As a guy who rode his first motorcycle 34 years ago, I have been closely following the news about Harley-Davidson this week.
Getting information these days can be difficult because Republicans will give you one version of the story and Democrats a totally different take.
Trying to get to the bottom of things, Harley-Davidson – a company that is even more American than baseball and apple pie – has said it will shift production of some motorcycles overseas over the next year and a half.
The hows and whys are a little trickier.
Harley said it will make bikes overseas that are intended for the European market because the European Union has started taxing its exports there.
“Harley-Davidson is using that as an excuse,” President Donald Trump said Tuesday of the EU tariffs.
Trump tweeted that Harley had already announced it was closing a Kansas City plant and moving those jobs to Thailand before the tariffs were announced.
Hold on a minute, Harley is denying any link to Thailand. The company said the Kansas City production was consolidated into its York, Pennsylvania, plant because sales have dropped from its high 13 years ago.
So where did Trump hear the Thailand connection? From the union officials representing the employees in Kansas City. Perhaps the union fabricated the story to gain sympathy for its workers, or maybe it is spilling the truth so Harley-Davidson can’t quietly send work to Asia.
If the idea is to avoid entry tariffs into Europe, Harley-Davidson could open a plant in Europe. There are countries on the eastern side of the EU like Estonia, Latvia and Romania where the average monthly wage is one-third of its western neighbors. Heck, Portugal is half the wages of Spain. Go put a plant right on the Atlantic.
If the company is indeed looking to put a plant in Thailand, then I begin to wonder just how much production will be moved there. Will it just be the European Union market, or will it spread to all exports?
Harley said the EU market is almost 40,000 bikes a year, about one-sixth its global sales. So that means about 250,000 bikes are sold around the planet. Could all of those bikes eventually be made in Thailand with only the American market bikes left to be made in the States?
Then, as the president said, what happens to Harley-Davidson’s aura? There is a rabid fan base out there supporting the company because of its U.S. presence. Will people care as much if 60 percent of Harleys are made in Thailand?
My dad used to have a solid-black Yamaha V Star 1100 that looked like a Harley-Davidson. When we were out riding, bikers would sometimes do a double take when they realized it wasn’t a Harley.
Yamaha, Suzuki, Kawasaki and Honda make some fine bikes. Take away the American-made mystique, and why should folks spend more on a Harley than a comparable Japanese brand?
Won’t happen? Just look at the financial problems of Gibson guitars. The once-proud company still sells a lot of Asian-made Epiphone guitars, but the Gibson corporation as a whole is on the verge of collapse. Sure, some folks still crave that American-made Les Paul, but not enough to keep it financially solvent.
One thing that seems to be overlooked this week in coverage of Harley is the potential impact this could have on U.S. customers.
Consider this, from an Associated Press story on Tuesday: Harley-Davidson said in a regulatory filing Monday the new tariffs are adding about $2,200 per average motorcycle it exports from the U.S. to the EU.
Harley-Davidson said it will not raise its prices to avert “an immediate and lasting detrimental impact” on sales in Europe. It will instead absorb a significant amount of the cost in the near term. It anticipates the cost for the rest of the year to be approximately $30 million to $45 million.
That is the figure for half a year, and getting production up and running overseas is expected to take three times that long, so Harley could be talking about absorbing $90 million to $135 million?
Are we supposed to believe that this won’t have an impact on us? I don’t know how deep Harley’s pockets are, but at some point, the company will have to make changes to stop the bleeding, and I’m betting the price hikes will be small and gradual across the board, causing U.S. goods to go up as well.
In other words, Harley’s worry about losing European customers could mean we U.S. customers subsidize Europe.
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One last thing, don’t go blaming the president for this one. Sure, I have complained about Trump rolling back environmental protections, but what the EU did isn’t apples to apples.
Trump put tariffs on steel and aluminum imports because those are things we are making here and don’t need foreign competition. The EU just started putting tariffs on all kinds of categories regardless of whether or not anyone in Europe is in direct competition.
Is there a major motorcycle brand in Europe that needed this tariff? No. BMW, Ducati, Piaggio and Benelli make bikes that don’t directly compete with Harley.
I can see a tariff on orange juice. According to one report I saw, the EU is third, just ahead of the U.S. in fourth, in orange juice exports, so those countries don’t need to bring in anyone else’s juice. Makes sense to me.
Kentucky bourbon? Seen any Kentucky bourbon distilleries in Europe? Peanut butter? Lot of peanut farms in Europe are there? Some of these tariffs just seem petty, not for financial reasons.
Jeff is the news editor and can be reached at 415-4692.