Daily Management Review

EU Retaliatory Tariffs Forces Harley-Davidson To Shift Some Production Out Of U.S.


06/25/2018




EU Retaliatory Tariffs Forces Harley-Davidson To Shift Some Production Out Of U.S.
While forecasting that the tariffs imposed on bikes by the European Union (EU) would amount to losses of between $90 million and $100 million a year, Harley-Davidson Inc announced on Monday of shifting the motorcycle production that caters to the EU from the United States to its other international facilities.
 
This shifting of the production of motorcycles out from the US is an indirect and unintended result of the tariffs on import of steel and aluminum imposed on the EU by U.S. President Donald Trump’s administration earlier this month ostensibly to protect U.S. jobs. However, some jobs would potentially now be lost in eh US because of the shifting of production by Harley Davidson.
 
The move by the super bike manufacturing company comes in response to reduce losses resulting form retaliatory tariff on American products that was imposed by the EU against the decision of Trump to include the Eu ion his steel and aluminum tariffs. The likes of Harley Davidson were included in the list of American products that the EU wants tax at the rate of 25 per cent.
 
An additional cost of about $2,200 per average motorcycle that is exported to the EU from the United States because of the retaliatory tariffs, said the Milwaukee, Wisconsin-based company in a regulatory filing on Monday. However, in order to cover the additional costs, the company also announced that it was not immediately increasing both retail and wholesale prices for its dealers.  
 
The filing said that for the rest of 2018, incremental costs of $30 million to $45 million would be incurred by the company because of the tariffs, the company 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.
 
The company has bene aiming opt increase the international sale revenues for its iconic motorcycles to about 50 per cent of the total volume of sale and revenues because of a slow down in the US for its bikes in recent years. Currently, international business accounts for about 43 per cent of the total revenues for the company.
 
Following the slump in shipments of its bikes to the lowest in six years, the company decided to close down a plant in Kansas City, Missouri in January this year which was a part of the plan for consolidation.
 
Europe accounted for about 14 per cent of the total sale for the company in 2017 with a sale number of 40,000 new motorcycles in the block. The total revenue generated from the EU was second to that generated from its home market – the US.
 
The company has set itself a time frame of at least nine to 18 months for the ramping-up production at its overseas international plants in addition to additional investments, Harley said.
 
(Source:www.reuters.com)






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