Harley opening Thailand plant
PRESIDENT Donald Trump has held up Harley-Davidson as a pillar of US manufacturing. “We’re proud of you! Made in America, Harley-Davidson,” Trump said to the company’s leather-clad top executives in February as five of its motorcycles rumbled on the White House lawn.
But even as he praised Harley-Davidson’s all-American credentials, the company was busily building a new plant – in Thailand.
Harley-Davidson, an icon of American style and know-how, serves as an example of the nuanced economic realities that are pushing US companies to lay off workers at home and set up new factories overseas. Unions representing its workers accuse the company of cutting US jobs to hire lower-paid foreign workers. Yet global trade barriers and proximity to a growing base of new customers also play roles, complexities inherent in Trump’s ambition to overhaul trade policy.
Motorcycles made in the new factory – plans for which had not been previously disclosed – will be sold in Asia, not the US, which its domestic plants will continue to serve, Harley-Davidson said.
“This is absolutely not about taking jobs out of the United States,” said Marc D McAllister, a managing director of international sales at Harley-Davidson based in Singapore. “This is about growing our business in Asia.”
Still, unions representing its workers in the United States are not pleased.
“Why couldn’t we build them in the US and export them?” asked Leo W Gerard, the international president of the United Steelworkers, which represents Harley-Davidson workers at plants in Wisconsin and Missouri. He expressed concern that the company could be entering a “race to the bottom” in pursuit of lower labour costs.
“It’s a slap in the face to the US workers who built an American icon,” said Robert Martinez Jr, the international president of the International Association of Machinists and Aerospace Workers. The union represents Harley-Davidson workers at plants including one in York, Pennsylvania, where the company plans to lay off over 100 workers.
Harley-Davidson argues that steep trade barriers in a high-growth market, not a desire to cut US jobs, drove the move. Southeast Asia offers rapid development and increasingly affluent spenders, but many countries in the region levy high tariffs on imported goods that make its motorcycles prohibitively expensive, the company says.
“Building bikes in the US and exporting them does not get us the benefits that we’re talking about when it comes to the tariff barriers,” said McAllister, a 22-year veteran of the company.
Harley says the new Thailand plant will help it serve more Asian riders like Akaravech Chotinaruemol, a retired financial analyst in Bangkok who collects Harleys and enjoys taking them on winding road trips in Thailand’s rural north. For him, nothing else compares to the sound and sensation of riding a Harley.
“I only ride Harley-Davidson,” he said, “and nothing else.”
Despite Harley-Davidson’s all-American reputation, the Thai plant will not be its first abroad – or even in Asia. The company opened a similar plant in India in 2011 to help it get around that country’s 100 percent tariff on imported motorcycles. It also assembles motorcycles at a plant in Brazil and has a wheel factory in Australia. The Thailand plant will assemble motorcycles for Asia that were previously imported from India or the US.
Harley-Davidson’s made-in-Thailand bikes will avoid the country’s up to 60 percent tariff on imported motorcycles. They would also get a huge break on tariffs when exported to Thailand’s neighbours, thanks to a trade deal among the 10 members of the Association of Southeast Asian Nations, or Asean.
The Thai plant is also intended to help serve a vast market in mainland China. Asean is pursuing an enlarged free-trade area with Beijing. And McAllister of Harley-Davidson said the Thai plant would lower the transport and shipping time to the Chinese market to around five to seven days, from 45 to 60 days from the US.
For big companies, “the economics are increasingly compelling, and Asean is again attracting the lion’s share of foreign direct investment into Asia, after China had been the primary destination for many years,” said Frederic Neumann, a co-head of Asian economic research at HSBC in Hong Kong.
By contrast, many of those nations charge steep tariffs on foreign-made goods like Harley motorcycles.
Trump in February used those trade barriers to illustrate the obstacles US manufacturers face when they sell abroad, a central argument as he pushed to renegotiate US trade deals. Four weeks after the Harley-Davidson executives visited the White House, Trump said in a speech to Congress that he had asked them about international sales.
“They told me – without even complaining, because they have been so mistreated for so long that they’ve become used to it – that it’s very hard to do business with other countries because they tax our goods at such a high rate,” he said.
But the month before, citing its potential impact on US workers, Trump killed the Trans-Pacific Partnership, a trade deal that would have slashed the tariffs Harley-Davidson faced in Vietnam and Malaysia to zero. The company had been a supporter of what would have been the 12-nation pact.