Allen	Director
/s/ RICHARD I. BEATTIE Richard I. Beattie	Director
/s/ RICHARD J. HERMON-TAYLOR Richard J. Hermon-Taylor	Director
/s/ DONALD A. JAMES Donald A. James	Director
/s/ RICHARD G. LEFAUVE Richard G. LeFauve	Director
/s/ SARA L. LEVINSON Sara L. Levinson	Director
/s/ JAMES A. NORLING James A. Norling	Director
/s/ RICHARD F. TEERLINK Richard F. Teerlink	Director

59

INDEX TO EXHIBITS
[Items 14(a)(3) and 14(c)]

Exhibit No	Description
3.1	Restated Articles of Incorporation (incorporated herein by reference to Exhibit 2.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9183))
3.2	By-Laws (incorporated herein by reference to Exhibit 3.2 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9183))
4.1	Form of Rights Agreement between the Registrant and Firstar Bank, N.A. dated February 17, 2000 (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-A dated February 18, 2000 (File No. 1-9183))
4.2	Form of Rights Agent Agreement between the Registrant and Computershare Investor Services, LLC
10.1*	Form of Employment Agreement between the Registrant and Mr. Bleustein (incorporated by reference from Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 (File No. 33-5871))
10.2*	Harley-Davidson, Inc. 1988 Stock Option Plan as amended through August 20, 1997 (incorporated herein by reference to Exhibit 10.2 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1997 (File No.  1-9183))
10.3*	Harley-Davidson, Inc. 1990 Stock Option Plan as amended through December 9, 1998
10.4*	Harley-Davidson, Inc. 1995 Stock Option Plan as amended through December 8, 1999
10.5*	Harley-Davidson, Inc. 1998 Director Stock Plan (incorporated by reference to Exhibit 4.1 to the Registrants' Registration Statement on Form S-8 (File No. 333-51741))
10.6*	Form of Transition Agreement between the Registrant and each of Messrs. Berryman, Bleustein, Brostowitz, Hevey, Hutchinson, McCaslin, Wilke and Ziemer and Ms. Lione and Ms. Zarcone (incorporated herein by reference to Exhibit 10.7 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))
10.7*	Deferred Compensation Plan
10.8*	Form of Life Insurance Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Hutchinson, McCaslin, Wilke and Ziemer and Ms. Lione (incorporated herein by reference from Exhibit 10.10 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9183))
10.9*	Harley-Davidson, Inc. Corporate Short Term Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-9183))
10.10*	Form of Restricted Stock Agreement between the Registrant and Mr. McCaslin (incorporated herein by reference to Exhibit 10.11 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1996 (File No.  1-9183))
10.11*	Form of Severance Benefits Agreement between the Registrant and each of Messrs. Bleustein, Brostowitz, Hutchinson, Hevey, McCaslin, Wilke and Ziemer and Ms. Lione (incorporated herein by reference to Exhibit 10.12 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))

60

10.12*	Form of Supplemental Executive Retirement Plan Agreement between the Registrant and each of Messrs. Bleustein, McCaslin and Ziemer (incorporated herein by reference from Exhibit 10.2 to the Registrants' Quarterly Report on Form 10-Q for the period ended March 31, 1996 (File No. 1-9183))
10.13*	Harley-Davidson Pension Benefit Restoration Plan (incorporated herein by reference from Exhibit 10.1 to the Registrants' Quarterly Report on Form 10-Q for the period ended March 31, 1996 (File No. 1-9183))
10.14*	Description of post-retirement life insurance equivalent (incorporated herein by reference to Exhibit 10.15 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-9183))
10.15*	1998 Stock Option Plan (incorporated by reference to Exhibit 4.1 to the Registrants' Registration Statement on Form S-8 (File No. 333-75347))
10.16*	Employment Agreement between the Registrant and Ms. Zarcone (incorporated herein by reference to Exhibit 10.15 to the Registrants' Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 1-9183))
10.17*	2001 Stock Option Plan
21	List of Subsidiaries
23	Consent of Ernst & Young LLP, Independent Auditors

*

Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated

61

QuickLinks

PART I

Item 1. Business Summary

Item 2. Properties

Item 3. Legal proceedings
Item 4. Submission of matters to a vote of security holders

PART II

Item 5. Market for Harley-Davidson, Inc. common stock and related shareholder matters
Item 6. Selected financial data

Item 7. Management's discussion and analysis of financial condition and results of operations

Item 7a. Quantitative and qualitative disclosures about market risk

Item 8. Consolidated financial statements and supplementary data

PART III

Item 10. Directors and executive officers of the registrant
Item 11. Executive compensation
Item 12. Security ownership of certain beneficial owners and management
Item 13. Certain relationships and related transactions

Item 14. Exhibits, financial statement schedules, and reports on Form 8-K

EX-4.2

                                                                     EXHIBIT 4.2

                             RIGHTS AGENT AGREEMENT

          This Agreement, effective as of the 30th day of November, 2000, is
made and entered into by and between Computershare Investor Services, LLC
("CIS") and Harley-Davidson, Inc., a Wisconsin corporation (the "Company").

                                   WITNESSETH

          WHEREAS, the Company and Firstar Bank, N.A. ("Firstar") are parties to
that certain Rights Agreement, dated as of February 17, 2000, a copy of which is
attached hereto as Exhibit A (the "Rights Agreement"), pursuant to which Firstar
undertook the duties and obligations of the Rights Agent (as defined in the
Rights Agreement) under the terms and conditions of the Rights Agreement;

          WHEREAS, pursuant to Section 21 of the Rights Agreement, the Company
is removing and discharging Firstar from its duties as Rights Agent under the
Rights Agreement;

          WHEREAS, the Company desires to appoint CIS as a successor Rights
Agent under the Rights Agreement, and CIS desires to undertake and perform the
duties and obligations of the Rights Agent under the terms and conditions of the
Rights Agreement.

          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:

     1.   APPOINTMENT. The Company hereby appoints CIS as a successor Rights
Agent under the terms and conditions of the Rights Agreement.

     2.   ASSUMPTION. CIS hereby accepts the appointment as agent for the
Company and the holders of Rights under the Rights Agreement, and CIS hereby
assumes and agrees to perform all of the duties and obligations of the Rights
Agent under the terms and conditions of the Rights Agreement.

     3.   NOTICE. CIS hereby acknowledges that this Agreement constitutes notice
to CIS, as a transfer agent of the Company, pursuant to Section 21 of the Rights
Agreement that the Company has appointed CIS as the successor Rights Agent to
Firstar under the Rights Agreement.

     4.   NO AMENDMENT. The terms and conditions of the Rights Agreement shall
be unaffected by this Agreement and shall remain in full force and effect. The
Company and CIS each acknowledge that pursuant to Section 28 of the Rights
Agreement the respective covenants and provisions of the Rights Agreement by or
for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns thereunder.





     5.   GOVERNING LAW. This Agreement shall be deemed to be a contract made
under the laws of the State of Wisconsin and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and performed entirely with such State.

     6.   COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of the date recited above.


                                         HARLEY-DAVIDSON, INC.


                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                         COMPUTERSHARE INVESTOR SERVICES, LLC


                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:


                                      -2-

EX-10.3

                                                                     EXIBIT 10.3

                              HARLEY-DAVIDSON, INC.

                             1990 STOCK OPTION PLAN

                      (as amended through December 9, 1998)

                                    ARTICLE I

                                     PURPOSE

     The purpose of the Harley-Davidson, Inc. 1990 Stock Option Plan is to
provide favorable opportunities for certain selected employees of
Harley-Davidson, Inc. and its subsidiaries to purchase or receive shares of
Common Stock of Harley-Davidson, Inc., or to benefit from the appreciation
thereof. Such opportunities should provide an increased incentive for these
employees to contribute to the future success and prosperity of Harley-Davidson,
Inc., thus enhancing the value of the stock for the benefit of the shareholders,
and increase the ability of Harley-Davidson, Inc. to attract and retain
individuals of exceptional skill upon whom, in large measure, its sustained
progress, growth and profitability depend.

                                   ARTICLE II

                                   DEFINITIONS

     The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:

          2.1. BOARD: The Board of Directors of Harley-Davidson, Inc.

          2.2. CODE: The Internal Revenue Code of 1986, as amended.

          2.1. COMMITTEE: The human Resources Committee of the Board; provided
that if any member of the Human Resources Committee is not both a Disinterested
Person and Outside Director, the Committee shall be comprised of only those
members of the Human Resources Committee who are both Disinterested Persons and
Outside Directors.

          2.4. COMMON STOCK: The common stock of Harley-Davidson, Inc.

          2.5. COMPANY: Harley-Davidson, Inc. and any of its Subsidiaries.

          2.6. DISABILITY: Disability within the meaning of Section 22(e)(3) of
the Code, as determined by the Committee.

          2.7. DISINTERESTED PERSONS: Non-employee directors within the meaning
of Rule 16b-3 as promulgated under the Securities Exchange Act of 1934, as
amended.

          2.8. EMPLOYER: The entity that employs the employee or Optionee.

          2.9. FAIR MARKET Value: The average of the high and low reported sales
prices of Common Stock on the New York Exchange Composite Tape on the date for
which fair market value is being determined.

          2.10. ISO: An incentive stock option within the meaning of Section 422
of the Code and which is designated as an incentive option by the Committee.

          2.11. NON-ISO: A stock option which is not an ISO.





          2.12. OPTION: A stock option granted under the Plan. Options include
both ISOs and Non-ISOs.

          2.13. OPTION PRICE: The purchase price of a share of Common Stock
under an Option.

          2.14. OPTIONEE: A person who has been granted one or more Options.

          2.15. OUTSIDE DIRECTORS: Outside Directors within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder.

          2.16. PARENT CORPORATION: The parent corporation, as define in Section
424(e) of the Code.

          2.17 PLAN: The Harley-Davidson, Inc. 1990 Stock Option Plan.

          2.18. RETIREMENT: Retirement on or after age sixty-two or, with the
consent of the Committee, at an earlier age.

          2.19. SUBSIDIARY: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of which
more than fifty percent (50%) of the voting power or ownership interest is
directly and/or indirectly held by the Harley-Davidson, Inc.

          2.20. TERMINATION DATE: A date fixed by the Committee but not later
than the day preceding the tenth anniversary of the date on which the Option is
granted.

                                   ARTICLE III

                                 ADMINISTRATION

     3.1. The Committee shall administer the Plan and shall have full power to
grant Options, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, which it
believes reasonable and proper.

     3.2. Subject to the provisions of the Plan, the Committee shall, in its
discretion, determine who shall be granted Options, the number of shares subject
to option under any such Options, the dates after which Options, the dates after
which Options may be exercise, in whole or in part, whether Options shall be
ISOs, and the terms and conditions of the Options.

     3.3. Any decision made, or action taken, by the Committee arising out of or
in connection with the interpretation and administration of the Plan shall be
final and conclusive.

