Driving away
Harley, stung by tariffs, shifts some production overseas
Harley-davidson, up against spiraling costs from tariffs, will begin to shift the production of motorcycles headed for Europe from the U.S. to factories overseas.
The European Union on Friday began rolling out tariffs on American imports like bourbon, peanut butter and orange juice. The EU tariffs on $3.4 billion worth of U.S. products are retaliation for duties the Trump administration is imposing on European steel and aluminum.
President Donald Trump has used Harley-davidson as an example of a U.S. business that is being harmed by trade barriers. Yet Harley has warned consistently against tariffs, saying they would negatively impact sales.
Harley-davidson Inc. sold almost 40,000 motorcycles in the European Union last year, generating revenue second only to the United States, according to the Milwaukee company.
The maker of the iconic American motorcycle said in a regulatory filing Monday that EU tariffs on its motorcycles exported from the U.S. jumped between 6 per cent and 31 per cent, which translates into an additional, incremental cost of about $2,200 per average motorcycle exported from the U.S. to the EU.
“Harley-davidson maintains a strong commitment to U.s.based manufacturing which is valued by riders globally,” the company said in prepared remarks. “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles
accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harleydavidson.”
Harley-davidson will not raise its prices to avert “an immediate and lasting detrimental impact” on sales in Europe, it said. It will instead absorb a significant amount of the cost in the near term. It anticipates the cost for the rest of the year to be approximately $30 million to $45 million.
Harley-davidson said that shifting targeted production from the U.S. to international facilities could take at least nine to 18 months to be completed.
The company is already
struggling with falling sales. In January, it said it would consolidate its Kansas City, Missouri, plant into its York, Pennsylvania, facility. U.S. motorcycle sales peaked at more than 1.1 million in 2005 but then plummeted during the recession.
Asked about the Harley decision Monday, Wisconsin Gov. Scott Walker addressed the issue of tariffs in general but not specifically the situation faced by the company.
“The ultimate goal, if we could get there, is no tariffs or if anything few tariffs on anything,” said Walker, a Republican. “That’s what I’m going to push for, ways that we can get to a level playing field then we
don’t have this tit for tat on any number of products out there.”
Increasing foreign investment in the United States, something Walker was in Washington advocating for at a U.S. Department of Commerce event last week, will also help reduce the trade imbalance and need for tariffs, he said.
More potential pitfalls for Harley-davidson and other U.S. manufacturers could be on the way.
Last week German automaker Daimler AG cut its 2018 earnings outlook, a change that it says is partly due to increased import tariffs for U.S. vehicles in China. Daimler produces vehicles in the U.S.