Harley-Davidson Moving Production Because of Trade War

Google+ Pinterest LinkedIn Tumblr

We have already reported on the European Union’s 25% tariff increase (6% to 31%) on American-made motorcycles, and how those import taxes are going to affect in particular Harley-Davidson. The short version: not well.

Seeing that writing on the wall, Harley-Davidson has responded to Europe’s retaliatory tariffs, though it is perhaps not the response that the American government was hoping for when it began taxing aluminum and steel from European Union member states.

As such, Harley-Davidson plans to shift its production for motorcycles destined to the European market from its factories in the United States to it facilities abroad.

“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option,” the iconic American brand is reported saying in a regulatory filing.

With facilities in Australia, Brazil, India, and Thailand, Harley-Davidson can use the more favorable tariff positions of those countries to side-step European trade barriers to the United States – a move that Harley-Davidson says will save them roughly $100 million per year in taxes.

The effect this has on US operations though is perhaps the bigger issue, and it will certainly come at a high cost.

Currently, Harley-Davidson produces 40,000 motorcycles a year for the European market in its US factories – a volume that will disappear once production overseas is ramped up.

With Harley-Davidson’s European sales accounting for 16% of the company’s worldwide sales volume, and nearly half of the brand’s sales outside of the United States, this news will almost certainly mean a reduction in Harley-Davidson’s workforce, and could even mean the closing of a production facility.

To this vein, the Trump Administration is accusing Harley-Davidson of using the European trade dispute as cover for moving more manufacturing outside of the United States – an assertion often lobbed by Harley-Davidson’s own worker unions.

Of course, the likelihood of Harley-Davidson returning to the US for European production after the trade war seems unlikely, with the net effect of these tariffs likely being a mixture of both Trump’s assertion and Harley-Davidson’s stated reason.

Whatever the true motivation, the end result is less production occurring in the United States, which means less aluminum and steel bought domestically, and fewer manufacturing jobs at Harley-Davidson.

In the case of winning the trade war, it only seems to apply to Harley-Davidson’s bottom line. Though, this is certainly not the last we have seen of this story.

Source: CNN & Chicago Tribune