                                   ARTICLE IV

                           SHARES SUBJECT TO THE PLAN

     4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be 7,200,000; provided that Options for not more
than 400,000 shares of Common Stock shall be granted to an Optionee in any
calendar year under the Plan, which amount shall be reduced by the amount of
Common Stock subject to options granted to such Optionee in such calendar year
under any other stock option plan of the Company. The foregoing amounts shall be
subject to adjustment in accordance with Article VIII of the Plan. If an Option
or portion thereof shall expire, be canceled or terminate for any reason without
having been exercised in full, the unpurchased shares covered by such Option
shall be available for future grants of Options. An Option, or portion thereof,
exercised through the exercise of a stock appreciation right pursuant to Section
6.7 of


                                       2



the Plan shall be treated, for the purposes of this Article, as though the
Option, or portion thereof, had been exercised through the purchase, that was so
exercised shall not be available for future grants of Options.

                                    ARTICLE V

                                   ELIGIBILITY

     5.1. Options may be granted to key employees of the Company or to persons
who have been engaged to become key employees of the Company. Key employees will
comprise, in general, those who contribute to the management, direction and
overall success of the Company, including those who are members of the Board.
Members of the Board who are not employees of the Company shall not be eligible
for Option grants.

                                   ARTICLE VI

                                 TERM OF OPTIONS

     6.1. OPTION AGREEMENTS: All Options shall be evidenced by written
agreements executed by the Company. Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe. All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the Option Price and the Termination Date. Those Options that
comply with the requirements for an ISO set forth in Section 422 of the Code and
are designated ISOs by the Committee shall be ISOs and all other Options shall
be Non-ISOs.

     6.2. OPTION PRICE: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.

     6.3. PERIOD OF EXERCISE: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. How ever, no Option or portion thereof shall be exercisable after
the Termination Date.

     6.4. SPECIAL RULES REGARDING ISOS GRANTED TO CERTAIN EMPLOYEES:
Notwithstanding any contrary provisions of Sections 6.2 and 6.3 of the Plan, no
ISO shall be granted to any employee who, at the time the Option is granted,
owns (directly or indirectly, within the meaning of Section 424(d) of the Code)
more than ten percent of the total combined voting power of al classes of stock
of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a)
the Option Price under such Option is at least 110 percent of the Fair Market
Value of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.

     6.5. MANNER OF EXERCISE AND PAYMENT: An Option, or portion thereof, shall
be exercised by delivery of a written notice of exercise to the Company and
payment of the full price of the shares being purchased pursuant to the Option.
An Optionee may exercise an Option with respect to less than the full number of
shares for which the Option may then be exercised, but an Optionee must exercise
the Option in full shares of Common Stock. The price of Common Stock purchased
pursuant to an Option, or portion thereof, may be paid:

     a.   in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company.

     b.   through the delivery of shares of Common Stock with an aggregate Fair
Market Value on the date of exercise equal to the Option Price, or

     c.   by any combination of the above methods of payment.


                                       3



The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Options and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without, limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.

     6.6. WITHHOLDING TAXES: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon or prior to
the exercise of an Option by the Company from the shares otherwise to be
received. The number of shares so withheld shall have an aggregate Fair Market
Value on the date of exercise sufficient to satisfy the applicable withholding
taxes. The exercise of an Option does not give rise to an obligation to withhold
Federal income taxes on the date of exercise, the Company may, in it discretion,
require an Optionee to pay to the Company the amount that the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of the Option, in which case
the shares of Common Stock will be released from escrow to a written election to
have shares of Common Stock held in escrow applied toward the Company's
obligation to withhold Federal, state or local income or other taxes incurred by
reason of the exercise of the Option, based on the Fair Market Value of the
shares on the date of the termination of the escrow arrangement. Upon
application of such shares toward the Company's withholding obligation, any
shares of Common Stock held in escrow and not, in the judgement of the
Committee, necessary to satisfy such obligation shall be released from escrow to
the Optionee.

     6.7. STOCK APPRECIATION RIGHTS: At or after the grant of an Option, the
Committee, in its discretion, may provide an Optionee with an alternate means of
exercising an Option, or a designated portion thereof, by granting the Optionee
a stock appreciation right. A "stock appreciation right: is a right to receive,
upon exercise of an Option or any portion thereof, in the Committee's sole
discretion, an amount of cash equal to, and/or shares of Common Stock having a
Fair Market Value on the date of exercise equal to, the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the Option
Price, multiplied by the number of shares of Common Stock that the Optionee
would have received had the Option or portion thereof been exercised through the
purchase of shares of Common Stock at the Option Price, provided that (a) such
Option or portion thereof has been designated as exercisable in this alternative
manner, (s) such Option or portion thereof is otherwise exercisable, and (c) the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
Option Price.

     6.8. NONTRANSFERABILITY OF OPTIONS: Except as may otherwise be provided by
the Committee, each Option shall, during the Optionee's lifetime, be exercisable
only by the Optionee, and neither it nor any right hereunder shall be
transferable otherwise than by will or the laws of descent and distribution or
be subject to attachment, execution or other similar process. In the event of
any attempt by the Optionee to alienate, assign, pledge, hypothecate or other
wise dispose of an Option or of any right hereunder, except as provided for
herein, or in the event of any levy or any attachment, execution or similar
process upon the rights or interest hereby conferred, the Company may terminate
the Option by notice to the Optionee and the Option shall thereupon become null
and void.

     6.9. CESSATION OF EMPLOYMENT OF OPTIONEE:

     a.   CESSATION OF EMPLOYMENT OTHER THAN BY REASON OF RETIREMENT, DISABILITY
OR DEATH. If an Optionee shall cease to be employed by the Company otherwise
than by reason of Retirement, Disability, or death, each Option held by the
Optionee, together with all rights hereunder, shall terminate on the date of
cessation of employment, to the extent not previously exercised.

     b.   CESSATION OF EMPLOYMENT BY REASON OF RETIREMENT OR DISABILITY. If an
Optionee shall cease to be employed by the Company by reason of Retirement or
Disability, each Option held by the Optionee shall remain exercisable, to the
extent it was exercisable at the time of cessation of employment, until the
earliest of:

          i.   the Termination Date,

          ii.  the death of the Optionee, or such later date not more than one
     year after the death of the Optionee as the Committee, in its discretion,
     may provide pursuant to Section 6.9(c) of the Plan,


                                       4



          iii. the third anniversary of the date of the cessation of the
     Optionee's employment, if employment ceased by reason of Retirement, or

          iv.  the first anniversary of the date of the cessation of the
     Optionee's employment by reason of Disability;

     and thereafter all such Options shall terminate together with all rights
     hereunder, to the extent not previously exercised.

     c.   CESSATION OF EMPLOYMENT BY REASON OF DEATH. In the event of the death
of the Optionee, while employed by the Company, an Option may be exercised at
any time or from time to time prior to the earlier of the Termination Date or
the first anniversary of the date of the Optionee's death, by the person or
persons to whom the Optionee's rights under each Option shall pass by will or by
the applicable laws of descent and death. In the event of the death of the
Optionee while entitled to exercise an Option pursuant to Section 6.9(b), the
Committee, in its discretion, may permit such Option to be exercised at any time
or from time to time prior to the Termination Date during a period of up to one
year from the death of the Optionee, as shall pass by will of by the applicable
laws of descent and distribution, to the extent that the Option was exercisable
at the time of cessation of the Optionee's employment. Any person or person to
whom an Optionee's rights under an Option have passed by will or by the
applicable laws of descent and distribution shall be subject to all terms and
condition of the plan and the Option applicable to the Optionee.

     6.10. NOTIFICATION OF SALES OF COMMON STOCK: Any Optionee who disposes of
shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.

                                   ARTICLE VII

                 LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY

     7.1. Notwithstanding any other provision of this Plan, in the case of an
ISO, the aggregate Fair Market Value (determined at the time the ISO is granted)
of the shares of Common Stock with respect to which all "incentive stock
options" (within the meaning of Section 422 of the Code) are first exercisable
by the Optionee during any calendar year (under this Plan and under all other
incentive stock option plans of the Employer, any Subsidiary and any Parent
Corporation) shall not exceed $100,000.

     7.2. Each Option granted under the Plan shall have a limited right of
surrender allowing the Optionee to surrender that Option within the 30-day
period following a Change of Control Event and to receive cash, in lieu of
exercising the Option, in the amount by which the highest "COC Fair Market
Value" (as hereinafter defined) of the number of shares of Common Stock covered
by the Option during the 60 days preceding the date on which the Change of
Control Event occurs exceeds the exercise price for the shares of Common Stock
covered by the Option. For this purpose, the "COC Fair Market Value" of the
Common Stock means the closing price of one share of Common Stock as reported on
the New York Stock Exchange Composite Tape. If the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, the COC Fair Market Value of
the Common Stock shall be the closing price of one share of Common Stock on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market of the Common Stock, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other system then in use, or, if on any such date the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices of the Common Stock as furnished by a professional market making a market
in the Common Stock selected by the Board. If on any such date no market maker
is making a market in the Common Stock or other Stock, the COC Fair Market Value
shall be determined in good faith by the Continuing Directors who are not
Disinterested Persons. For purposes of this Section 7.2:


                                       5



          (a)  "Change of Control Event" means any one of the following: (i)
Continuing Directors no longer constitute at least two-thirds of the Directors
constituting the Board; (ii) any person or groups (as defined in Rule 13d-5_
under the Securities Exchange Act of 1934, as amended ("Exchange Act")),
together with its affiliates, becomes the beneficial owner, directly or
indirectly, of 20% or more of Harley-Davidson, Inc.'s then outstanding Common
Stock or 20% or more of the voting power of Harley-Davidson, Inc.'s Directors;
(iii) the approval by Harley-Davidson, Inc.'s stockholders of the merger or
consolidation of Harley-Davidson, Inc. with any other corporation, the sale of
substantially all of Harley-Davidson, Inc.'s assets or the liquidation or
dissolution of Harley-Davidson, inc., unless, in the case of a merger or
consolidation, the Continuing Directors in office immediately prior to such
merger or consolidation constitute at least two-thirds of the directors
constituting the board of directors of the surviving corporation of such merger
or consolidation and any parent (as defined in Rule 12b-2 under the Exchange
Act) of such corporation; or (iv) at least two-thirds of the Continuing
Directors who are Disinterested Persons in office immediately prior to any other
action proposed to be taken by Harley-Davidson, Inc.'s stockholders or by the
Board determine that such proposed action, if taken, would constitute a change
of control of Harley-Davidson, Inc. and such action is taken; and

          (b)  "Continuing Director" means any individual who is either (i) a
member of the Board on the date hereof or (ii) a member of the Board whose
election or nomination to the Board was approved by a vote of at least two
thirds (2/3) of the Continuing Directors (other than a person whose election was
as a result of an actual or threatened proxy or other control contests).

                                  ARTICLE VIII

                                   ADJUSTMENTS

     8.1. If (a) the Company shall at any time be involved in a transaction to
which Section 424(a) of the Code is applicable; (b) the Company shall declare a
dividend payable in, or shall subdivide or combine, its Common Stock; or (c) any
other event shall occur which in the judgement of the Committee necessitates an
adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of securities subject to the Plan and which thereafter may be the subject
of Options; (ii) the number and type of securities subject to outstanding
Options; (iii) the Option Price with respect to any Option; and (iv) the number
of shares of Common Stock that may be issued pursuant to Options granted to an
Optionee in any calendar year; provided, however, that each such adjustment, in
the case of ISOs, shall be made in such manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the Code. The
judgement of the Committee with respect to any matter referred to in this
Article shall be conclusive and binding upon each Optionee.

