Harley-Davidson took an unaccustomed skid on Wednesday after warning of lower-than-expected earnings and announcing a cut in production of its distinctive motorcycles.

Shares of the Milwaukee-based company were 17 per cent lower at $48.84 in New York at noon, pushing Harley's market value back below General Motors. Harley overtook the world's biggest carmaker last month after GM sharply lowered its profit estimates.

Building on 19 consecutive years of record revenue and profits, Harley reported record first-quarter earnings of $227.2m, or 77 cents a share, up from $204.6m, or 68 cents, a year earlier. Revenues climbed by almost 6 per cent.

But US motorcycle sales were ”relatively flat” in the first quarter, falling short of expectations. Second quarter earnings are now likely to be lower than last year, while earnings for the year as a whole are expected to grow by about 5-8 per cent, down from the earlier projection of a 15 per cent increase.

Harley now expects to ship 329,000 bikes this year, 3.7 per cent more than in 2004 but 10,000 units fewer than its previous estimate. The drop in output will occur almost entirely in the second quarter.

The cutback could jeopardise Harley's goal of reaching a production rate of 400,000 bikes in 2007. Still, Jim Ziemer, chief financial officer who will shortly take over as chief executive, said that “we see no reason to change our long-term unit growth projection of 7-9 per cent annually based on just three winter months of sales data”.