Trump blasts Harley plan to shift some production outside US

Daniel Fowler
June 26, 2018

To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for European Union destinations from the U.S.to its worldwide facilities to avoid the tariff burden.

Harley-Davidson will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe, it said.

"We are now assessing the potential impact on our United States facilities", said Harley-Davidson spokesman Michael Pflughoeft. Bikes built at these facilities for European customers won't be subject to the new EU tariffs, which came after President Donald Trump instituted steep tariffs on European steel and aluminum coming into the United States.

The company told the US Securities and Exchange Commission that the European Union's reaction to Trump's steel tariffs, which will add $2,200 (Rs 1.5 lakh) to the average cost of a motorcycle exported from the United States to Europe, will cost it up to $100 million (Rs 682 crore) more over the next two years.

Harley forecast the EU's retaliatory tariffs would cost the company $US90 million ($121 million) to $US100 million ($135 million) a year.

The company, which is to give more details on the move next month when it reports second-quarter earnings, has been moving some production overseas for years, somewhat eroding its image as an iconic American brand.

Europe is H-D's second-biggest market (guess the first), having sold 40,000 bikes there in 2017.

Mr Trump vowed to make the iconic motorcycle maker great again when he took office past year, meeting company executives at the White House and thanking them "for building things in America". But since then the company has been counting the costs of his trade policy.

US President Donald Trump's tweeted his disappointment at Harvey-Davidson's decision which he characterised as the company waving the white flag of defeat.

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"We are now assessing the potential impact on our USA facilities", Michael Pflughoeft, a company spokesman, said in an email.

Harley has warned consistently against tariffs, saying they would negatively impact sales.

Harley said ramping up production overseas could take at least nine to 18 months.

Brown-Forman fell to its lowest level in nearly seven months on Monday.

The company chose to build the Thailand plant in response to Trump's decision to pull out from the Trans-Pacific Partnership which would have lowered import tariffs on its bikes in some of the fastest-growing motorcycle markets in Asia.

The company has assembly plants in the United States, India and Brazil, and will open a new plant in Thailand in the summer.

United Steelworkers, a labor union representing some of the motorcycle maker's USA employees, said Monday that Harley-Davidson had long since begun to shift its manufacturing operations overseas.

In January, it said it would consolidate its Kansas City, Missouri, plant into its York, Pennsylvania, facility.

In late April, Harley said Mr Trump's metal tariffs would inflate its costs by US$15 million to US$20 million this year on top of already rising raw material prices that it expected at the start of the year. Paul Ryan, the Republican speaker of the House of Representatives, hails from Harley's home state of Wisconsin, while Senate Majority Leader Mitch McConnell represents Kentucky, a major maker of bourbon. On a full-year basis, the company estimates the aggregate annual impact due to the European Union tariffs to be approximately $90 to $100 million.

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