                                   ARTICLE IX

                        AMENDMENT AND TERMINATION OF PLAN

     9.1. The Board may at any time, or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate, provided, however, that no such amendment shall be made, which
would, without approval of the shareholders:

          a. materially modify the eligibility requirements for receiving
Options;

          b.   increase the aggregate number of Shares of Common Stock which may
be issued pursuant to Options granted under the Plan, except as is provided for
in accordance with Article VIII of the Plan;

          c.   increase the number of shares of Common Stock which may be issued
pursuant to Options granted to an Optionee in any calendar year, except as is
provided for in accordance with Article VIII of the plan;


                                       6




          d.   reduce the minimum Option Price, except as is provided for in
accordance with Article VIII of the Plan;

          e.   extend the period of granting Options; or

          f.   materially increase in any other way the benefits accruing to
Optionees.

     9.2. No Amendment, suspension or termination of this Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations under
any Option theretofore granted to an Optionee under the Plan.

     9.3. The Board may amend this Plan, subject to the limitations cited above,
in such manner as it deems necessary to permit the granting of Options meeting
the requirements of future amendments or issued regulations, if any, to the
Code.

                                    ARTICLE X

                        GOVERNMENT AND OTHER REGULATIONS

     10.1. The obligation of the Company to issue or transfer and deliver shares
for Options exercised under the plan shall be subject to all applicable laws,
regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

     11.1. PLAN DOES NOT CONFER EMPLOYMENT OR SHAREHOLDER RIGHTS: The right of
the Employer to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved. Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a shareholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.

     11.2. PLAN EXPENSES: Any expenses of administering this Plan shall be borne
by the Company.

     11.3. USE OF EXERCISE PROCEEDS: Payments received from Optionees upon the
exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.

     11.4. INDEMNIFICATION: In addition to such other rights of indemnification
as they may have as members of the Board, or the Committee, the members of the
Committee and the Board shall be indemnified by the Company against all costs
and expenses reasonably incurred by them in connection with nay action, suit or
proceeding to which they or any of them may be party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgement in any such action,
suit or proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or proceeding a
Committee or Board member shall, in writing, give the Company notice thereof and
an Opportunity, at its own expense, to handle and defend the same before such
Committee or Board member undertakes to handle and defend it on such member's
own behalf.



                                       7



                                   ARTICLE XII

                    SHAREHOLDER APPROVAL AND EFFECTIVE DATES

     12.1. The Plan shall become effective when it is approved by the
shareholders of Harley-Davidson, Inc. at a shareholders meeting by the requisite
vote under New York Stock Exchange Rules, Internal Revenue Code Section 162(m)
and Rule 16b-3 under the Securities Exchange Act of 1934. Options may not be
granted under the Plan after May 6, 1995.



                                       8

EX-10.4

                                                                    EXHIBIT 10.4

                              HARLEY-DAVIDSON, INC.

                             1995 STOCK OPTION PLAN

                      (as amended through December 8, 1999)

                                    ARTICLE I

                                     PURPOSE

          The purpose of the Harley-Davidson, Inc. 1995 Stock Option Plan is to
provide favorable opportunities for certain selected employees of
Harley-Davidson, Inc. and its subsidiaries to purchase or receive shares of
Common Stock of Harley-Davidson, Inc., or to benefit from the appreciation
thereof. Such opportunities should provide an increased incentive for these
employees to contribute to the future success and prosperity of Harley-Davidson,
Inc., thus enhancing the value of the stock for the benefit of the shareholders,
and increase the ability of Harley-Davidson, Inc. to attract and retain
individuals of exceptional skill upon whom, in large measure, its sustained
progress, growth and profitability depend.

                                   ARTICLE II

                                   DEFINITIONS

     The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:

          2.1. BOARD: The Board of Directors of Harley-Davidson, Inc.

          2.2. CODE: The Internal Revenue Code of 1986, as amended.

          2.3. COMMITTEE: The human Resources Committee of the Board; provided
     that if any member of the Human Resources Committee is not both a
     Disinterested Person and Outside Director, the Committee shall be comprised
     of only those members of the Human Resources Committee who are both
     Disinterested Persons and Outside Directors.

          2.4. COMMON STOCK: The common stock of Harley-Davidson, Inc.

          2.5. COMPANY: Harley-Davidson, Inc. and any of its Subsidiaries.

          2.6. DISABILITY: Disability within the meaning of Section 22(e)(3) of
     the Code, as determined by the Committee.

          2.7. DISINTERESTED PERSONS: Non-employee directors within the meaning
     of Rule 16b-3 as promulgated under the Securities Exchange Act of 1934, as
     amended.

          2.8. EMPLOYER: The entity that employs the employee or Optionee.




          2.9. FAIR MARKET VALUE: The average of the high and low reported sales
     prices of Common Stock on the New York Exchange Composite Tape on the date
     for which fair market value is being determined.

          2.10. ISO: An incentive stock option within the meaning of Section 422
     of the Code and which is designated as an incentive option by the
     Committee.

          2.11. NON-ISO: A stock option which is not an ISO.

          2.12. OPTION: A stock option granted under the Plan. Options include
     both ISOs and Non-ISOs.

          2.13. OPTION PRICE: The purchase price of a share of Common Stock
     under an Option.

          2.14. OPTIONEE: A person who has been granted one or more Options.

          2.15. OUTSIDE DIRECTORS: Outside Directors within the meaning of
     Section 162(m) of the Code and the regulations promulgated thereunder.

          2.16. PARENT CORPORATION: The parent corporation, as define in Section
     424(e) of the Code.

          2.17. PLAN: The Harley-Davidson, Inc. 1995 Stock Option Plan.

          2.18. RETIREMENT: Retirement on or after age sixty-two or, with the
     consent of the Committee, at an earlier age.

          2.19. SUBSIDIARY: A corporation, limited partnership, general
     partnership, limited liability company, business trust or other entity of
     which more than fifty percent (50%) of the voting power or ownership
     interest is directly and/or indirectly held by the Harley-Davidson, Inc.

          2.20. TERMINATION DATE: A date fixed by the Committee but not later
     than the day preceding the tenth anniversary of the date on which the
     Option is granted.

                                   ARTICLE III

                                 ADMINISTRATION

          3.1. The Committee shall administer the Plan and shall have full power
to grant Options, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, which it
believes reasonable and proper.

          3.2. Subject to the provisions of the Plan, the Committee shall, in
its discretion, determine who shall be granted Options, the number of shares
subject to option under any




such Options, the dates after which Options, the dates after which Options may
be exercise, in whole or in part, whether Options shall be ISOs, and the terms
and conditions of the Options.

          3.3. Any decision made, or action taken, by the Committee arising out
of or in connection with the interpretation and administration of the Plan shall
be final and conclusive.

          3.4 To the extent permitted by applicable law, the Committee may, in
its discretion, delegate to the Chief Executive Officer of the Company any or
all of the authority and responsibility of the Committee under the Plan to grant
Options to employees of the Company or its affiliates and/or persons who have
been engaged to become employees of the Company or its affiliates, in each case
other than employees who are, or persons engaged to become employees who upon
employment will be, subject to the provisions of Section 16 of the Securities
and Exchange Act of 1934, as amended, at the time any such delegated authority
or responsibility is exercised. To the extent that the committee has delegated
to the Chief Executive Officer the authority and responsibility of the
Committee, all references to the Committee in the Plan other than in this
Section 3.4 shall include the Chief Executive Officer with respect to the
matters delegated. No such delegation shall preclude the Committee from
exercising the authority and responsibility delegated.

                                   ARTICLE IV

                           SHARES SUBJECT TO THE PLAN

          4.1. The total number of shares of Common Stock available for grants
of Options under the Plan shall be 15,200,000; provided that Options for not
more than 800,000 shares of Common Stock shall be granted to an Optionee in any
calendar year under the Plan, which amount shall be reduced by the amount of
Common Stock subject to options granted to such Optionee in such calendar year
under any other stock option plan of the Company. The foregoing amounts shall be
subject to adjustment in accordance with Article VIII of the Plan. If an Option
or portion thereof shall expire, be canceled or terminate for any reason without
having been exercised in full, the unpurchased shares covered by such Option
shall be available for future grants of Options. An Option, or portion thereof,
exercised through the exercise of a stock appreciation right pursuant to Section
6.7 of the Plan shall be treated, for the purposes of this Article, as though
the Option, or portion thereof, had been exercised through the purchase, that
was so exercised shall not be available for future grants of Options.

                                    ARTICLE V

                                   ELIGIBILITY

          5.1. Options may be granted to key employees of the Company or to
persons who have been engaged to become key employees of the Company. Key
employees will comprise, in general, those who contribute to the management,
direction and overall success of the Company, including those who are members of
the Board. Members of the Board who are not employees of the Company shall not
be eligible for Option grants.





                                   ARTICLE VI

                                 TERM OF OPTIONS

          6.1. OPTION AGREEMENTS: All Options shall be evidenced by written
agreements executed by the Company. Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe. All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the Option Price and the Termination Date. Those Options that
comply with the requirements for an ISO set forth in Section 422 of the Code and
are designated ISOs by the Committee shall be ISOs and all other Options shall
be Non-ISOs.

          6.2. OPTION PRICE: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock on the date the Option is granted.

          6.3. PERIOD OF EXERCISE: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after the
Termination Date.

          6.4. SPECIAL RULES REGARDING ISOS GRANTED TO CERTAIN EMPLOYEES:
Notwithstanding any contrary provisions of Sections 6.2 and 6.3 of the Plan, no
ISO shall be granted to any employee who, at the time the Option is granted,
owns (directly or indirectly, within the meaning of Section 424(d) of the Code)
more than ten percent of the total combined voting power of all classes of stock
of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a)
the Option Price under such Option is at least 110 percent of the Fair Market
Value of a share of Common Stock on the date the Option is granted and (b) the
Termination Date of such Option is a date not later than the day preceding the
fifth anniversary of the date on which the Option is granted.

          6.5. MANNER OF EXERCISE AND PAYMENT: An Option, or portion thereof,
shall be exercised by delivery of a written notice of exercise to the Company
and payment of the full price of the shares being purchased pursuant to the
Option. An Optionee may exercise an Option with respect to less than the full
number of shares for which the Option may then be exercised, but an Optionee
must exercise the Option in full shares of Common Stock. The price of Common
Stock purchased pursuant to an Option, or portion thereof, may be paid:

               a.   in United States dollars in cash or by check, bank draft or
     money order payable to the order of the Company.

               b.   through the delivery of shares of Common Stock with an
     aggregate Fair Market Value on the date of exercise equal to the Option
     Price, or




               c.   by any combination of the above methods of payment.

The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, including, without, limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.

          6.6. WITHHOLDING TAXES: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon or prior to
the exercise of an Option requiring tax withholding, an Optionee may make a
written election to have shares of Common Stock withheld by the Company from the
shares otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an Optionee
shall be at the sole discretion of the Committee. Where the exercise of an
Option does not give rise to an obligation to withhold Federal income taxes on
the date of exercise, the Company may, in it discretion, require an Optionee to
pay to the Company the amount that the Company deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes incurred by
reason of the exercise of the Option, in which case the shares of Common Stock
will be released from escrow to a written election to have shares of Common
Stock held in escrow applied toward the Company's obligation to withhold
Federal, state or local income or other taxes incurred by reason of the exercise
of the Option, based on the Fair Market Value of the shares on the date of the
termination of the escrow arrangement. Upon application of such shares toward
the Company's withholding obligation, any shares of Common Stock held in escrow
and not, in the judgment of the Committee, necessary to satisfy such obligation
shall be released from escrow to the Optionee.

