Harley-Davidson is staying in York.

The company's board of directors voted Thursday morning to approve a contract with its York union, announcing shortly thereafter it is aborting its efforts to relocate and is staying in York.

In a company statement, Harley president and CEO Keith Wandell said a new labor agreement, approved by the plant's union on Wednesday, is critical to making a restructured York operation "competitive and sustainable for the future."

"On behalf of the company, I want to thank the employees at York for their vote to make the changes necessary to create a more flexible and efficient operation, and we look forward to moving ahead together to achieve that goal," Wandell said.

Harley workers were smiling and

cheering when they left the York Expo Center, after the votes were counted and it was clear the "yeas" had scored an overwhelming victory.

But there was a layer of discontent under the smiles; most of the workers don't like the contract.

About half of the union members who voted to approve it - half of the people smiling and cheering - are going to be laid off because of it.

And in exchange for seven years of job security for less than half of them, there will soon be the reality of working under the belt-tightening terms to which they just agreed.

The company said Thursday the new York operation will be consolidated into one building and focused on the core areas of motorcycle assembly, metal fabrication and paint.

The operation will have a smaller, more flexible workforce, the number of hourly employees reduced from about 1,950 to 1,000.

That number includes 200 to 300 unionized casual employees who are called to work as needed.

The number of salaried employees will be cut from 270 to 150, the company said in the statement.

When fully operational in 2012, the restructuring is expected to save the company about $100 million in annual operating savings, the company said.

The restructuring is expected to cost

about $200 million. It will spend about $90 million on capital improvements to consolidate facilities, the company said.

The amount reflects about $15 million in state incentives committed by Gov. Ed Rendell for capital improvements and training, the company said.

"I want to acknowledge and thank Pennsylvania Gov. Rendell and his team for their support of the changes we are embarking on at York," Wandell said. "They have been terrific to work with throughout our decision-making process."

Rendell's office said Wednesday it was happy with the outcome of the union vote.

"Given the plant's importance to not only the regional economy but the state's economy, the governor feels that we owe them a debt of gratitude for their vote," Smith said. "They showed remarkable flexibility in working with Harley to keep the plant open and ensure that it can prove competitive in the long run."

A victory? Those who remain after the plant is restructured will pay more for insurance, go without raises, lose vacation time and have fewer paid holidays. They will have no right to strike, and they'll have to do more jobs than they used to. Some people will have to take tests to see whether they can keep their job, regardless of how long they've already been doing it.

The company will introduce a sick-time and absenteeism policy later. Union leader Tom Santone said he doesn't know whether that's going to be "reasonable."

He acknowledged there was "nothing to like" about the contract, and that some of his union brothers and sisters are upset because it strips workers of rights they fought to earn over decades of bargaining.

But still, Santone wouldn't directly answer whether he classified this vote - 1,587 to 193 - as a win or a loss for the International Association of Machinists and Aerospace Workers District 98, which represents the 1,950 production workers.

"Even though we're going to have a loss of jobs, if Harley completely moved out it would have been devastating in this area," he said.

Santone said the company had created "the perfect storm," threatening to relocate if the York plant couldn't operate more efficiently. The threat made workers concerned enough about their job, their family and the community to vote for the contract, he said.

Union members were also enticed by the $10,000 severance bonus the contract puts forth for people who are laid off; it would provide some buffer for those who are facing unemployment, he said.

Aside from that consolation, the only real victory is for the York community, a community which he conceded has been very critical of the union work force, he said.

As for the union, he said, it's alive to fight another day.

-Reach Christina Kauffman at 505-5436 or ckauffman@yorkdispatch.com.