Harley to shift output to plants outside US

HARLEY-DAVIDSON, up against spiraling costs from tariffs, will begin to shift the production of motorcycles headed for Europe from the US 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 US$3.4 billion worth of US 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 US 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 EU last year, generating revenue second only to the US, according to the Milwaukee company.

The maker of the iconic American motorcycle said in a regulatory filing on Monday that EU tariffs on its motorcycles exported from the US jumped between 6 percent and 31 percent, which translates into an additional, incremental cost of about US$2,200 per average motorcycle exported from the US to the EU.

“Harley-Davidson maintains a strong commitment to US-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.”

The company 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 around US$30 million to US$45 million.

Harley-Davidson said that shifting targeted output from the US to overseas facilities could take at least nine to 18 months to be completed.

The company is already struggling with falling sales. US motorcycle sales peaked at above 1.1 million in 2005 but then fell in the recession.