          6.7. STOCK APPRECIATION RIGHTS: At or after the grant of an Option,
the Committee, in its discretion, may provide an Optionee with an alternate
means of exercising an Option, or a designated portion thereof, by granting the
Optionee a stock appreciation right. A "stock appreciation right": is a right to
receive, upon exercise of an Option or any portion thereof, in the Committee's
sole discretion, an amount of cash equal to, and/or shares of Common Stock
having a Fair Market Value on the date of exercise equal to, the excess of the
Fair Market Value of a share of Common Stock on the date of exercise over the
Option Price, multiplied by the number of shares of Common Stock that the
Optionee would have received had the Option or portion thereof been exercised
through the purchase of shares of Common Stock at the Option Price, provided
that (a) such Option or portion thereof has been designated as exercisable in
this alternative manner, (s) such Option or portion thereof is otherwise
exercisable, and (c) the Fair Market Value of a share of Common Stock on the
date of exercise exceeds the Option Price.

          6.8. NONTRANSFERABILITY OF OPTIONS: Except as may otherwise be
provided by the Committee, each Option shall, during the Optionee's lifetime, be
exercisable only by the Optionee, and neither it nor any right hereunder shall
be transferable otherwise than by will or




the laws of descent and distribution or be subject to attachment, execution or
other similar process. In the event of any attempt by the Optionee to alienate,
assign, pledge, hypothecate or otherwise dispose of an Option or of any right
hereunder, except as provided for herein, or in the event of any levy or any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the Option by notice to the Optionee and
the Option shall thereupon become null and void.

          6.9. CESSATION OF EMPLOYMENT OF OPTIONEE:

               a.   CESSATION OF EMPLOYMENT OTHER THAN BY REASON OF RETIREMENT,
          DISABILITY OR DEATH. Except as may be otherwise provided by the
          Committee, if an Optionee shall cease to be employed by the Company
          otherwise than by reason of Retirement, Disability, or death, (i) each
          Option held by the Optionee, together with all rights thereunder, that
          is not vested shall terminate on the date of cessation of employment,
          to the extent not previously exercised and (ii) the Optionee shall
          have a period of 90 days from the date of cessation of employment to
          exercise each Option held by the Optionee that is vested on the date
          of cessation of employment. At the end of such 90-day period, each
          such Option that has not been exercised, together with all rights
          thereunder, shall terminate, to the extent not previously exercised.

               b.   CESSATION OF EMPLOYMENT BY REASON OF RETIREMENT OR
          DISABILITY. If an Optionee shall cease to be employed by the Company
          by reason of Retirement or Disability, each Option held by the
          Optionee shall remain exercisable, to the extent it was exercisable at
          the time of cessation of employment, until the earliest of:

                    i. the Termination Date,

                    ii. the death of the Optionee, or such later date not more
               than one year after the death of the Optionee as the Committee,
               in its discretion, may provide pursuant to Section 6.9(c) of the
               Plan,

                    iii. the third anniversary of the date of the cessation of
               the Optionee's employment, if employment ceased by reason of
               Retirement, or

                    iv. the first anniversary of the date of the cessation of
               the Optionee's employment by reason of Disability;

          and thereafter all such Options shall terminate together with all
          rights hereunder, to the extent not previously exercised.

               c.   CESSATION OF EMPLOYMENT BY REASON OF DEATH. In the event of
          the death of the Optionee, while employed by the Company, an Option
          may be exercised at any time or from time to time prior to the earlier
          of the Termination Date or the first anniversary of the date of the
          Optionee's death, by the person or persons to whom the Optionee's
          rights under each Option shall pass by will or by the applicable laws
          of descent and distribution, to the extent that the Optionee was
          entitled to exercise such Option on the Optionee's




          date of death. In the event of the death of the Optionee while
          entitled to exercise an Option pursuant to Section 6.9(b), the
          Committee, in its discretion, may permit such Option to be exercised
          at any time or from time to time prior to the Termination Date during
          a period of up to one year from the death of the Optionee, as
          determined by the Committee, by the person or persons to whom the
          Optionee's rights under each Option shall pass by will of by the
          applicable laws of descent and distribution, to the extent that the
          Option was exercisable at the time of cessation of the Optionee's
          employment. Any person or person to whom an Optionee's rights under an
          Option have passed by will or by the applicable laws of descent and
          distribution shall be subject to all terms and condition of the Plan
          and the Option applicable to the Optionee.

          6.10. NOTIFICATION OF SALES OF COMMON STOCK: Any Optionee who disposes
of shares of Common Stock acquired upon the exercise of an ISO either (a) within
two years after the date of the grant of the ISO under which the stock was
acquired or (b) within one year after the transfer of such shares to the
Optionee, shall notify the Company of such disposition and of the amount
realized upon such disposition.

                                   ARTICLE VII

                 LIMITATIONS AND ACCELERATIONS ON EXERCISABILITY

          7.1. Notwithstanding any other provision of this Plan, in the case of
an ISO, the aggregate Fair Market Value (determined at the time the ISO is
granted) of the shares of Common Stock with respect to which all "incentive
stock options" (within the meaning of Section 422 of the Code) are first
exercisable by the Optionee during any calendar year (under this Plan and under
all other incentive stock option plans of the Employer, any Subsidiary and any
Parent Corporation) shall not exceed $100,000.

          7.2. Each Option granted under the Plan shall have a limited right of
surrender allowing the Optionee to surrender that Option within the 30-day
period following a Change of Control Event and to receive cash, in lieu of
exercising the Option, in the amount by which the highest "COC Fair Market
Value" (as hereinafter defined) of the number of shares of Common Stock covered
by the Option during the 60 days preceding the date on which the Change of
Control Event occurs exceeds the exercise price for the shares of Common Stock
covered by the Option. For this purpose, the "COC Fair Market Value" of the
Common Stock means the closing price of one share of Common Stock as reported on
the New York Stock Exchange Composite Tape. If the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, the COC Fair Market Value of
the Common Stock shall be the closing price of one share of Common Stock on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market of the Common Stock, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ")
or such other system then in use, or, if on any such date the Common Stock is
not quoted by any such organization, the average of the closing bid and asked
prices of the Common Stock as furnished by a professional market making a market
in the Common Stock selected by the Board. If on any such date no market




maker is making a market in the Common Stock or other Stock, the COC Fair Market
Value shall be determined in good faith by the Continuing Directors who are not
Disinterested Persons. For purposes of this Section 7.2:

               (a)  "Change of Control Event" means any one of the following:
          (i) Continuing Directors no longer constitute at least two-thirds of
          the Directors constituting the Board; (ii) any person or groups (as
          defined in Rule 13d-5) under the Securities Exchange Act of 1934, as
          amended ("Exchange Act")), together with its affiliates, becomes the
          beneficial owner, directly or indirectly, of 20% or more of
          Harley-Davidson, Inc.'s then outstanding Common Stock or 20% or more
          of the voting power of Harley-Davidson, Inc.'s Directors; (iii) the
          approval by Harley-Davidson, Inc.'s stockholders of the merger or
          consolidation of Harley-Davidson, Inc. with any other corporation, the
          sale of substantially all of Harley-Davidson, Inc.'s assets or the
          liquidation or dissolution of Harley-Davidson, Inc., unless, in the
          case of a merger or consolidation, the Continuing Directors in office
          immediately prior to such merger or consolidation constitute at least
          two-thirds of the directors constituting the board of directors of the
          surviving corporation of such merger or consolidation and any parent
          (as defined in Rule 12b-2 under the Exchange Act) of such corporation;
          or (iv) at least two-thirds of the Continuing Directors who are
          Disinterested Persons in office immediately prior to any other action
          proposed to be taken by Harley-Davidson, Inc.'s stockholders or by the
          Board determine that such proposed action, if taken, would constitute
          a change of control of Harley-Davidson, Inc. and such action is taken;
          and

               (b)  "Continuing Director" means any individual who is either
          (i) a member of the Board on the date hereof or (ii) a member of the
          Board whose election or nomination to the Board was approved by a vote
          of at least two-thirds (2/3) of the Continuing Directors (other than a
          person whose election was as a result of an actual or threatened proxy
          or other control contest).

                                  ARTICLE VIII

                                   ADJUSTMENTS

          8.1. If (a) the Company shall at any time be involved in a transaction
to which Section 424(a) of the Code is applicable; (b) the Company shall declare
a dividend payable in, or shall subdivide or combine, its Common Stock; or (c)
any other event shall occur which in the judgment of the Committee necessitates
an adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of securities subject to the Plan and which thereafter may be the subject
of Options; (ii) the number and type of securities subject to outstanding
Options; (iii) the Option Price with respect to any Option; and (iv) the number
of shares of Common Stock that may be issued pursuant to Options granted to an
Optionee in any calendar year; provided, however, that each such adjustment, in
the case of ISOs, shall be made in such manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the Code. The judgment
of the Committee with respect to any matter referred to in this Article shall be
conclusive and binding upon each Optionee.




                                   ARTICLE IX

                        AMENDMENT AND TERMINATION OF PLAN

          9.1. The Board may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the Board
may deem appropriate, provided, however, that no such amendment shall be made,
which would, without approval of the shareholders:

               a.   materially modify the eligibility requirements for receiving
          Options;

               b.   increase the aggregate number of Shares of Common Stock
          which may be issued pursuant to Options granted under the Plan, except
          as is provided for in accordance with Article VIII of the Plan;

               c.   increase the number of shares of Common Stock which may be
          issued pursuant to Options granted to an Optionee in any calendar
          year, except as is provided for in accordance with Article VIII of the
          plan;

               d.   reduce the minimum Option Price, except as is provided for
          in accordance with Article VIII of the Plan;

               e.   extend the period of granting Options; or

               f.   materially increase in any other way the benefits accruing
          to Optionees.

          9.2. No Amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to an Optionee under the Plan.

          9.3. The Board may amend this Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of Options
meeting the requirements of future amendments or issued regulations, if any, to
the Code.

                                    ARTICLE X

                        GOVERNMENT AND OTHER REGULATIONS

          10.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.





                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

          11.1. PLAN DOES NOT CONFER EMPLOYMENT OR SHAREHOLDER RIGHTS: The right
of the Employer to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved. Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a shareholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.

          11.2. PLAN EXPENSES: Any expenses of administering this Plan shall be
borne by the Company.

          11.3. USE OF EXERCISE PROCEEDS: Payments received from Optionees upon
the exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.

          11.4. INDEMNIFICATION: In addition to such other rights of
indemnification as they may have as members of the Board, or the Committee, the
members of the Committee and the Board shall be indemnified by the Company
against all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except a judgment based upon a finding
of bad faith; provided that upon the institution of any such action, suit or
proceeding a Committee or Board member shall, in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle and defend the
same before such Committee or Board member undertakes to handle and defend it on
such member's own behalf.

