Harley-Davidson to Shift Production Overseas to Offset EU Tariffs -- 2nd Update
June 25 2018 - 9:38AM
Dow Jones News
By Bob Tita and Allison Prang
Harley-Davidson Inc. plans to shift production overseas to avoid
European Union tariffs on its iconic motorcycles, the latest
manufacturer to reconfigure operations amid a widening global trade
fight.
Harley has argued that its made-in-the-USA label was central to
its appeal to customers all over the world. Overseas sales
customers have become increasingly important to Harley as the
company's loyal customers in the U.S. age. In some other markets,
including Thailand, Harley has opened local factories to avoid
tariffs and hold down prices.
Harley said in a security filing on Monday that tariffs of 31%
the EU enacted last week on its motorcycles would raise the cost of
each motorcycle it ships there from the U.S. by about $2,200.
Rather than raise prices, Harley said it will shift production of
the motorcycles it sells in the EU outside of the U.S. over the
next 18 months.
"Increasing international production to alleviate the EU tariff
burden isn't 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,"
Harley-Davidson said.
Harley's shares fell more than 3% in heavy pre-market trading on
Monday.
Harley's Chief Executive Matt Levatich has made a priority of
boosting overseas sales as ridership in the U.S. stalls. Harley's
international sales rose 12% in the company's first quarter while
U.S. sales declined 0.2%.
EU officials have said the EU'S tariffs are a response to the
U.S. tariffs on steel and aluminum.
The company's announcement shows how countries' responses to
President Donald Trump's tariffs stand to affect companies that do
business abroad. Last week, luxury German car manufacturer Daimler
AG warned that tariffs from China placed on vehicles manufactured
in the U.S. would hurt revenue and profit from its Alabama factory
that makes SUVs.
Harley-Davidson said it expects costs related to the tariffs to
come out to about $30 million to $45 million for the rest of 2018
and about $90 million to $100 million annually.
Nearly 40,000 people bought the company's motorcycles in Europe
in 2017, Harley-Davidson said. Europe is the company's
second-largest source of revenue, behind the U.S.
While most of the company's motorcycles are made in the U.S.,
Harley-Davidson also has facilities in India, Brazil and
Australia.
Shares of Harley-Davidson fell 2.7% premarket.
Write to Bob Tita at robert.tita@wsj.com and Allison Prang at
allison.prang@wsj.com
(END) Dow Jones Newswires
June 25, 2018 09:23 ET (13:23 GMT)
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