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Harley-Davidson: No US sales hit from job offshoring dustup


Harley-Davidson executives said today they had seen no US sales hit so far over the decision to relocate some American manufacturing overseas as the company navigates trade conflicts.

Harley-Davidson: No US sales hit from job offshoring dustup
Harley-Davidson executives said today they had seen no US sales hit so far over the decision to relocate some American manufacturing overseas as the company navigates trade conflicts. "We've actually done quite a lot of consumer research...and we see no discernible shift in the sales patterns" or to brand favourability, chief executive Matt Levatich said on an analyst conference call.
The motorcycle company found itself in the firing line of President Donald Trump, who repeatedly attacked the company on Twitter after Harley announced the move on June 26 in response to European Union tariffs on US-made bikes.
Trump's attacks on Harley for being the first to "wave the White Flag" had raised fears among investors the company's sales could be hurt given the president's popularity in areas of the United States where Harleys sell well.
But Harley executives said direct consumer research, as well as sales, showed no evidence of a hit due to the uproar.
"We'll continue to be sure we monitor it...and correct errors in interpretation that seem to pop up from time to time," Levatich said. "We're on it." Trump's name did not come up during a 60-minute earnings conference call, although Levatich did say at one point that the company was working with US administration officials and other governments to "get these tariffs removed."
Shares of Harley-Davidson finished up 7.7 per cent at USD 44.63 after the company reported a second-quarter dip of six percent in profits to USD 242.3 million. But the results topped analyst expectations in terms of earnings-per-share and revenues.
The rise in shares was likely due to enthusiasm after executives announced they would hold a strategy day to outline their growth plan next week, said James Hardiman, an analyst at Wedbush Securities.
Harley-Davidson suffered another fall in US motorcycle sales, this time by 6.4 per cent from the year-ago period to 46,490.
Executives characterized the drop as part of a long-term challenge as it stepped up marketing campaigns to lure young consumers that have so far shown lackluster interest in motorcycles.
Harley signalled it expected lasting business impacts from the EU tariffs, which targeted Harley and other brands from politically consequential regions of the United States and were taken in response to US tariffs on imported steel and aluminum.
Harley is based in Wisconsin, home to House Republican leader Paul Ryan.
The EU tariffs add USD 90 to USD 100 million in annual costs to EU sales. Executives said they hoped to mitigate those effects in 2019 through corporate efficiencies and by shifting production from the US to an overseas plant.
Harley-Davidson has not reached a decision whether the EU-market bikes will be manufactured at existing overseas plants in Brazil or India or at a new plant being built in Thailand.
The company trimmed its 2019 profit margin to a range of nine to 10 per cent from the prior 9.5 per cent to 10.5 per cent.
Trade actions will subtract USD 45 million to USD 55 million in 2018, with USD 30 to USD 35 million due to the EU tariffs and the rest coming from US tariffs on steel and aluminum.
"We never contemplated moving our European volume out of the United States," Levatich said.
Analyst Hardiman said the profit margin projections suggested the company had succeeded in cutting business costs enough to offset the tariffs at least partly.
He noted Trump's tirades against Harley-Davidson occurred at the very end of the second quarter, too late for any sales decline to show up.
Still, the impact to US sales could be "short-lived" given that Trump's broadsides against the company were intense but ended after a few days, Hardiman said.

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