                                   ARTICLE XII

                    SHAREHOLDER APPROVAL AND EFFECTIVE DATES

          12.1. The Plan shall become effective when it is approved by the
shareholders of Harley-Davidson, Inc. at a shareholders meeting by the requisite
vote under New York Stock Exchange Rules, Internal Revenue Code Section 162(m)
and Rule 16b-3 under the Securities Exchange Act of 1934. Options may not be
granted under the Plan after April 26, 2005.

EX-10.7

                                                                    EXHIBIT 10.7


                                 HARLEY-DAVIDSON

                           DEFERRED COMPENSATION PLAN


                      AS RESTATED EFFECTIVE JANUARY 1, 2000





                                 HARLEY-DAVIDSON
                           DEFERRED COMPENSATION PLAN

                                TABLE OF CONTENTS




                                                                                                              Page
                                                                                                              ----
                                                                                                           
HARLEY-DAVIDSON  DEFERRED COMPENSATION PLAN......................................................................1

ARTICLE  I. DEFINITIONS    ......................................................................................2
         Section 1.1.      Administrator.........................................................................2
         Section 1.2.      Board.................................................................................2
         Section 1.3.      Change of Control Event...............................................................2
         Section 1.4.      Company...............................................................................2
         Section 1.5.      Continuing Director...................................................................3
         Section 1.6.      Deferred Benefit Account..............................................................3
         Section 1.7.      Plan..................................................................................3
         Section 1.8.      Plan Interest Rate....................................................................3

ARTICLE  II. ELIGIBILITY AND PARTICIPATION.......................................................................4
         Section 2.1.      Eligibility...........................................................................4
         Section 2.2.      Participation.........................................................................4
         Section 2.3.      Deferred Amount.......................................................................4
         Section 2.4.      Irrevocable Elections.................................................................5
         Section 2.5.      Effect of Change of Control Event.....................................................5

ARTICLE  III. INVESTMENT PROGRAMS FOR DEFERRED BENEFIT ACCOUNTS..................................................6
         Section 3.1.      Life Insurance Investment Program.....................................................6
         Section 3.2.      Diversified Investment Program........................................................6
         Section 3.3.      Participant Investment Directions.....................................................6
         Section 3.4.      Payroll Tax Withholding...............................................................7
         Section 3.5.      401(k) Matching Contribution Make Up Amounts..........................................7
         Section 3.6.      Unfunded Plan.........................................................................7
         Section 3.7.      Participant Statements................................................................7

ARTICLE  IV. DISTRIBUTIONS AND BENEFITS..........................................................................8
         Section 4.1.      Benefits Generally....................................................................8
         Section 4.2.      Benefits Upon Death...................................................................8
         Section 4.3.      Benefit Adjustments...................................................................9
         Section 4.4.      Payment of Benefits Upon Termination of Employment At or After Age 55.................9
         Section 4.5.      Changes to Payment Periods...........................................................10
         Section 4.6.      Beneficiary Designation..............................................................10
         Section 4.7.      Annual Payment Date..................................................................11
         Section 4.8.      Hardship Payments....................................................................11


                                      -i-



         Section 4.9.      Nonalienation........................................................................11
         Section 4.10.     Not a Contract of Employment.........................................................11

ARTICLE  V. RELATION TO DEFINED BENEFIT PLANS...................................................................12
         Section 5.1.      General..............................................................................12
         Section 5.2.      Lump Sum Payment Election............................................................12
         Section 5.3.      Lump Sum Payment Procedures; Small Payment Cash Out Rules............................12

ARTICLE  VI. MISCELLANEOUS .....................................................................................13
         Section 6.1.      Tax Withholding Upon Distribution....................................................13
         Section 6.2.      Amendment and Termination............................................................13
         Section 6.3.      Governing Law........................................................................13
         Section 6.4.      Binding Upon Successors..............................................................13



                                      -ii-





                                  INTRODUCTION

          Harley-Davidson, Inc. created the Deferred Compensation Plan,
effective October 1, 1988, to assist eligible employees of Harley-Davidson, Inc.
and its affiliates to defer income, while creating an enhanced death benefit,
until their retirement, death, or other termination of employment.

          Harley-Davidson Motor Company became the sponsor of the Plan in 1994.
Employees of Harley Davidson, Inc. and its affiliates remain eligible to
participate in the Plan.

          The Plan was amended and restated effective January 1, 1998, to
consolidate previous changes to the Plan.

          The Plan was amended and restated effective January 1, 1999, to add an
additional investment program and to enhance the certainty of payment of Plan
benefits in case of a change of control of Harley-Davidson, Inc. The Plan was
further amended effective January 1, 2000, to close Program A, the life
insurance investment program, to new deferral commitments effective January 1,
2000. All changes through January 1, 2000, are incorporated herein.






                             ARTICLE I. DEFINITIONS

          SECTION 1.1. ADMINISTRATOR. "Administrator" means the Retirement Plans
Committee appointed by the Board of Directors of Harley-Davidson Motor Company
Group, Inc. The Vice President--Controller of Harley-Davidson Motor Company
Group, Inc., or such Vice-President's delegate, is charged with the day-to-day
responsibility of administration of the Plan.

          SECTION 1.2. BOARD. "Board" means the board of directors of
Harley-Davidson, Inc.

          SECTION 1.3.CHANGE OF CONTROL EVENT. "Change of Control Event" means
any one of the following:

          (a)  Continuing Directors no longer constitute at least two-thirds
(2/3) of the members of the Board;

          (b)  Any person or group of persons (as defined in Rule 13d-5 under
the Securities Exchange Act of 1934), together with its affiliates, becomes the
beneficial owner, directly or indirectly, of twenty percent (20%) or more of the
then outstanding common stock of Harley-Davidson, Inc. or twenty percent (20%)
or more of the voting power of the then outstanding securities of
Harley-Davidson, Inc. entitled generally to vote for the election of the members
of the Board;

          (c)  The approval by the stockholders of Harley-Davidson, Inc. of the
merger or consolidation of Harley-Davidson, Inc. with any other corporation, the
sale of substantially all of the assets of Harley-Davidson, Inc., or the
liquidation or dissolution, of Harley-Davidson, Inc., unless, in the case of a
merger or consolidation, the then Continuing Directors in office immediately
prior to such merger or consolidation will constitute at least two-thirds (2/3)
of the directors of the surviving corporation of such merger or consolidation
and any parent (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934) of such corporation; or

          (d)  At least two-thirds (2/3) of the then Continuing Directors in
office immediately prior to any other action proposed to be taken by the
shareholders of Harley-Davidson, Inc. or by the Board determines that such
proposed action, if taken, would constitute a change of control of
Harley-Davidson, Inc. and such action is taken.

          SECTION 1.4. COMPANY. "Company" means Harley-Davidson Motor Company
Group, Inc.


                                      -2-



          SECTION 1.5. CONTINUING DIRECTOR. "Continuing Director" means any
individual who is either (i) a member of the Board on January 1, 1999, or (ii) a
member of the Board whose election or nomination to the Board was approved by a
vote of at least two-thirds (2/3) of the Continuing Directors (other than a
person whose election was as a result of an actual or threatened proxy or other
control contest).

          SECTION 1.6. DEFERRED BENEFIT ACCOUNT. "Deferred Benefit Account"
means the account established for each participant under the Plan comprised of
deferred compensation amounts as adjusted to reflect the net investment return
associated with such amounts, as determined under the Plan. The Deferred Benefit
Account established for a participant under the Life Insurance Investment
Program (Program A) is called the participant's "Deferred Benefit Account in
Program A." The Deferred Benefit Account established for a participant under the
Diversified Investment Program (Program B) is called the participant's "Deferred
Benefit Account in Program B." The amount credited under the Plan for a
participant pursuant to Section 3.5 is called the participant's "Harley-Davidson
Match Deferred Benefit Account."

          SECTION 1.7. PLAN. "Plan" means the Harley-Davidson Deferred
Compensation Plan.

          SECTION 1.8. PLAN INTEREST RATE. The "Plan Interest Rate" means, for
each twelve (12) consecutive months ending after September 1, the Moody's Long
Term Bond Rate in effect on such September 1 (or the last business day
immediately preceding such date if it is a Saturday, Sunday, or holiday).


                                      -3-




          ARTICLE II. ELIGIBILITY AND PARTICIPATION

          SECTION 2.1. ELIGIBILITY. Plan participation is limited to a select
group of management or highly compensated employees of the Company,
Harley-Davidson, Inc., or their affiliates. Coverage under the Plan also may be
extended to independent contractors engaged by the Company, Harley-Davidson,
Inc., or their affiliates under circumstances, terms, and conditions that are
specifically approved by the Administrator and included in such person's written
participation agreement. The Administrator determines eligibility and may adjust
the entry level requirements if necessary to assure that the Plan continues to
be exempt from the eligibility, vesting, and funding requirements of the
Employee Retirement Income Security Act of 1974, as amended.

          SECTION 2.2. PARTICIPATION.

          (a)  Eligible persons must complete written agreements annually in
order to participate. These agreements are called Deferred Compensation
Agreements. Deferred Compensation Agreements must be completed and filed with
the Administrator before the beginning of the calendar year for which they are
effective, except Deferred Compensation Agreements completed by newly-eligible
persons within thirty (30) days of becoming eligible for the first time under
the Plan may be effective immediately, but only as to compensation earned after
the date the Agreement is completed and filed with the Administrator.

          (b)  A person who ceases to be eligible for Plan participation cannot
elect any new deferrals under the Plan. Deferred Compensation Agreements in
effect at the time eligibility for Plan participation ceases may remain in
effect in accordance with their terms and the rules of the Plan.

          (c)  The Administrator makes all final decisions regarding eligibility
and compliance with the participation requirements.

          SECTION 2.3. DEFERRED AMOUNT.

          (a)  Deferred Compensation Agreements must designate the amount of
compensation that is to be deferred and indicate whether the deferred amount is
to be deducted from salary or bonus, or from both. Deferred Compensation
Agreements entered into prior to January 1, 2000, also shall specify whether any
amount deferred is part of the Diversified Investment Program, rather than the
Life Insurance Investment Program, as such programs are described in Article
III. The Life Insurance Investment Program is closed to new deferrals, effective
January 1, 2000.

          (b)  Each Agreement shall also specify the calendar year during which
the compensation deferral is to take place.

          (c)  The minimum aggregate deferral under each separate Agreement is
five thousand dollars ($5,000). Only specific dollar amounts of compensation may
be elected as part of any Agreement. The Administrator may, in its discretion,
prospectively adjust minimum and maximum levels of deferral for all
participants.


                                      -4-




          (d)  The participant's employer will make the corresponding reductions
in compensation and the Company will credit such amount to the participant's
Deferred Benefit Accounts, making appropriate records to distinguish amounts
held under the Life Insurance Investment Program and the Diversified Investment
Program.

          SECTION 2.4. IRREVOCABLE ELECTIONS. A participant's deferral election
is irrevocable except for substantial financial need of a participant due to
serious and unanticipated family health, education, or housing needs
("Hardship"). The Administrator, in the Administrator's discretion, upon
demonstration of Hardship, may permit prospective reduction of the participant's
compensation deferral election for a calendar year. A request for reduction in
the deferral amount due to Hardship must be submitted in writing, with evidence
of Hardship, to the Administrator. If the request for change is approved it will
be prospectively effective, only.

