Harley Cutting American Jobs

OFF THE WIRE
In what is called an “8-K Filing” today with the Securities and Exchange Commission Harley-Davidson, Inc. announced it will move manufacturing jobs from the United States overseas, probably to assembly plants in India and Brazil.

An “8K Filing” is a “current report” (as opposed to a “10 K” annual report) that companies must file with the SEC to announce major events that shareholders should know about.

The filing states: “To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete.”
Trade War

Harley-Davidson currently has four plants in the United States: In Kansas City, Missouri; York, Pennsylvania; and Menomonee Falls and Tomahawk, Wisconsin. The company also has assembly plants in Manaus, Brazil; Bawal, India and Rayong, Thailand. Harley announced in January that it intended to close its Kansas City assembly plant. At the time the company said it would add 450 jobs at the York assembly plant.

The move is a direct result of a burgeoning trade war with the European Union, a political and economic coalition of 28 (soon to be 27) European nations. The United Kingdom voted to leave the European Union last year.

This spring, President Trump raised import taxes on European steel and aluminum. The European Union retaliated by raising its own import taxes and numerous, iconic American products including Harleys, Levis, orange juice and American bourbon. The new European tariffs went into effect last Friday.
Casualties

“Consequently,” the filing states, “EU tariffs on Harley-Davidson motorcycles exported from the U.S. have increased from 6% to 31%. Harley-Davidson expects these tariffs will result in an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.

“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, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses. Therefore, Harley-Davidson will not raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs. In the near-term, the company will bear the significant impact resulting from these tariffs, and the company estimates the incremental cost for the remainder of 2018 to be approximately $30 to $45 million. On a full-year basis, the company estimates the aggregate annual impact due to the EU tariffs to be approximately $90 to $100 million.”

“Harley-Davidson will provide more details of the financial implications and plans to mitigate the impact of retaliatory EU tariffs during the company’s second quarter earnings conference call on July 24, 2018, at 8:00AM CDT.”
Symbolism

The President has long used Harley-Davidson and Harley riders as symbols of his promise to make America great again and of the people to whom he was making that promise. Less than a month after taking office, Trump invited Harley executives to the White House to discuss their company’s “success.”

Harley-Davidson motorcycle sales have plummeted for the last four years.

At that press event, he called Harley “a true American icon, one of the greats…. Your motorcycles have carried American service members in the war,” Trump said, “and they take care of our police officers…. You’ve given me tremendous support, your workers in particular.”