BLOG

In what could be spun as a PR victory for President Trump as he browbeats iconic motorcycle brand Harley Davidson into beefing up its US manufacturing presence, a spokesperson for the company reiterated its intention to ensure that all of its hogs sold in the US will be manufactured here.

Case in point: a company spokesperson said Wednesday that Harley-Davidson remains committed to American manufacturing and selling only US-made motorcycles in the US - which is where Harley sells the bulk of its motorcycles - the Wall Street Journal reported.

In response to retaliatory tariffs out of the European Union, Harley-Davidson announced that it would shift more of its production to foreign factories (it has a factory in Brazil and is opening a new one in Thailand) in a bid to avoid the tariffs. Still, the company's announcement raised the ire of President Trump, who accused it of prematurely throwing in the towel.

As the Wall Street Journal writes, as it lays out the deteriorating relationship between Harley Davidson and the administration, the company had hoped "to establish a rapport with the new administration" as recently as last summer.

Tension between Harley and Mr. Trump is a sharp contrast to early 2017, when Harley executives traveled to D.C. to meet the newly inaugurated president. They hoped to establish a rapport with Mr. Trump, overcoming some internal concerns about how Harley should engage with his administration, according to a person familiar with the meeting.

"We welcome the opportunity to work with, and provide our perspective to, this administration on the future of U.S manufacturing and how it can help unify the country," Mike Kennedy, then a Harley vice president, told dealers in a February 2017 memo reviewed by the Journal.

The Harley spokesman said the company has met with U.S. presidents for decades to talk about its operations and U.S. manufacturing. He declined to comment on the 2017 White House meeting.

Since the disagreement with Trump exploded into the open, the relationship between the company and the administration has soured (even as a majority of Harley's own employees say they support Trump's push to bring back American manufacturing jobs).

But Harley Davidson sees international markets - and Europe in particular - as a key source of growth.

Europe is Harley’s largest overseas market and a bright spot for the company as sales decline in the U.S. Retail sales of Hogs in Europe, the Middle East and Africa rose 7% in the first quarter while U.S. sales sank 12%.

“It’s been a thoroughly bonkers summer,” said Don Rutherford, managing director of West Coast Harley-Davidson, a 17,000 square foot dealership near Glasgow, Scotland.

Harley, which has building bikes overseas for years, also countered that the company's decision to build a plant in Thailand was motivated by tariff concerns. Chief Executive Matt Levatich has said an assembly plant due to open in Thailand this year was necessary to avoid paying steep tariffs in that market.

"Without that investment we wouldn’t be able to access that market and have that volume," Mr. Levatich said in a January interview.

Harley’s move to build the plant in Thailand followed "extremely difficult" discussions inside the company’s Milwaukee headquarters, the WSJ reports citing a person familiar with the decision, who added that Harley may not have needed the plant if the U.S. had ratified the Trans-Pacific Partnership trade agreement (Trump withdrew the U.S. from TPP negotiations on his first workday in office last year).

Harley executives have struggled with balancing their strategy for finding growth abroad with the "meaning and the strength of the brand and the emotional connection with its customers," this person said.

Harley was determined not to shift any American jobs offshore for the new plant in Thailand, and not to import any foreign-made motorcycles from there into the U.S., this person said.

Harley had faced a similar dilemma in deciding to build plants in India and Brazil, according to a former Harley executive. As a result, the plant in Brazil was designed to mostly assemble bikes from U.S. made components, the executive said, thereby supporting jobs at Harley plants in the U.S.

"Every motorcycle they sold over there was made with parts that came from the states," this former executive said.

True, but now that Trump is in the picture, and following pressure from its workers and customers mounts, will Harley decide that preserving its "American made" brand - which initially made it a target for EU tariffs - is worth more than whatever savings it can squeeze out of its foreign factories?