Trump blasts Harley-Davidson’s decision to shift production overseas

26 June, 2018, 16:14 | Author: Kevin Carter
  • Harley-Davidson to shift some production out of US over EU tariffs

The EU began levying the new tariffs Friday on $3.4 billion worth of USA goods such as motorcycles, bourbon and peanut butter.

Last week German automaker Daimler AG cut its 2018 earnings outlook, a change that it says is partly due to increased import tariffs for US vehicles in China.

Meanwhile, Trump is threatening to slap 20% tariffs on USA auto imports from Germany and the rest of Europe, which would dramatically escalate the conflict.

In a regulatory filing, the 115-year-old Milwaukee, Wisconsin-based company said the retaliatory duties would result in an incremental cost of about US$2,200 per average motorcycle exported from the United States to the European Union, but did not provide more details on current motorcycle costs.

In response, Trump blasted Harley-Davidson for using the tariffs as an "excuse" to move more of their manufacturing overseas.

Harley says in the filings that it will not raise MSRPs or wholesale dealership prices to make up for the losses connected to tariffs.

"In the near-term, the company will bear the significant impact resulting from these tariffs, and it estimates the incremental cost for the remainder of 2018 to be approximately $30 to $45m", it continued.

Harley-Davidson Inc. plans to shift some production of its iconic motorcycles out of the United States in response to retaliatory European Union tariffs, as President Donald Trump's trade war ripples back to American companies. From the company's statements, it plans to continue to manufacture parts for motorcycles in the USA and ship them to Thailand for assembly, as it does for facilities in Brazil and India.

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 global factories in coming months.

Harley-Davidson sold nearly 40,000 motorcycles in the European Union a year ago, generating revenue second only to the U.S. sales, according to the Milwaukee-based company. Harley reports it will share more information on this shift in its second-quarter conference call set for 8 a.m. July 24.

In January, Harley-Davidson announced that it would be closing its plant in Kansas City and moving leftover production to York, Pennsylvania.

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Mr Trump responded to the situation via Twitter, writing that he was "surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag". The levy on Harley-Davidson bikes has increased to 31% from 6%, the company said.

Even as American companies feel the heat from Trump's economic aggression, there is no sign that he is backing down.

In early 2017, President Donald Trump met with executives from Harley-Davidson who he thanked for "building things in America".

The shift in production is expected to take about 18 months. A trade war, we'd like to remind you, that he promised would be easy to win. Case in point, Harley Davidson.

Trump criticized Harley's decision and, in a cryptic tweet, suggested it ultimately would not face tariffs.

Mercedes-Benz maker Daimler last week cut its 2018 profit forecast citing growing trade tensions.

It also did not say which USA factories would be affected.

In turn, it also incentivizes firms to move their production overseas since other countries may have lower tariffs - or no tariffs - on the same intermediate product.

Harley-Davidson's stock fell 5% on Monday.

Trump hosted chief executive Matt Levatich and other Harley executives and union leaders for a White House listening session in February 2017 and hailed the motorcycle maker as "a true American icon" and "one of the greats".

But that status made the company a target for European Union retaliation along with bourbon and blue jeans.

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