YOU MEAN ’CAUSE OF THAT THAR TRUMP THEM BIKES ARE GOING TO BE MADE OVERSEAS ….. QUICK, GIT A ROPE!

Harley-Davidson to Shift Production Overseas to Offset EU Tariffs

By Bob Tita

The Wall Street Journal
June 25, 2018

Harley-Davidson Inc. plans to shift more production overseas to avoid European Union tariffs on its iconic motorcycles, the latest manufacturer to reconfigure operations amid a widening global trade fight.

Harley prizes its made-in-the-USA reputation as central to its appeal to customers all over the world. But the Milwaukee company has opened factories in Brazil, India and Australia to tap international markets and hold down prices as sales falter in the U.S.

That manufacturing footprint outside the U.S. is set to expand. Harley said in a securities filing Monday the 31% tariff the EU enacted last week on its motorcycles would raise the cost of each Hog it ships there from the U.S. by about $2,200. Rather than raise prices, Harley said it would shift production of the motorcycles it sells in the EU outside the U.S. over the next 18 months.

“Expanding international production to alleviate the EU tariff burden is not our preference, but it’s the only sustainable option we have to make motorcycles available and affordable to EU customers,” Harley spokesman Michael Pflughoeft said.

Harley’s shares fell 6% on Monday to $41.57.

President Donald Trump criticized the company’s move. “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” he wrote in a tweet. “I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade.” He added: “Taxes just a Harley excuse - be patient!”

The tariffs by the EU, Harley’s second-biggest market after the U.S., are a response to tariffs the Trump administration imposed this spring on steel and aluminum from producers in Europe and elsewhere.

EU officials retaliated by placing tariffs on many U.S. products including those with strong American branding, such as Harleys, Levi’s jeans and Kentucky bourbon. A spokesman for the European Commission, the EU’s executive arm, declined to comment Monday on Harley’s plans.

The White House on Monday defended its trade policy in the wake of Harley’s announcement. “The European Union is attempting to punish U.S. workers with unfair and discriminatory trade policies,” White House press secretary Sarah Sanders said. “President Trump will continue to push for free, fair and reciprocal trade in the hopes that the EU will join us in that.”

The tariffs are a tough blow for Harley, which has struggled to lift sales. Chief Executive Matthew Levatich has made a priority of boosting overseas sales as ridership in the U.S. stalls and the company’s die-hard fans age.

Harley on Monday urged U.S. and EU officials to reach an agreement to rescind their tariffs.

Harley’s international sales rose for the first time in over a year in the company’s first quarter, by 0.2% annually. Harley wants to boost its international business to half of its annual sales volume over the next decade, from about 40% currently.

U.S. sales fell by 12% in the quarter, continuing a downward trend in recent years. Harley has aimed to boost its U.S. customer base by promoting motorcycle-riding classes and trying to recruit more women and minority riders.

Mr. Levatich has said that it can’t price its motorcycles competitively without opening plants abroad to avoid tariffs and take advantage of lower manufacturing costs in some markets.

Harley was already planning to shrink its U.S. manufacturing base. Earlier this year the company said it would close a factory in Kansas City and consolidate production at plants in Milwaukee and York, Pa. The first layoffs at the Kansas City plant are scheduled for August.

Joe Capra, a district representative for the International Association of Machinists union in Kansas City, said Harley’s response to the EU tariffs and the company’s plan for a plant in Thailand confirmed it aims to siphon production from the U.S.

Mr. Pflughoeft, the Harley spokesman, said the company remained committed to making motorcycles in the U.S.—and to expanding its reach abroad. “To do that, we must provide riders greater access to our brand and our products,” he said. “And we have to do that at a competitive retail price.”

Other companies are also navigating hurdles that the tariffs have thrown up for their international supply chains and sales. Luxury German car manufacturer Daimler AG DMLRY -2.44% warned that tariffs China placed on vehicles it makes in the U.S. would hurt revenue and profit from its Alabama factory that makes SUVs.

Cummins Inc., which imports components from its factories in China for further assembly at its U.S. plants, is weighing whether to raise prices to reflect the 25% tariff the U.S. is implementing on those products July 6.

Harley-Davidson said it expects costs related to the tariffs to reach up to $45 million for the rest of 2018 and about $90 million to $100 million annually thereafter.

“This will make their manufacturing less efficient,” said Sharon Zackfia, an analyst for William Blair & Co. “It’s just another headache for Harley.”

George Gatto, a longtime Harley dealer in the Pittsburgh area, had mixed feelings about the plans to shift production abroad. “I am a big proponent of made in U.S.A. and good-paying union jobs,” he said. “People with these jobs are many times the same people who buy and ride Harley-Davidson motorcycles.”

But, he said, faced with steep tariffs in Europe, Harley needs to do whatever it takes to stay competitive.

EDITOR’S NOTE: So much for that bullshit about the tariff on steel bringing jobs back to America.