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Monday 2 September 2024

Comment by Editor-in-Chief, Robin Bradley

Harley Needs to Start Thinking the Unthinkable 


In a low-key announcement, Harley-Davidson has said that it is to move production of its Revolution Max engine-based models, the Pan America and Sportsters, from the United States to its production facility in Thailand. 

Harley opened the Thailand facility in 2018, and some jobs that would otherwise have been based in Wisconsin or Pennsylvania at that stage were immediately located in Thailand instead.

A year later, when Harley closed its Kansas City, Missouri facility in 2019, and it moved some existing Wisconsin jobs to Thailand, the company stated that the whole Thailand production project was in direct response to the 31% tariffs that the EU had placed on Harleys and other U.S. made luxury goods. Tariffs which themselves were a response to the U.S. tariffs on imported steel and aluminum from Europe. 

To head off political, employee and consumer disquiet, Harley clearly stated at the time that the new Asian facility would only ever produce or assemble motorcycles for international markets. This on the basis that it would have been bad businesses to import tariff-laden raw materials into the USA only to then export the finished goods back to 'tariff-land'.

However, employees in Wisconsin (and Pennsylvania) were sceptical, and they are certainly not happy now - claiming that in affecting production of the Pan America and 'Sport Series' models that are sold in USA, Harley is reneging on its 2019 guarantee.

Local Milwaukee and Wisconsin media channels are reporting that workers at Harley's Menomonee Falls factory (especially) are 'pretty nervous' as a result of the announcements, with considerable uncertainty sown by the move. Not surprisingly, Harley-Davidson employee Unions are furious.

a square in search of a circle

Among the many sentiments expressed by workers at the Menomonee Falls plant, all of whom wished to remain anonymous, one is quoted in reports as telling Milwaukee news outlet TMJ4 that “we believe jobs are leaving, but they don’t want to say how many.” 

Harley-Davidson is quoted as telling the channel that this is a “temporary transition” and “just for model year 25.” But the International Association of Machinists and Aerospace Union (IAM) isn't convinced.

It is forthright in accusing Harley of breaking its word and threatening to bring down a world of hurt on the company's management. Brian Bryant, International President of the 600,000-member IAM, released a statement in which he said that "in 2019, nearly 600 IAM members at Harley-Davidson and Syncreon in Kansas City lost their jobs when the company shuttered its facility, claiming that its Thailand plant would only serve the Asian and European markets. 

“Harley-Davidson has backtracked on that promise, planning to manufacture these bikes abroad and send them back to the U.S. for American consumers.

“To now see this self-proclaimed American icon ship our jobs to Asia is a disgrace. This decision undermines the hard work and dedication of IAM members in York, Pa., and Menomonee Falls, Wis., who have been the backbone of Harley-Davidson’s success.

“The IAM will employ every resource at our disposal to fight this outrageous move. Harley-Davidson needs to return to the drawing board and develop a solution that keeps the production of the Sport Series and Pan America bikes where they belong - in the United States.” 

Harley-Davidson confirmed the change, but disagreed with the union on the jobs issue, stating that “this does not have an impact on employment at U.S. facilities.”

In its formal response to the ruckus, the company said: “As a global company, Harley-Davidson also maintains an international manufacturing footprint, like many of its peers. 

"As part of our overall manufacturing optimization strategy, Harley-Davidson is to temporarily transition the production of its non-core Revolution Max powertrain equipped models (Pan America, Sportster S, Nightster) to its existing manufacturing facility in Thailand, for model year 2025. 

"This move optimizes production capacity for Grand American Touring and other core product segments such as Softail and Trike motorcycles at its York, PA facility. Additionally, building on the [$89m Inflation Reduction Act] DOE Grant, as part of this move, we are investing an additional $9m into our U.S. manufacturing facilities to focus and strengthen our U.S. manufacturing capabilities and capacity for our core products.”

Depending on your point of view, this is either confused or downright disingenuous. It was quite clear at the time that the Inflation Reduction Act/DOE Grant was specifically aimed at subsidizing and incentivizing investment in electric motorcycle production (namely LiveWire) and not for so-called "core product" capabilities.

So, if nothing else is to come out of this brouhaha, at the very least Harley has a square it needs to circle right there.

In February 2017, then President Donald Trump was effusive in extolling the virtues of the iconic American manufacturer when welcoming then CEO Matt Levatich to the White House lawn. The general gist of his remarks was that Harley-Davidson was exactly the kind of 'Made in USA' company that he wanted to see more of. 

When the Thailand move became widespread public knowledge a year later, President Trump's volte-face was dramatic. He took it as a personal afront and called on Americans to boycott the Harley-Davidson brand in protest at what he characterized as a betrayal of American interests. At the time, the President claimed Harley was merely using the tariffs as an excuse for moving production abroad anyway.

Well, while that may not have entirely been the case back then, and regardless of how it got to the here-and-now, the company is definitely now in a place that behoves it to start thinking radically about its activities. In preparing a 'Son of HardWire' for 2026 and beyond, Harley needs to confront strategic thinking that despite initial optimism has proven to be just as deeply flawed as the Levatich 'More Roads' plan was. 

When it comes to trying to build a next stage on the, at best, partial success of the HardWire strategy, Harley may well be faced with thinking a whole bunch of unthinkables. It is highly likely that the next 12 months will see Harley coming under pressure from investor muscle that does not see the present direction of travel as delivering the kind of ROI that had been promised, and while what is produced, and where, will not be the only question raised - it will certainly be a "biggie."