tiptrot.com July 18, 2018

Harley-Davidson to build motorcycles destined for European Union outside of U.S.

26 June 2018, 07:16 | Cedric Leonard

Harley, stung by tariffs, shifts some production overseas

The Harley Davidson logo is seen on the fuel tank of a motorcycle on display at the Oakland Harley Davidson dealership in Oakland Calif

The company said in a regulatory filing Monday that European Union tariffs on its motorcycles exported from the USA jumped between 6 per cent and 31 per cent, adding about $2,200 per average motorcycle exported from the U.S.to the EU.

But rather than hike prices in the USA, the company said it would absorb the cost in the short term ― projected to be some $30 million to $45 million through this year― and shift some production to worldwide factories in coming months.

Harley-Davidson said that moving some production from the U.S.to factories overseas could take at least nine to 18 months to be completed.

In 2017, the company sold 40,000 bikes in Europe, its second largest market, CNN report, compared to the 148,000 customers who bought two-wheel vehicles in the USA from Harley-Davidson.

Harley-Davidson now has overseas manufacturing plants in Brazil, India and Australia and is building a plant in Thailand.

"Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region", it said in the filing.

Additionally, retaliatory tariffs from the EU, Canada, Mexico, and more make it expensive to get finished goods into those markets.

"Europe is a critical market for Harley-Davidson", the company said in a statement.

The motorcycle manufacturer, founded in 1903, has factories in Kansas City, Missouri; York, Pennsylvania; Menomonee Falls and Tomahawk in Wisconsin.

The announcement comes as the 117-year old company is also buffeted by higher steel costs following tariffs enacted by US President Donald Trump, who had embraced the company as an emblematic US industrial firm in the early days of his administration. Harley's filing follows a profit warning last week from Daimler AG, which cited escalating tensions between the US and China.

Harley-Davidson's shares fell as much as 7 percent on Monday, before paring some losses in late trading. Harley-Davidson has plans to open another facility in Thailand for the same reason.

Harley-Davidson bikes are lined up at a bike fair in Hamburg, Germany, February 24, 2017. This year, domestic sales are flat, but foreign sales are up 12 percent, according to the The Wall Street Journal. Harley-Davidson's United States bike revenue dropped 8.5% a year ago from 2016, but only 0.4% in Europe.

Trump's claim that "ultimately [Harley-Davidson] will not pay tariffs", appeared to imply that he believed that the European Union would reverse its decision.

"We can not speculate about how this morning's announcement will impact employment in the U.S. Domestic sales are what drive production and employment at Harley's U.S. facilities". 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.

Ramping up output in worldwide plants for the European Union may take at least nine to 18 months, according to the company.

He says the ultimate goal should be no tariffs.

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