American success story’Harley-Davidson to shift production out of U.S. to avoid Trump’s trade war
The EU’s tariffs retaliating against Trump’s steel andaluminum levies will cost Harley about $2,200 per bike shipped to Europe
June 25, 2018
11:31 AM EDT
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‘American success story’ Harley-Davidson to shift productionout of U.S. to avoid Trump’s trade war
President Donald Trump’s trade war with the European Unionis undermining Harley-Davidson Inc., a manufacturer he embraced soon aftertaking office,
by costing the company as much as US$100 million a year andspurring a shift in motorcycle production out of the U.S.
The EU’s tariffs retaliating against Trump’s steel andaluminum levies will cost Harley about US$2,200 per bike shipped to Europe,according to a Monday filing.
Passing that on to dealers or customers would cause an“immediate and lasting detrimental impact” on the company’s business in itssecond-largest market, so it’ll bear the brunt of the expense.
There’s a lot of irony here, to put it mildly
While Trump has repeatedly claimed that the U.S. can wintrade wars, victims are starting to pile up at home and abroad.
Daimler AG warned last week that escalating tension betweenthe U.S. and China will impair earnings its Alabama SUV plant and lower profitthis year. Harley tied its higher costs to a sequence started by Trump, whopraised the company as a model American manufacturer during a February 2017meeting at the White House.
“A company that is as connected to America, and Americana,as Harley is probably going to be laying off U.S. workers in favor of foreignworkers and going to be losing money as a result of this,” James Hardiman, anequity research analyst with Wedbush Securities, said by phone from New York.“There’s a lot of irony here, to put it mildly.”
Harley, stungby tariffs, shifts some production overseas
EU to taxHarleys, bourbon and other US goods from Friday
Harley didn’t specify which international plants will boostoutput for EU markets. The company operates manufacturing facilities in Brazil,India and Australia,
and is beginning production in Thailand this year.
“We are currently assessing the potential impact on our U.S.facilities,” Michael Pflughoeft, a company spokesman, said in an email.
“We are hopeful the U.S. and EU governments will continue towork together to reach an agreement on trade issues and rescind these tariffs.”
Harley estimated facing US$30 million to US$45 million incosts linked to the tariffs for the remainder of 2018.
Analysts project the company will earn about US$591 millionthis year on US$5 billion of revenue.
Harley estimated that ramping up output in internationalplants for the EU may take at least nine to 18 months.
While the company said it’s committed to making motorcyclesin the U.S., it suggested it has no other choice but to move production fromits home market.
The company sold almost 40,000 bikes in Europe last year,and the continent’s share of total deliveries was the highest since 2011.
“Increasing international production to alleviate the EUtariff burden is not the company’s preference, but represents the onlysustainable option to make its motorcycles accessible
to customers in the EU and maintain a viable business inEurope,” the company said in the filing.
Harley shares fell as much as 4.2 per cent and were down 4per cent to US$42.45 as of 10:35 a.m. in New York. The stock is down 17 percent this year.
The EU’s tariffs are only the latest blowback Harley hasfaced from Trump’s trade policies. The company has warned the president’stariffs on steel and aluminum will drive up raw materials costs.
Chief Executive Officer Matt Levatich also was a supporterof the Trans-Pacific Partnership, which could have lowered barriers in some ofthe largest markets for motorcycles in the world.
Trump withdrew from the long-planned trade pact in January2017.
The week after he pulled the U.S. out of the TPP, Trumphosted Levatich and other Harley executives and union leaders for a
White House listening session and held the motorcycle makerup as an “American success story.”
“So thank you, Harley-Davidson, for building things inAmerica,” Trump said at the time.
A U.S. motorcycle sales slump has deepened since then,spurring Harley’s decision in January to close a plant in Kansas City,Missouri, eliminating about 260 jobs.
The European Commission in Brussels gave final approval lastmonth for a 25 per cent duty on 2.8 billion euros (US$3.2 billion) of EUimports covering a range of U.S.
products including Harley motorcycles, Levi Strauss &Co. jeans and bourbon whiskey. Paul Ryan, the Republican speaker of the Houseof Representatives,
hails from Harley’s home state of Wisconsin, while SenateMajority Leader Mitch McConnell represents Kentucky, a major maker of bourbon.
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