Published: Tue, June 26, 2018
Finance | By Jaime Brady

Harley Moves Production to Europe to Avoid Tariffs

Harley Moves Production to Europe to Avoid Tariffs

President Donald Trump sharply criticized American motorbike manufacturer Harley-Davidson's decision today to shift some of its production overseas, a move the company said it is making in order to avoid the president's tariffs.

"Harley has opted not to raise prices, instead bearing the $90 million to $100 million annual cost of the tariffs in the short term", the Journal explained.

"Harley-Davidson expects ramping up production in global plants will require incremental investment and could take at least nine to 18 months to be fully complete", the company said.

The EU is Harley's most important market outside of the US, accounting for 40,000 sales in 2017. From the company's statements, it plans to continue to manufacture parts for motorcycles in the US and ship them to Thailand for assembly, as it does for facilities in Brazil and India.

Harley-Davidson's stock dipped 6 percent on Monday as it became embroiled in a raging trade dispute between the USA and Europe, which accounts for a significant amount of its sales.

Harley-Davidson's warning is a huge blow for the Republican President, who says he is safeguarding jobs in the US's industrial hotspots.

"The company built its reputation and image by making motorcycles here, and if the company wants to continue to market itself as an iconic American brand both at home and overseas, it needs to focus on U.S. production", he added.

President Donald Trump late on Monday went after iconic American motorcycle company Harley-Davidson after the company announced it was moving some production out of the US.

Harley-Davidson employs more than 6,000 people globally. Harley fell 2.2% on Friday as European Union tariffs against Harley took effect.

The EU's tariffs were a direct response to the Trump administration's tariffs placed against steel and aluminum exports from Europe.

Trump signs order to reverse family separation policy at US-Mexico border
It's not clear how this was allowed to slip through the careful White House protocols but it's a mistake on the part of her staff. Since Trump's executive order , Democrats have argued his search for a way out of one humanitarian crisis merely created another.

Trump backflips on separating migrant kids, families
Democrats oppose both measures as harsh. "It may be a compromise with the devil, but it is not a compromise with the Democrats". Immigrations and Customs Enforcement (ICE) has set up a hotline for parents to call after they are released from custody.

England training note suggests Raheem Sterling will be dropped against Panama
The FC panel try to wrap their head around a leaked team sheet that revealed Marcus Rashford could replace Raheem Sterling in the England squad to face Panama .

Harley's entry-level bike in France now costs 7,490 euros (S$11,939).

They did not say which countries production will be moved to. Outside the United States, Harley-Davidson already has or is constructing facilities in Brazil, Thailand, Australia and India, with its site in India producing a number of models for the European market. At the high end, the additional cost from the European tariffs would represent a 2 percentage point reduction in Harley's operating profit margin from past year.

What is Harley-Davidson doing?

Europe is a critical market for Harley-Davidson.

Harley estimated facing US$30 million to US$45 million in costs linked to the tariffs for the remainder of 2018.

The EU threatened that its payback for those levies would be to boost taxes on U.S. motorcycles, Levi Strauss jeans and bourbon whiskey.

It also did not say which US factories would be affected.

Harley-Davidson's move is one of the most visible consequences of the trade disputes triggered by President Trump's decision to levy tariffs on steel and aluminium imports.

Harley-Davidson felt that if it passed on the cost increase to dealers and customers it would have an immediate negative impact on its business in the European Union, including threatening the sustainability of its dealers' businesses.

"A company that is as connected to America, and Americana, as Harley is probably going to be laying off US workers in favor of foreign workers and going to be losing money as a result of this", said James Hardiman, an equity research analyst with Wedbush Securities.

Like this: