Harley-Davidson has thrown a stainless-steel wrench in Donald Trump’s tariff gears.
The fallout from the president’s misguided economic nationalism has prompted the $7 billion American motorcycle-manufacturing icon to move US production of its European Union-bound bikes overseas. It’s a rational response to stupid policy — and one that serves Harley’s longer-term interests.
Last year the company based in the industrial heart of Republican Speaker of the House Paul Ryan’s home state of Wisconsin sold almost 40,000 bikes in Europe.
It’s the company’s largest overseas market and growing, with sales in the Europe, Middle East and Africa region rising almost 7 per cent in the first three months of this year.
And they’re all currently made in the Milwaukee-based company’s four US manufacturing plants.
Overseas growth is needed to offset domestic sales, which plummeted more than 12 per cent in the first quarter after an 8.5 per cent slowdown in 2017. The irony is that Trump’s trade wars are putting some of Harley’s hometown jobs at risk.
The EU’s retaliatory tariffs, which went into effect last Friday, will add an extra $2,200 per bike on average to Hogs shipped to the continent, reckons the company.
Chief Executive Matthew Levatich has decided to swallow the $100 million or so of annual costs, rather than pass them on to customers, during the 18 months he needs to shift production to facilities in Brazil, India or Thailand.
Trump’s stated aim is to encourage or cajole businesses to create more US jobs.
Few companies are as entwined with American culture as Harley, which celebrates its 115th anniversary this year.
Think Peter Fonda astride his Captain America chopper in “Easy Rider,” or Kurt Russell’s Snake Plissken on a Sportster in “Escape from LA” The bikes even got a bit part in “Pee-Wee’s Big Adventure.” Harley’s decision to move some 16 per cent — and growing — of its production overseas is a symbolic, if pragmatic, rebuke of the president’s myopic trade policy.
Granted, Harley’s shareholders are unenthused.
The stock fell almost 7 per cent on Monday.
That suggests they see a reduction of around $45 million to earnings, based on analysts’ 2019 estimates, according to data.
That may be less than the potential hit the company may suffer Moreover, it’ll be cheaper to make bikes in its overseas factories. Over time, that should outweigh the short-term pain. — Reuters
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