Berlin agency courts Harley-Davidson for factory in Germany.
European plant unlikely with tariffs in place
A German economic development agency is courting Harley-Davidson Inc., saying Berlin would be a prime location for the company to locate a motorcycle factory in the European Union.
German press reports say Stefan Franzke, managing director of the agency Berlin Partners, sent a letter to Harley CEO Matt Levatich, touting the German capital as a place that attracts “highly qualified talents from all over the world.”
Berlin Partners promised Harley-Davidson a grant to open a factory, according to Spiegel Online, one of Germany’s most widely read online news sources, citing Franzke’s letter.
Berlin already has a BMW motorcycle factory, the letter said, and the city “is the capital of Europe’s strongest economy ... a hotspot right in the heart of the European Union.”
“But most importantly, Berlin is the city of freedom,” noted the letter, dated July 4.
A spokesman for Berlin Partners, a private-public partnership that works with hundreds of companies, said Levatich received the letter but hasn’t yet responded.
Harley-Davidson did not immediately respond to Milwaukee Journal Sentinel questions about the Berlin offer.
The world’s largest manufacturer of heavyweight motorcycles recently said it was moving production of bikes destined for the European Union to its international factories, located in Thailand, Brazil and India, in response to 31 percent tariffs the EU has imposed on bikes made in the U.S.
The EU has begun rolling out tariffs on American imports, including Harleys, bourbon, peanut butter and orange juice. The tariffs on $3.4 billion worth of U.S. products are retaliation for duties President Donald Trump imposed on European steel and aluminum.
But industry analysts say it wouldn’t make sense for Harley to open a factory in Germany, or anywhere else in the European Union, unless the company was certain the tariffs were long-lasting.
“It’s hard to imagine a situation where you would have that virtual certainty,” said analyst Sharon Zackfia with William Blair Co.
“I just think it’s too early in this discussion to be talking about a European plant,” she added.
Harley-Davidson recently said it hoped the U.S. and the EU would reach a trade agreement that would make the tariffs on its bikes disappear.
About 16 percent of all new Harleys are sold in Europe, the company’s second-strongest market behind the U.S. Harley-Davidson has viewed the European Union as a growth opportunity, going wheel-to-wheel with Euro competitors Ducati, Triumph and BMW, and Japanese motorcycle manufacturers.
But “absent any sweeteners, I don’t think any European Union country would be attractive for manufacturing, given the rigid labor laws and high cost of production,” said analyst Gerrick Johnson with BMO Capital Markets.
“I think the better way to go is to generate more throughput in India, and to build out the Thai plant so that it can fulfill EU demand,” Johnson said.
The uncertainty of tariffs is a problem for Harley-Davidson, and other companies, because it’s hard to run a business when the rules keep changing, said analyst Craig Kennison with Milwaukee-based Robert W. Baird & Co.
Based on the current demand for heavyweight motorcycles, however, Harley doesn’t need another factory right now, according to Kennison.
“In time, anything is possible,” he said, but “no chance Harley-Davidson will build bikes in Germany for American riders. Every bike sold in the U.S. will be made in America.”
It’s not surprising that Berlin made a pitch for a Harley factory, said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce.
“I think it’s a smart, timely thing for them to do.
“If the shoe were on the other foot, we would put together the same letter,” Sheehy said.