Harley-Davidson to move some production out of U.S to avoid tariffs

Vastavam web: Harley-Davidson Inc 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.

Harley-Davidson shares sank more than 5 percent in morning trading on Monday. In a regulatory filing 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 did not provide more details on current motorcycle costs. “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.

Trump vowed to make the iconic motorcycle maker great again when he took office last year. But since then the company has been counting the costs of his trade policy. 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. 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 does not have any manufacturing facility in Europe. It has three assembly plants outside the United States, one each in Brazil, India and Thailand. The company will provide more details of the financial implications of retaliatory EU tariffs and its plans to offset their impact on July 24 when its second-quarter earnings are due, the filing said.

Mercedes-Benz maker Daimler (DAIGn.DE) last week cut its 2018 profit forecast citing growing trade tensions. Its German rival BMW (BMWG.DE) said it was considering “possible strategic options” in view of the rising trade tensions between China and the United States.