Harley-Davidson will move the production of motorcycles bound for European countries out of the United States, citing rising costs from European Union tariffs on its products. The company said in a filing Monday that the EU tariffs on motorcycles exported from the U.S. rose from 6 percent to 31 percent, The Associated Press reported. Motorcycles bound for European countries will now be produced in overseas factories. ADVERTISEMENT Harley-Davidson Inc. said that it will not raise its prices due to “an immediate and lasting detrimental impact to its business in the region," according to the AP. The EU announced earlier this month that it would impose retaliatory tariffs on a range of U.S. goods in July, including motorcycles. The measures came in response to Trump’s steep tariffs on imported aluminum and steel from the EU and other key U.S. allies, including Canada and Mexico.<doc-sep>Not long ago, President Trump pointed to Harley-Davidson Inc. as an example of what was going to go right for manufacturing in America. Now, Harley seems to encapsulate a lot of what’s going wrong. Citing tariffs tied to escalating tension between Trump and the European Union, the motorcycle maker will further retrench its U.S. operations. Bikes destined for the EU were made less viable by levies that will boost costs for the company by about $100 million a year. “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag,” Trump tweeted Monday. The president said he has “fought hard” for the company and said it ultimately won’t have to pay the tariffs, urging it to “be patient!” Trump threatens tariffs on European auto imports in escalation of trade dispute » Advertisement Already, Harley had announced plans to close a factory in Missouri and build one in Thailand, after Trump pulled the United States out of the Trans-Pacific Partnership, the free-trade agreement with a bloc of Asian countries that would have lowered barriers to key markets. Now Harley joins American companies such as Levi Strauss & Co. and Germany’s Daimler AG in getting caught in the middle of Trump’s trade skirmishes with major trading partners. “A company that is as connected to America, and Americana, as Harley is, probably going to be laying off U.S. workers in favor of foreign workers and going to be losing money as a result of this,” James Hardiman, an equity analyst with Wedbush Securities, said of the trade battle between the United States and the EU. “There’s a lot of irony here, to put it mildly.” Harley shares fell 6%, their biggest drop in almost five months, to close at $41.57. The stock is down 18% this year. The EU’s retaliation to Trump’s steel and aluminum levies will cost about $2,200 per motorcycle shipped to Harley’s second-biggest market in the world, the company estimated in a filing Monday. So Harley is shifting production of bikes for European riders to unspecified overseas plants. The move conflicts with the Trump administration’s touting of the U.S. economy’s strength. “The results of President Trump’s tax cuts can be seen in our Nation’s business environment, as American companies start investing once again,” the White House said in a post that the president’s @POTUS account retweeted to 23.5 million followers. Easy win Although Trump has repeatedly claimed that the United States can easily win trade wars, victims are starting to pile up at home and abroad. Daimler, the maker of Mercedes-Benz luxury vehicles, warned last week that escalating tension between the United States and China will impair earnings from its Alabama sport utility vehicle plant and lower profits this year. Harley plans to eat much of the cost increase tied to the EU’s tariffs because trying to pass it along to dealers or customers would make an “immediate and lasting detrimental impact” on its business, it said in the filing. The EU levies are only the latest blowback Harley has faced from Trump’s trade policies. A year after Trump pulled the United States out of the Trans-Pacific Partnership in January 2017, Harley announced it would close its factory in Kansas City and consolidate production in York, Pa., eliminating about 260 jobs. Advertisement 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.” “Thank you, Harley-Davidson, for building things in America,” Trump said at the time. “I think you’re going to even expand. I know your business is now doing very well and there’s a lot of spirit right now in the country that you weren’t having so much in the last number of months that you have right now.” Other woes Harley has been dealing with woes independent of Trump’s policies. Levatich has struggled to attract younger buyers in the company’s core home market: U.S. retail sales plunged 12% in the first quarter, the 13th decline in the last 14 quarters. Overseas sales also have been stalling. The International Assn. of Machinists and Aerospace Workers, which represents workers at the company’s facilities in Wisconsin, Missouri and Pennsylvania, expressed skepticism that the production shift was needed. Advertisement “This latest move is in keeping with Harley’s past decisions to open plants outside of North America,” President Robert Martinez Jr. said in an emailed statement. He called the plan the “latest slap in the face to the loyal, highly skilled work force” that builds the company’s bikes. In his tweet, Trump appeared to echo the union’s sentiment, writing that the EU’s taxes were “just a Harley excuse.” Harley already had warned that Trump’s tariffs on imported steel and aluminum will drive up the costs of raw materials. The EU threatened that its payback for those levies would be to boost taxes on U.S. