Trump tweets criticism of Harley

President says company surrendered by moving production

Problems for Harley-Davidson include difficulty modeling future demand
Riders depart Harley-Davidson’s Milwaukee headquarters on the first leg of the MDA Ride for Life.

Last updated on July 2nd, 2019 at 09:08 pm

President Donald Trump continued his criticism of Milwaukee-based Harley-Davidson Inc. Tuesday on Twitter, after saying on Monday the company had surrendered by choosing to shift some production overseas.

Harley announced Monday it would move production of motorcycles destined for the European Union to international facilities in Brazil, India and Thailand. The decision came in response to the EU announcing an increase in tariffs on Harley motorcycles from 6 percent to 31 percent.

Harley said the tariffs would increase the average price of a motorcycle by $2,200 and the company wouldn’t pass along the cost to dealers or consumers. The EU’s actions were in response to Trump’s tariffs on steel and aluminum.

Trump took to Twitter Tuesday to comment on Harley’s plans to move production.

But for Harley the back-and-forth of the trade dispute poses a significant business risk. The increased costs of the European tariffs would cost the company up to $100 million an annualized basis, a potential 2 percentage point hit to its operating profit margin. Those costs are on top of up to $20 million in increased raw material costs prompted by the steel and aluminum tariffs.

Harley determined passing the costs on to dealers and consumers in Europe would have “an immediate and lasting detrimental impact on its business.” While increasing international production was not its preference, it was the best option for maintaining a viable business in Europe, where nearly 40,000 Harley’s were sold last year.

Trump said in a tweet Monday he was surprised Harley “would be the first to wave the White Flag,” adding the company should be patient.

The president returned to the topic Tuesday morning, tweeting five times about Harley and trade. Trump claimed Harley had announced earlier this year it would move “much of their plant operations in Kansas City to Thailand.”

A company spokesman did not immediately respond to requests for comment on the latest string of tweets and declined to elaborate on the company’s decision Monday, pointing to the company’s securities filings instead.

Harley is closing its Kansas City plant where it assembled its smaller Sportser and Softail platforms, eliminating 800 jobs. The company said in February it would move the work to its facility in York, Pennsylvania, where it already makes its larger touring models. About 400 jobs are expected to be added in York.

Harley is opening a new facility in Thailand this year. Like similar facilities in Brazil and India, the new plant will assemble motorcycles for international markets. Harley says those facilities are necessary to get around tariffs in Asian and South American markets and would not be able to sell as many motorcycles internationally without them.

The Milwaukee Journal Sentinel, however, reported in May that unions representing workers at the Kansas City plant believe some of their jobs are going to Thailand. The company denied any connection between the two actions.

Trump is familiar with Harley’s challenges in international markets. He cited the 100 percent tariff the company faces in some countries during an address to a joint session of Congress in early 2017, just days after company executives made a visit to the White House.

He referenced that meeting in one of his Tuesday morning tweets.

Harley’s international production, however, isn’t aimed at selling motorcycles into the United States. The company has had a complete-knock-down assembly facility in Brazil since 1999. The company ships parts into the country and completes final assembly there to avoid some tariff costs.

A major portion of Harley’s strategy for the next nine years also focuses on growing the international portion of the business to 50 percent of the total. International sales accounted for about 40 percent of the 241,498 motorcycles Harley shipped last year.

The company is also trying to add 150 to 200 new international dealership between 2016 and 2020. Harley has added a net of nearly 70 dealerships outside the United States since the end of 2015 and is also opening brand apparel stores in China and India.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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