          SECTION 2.5. EFFECT OF CHANGE OF CONTROL EVENT. Upon the occurrence of
a Change of Control Event:

          (a)  All deferrals of compensation under the Plan shall cease. Amounts
that would otherwise be deferred will, instead, be paid to participants
currently as compensation.

          (b)  Deferred Benefit Accounts of all participants (whether employed,
terminated, or participants whose accounts are in pay status) shall be paid out
to all such participants within ten (10) business days after the Change of
Control Event. If payment is delayed beyond such payment deadline for any
reason, the balance to be paid out shall become fixed as of such tenth (10th)
day, except that such amount shall be increased in an amount equivalent to
interest on such fixed amount, to the date of actual payment, at a rate equal to
two times the Plan Interest Rate.


                                      -5-




         ARTICLE III. INVESTMENT PROGRAMS FOR DEFERRED BENEFIT ACCOUNTS

          SECTION 3.1. LIFE INSURANCE INVESTMENT PROGRAM.

          (a)  The Life Insurance Investment Program was the original investment
program that has been available under the Plan since 1988. Under the Life
Insurance Investment Program (sometimes referred to herein as "Program A") a
participant's deferred compensation amounts were used to establish a Deferred
Benefit Account in Program A that was credited with interest at the Plan
Interest Rate, and a death benefit (described in Article IV). The Life Insurance
Investment Program is closed to new deferrals effective January 1, 2000.
Effective at such time as the Administrator determines, a participant may elect
that the participant's Deferred Benefit Account under Program A shall cease
being deemed credited with interest at the Plan Interest Rate and shall
thereafter be deemed to be invested in accordance with Section 3.3.

          (b)  If a Program A Deferral Commitment is reduced, either for
Hardship or because of a Change of Control Event, the participant's death
benefit will be adjusted by the Administrator to reflect the reduced amount of
the compensation deferral. A participant whose Program A Deferral Commitment has
been reduced for Hardship may elect, prior to termination of employment, to
reinstate the participant's original deferral by paying to the Company the
difference between the reduced deferrals actually made and the originally
scheduled amount as described in the participant's original Program A Deferral
Commitment.

          SECTION 3.2. DIVERSIFIED INVESTMENT PROGRAM. The Diversified
Investment Program (sometimes referred to herein as "Program B") is added to the
Plan effective January 1, 1999. Under the Diversified Investment Program, the
participant's Deferred Benefit Account in Program B is deemed to be invested in
investment options made available by the Administrator and selected by the
participant in accordance with Administrator rules. The special death benefit
provisions of Sections 4.2 and 4.3 do not apply to a participant's Deferred
Benefit Account in Program B.

          SECTION 3.3. PARTICIPANT INVESTMENT DIRECTIONS.

          (a)  The participant investment direction provisions of this Section
apply to each participant's Deferred Benefit Account in Program B, the
participant's Harley-Davidson Match Deferred Benefit Account described in
Section 3.5, and, when elected by the participant in accordance with
Administrator rules, the participant's Deferred Benefit Account in Program A.

          (b)  The Administrator shall select and may prospectively change the
alternative investment options to be available for participant investment
direction under the Plan.

          (c)  Investment directions may be changed not less frequently than
once each year by participants. Any new or revised participant investment
direction, completed in accordance with Administrator rules, shall apply to all
of a participant's Deferred Benefit Accounts subject to participant investment
direction in the aggregate. A designated beneficiary may make investment
direction changes, in the event of the participant's death, in the same


                                      -6-




manner, before the beneficiary's interest in the Plan is fully paid out. The
Administrator may, from time to time, in its sole discretion, modify the minimum
notice period and maximum frequency of investment direction changes.

          SECTION 3.4. PAYROLL TAX WITHHOLDING. A participant's employer may
deduct from non-deferred compensation any taxes it is required to withhold on
deferred amounts unless such amounts are withheld directly from the amount of
compensation actually deferred.

          SECTION 3.5. 401(K) MATCHING CONTRIBUTION MAKE UP AMOUNTS.

The Company will also credit to the Harley-Davidson Match Deferred Benefit
Account of each participant a Company matching contribution in cash on amounts
deferred under this Plan in the same relative amount as is made to the
participant's pretax savings account in the Harley-Davidson Retirement Savings
Plan on amounts the participant has elected to defer under that plan. This
credit will be made as of the last day of the month in which the Company
matching contribution is deposited to the Retirement Savings Plan for a year.
The credit, and the earnings attributed to it, are subject only to the vesting
rules of the Retirement Savings Plan. Such amount shall not be deemed to be a
Company matching contribution to the Retirement Savings Plan for any
nondiscrimination testing purposes. A participant will not, under any
circumstances, be credited with an aggregate Company matching amount under this
Plan and the Retirement Savings Plan that is larger than the rate of matching
applicable for the year under the Retirement Savings Plan multiplied by six
percent (6%) of the participant's current and deferred compensation for such
year.

          SECTION 3.6. UNFUNDED PLAN. A participant's Deferred Benefit Accounts
are a means of measuring the value of the participant's deferred compensation.
The Accounts do not create a trust fund of any kind. Any assets earmarked by the
Company to pay benefits under this Plan do at all times remain assets of the
Company. A participant has no property interest in specific assets of the
Company because of the Plan. The rights of the participant, a beneficiary, or an
estate to benefits under the Plan shall be solely those of an unsecured creditor
of the Company.

          SECTION 3.7. PARTICIPANT STATEMENTS. Following the close of each year
the Administrator will provide statements of account to each participant.
Accounts shall be maintained, reported, and distributed in United States
Dollars.


                                      -7-




                     ARTICLE IV. DISTRIBUTIONS AND BENEFITS


          SECTION 4.1. BENEFITS GENERALLY. Except as otherwise provided in
Section 4.2 in case of death or in Section 4.4 in case of a termination of
employment at or after reaching age fifty-five (55), upon a participant's
termination of employment the Company will pay to the participant, as
compensation for prior services, an amount equal to the participant's aggregate
Deferred Benefit Accounts measured as of the last day of the month in which
employment terminated. Such payment shall be made in a single lump sum amount
within thirty (30) days following the termination of employment or as soon
thereafter as is administratively feasible.

          SECTION 4.2. BENEFITS UPON DEATH.

          (a)  Upon the death of a participant prior to termination of
employment, and before any periodic payments have started, the Company will pay
to the designated beneficiary of a participant with a Deferred Benefit Account
in Program A, as compensation for services rendered prior to the date of death,
a benefit equal to the participant's Deferred Benefit Account in Program A
measured as of the last day of the month coincident with or immediately
following the date of death or, if greater, a death benefit determined as
follows:




                                                Multiple of Program A Deferral
                      Age at                  Commitments Determined Separately
                     Deferral                   as to each deferral Commitment
                     --------                   ------------------------------
                                           
                    Through 45                                  5.0
                        46                                      4.8
                        47                                      4.6
                        48                                      4.4
                        49                                      4.2
                        50                                      4.0

                        51                                      3.8
                        52                                      3.6
                        53                                      3.4
                        54                                      3.2
                        55                                      3.0

                        56                                      2.8
                        57                                      2.6
                        58                                      2.4
                        59                                      2.2
                        60                                      2.0

                        61                                      1.8
                        62                                      1.6
                        63                                      1.4
                        64                                      1.2



                                      -8-







                                                Multiple of Program A Deferral
                      Age at                  Commitments Determined Separately
                     Deferral                   as to each deferral Commitment
                     --------                   ------------------------------
                                           
                    65 and over                                 1.0


          (b)  Upon the death of a participant prior to termination of
employment, and before any periodic payments have started, the Company will pay
to the designated beneficiary of a participant with any Deferred Benefit
Accounts other than in Program A, as compensation for service rendered prior to
the date of death, a benefit equal to the participant's Deferred Benefit
Accounts other than in Program A measured as of the last day of the month
coincident with or immediately following the date of death.

          (c)  Upon the death of a participant after termination of employment
and after the commencement of periodic payments under Section 4.4, but before
the completion of all such payments, the beneficiary entitled to receive such
payments may elect, subject to the discretion of the Administrator, to take an
immediate lump sum payment of any unpaid amounts due the beneficiary. The
Administrator shall have full discretion in determining whether or not to allow
such acceleration of payment to the beneficiary.

          (d)  Death benefits under (a) or (b) above are to be paid in ten (10)
annual installments. The amount to be distributed annually is determined by
multiplying the deceased participant's aggregate Deferred Benefit Account
balance by a fraction, the numerator of which is one (1) and the denominator of
which is the number of years remaining for the payments to be made (E.G., 1/10,
1/9, 1/8 etc.). Additional earnings are to be credited to amounts (other than
Deferred Benefit Accounts in Program A) during the installment payment period in
the same way earnings are credited while a participant is employed. No
additional earnings are credited during the installment payment period for any
death benefit amount that is determined as a multiple of a participant's Program
A Deferral Commitment.

          SECTION 4.3. BENEFIT ADJUSTMENTS. If there is a reduction in a Plan A
deferral commitment, or a premature distribution from a Deferred Benefit Account
in Program A due to Hardship, the Administrator will advise the participant as
to the corresponding effect on the participant's death benefit. If a participant
has made more than one deferral commitment under Program A, the participant's
death benefit will be separately determined for each commitment. A special rule
applies, however, for any participant who was not insurable for a death benefit
larger than the "guaranteed issue" amount available to the Company at standard
rates when the participant, prior to January 1, 2000, completed a Deferred
Compensation Agreement calling for a deferral commitment to Program A. In that
case, the affected participant's death benefit with respect to such deferral
commitment is limited to the greater of (i) the balance in the participant's
Deferred Benefit Account, attributable to such deferral commitment, or (ii) an
amount of death benefit able to be insured by the Company at standard rates at
the time the participant completed his or her Deferred Compensation Agreement
providing for such Program A deferral commitment.

          SECTION 4.4. PAYMENT OF BENEFITS UPON TERMINATION OF EMPLOYMENT AT OR
AFTER AGE 55.


                                      -9-



          (a)  A participant may select the number of years over which the
aggregate amount of the participant's Deferred Benefit Accounts is to be paid to
the participant upon termination of employment with the Company at or after age
fifty-five (55), up to a maximum of fifteen (15) years. Such election must be
made in writing filed with the Administrator prior to the initial deferral of
any amount hereunder, except as provided in (c) below. A participant may change
the participant's benefit payment election as described in Section 4.5. If no
valid election is in effect, then payment of the participant's aggregate
Deferred Benefit Accounts shall be made in ten (10) annual installments.

          (b)  The amount to be distributed annually is determined by
multiplying the aggregate balance of the participant's Deferred Benefit Account
by a fraction, the numerator of which is one (1) and the denominator of which is
the number of years remaining for the payments to be made (E.G., 1/10, 1/9, 1/8
etc.). Additional earnings are to be credited to a Deferred Benefit Account
during the installment payment period in the same way earnings are credited
while the participant is employed.

