Harley-Davidson plans for motorcycle tariffs to cut profit
The motorcycle maker says tariffs will add up to $55 million to its 2018 costs
Harley-Davidson Inc. said its profit would take a hit this year as tariffs compound a long sales slump for the motorcycle maker.
Harley said its costs would increase by up to $55 million this year as the Milwaukee-based manufacturer pays more for steel and aluminum used to make its motorcycles in the U.S. and pays higher duties on Hogs it exports from the U.S. to Europe.
“We are working with the administration and all the governments we can to do the best we can to get these tariffs removed,” Harley Chief Executive Matt Levatich told investors on Tuesday.
Harley said its operating margin, a measure of profitability, would be 9% to 10% this year, down from a previous forecast of 9.5% to 10.5%.
Still, Harley shares rose 7.7% to $44.73 as the company’s pershare earnings surpassed analyst estimates. Before Tuesday, the stock had fallen 19% this year amid slowing U.S. sales and concerns about the impact from tariffs.
In June, Harley said it would move more motorcycle production overseas to avoid European Union duties applied in response to Trump administration tariffs on foreign steel and aluminum.
President Donald Trump and union leaders have criticized Harley’s move, saying the company was betraying its made-inAmerica heritage and using the tariffs as an excuse to shift production to countries with lower costs. Mr. Levatich on Tuesday defended the decision, which he said was made to keep down the cost of its motorcycles in Europe. “We made the best de- cision given the circumstances,” he said.
Harley’s sales in Europe and other foreign markets have become increasingly important as sales stall at home.
Harley’s U.S. retail sales fell 6.4% to 46,490 motorcycles in the second quarter, while international sales rose 0.7% to 31,938 including a 3.6% increase in sales to Europe. The company said its global motorcycle shipments fell 11% in the latest quarter, but Harley maintained its forecast of shipping 231,000 to 236,000 motorcycles this year.
The company’s share of the U.S. market for big motorcycles slipped to 48.4% in the second quarter from 50.4% in the first.
Harley has told investors that its future depends on getting new customers abroad. The company hopes up to 100 new and updated models can help attract 2 million U.S. riders over the next decade, while also boosting international sales to 50% of Harley’s total from 38% now.
“We know global consumer needs and interests are shifting, and we know we needed to shift our thinking with bold actions,” Mr. Levatich said.
The company’s latest quarter ended on July 1, about a week after the EU’s motorcycle tariffs went into effect, so the impact on the financial results released Tuesday were limited.
Harley had said that until it shifts production abroad, it will cover the cost of the tariffs rather than raise prices in the EU.
That will add up to about $2,200 per motorcycle and a total of up to $35 million this year, Harley said.
Pricier steel and aluminum in the U.S. will cost Harley up to $20 million more than planned this year, Harley said. Prices for domestic flat-rolled steel in the U.S. have risen by more than 30% this year in response to a 25% U.S. tariff on imported steel.
Overall, Harley’s revenue from motorcycles and accessories fell 3.3% in the second quarter to $1.53 billion.
Harley posted a profit of $242.4 million, or $1.45 a share, compared with $258.9 million, or $1.48 a share, a year earlier. Excluding certain costs, the company reported per-share earnings of $1.52.