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Wednesday, 14 June 2017

Comment by Editor-in-Chief, Robin Bradley

“Way to go Harley”!

With the jury still definitely out as to whether or not this season has seen any uptick in business (OE or aftermarket) so far (most are saying not, especially where OE sales are concerned), the market appears to be at a loss to understand why.
Although some of the primary economic indicators for April have been positive (among Europe’s 19 members of the Euro currency zone as well as in the United States), there appears to be a continuing lack of confidence that any newly minted largesse will be coming the way of the custom motorcycle industry and growing concern that further market contraction is upon us.
Don’t get me wrong, it’s not that the wider economic picture is definitely, for sure and 100 percent for certain “doing well” as such, it isn’t and it can’t while growth and consumer spending continue to zip around all over the place.
However, with employment levels good or at worst improving (Eurozone) and nudging labor shortage territory on both sides of the Atlantic, especially skilled labor, and with growth being revised dramatically upwards for the first quarter in the United States, stocks hesitating but still essentially growing more valuable by the quarter (including Harley’s and Polaris’), inflation climbing but under control and likely to finally going to trigger rate rises, the big question is where’s the “trickle down”?
These are such febrile times that one is reminded of Ezra Soloman’s famous and often misquoted quote that “the only function of economic forecasting is to make astrology look respectable.” Soloman was a major player in Nixon’s economic team in the 1970s, and is it just me, or do the times in which we now live feel like a return to the unpredictability and uncertainty of what, in economic terms at least, was a “Dark Decade”?
Personally I loved the 1970s, I had a great time (if you know what I mean!), but in financial (and political) terms it was as if the world was in meltdown, that any orthodoxies or certainties were simply there as shooting practice, and that many of the issues that were in play then are returning to haunt us now?
For example, “outsourcing” (or “off-shoring” as it is also euphemistically known) was just as hot a topic and just as misunderstood is it is now. Back then the motorcycle parts and accessories industry that we know today was just starting to emerge, and with it a growing proportion of parts manufacturing was being placed on Asian tooling as we consumers availed ourselves of the lower pricing it brought us.
Interesting then that following its trumpeting of its status as an ‘American Icon’ Harley-Davidson should have let slip (via a “fake news” item in the New York Times?) that it is planning to start making whole motorcycles in Thailand.
What has been even more interesting though has been the widespread reaction to it – especially from the Unions.
Here is an instinctively counter-intuitive ‘factoid’ for you. Did you know that, in general terms, the less that the west has consumed of western made goods, the wealthier, in general terms, most (though not all) western economies have become?
I’m not as familiar with the minutiae of the math in the United States and elsewhere as I am for my own country, but here in the UK the decades of unprecedented growth and recovery from the industrial blight of the 1960s and 1970s have happened hand-in-hand with the decline of domestic UK manufacturing – and in broad terms it is as true in countries such as the United States and most of the leading European economies as it is in the UK.
There was a time in the UK when the phrase “trade old boy” was a derogatory, used to decry the rather sordid process of actually having to work for a living. But without trade nobody gets to go to the bank. Without profit, nobody gets to go to work at all.
Harley-Davidson are not transferring jobs to Asia, they are creating new jobs there so they can repatriate profit (not bikes) that western wage rates, benefits and (above all) union practices would simply make unavailable to them otherwise.
It isn’t the (massively) overstated effects of tariffs that make Wisconsin, Pennsylvania or Missouri based manufacturing unprofitable for them in Asia, it is the relative costs that they would need to export there that prevents them from otherwise being able to exploit the undoubted opportunities that the love of an ‘American Icon’ that there is throughout the rest of the world provides them with.
The purpose behind making things is not to leave us all with a warm and fuzzy feeling (well, not only), but to make us profit. Besides, if you can make profit without actually making something yourself (Apple anyone?), then how much smarter is that?
Without being able to enter some of the world’s fastest growing markets profitably, Harley (and everyone else for that matter) would be challenged in terms of delivering value to stake holders, and it is that value that is the oil in the west’s engine. Without being able to generate the capital needed for investment, for growth, for rising stock prices, for wages and for taxes, the whole edifice comes tumbling down.
That was the 1970s, in a nut shell. It’s time to realize that it isn’t necessarily only about the metal, it’s about the money too. What is so wrong with bringing a big slice of Asian consumers’ “ha