          (c)  Prior to January 1, 2000, each Deferred Compensation Agreement
separately required the election of a benefit payment period to apply if
payments commenced at or after age fifty-five (55). The number of possible
different elections that may be in effect for a participant after several years
of Plan participation presented complex administrative challenges that required
simplification. Accordingly, effective January 1, 2000, only a participant's
most recent valid benefit payment election will be recognized hereunder and it
will apply to the participant's Deferred Benefit Accounts in the aggregate. All
benefit payment elections made before the most recent valid election are void
and of no effect as of January 1, 2000, for any participant not then currently
in pay status (i. e., already receiving installment payments prior to January 1,
2000). Notwithstanding the foregoing simplification of the payment period
election process, any participant affected by this change may elect in writing
filed with the Administrator before January 1, 2001, a different installment
payment period (up to the maximum of fifteen (15) annual payments) to apply to
the participant's Deferred Benefit Accounts in the aggregate.

          SECTION 4.5. CHANGES TO PAYMENT PERIODS.

          (a)  A participant who has not previously made a benefit payment
period election, or who has a benefit payment period election already in effect,
may make an election or change an election, selecting a payment period of up to
fifteen (15) years.

          (b)  Except as provided in Section 4.4(c), any election or change of a
benefit payment period election must be made in writing and filed with the
Administrator not less than twelve (12) months before the date of the
participant's termination of employment with the Company.

          SECTION 4.6. BENEFICIARY DESIGNATION. All payments by the Company will
be made to the participant, if living. If the participant has died, then any
payment under the Plan will be made to the designated beneficiary of the
participant, which may include multiple beneficiaries. If such beneficiary dies
before receiving all payments due such beneficiary, any remaining payments will
be made to the designated beneficiary's estate unless a contingent beneficiary
was designated by the participant as to such amounts. If there is a contingent


                                      -10-



beneficiary payments will be made to the contingent beneficiary and, if such
contingent beneficiary dies, any remaining payments will be made to the
contingent beneficiary's estate. If there is no beneficiary designation in force
when Plan benefits become payable upon the death of a participant, payment shall
be to the participant's spouse, or if no spouse is then living, to the
participant's estate. All beneficiary designations must be made in writing and
acknowledged by the Administrator.

          SECTION 4.7. ANNUAL PAYMENT DATE. All installment payments by the
Company of Deferred Benefit Accounts hereunder will be made each year on a June
payroll date on the basis of account values determined as of the immediately
preceding March 31. The Administrator may make payments on other dates where
necessary due to Hardship, other special circumstances, or where authorized by
Administrator rule.

          SECTION 4.8. HARDSHIP PAYMENTS. The Administrator may, in his or her
sole discretion, upon the finding that the participant has suffered a Hardship
(as described in Section 2.4), distribute to the participant any portion of the
participant's Deferred Benefit Account as of such date that is appropriate to
the need created by the Hardship.

          SECTION 4.9. NONALIENATION. The right of a participant or any other
person to the payment of benefits under this Plan shall not be assigned,
transferred, pledged, or encumbered.

          SECTION 4.10. NOT A CONTRACT OF EMPLOYMENT. This Plan may not be
construed as giving any person the right to be retained as an employee of the
Company, Harley-Davidson, Inc., or any of their subsidiaries or affiliates.


                                      -11-



                  ARTICLE V. RELATION TO DEFINED BENEFIT PLANS


          SECTION 5.1. GENERAL. The Company will supplement the defined benefit
pension benefit that may be provided to each participant under the Company's
defined benefit pension plan with an amount equal to the pension benefit that
would have been earned by the participant on the amount of compensation deferred
by the participant under this Plan, had such amount been received as
compensation by the participant rather than deferred hereunder. Unless a
participant has elected an optional lump sum form of payment under this Article
V, such amount shall be paid in the same form of payment applicable to the
payment of benefits to the participant under the Company's defined benefit
pension plan. The supplemental pension amount described in this Section is
subject to the defined benefit pension plan's rules regarding determination of
amount and vesting. Under no circumstance will this provision be construed to
permit payment to a participant of an aggregate pension benefit, including this
supplemental pension benefit, that is larger than the pension benefit the
participant otherwise would have received if there had been no deferral election
under this Plan.

          SECTION 5.2. LUMP SUM PAYMENT ELECTION. A participant may elect, in
accordance with Administrator rules, prior to the calendar year in which
periodic payments under the Plan are otherwise to commence, to receive payment
of the participant's supplemental pension amount under this Article in a single
lump sum cash payment amount. The amount of such lump sum cash payment shall be
equal to the present value of the participant's supplemental pension under this
Article V determined on the assumption that two hundred forty (240) consecutive
monthly payments in the form of a single life annuity would otherwise be made,
commencing on the later of the first day of the month following the
participant's attainment of age fifty-five (55) or the employee's retirement
date and based on a reasonable interest rate assumption for this purpose,
determined by the Administrator, which shall be the "applicable interest rate"
used by the Company for purposes of its Pension Benefit Restoration Plan.

          SECTION 5.3. LUMP SUM PAYMENT PROCEDURES; SMALL PAYMENT CASH OUT
RULES. The Administrator shall establish rules and procedures to facilitate
making lump sum payment elections no later than the close of the calendar year
preceding the calendar year in which benefit payments are to commence. The
Administrator is authorized to cash out the present value of benefits using the
methodology of this Article V where the monthly payments that would otherwise be
made would be DE MINIMIS, as determined by the Administrator.


                                      -12




                           ARTICLE VI. MISCELLANEOUS


          SECTION 6.1. TAX WITHHOLDING UPON DISTRIBUTION. The Company will
withhold from all benefit payments all required taxes.

          SECTION 6.2. AMENDMENT AND TERMINATION. The Company may, at any time,
modify or amend the Plan by action of the Retirement Plans Committee that is
charged with responsibility for this Plan. The Company may, at any time,
terminate the Plan. The Company may not, however, reduce any benefit payment
obligation to a participant based on deferrals already made, without the
participant's consent. Plan amendments adopted pursuant to this section shall
govern all Deferred Compensation Agreements and Deferred Benefit Accounts
uniformly except to the extent otherwise specifically provided by such
amendment.

          SECTION 6.3. GOVERNING LAW. The Plan is to be construed under the laws
of the State of Wisconsin.

          SECTION 6.4. BINDING UPON SUCCESSORS. This Plan is binding upon the
Company and participants and their respective successors, assigns, heirs,
executors, and beneficiaries.



                                      HARLEY-DAVIDSON MOTOR COMPANY GROUP, INC.

                                      BY:
                                         ---------------------------------------
                                           Vice President--Controller

                                      Date:
                                           -------------------------------------


                                      -13

EX-10.17

                                                                   EXHIBIT 10.17



                              HARLEY-DAVIDSON, INC.

                         2001 YORK HOURLY-PAID EMPLOYEES

                                STOCK OPTION PLAN

                                   ARTICLE I

                                    PURPOSE

         The purpose of the Harley-Davidson, Inc. 2001 York Hourly-Paid
Employees Stock Option Plan is to provide favorable opportunities for non-exempt
employees at the Harley-Davidson Motor Company York, Pennsylvania facility
covered by the collective bargaining agreement as defined in Section 5.1 (the
"Collective Bargaining Agreement") to purchase shares of Common Stock of
Harley-Davidson, Inc. covered by the Collective Bargaining Agreement. Such
opportunities should provide an increased incentive for these employees to
contribute to the future success and prosperity of Harley-Davidson, Inc., thus
enhancing the value of the stock for the benefit of the shareholders.

                                   ARTICLE II

                                   DEFINITIONS

         The following capitalized terms used in the Plan shall have the
respective meanings set forth in this Article:

         2.1. BOARD: The Board of Directors of Harley-Davidson, Inc.

         2.2. CODE: The Internal Revenue Code of 1986, as amended.

         2.3. COMMITTEE: The Human Resources Committee of the Board.

         2.4. COMMON STOCK: The common stock of Harley-Davidson, Inc.

         2.5. COMPANY: Harley-Davidson, Inc. and any of its Subsidiaries.

         2.6. DISABILITY: Disability retirement under the Retirement Annuity
Plan for York Hourly-Paid Employees of Harley-Davidson.

         2.7. FAIR MARKET VALUE: The average of the high and low reported sales
prices of Common Stock on the New York Stock Exchange Composite Tape on the date
for which fair market value is being determined.

         2.8. NON-ISO: A stock option which is not an incentive stock option
within the meaning of Section 422 of the Code.



         2.9. OPTION: A stock option granted under the Plan.

         2.10. OPTION PRICE: The purchase price of a share of Common Stock under
an Option.

         2.11. OPTIONEE: A person who has been granted one or more Options.

         2.12. PARENT CORPORATION: The parent corporation, as defined in Section
424(e) of the Code.

         2.13. PLAN: The Harley-Davidson, Inc. 2001 York Hourly-Paid Employees
Stock Option Plan.

         2.14. RETIREMENT: Normal, deferred, early, or thirty and out retirement
under the terms of the Retirement Annuity Plan for York Hourly-Paid Employees of
Harley-Davidson.

         2.15. SUBSIDIARY: A corporation, limited partnership, general
partnership, limited liability company, business trust or other entity of which
more than fifty percent (50%) of the voting power or ownership interest is
directly and/or indirectly held by Harley-Davidson, Inc.

         2.16. TERMINATION DATE: A date fixed by the Committee but not later
than the day preceding the tenth anniversary of the date on which the Option is
granted.

                                  ARTICLE III

                                 ADMINISTRATION

         3.1. The Committee shall administer the Plan and shall have full power
to grant Options, construe and interpret the Plan, establish and amend rules and
regulations for its administration, and perform all other acts relating to the
Plan, including the delegation of administrative responsibilities, which it
believes reasonable and proper.

         3.2. Subject to the provisions of the Plan, the Committee shall, in its
discretion, determine who shall be granted Options, the number of shares subject
to option under any such Options, the dates after which Options may be
exercised, in whole or in part, and the terms and conditions of the Options.

         3.3. Any decision made, or action taken, by the Committee arising out
of or in connection with the interpretation and administration of the Plan shall
be final and conclusive.

                                   ARTICLE IV

                           SHARES SUBJECT TO THE PLAN

         4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be three hundred thousand (300,000) shares.

                                       2


                                   ARTICLE V

                                   ELIGIBILITY

         5.1. Options may be granted to all full time, regular, production and
maintenance employees of the Company covered by the collective bargaining
agreement in effect between the Company and Tyson Lodge 175, District 98, of the
International Association of Machinists & Aerospace Workers, AFL/CIO (or any
successor thereto).

                                   ARTICLE VI

                                 TERM OF OPTIONS

         6.1. OPTION AGREEMENTS: All Options shall be evidenced by written
agreements executed by the Company. Such Options shall be subject to the
applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe. All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the date of the grant, the Option Price and the Termination Date.
All Options shall be Non-ISOs.

         6.2. OPTION PRICE: The Option Price shall be set by the Committee;
provided, however, that the price per share shall not be less than the Fair
Market Value of a share of Common Stock as of the date the Option is granted.

         6.3. PERIOD OF EXERCISE: The Committee shall determine the dates after
which Options may be exercised in whole or in part. If Options are exercisable
in installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee may also amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after the
Termination Date.

         6.4. MANNER OF EXERCISE AND PAYMENT: An Option, or portion thereof,
shall be exercised by delivery of a written notice of exercise to the Company
and payment of the full price of the shares being purchased pursuant to the
Option. An Optionee may exercise an Option with respect to less than the full
number of shares for which the Option may then be exercised, but an Optionee
must exercise the Option in full shares of Common Stock. The price of Common
Stock purchased pursuant to an Option, or portion thereof, may be paid:

                  a. in United States dollars in cash or by check, bank draft or
         money order payable to the order of the Company.

                  b. through the delivery of shares of Common Stock with an
         aggregate Fair Market Value on the date of exercise equal to the Option
         Price, or

                  c. by any combination of the above methods of payment.

