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Harley Weathers Tariffs As Trump Aims Tweet Ire at EU

April 23, 2019
President calls EU’s tariff rate "so unfair," vows retaliation.

Harley-Davidson Inc. (IW 500/182) overcame higher tariff costs to post better-than-expected profit, but its business is once again the subject of President Donald Trump’s tweets.

Adjusted net income fell by 26% in the first quarter, but the slump was less severe than Wall Street feared. Excluding costs of restructuring, tariffs and other factors, the motorcycle maker posted earnings of 98 cents a share, beating analysts’ average estimate for 85 cents.

Harley’s approach to trying to mitigate the impact of European Union tariffs landed the iconic American company in Trump’s doghouse last year. With the EU implementing a 31% tax rate on U.S.-built motorcycles as retaliation for the president’s steel and aluminum levies, the manufacturer said it would shift some production overseas.

Rather than attack Harley, as he did throughout 2018, Trump aimed his ire at the EU shortly after the Milwaukee-based company reported earnings Tuesday. In a tweet, the president called the bloc’s tariffs “so unfair” to the U.S. and threatened retaliation.

Trump’s post was an about-face from last June, when he accused Harley of using tariffs as an excuse to ship American jobs overseas. In August, he said he’d support a boycott of the company’s bikes.

In addition to staying squarely in the crossfire of Trump’s trade disputes, Harley is struggling to attract younger riders amid a shift in U.S. consumer tastes away from pricier, heavyweight motorcycles. Chief Executive Officer Matt Levatich closed an assembly plant in Missouri last year and built a factory in Thailand as part of a plan to sidestep tariffs and boost sales abroad. He wants half of revenue to come from outside the U.S. by 2027.

“We are acting with agility and discipline to take full advantage of rapidly evolving global markets,” Levatich said in a statement Tuesday.

Harley shares rose 0.8% to $40.05 as of 8:36 a.m. in New York, before the start of regular trading. The stock has rallied 16% this year, in line with broader market gains, after closing at an eight-year low on Dec. 24.

U.S. retail sales fell 4.2% in the first three months of the year, the ninth consecutive quarterly drop. As part of its bid to attract younger riders, Harley debuted its first electric motorcycle, LiveWire, in January and acquired an e-bike company in March.

Sales in Europe and Asia -- regions Levatich has pinned hopes for growth on -- fell 0.6% and 4%, respectively. While the new plant in Thailand is supposed to help Harley avoid tariffs, it’s still unclear whether the EU will exempt Harley’s Asia-made bikes from levies, according to analysts at Wells Fargo.

Harley is still investing in the U.S. It committed to put $65 million into its Milwaukee facility and $10 million into its Tomahawk, Wisconsin plant as part of a five-year contract with the United Steelworkers that was ratified this month.

By Gabrielle Coppola

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