Harley-Davidson Inc (NYSE:HOG) is looking to expand its presence in the growing Asian market, and will be building a plant in Thailand. The company, which used the “buy American” slogan for years and years, is expecting its new assembly facility to open in late 2018. The new facility will be used to assemble motorcycles from parts produced in the U.S. and will initially employ 100 people. (Source: “Steelworkers, machinists upset with Harley-Davidson about plans for Thailand plant,” Milwaukee-Wisconsin Journal Sentinel, May 23, 2017.)
News of the new Harley-Davidson assembly plant in Thailand does not sit well with labor unions, who say it’s shipping U.S. jobs overseas. Nor will it sit well with President Trump, who said back in February, “We’re proud of you! Made in America Harley-Davidson.”
The Thailand plant will join similar assembly plants in India and Brazil.
The international operations allow Harley-Davidson to skirt export tariffs. The Thailand factory is being built in Rayong province, southeast of Bangkok, and will allow Harley-Davidson to avoid Thailand’s import tariff of up to 60% on motorcycles. The company opened an assembly plant in India in 2011 to help it avoid the country’s 100% tariff on imported motorcycles.
The new assembly plant in Thailand will also help Harley-Davidson get tax sops (relief) when exporting to other countries in the region. Thailand has a free trade agreement with members of the Association of Southeast Asian Nations (ASEAN), which includes Indonesia, Vietnam, Cambodia, Brunei, Singapore, Malaysia, Philippines, Myanmar, and Laos.
The company claims that the new assembly plant in Thailand “is absolutely not about taking jobs out of the United States,” and is more about growing Harley-Davidson’s presence in Asia. However, labor unions point out that the move also does not do anything to help create U.S. jobs, which was a major part of Donald Trump’s “America First” election campaign pledge. (Source: “Even Harley-Davidson Can’t Resist the Tug of Overseas Factories,” The New York Times, May 23, 2017.)
United Steelworkers International President Leo W. Gerard dissed the company’s move and explanation for broadening its international sales at a time when the U.S. market remains flat. Union Steelworkers assembles Harley-Davidson engines in Menomonee Falls, Wisconsin.
“Harley-Davidson has been the crown jewel of American manufacturing,” Gerard said. “It’s an iconic brand that represents true American spirit. Management’s decision to offshore production is a slap in the face to the American worker and to hundreds of thousands of Harley riders across the country.” (Source: “USW Condemns Harley-Davidson’s Plan to Manufacture Motorcycles in Thailand,” United Steelworks, May 23, 2017.)
“Why couldn’t we build them in the U.S. and export them?” asked Gerard, noting that Harley-Davidson could be entering a “race to the bottom” in pursuit of lower labor costs. “Offshoring production is the wrong path to prosperity. It puts in jeopardy the success that has propelled Harley over the years: It is a brand of excellence that enables riders to confidently know that they are joining a special community of enthusiasts.”
Gerard’s sentiments were echoed by Robert Martinez Jr., the international president of the International Association of machinists and Aerospace Workers. “It’s a slap in the face to the U.S. workers who built an American icon,” he said.
The union represents Harley-Davidson workers at plants, including one in York, Pennsylvania, where the company plans to lay off over 100 workers.
Chances are good Harley-Davidson will be opening additional plants around the world. The company hopes to earn half its sales from international markets over the next 10 years. This compares with about 33% of sales coming from international markets in 2016 and less than 25% 10 years ago. In 2016, the company’s international sales advanced 2.3% while U.S. retail sales fell 3.9%. (Source: “Harley-Davidson Reports Fourth Quarter, Full-Year 2016 Results,” Harley-Davidson Inc, January 31, 2017.)