Harley Davidson’s U.S. sales slid after it decided to shift production overseas to avoid fallout from the White House’s wide-ranging tariffs, prompting President Trump to back a boycott of its motorcycles.
The 13 percent drop in the American market, by far the largest decline, was countered by growth in Europe and Latin America in the three months through September as Harley manages through “a challenging time in our history,” Chief Executive Officer Matt Levatich said Tuesday. “Increased ridership” is key to rebuilding the U.S. market, he explained on an earnings call. “We know we must lead the industry with bold action to change our trajectory.”
[Trump: Americans ‘won’t forget’ Harley-Davidson’s overseas move]
Harley-Davidson announced in June that it would move some manufacturing outside the U.S., a process expected to take 18 months, to insulate its European revenue from retaliatory tariffs imposed by the European Union after Trump included the trading bloc in double-digit duties on steel and aluminum.
The motorcycle-maker has yet to disclose details, but its concerns jibe with those of manufacturers who fear their businesses will be hurt by Trump’s trade policies, including subsequent tariffs on $250 billion of Chinese imports and threats to impose levies on cars and car parts.
“We never imagined moving production” overseas, Levatich told investors. “We are looking at all the things that we need to do to move our production of our EU volumes to plants outside the United States.”
The manufacturer previously estimated the trade skirmish would add $90 million to $100 million in costs for all motorcycles sold in Europe, roughly $2,200 per bike. The company on Tuesday said the metal levies and others would add $43 million to $48 million in costs in 2018.
Harley’s production changes brought swift condemnation from Trump, who described it as a betrayal and said his administration would work with the company’s competitors. He also praised what he said was a move to boycott Harley bikes.
Many @harleydavidson owners plan to boycott the company if manufacturing moves overseas. Great! Most other companies are coming in our direction, including Harley competitors. A really bad move! U.S. will soon have a level playing field, or better.
— Donald J. Trump (@realDonaldTrump) August 12, 2018
Trump’s messaging placed Wisconsin Gov. Scott Walker, the Republican who incorporated his 2003 Harley Davidson Road King into his political branding, in an awkward spot. His base overlaps with Trump’s, but Harley is one of the state’s most prominent employers.
In July, the governor — who is seeking re-election to a third term — posted a video of himself touring the state on his Harley, and in August, he reiterated that he wanted the manufacturer “to prosper here in Wisconsin.”
As I said yesterday, I want Harley-Davidson to prosper here in the State of WI — so of course I don’t want a boycott of Harley-Davidson. And one of the best ways for that to happen is to do what the President has called for and that is get to no tariffs as soon as possible.
— Scott Walker (@ScottWalker) August 13, 2018
Aside from the trade skirmishes, Harley’s production shift is also likely a response to the European market’s growing allure as U.S. consumers purchase fewer motorcycles from the company.
Overall, revenue at the Milwaukee-based firm rose 16.8 percent to $1.12 billion in the third quarter, while profit climbed 66 percent to $114 million. The earnings growth was driven largely by a 28 percent increase in motorcycle sales. Merchandising and parts sales fell 19.8 percent and 7.2 percent, respectively.
The company’s stock dropped 2.1 percent to $37.90 Tuesday afternoon amid a broader market selloff.