The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of

                                       3


Common Stock to exercise an Option as it deems appropriate, including, without
limitation, any limitation or prohibition designed to avoid certain accounting
consequences which may result from the use of Common Stock as payment upon
exercise of an Option.

         6.5. WITHHOLDING TAXES: The Company may, in its discretion, require an
Optionee to pay to the Company at the time of exercise the amount that the
Company deems necessary to satisfy its obligation to withhold Federal, state or
local income or other taxes incurred by reason of the exercise. Upon or prior to
the exercise of an Option requiring tax withholding, an Optionee may make a
written election to have shares of Common Stock withheld by the Company from the
shares otherwise to be received. The number of shares so withheld shall have an
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such election by an Optionee
shall be at the sole discretion of the Committee.

         6.6. NONTRANSFERABILITY OF OPTIONS: Each Option shall, during the
Optionee's lifetime, be exercisable only by the Optionee and neither it nor any
right hereunder shall be transferable otherwise than by will or the laws of
descent and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or of any right hereunder,
except as provided for herein, or in the event of any levy or any attachment,
execution or similar process upon the rights or interest hereby conferred, the
Company may terminate the Option by notice to the Optionee and the Option shall
thereupon become null and void.

         6.7. CESSATION OF EMPLOYMENT OF OPTIONEE:

                  a. CESSATION OF EMPLOYMENT OTHER THAN BY REASON OF RETIREMENT,
         DISABILITY OR DEATH. . Except as may be otherwise provided by the
         Committee, if an Optionee shall cease to be employed by the Company
         otherwise than by reason of Retirement, Disability, or death, (i) each
         Option held by the Optionee, together with all rights thereunder, that
         is not vested shall terminate on the date of cessation of employment,
         to the extent not previously exercised and (ii) the Optionee shall have
         a period of 90 days from the date of cessation of employment to
         exercise each Option held by the Optionee that is vested on the date of
         cessation of employment. At the end of such 90-day period, each such
         Option that has not been exercised, together with all rights
         thereunder, shall terminate, to the extent not previously exercised."

                  b. CESSATION OF EMPLOYMENT BY REASON OF RETIREMENT OR
         DISABILITY. If an Optionee shall cease to be employed by the Company by
         reason of Retirement or Disability, each Option held by the Optionee
         shall remain exercisable, to the extent it was exercisable at the time
         of cessation of employment, until the earliest of:

                           i. the Termination Date,

                                       4


                           ii. the death of the Optionee, or such later date not
                  more than one year after the death of the Optionee as the
                  Committee, in its discretion, may provide pursuant to Section
                  6.7(c) of the Plan,

                           iii. the third anniversary of the date of the
                  cessation of the Optionee's employment, if employment ceased
                  by reason of Retirement, or

                           iv. the first anniversary of the date of the
                  cessation of the Optionee's employment by reason of
                  Disability;

and thereafter all such Options shall terminate together with all rights
hereunder, to the extent not previously exercised.

                  c. CESSATION OF EMPLOYMENT BY REASON OF DEATH. In the event of
         the death of the Optionee while employed by the Company, an Option may
         be exercised at any time or from time to time prior to the earlier of
         the Termination Date or the first anniversary of the date of the
         Optionee's death, by the person or persons to whom the Optionee's
         rights under each Option shall pass by will or by the applicable laws
         of descent and distribution, to the extent that the Optionee was
         entitled to exercise such Option on the Optionee's date of death. In
         the event of the death of the Optionee while entitled to exercise an
         Option pursuant to Section 6.7(b), the Committee, in its discretion,
         may permit such Option to be exercised at any time or from time to time
         prior to the Termination Date during a period of up to one year from
         the death of the Optionee, as determined by the Committee, by the
         person or persons to whom the Optionee's rights under each Option shall
         pass by will or by the applicable laws of descent and distribution, to
         the extent that the Option was exercisable at the time of cessation of
         the Optionee's employment. Any person or persons to whom an Optionee's
         rights under an Option have passed by will or by the applicable laws of
         descent and distribution shall be subject to all terms and conditions
         of the Plan and the Option applicable to the Optionee.

                                  ARTICLE VII

                                   ADJUSTMENTS

         7.1. If (a) the Company shall at any time be involved in a transaction
to which Section 424(a) of the Code is applicable; (b) the Company shall declare
a dividend payable in, or shall subdivide or combine, its Common Stock, or (c)
any other event shall occur which in the judgment of the Committee necessitates
an adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee may,
in such manner as it may deem equitable, adjust any or all of (i) the number and
type of securities subject to the Plan and which thereafter may be the subject
of Options; (ii) the number and type of securities subject to outstanding
Options; (iii) the Option Price with respect to any Option; and (iv) the number
of shares of Common Stock that may be issued pursuant to Options granted to an
Optionee in any calendar year. The judgment of the Committee with respect to any
matter referred to in this Article shall be conclusive and binding upon each
Optionee.

                                       5


                                  ARTICLE VIII

                        AMENDMENT AND TERMINATION OF PLAN

         8.1. The Board may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the Board
may deem appropriate.

         8.2. No amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to an Optionee under the Plan.

         8.3. The Board may amend this Plan, without the limitation, in such
manner as it deems necessary to permit the granting of Options meeting the
requirements of future amendments or issued regulations, if any, to the Code.

                                   ARTICLE IX

                        GOVERNMENT AND OTHER REGULATIONS

         9.1. The obligation of the Company to issue or transfer and deliver
shares for Options exercised under the Plan shall be subject to all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by governmental entities and the stock exchanges on which Common Stock
is traded.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

         10.1. PLAN DOES NOT CONFER EMPLOYMENT OR SHAREHOLDER RIGHTS: The right
of the Company to terminate (whether by dismissal, discharge, retirement or
otherwise) the Optionee's employment with it at any time at will, or as
otherwise provided by any agreement between the Company and the Optionee, is
specifically reserved. Neither the Optionee nor any person entitled to exercise
the Optionee's rights in the event of the Optionee's death shall have any rights
of a shareholder with respect to the shares subject to each Option, except to
the extent that, and until, such shares shall have been issued upon the exercise
of each Option.

         10.2. PLAN EXPENSES: Any expenses of administering this Plan shall be
borne by the Company.

         10.3. USE OF EXERCISE PROCEEDS: Payments received from Optionees upon
the exercise of Options shall be used for the general corporate purposes of the
Company, except that any stock received in payment may be retired, or retained
in the Company's treasury and reissued.

         10.4. INDEMNIFICATION: In addition to such other rights of
indemnification as they may have as members of the Board or the Committee of the
Company, the members of the Board and the Committee shall be indemnified by the
Company against all costs and expenses reasonably incurred by them in connection
with any action, suit or proceeding to which they or


                                       6


any of them may be party by reason of any action taken or failure to act under
or in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith; provided that upon the institution
of any such action, suit or proceeding a Board member or the Committee shall, in
writing, give the Company notice thereof and an opportunity, at its own expense,
to handle and defend the same before such Board member or Committee undertakes
to handle and defend it on such member's own behalf.

                                   ARTICLE XI

                                 EFFECTIVE DATE

         11.1. The Plan shall become effective when it is approved by the Board.


                                       7

EX-21

Exhibit 21

HARLEY-DAVIDSON, INC.
SUBSIDIARIES

Name			State/Country of Incorporation
H-D Michigan, Inc.			Michigan
	Harley-Davidson Motor Company Group, Inc.		Wisconsin
		Harley-Davidson Motor Company Operations, Inc.	Wisconsin
		Harley-Davidson Motor Company, Inc.	Wisconsin
		RPT, LLC	Delaware
Harley-Davidson Transportation Co., Inc.			Delaware
Harley-Davidson Foreign Sales Corporation			Barbados
Harley-Davidson Dealer Systems, Inc.			Ohio
Harley-Davidson International Holding Co., Inc.			Wisconsin
Harley-Davidson Holding Co., Inc.			Delaware
	Harley-Davidson Benelux B.V.		Netherlands
	Harley-Davidson France SAS		France
	Harley-Davidson GmbH		Germany
	Harley-Davidson Japan, KK		Japan
	Harley-Davidson Europe Limited		England
	Harley-Davidson do Brazil Ltda.		Brazil
	Harley-Davidson Italia, S.r.l.		Italy
	Harley-Davidson Singapore, Inc.		Delaware
Buell Motorcycle Company, Inc.			Wisconsin
Buell Distribution Corporation			Wisconsin
Renovation Realty Investment Services, Inc.			Wisconsin
Highland Insurance Service, Inc.			Wisconsin
HR, LLC			Indiana
Harley-Davidson Financial Services, Inc.			Delaware
	Harley-Davidson Insurance Services, Inc.		Nevada
		Harley-Davidson Insurance Services of Illinois, Inc.	Illinois
	Harley-Davidson Credit Corp.		Nevada
		Harley-Davidson Customer Funding Corp.	Nevada
		Harley-Davidson Funding Corporation	Nevada
		Eaglemark Bank, N.A.	Nevada
		Harley-Davidson Leasing, Inc.	Nevada
		Harley-Davidson Mortgage, Inc.	Nevada
		Eaglemark Customer Funding Corporation-II	Nevada
		Eaglemark Customer Funding Corporation-III	Nevada
		Eaglemark Customer Funding Corporation-IV	Nevada
	Eaglemark International, Inc.		Delaware
		ODBH Limited	United Kingdom

EX-23

Exhibit 23

Consent of Ernst & Young LLP, Independent Auditors

    We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-33449, No. 33-35311, No. 33-48581, No. 333-07551, No. 333-51741,No. 333-75347 and No. 333-93879) pertaining to (a) the Harley-Davidson, Inc. 1986 Stock Option Plan and the Harley-Davidson, Inc. 1988 Stock Option Plan; (b) the Harley-Davidson Retirement Savings Plan for Salaried Employees, the Harley-Davidson Retirement Savings Plan for Milwaukee and Tomahawk Hourly Bargaining Unit Employees, and the Holiday Rambler LLC Employees Retirement Plan; (c) the Harley-Davidson, Inc. 1990 Stock Option Plan; (d) the Harley-Davidson, Inc. 1995 Stock Option Plan; (e) the Harley-Davidson, Inc. 1998 Director Stock Plan; (f) the Harley-Davidson, Inc. 1998 Stock Option Plan (g) the Harley-Davidson Retirement Savings Plan for Salaried Employees, the Harley-Davidson Retirement Savings Plan for Milwaukee and Tomahawk Hourly Bargaining Unit Employees, the Harley-Davidson Retirement Savings Plan for Kansas City Hourly Bargaining Unit Employees, the Harley-Davidson Retirement Savings Plan for York Hourly Bargaining Unit Employees and the Buell Motorcycle Company Retirement Savings Plan of our report dated January 17, 2001, with respect to the consolidated financial statements and schedule of Harley-Davidson, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2000.

ERNST & YOUNG LLP

Milwaukee, Wisconsin
March 28, 2001