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey. Paul Ryan, the Republican speaker of the House of Representatives, hails from Harley’s home state of Wisconsin; Senate Majority Leader Mitch McConnell represents Kentucky, a major maker of bourbon. “This is further proof of the harm from unilateral tariffs,” AshLee Strong, a Ryan spokeswoman, said Monday. “The best way to help American workers, consumers and manufacturers is to open new markets for them, not to raise barriers to our own market.” Advertisement Harley isn’t yet identifying which international plants will boost output for EU markets. The company operates manufacturing facilities in Brazil, India and Australia, and it expects to start operating the new Thailand factory this year. “We are currently assessing the potential impact on our U.S. facilities,” Michael Pflughoeft, a company spokesman, said in an email. “We are hopeful the U.S. and EU governments will continue to work together to reach an agreement on trade issues and rescind these tariffs.” Harley forecast $30 million to $45 million in costs linked to the EU tariffs for the remainder of 2018. Analysts project the company will earn about $587 million this year on $5 billion of revenue. Ramping up output in international plants for the EU may take at least nine to 18 months. While Harley said it’s committed to making motorcycles in the United States, it suggested it had no choice but to move production from its home market. The manufacturer sold almost 40,000 bikes in Europe last year, and the continent’s share of total deliveries was the highest for the company since 2011. Advertisement “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,” the company said in its filing. UPDATES: 3:40 p.m.: This article was updated throughout with additional details and context, as well as comments by President Trump, Harley-Davidson, analyst James Hardiman, the White House, International Assn. of Machinists and Aerospace Workers President Robert Martinez Jr. and Paul Ryan spokeswoman AshLee Strong. This article was originally published at 7 a.m.<doc-sep>
Harley-Davidson said on Monday it would move production of motorcycles shipped to the European Union from the United States to its international facilities and forecast the trading bloc's retaliatory tariffs would cost the company $90 million to $100 million a year. The shift in production is an unintended consequence of U.S. President Donald Trump's administration imposing tariffs on European steel and aluminum early this month, a move designed to protect U.S. jobs. In response to the U.S. tariffs, the European Union began charging import duties of 25 percent on a range of U.S. products including big motorcycles like Harley's on June 22. In a regulatory filing on Monday, the Milwaukee, Wisconsin-based company said the retaliatory duties would result in an incremental cost of about $2,200 per average motorcycle exported from the United States to the European Union, but it would not raise retail or wholesale prices for its dealers to cover the costs of the tariffs. The company expects the tariffs to result in incremental costs of $30 million to $45 million for the rest of 2018, the filing said. "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," the company said. Struggling to overcome a slump in U.S. demand, Harley has been aiming to boost sales of its iconic motorcycles overseas to 50 percent of total annual volume from about 43 percent currently. In January, the company announced the closure of a plant in Kansas City, Missouri as part of a consolidation plan after its motorcycle shipments fell to their lowest level in six years. In 2017, Harley sold nearly 40,000 new motorcycles in Europe which accounted for more than 16 percent of the company's sales last year. The revenues from EU countries were second only to the United States. Harley said ramping-up production at its overseas international plants will require incremental investments and could take at least nine to 18 months. The company will provide more details of the financial implications of retaliatory EU tariffs and plans to offset their impact on July 24 when its second-quarter earnings are due, the filing said. Trump vowed to make the iconic motorcycle maker great again when he took office last year. In late April, Harley said Trump's metal tariffs would inflate its costs by an additional $15 million to $20 million this year on top of already rising raw material prices that it expected at the start of the year. Correction: Reuters corrected this story to reflect that share of sales in Europe were more than 16 percent.