Iconic American Harley Davidson Motorcycles to be Made in Thailand

 

BANGKOK -American Motorcycle builder Harley-Davidson, praised by US President Donald Trump as a pillar of American manufacturing and keeping jobs at home, is building a new plant in Thailand.

Harley-Davidson serves as an example of the nuanced economic realities that are pushing US companies to lay off workers at home and set up new factories overseas. Unions representing its workers accuse the company of cutting US jobs to hire lower-paid foreign workers. Yet global trade barriers and proximity to a growing base of new customers also play roles, complexities inherent in Trump’s ambition to overhaul trade policy.

Motorcycles made in the new factory – plans for which had not been previously disclosed – will be sold in Asia, not the United States, which its domestic plants will continue to serve, Harley-Davidson said.

“This is absolutely not about taking jobs out of the United States,” said Marc D McAllister, a managing director of international sales at Harley-Davidson based in Singapore. “This is about growing our business in Asia.”

Still, unions representing its workers in the United States are not pleased.

“Why couldn’t we build them in the US and export them?” asked Leo W Gerard, the international president of the United Steelworkers, which represents Harley-Davidson workers at plants in Wisconsin and Missouri. He expressed concern that the company could be entering a “race to the bottom” in pursuit of lower labour costs.

“It’s a slap in the face to the US workers who built an American icon,” said Robert Martinez Jr, the international president of the International Association of Machinists and Aerospace Workers. The union represents Harley-Davidson workers at plants including one in York, Pennsylvania, where the company plans to lay off over 100 workers.

Harley-Davidson argues that steep trade barriers in a high-growth market, not a desire to cut US jobs, drove the move. Southeast Asia offers rapid development and increasingly affluent spenders, but many countries in the region levy high tariffs on imported goods that make its motorcycles prohibitively expensive, the company says.

“Building bikes in the US and exporting them does not get us the benefits that we’re talking about when it comes to the tariff barriers,” said McAllister, a 22-year veteran of the company.

Harley says the new Thailand plant will help it serve more Asian riders like Akaravech Chotinaruemol, a retired financial analyst in Bangkok who collects Harleys and enjoys taking them on winding road trips in Thailand’s rural and mountainous north. For him, nothing else compares to the sound and sensation of riding a Harley.

“I ride only Harley-Davidson,” he said, “and nothing else.”

“It’s a hobby to me, a toy, holiday entertainment,” he added. “And it’s also like a traveling companion.”

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Mr Akaravech’s most expensive Harley, a custom 2013 Road Glide, cost roughly US$60,000 (about 2 million baht), thanks in part to Thailand’s high tariffs. In the United States, the same model retails for just over half that amount. The Thailand plant would assemble lower-cost motorcycles.

Harley-Davidson has long cast its eyes abroad amid sluggish growth at home. It hopes to make half its sales international over the next decade, compared with about one-third last year and less than one-quarter 10 years ago. Its international sales last year grew 2.3%; by contrast, sales in the United States fell 3.9%.

Despite Harley-Davidson’s all-American reputation, the Thai plant will not be its first abroad, or even in Asia. The company opened a similar plant in Bawal, India, in 2011 to help it get around that country’s 100% tariff on imported motorcycles. It also assembles motorcycles at a plant in Brazil and has a wheel factory in Australia. The Thailand plant will assemble motorcycles for Asia that were previously imported from India or the United States.

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Harley-Davidson’s made-in-Thailand motorcycles will avoid the country’s up to 60% tariff on imported motorcycles. They would also get a huge break on tariffs when exported to Thailand’s neighbours, thanks to a trade deal among the 10 members of the Association of Southeast Asian Nations (Asean).

The Thai plant is also intended to help serve a vast market in mainland China. Asean is pursuing an enlarged free-trade area with Beijing. And McAllister of Harley-Davidson said the Thai plant would lower the transport and shipping time to the Chinese market to around five to seven days, from 45 to 60 days from the United States.

For big companies, “the economics are increasingly compelling, and Asean is again attracting the lion’s share of foreign direct investment into Asia, after China had been the primary destination for many years,” said Frederic Neumann, a co-head of Asian economic research at HSBC in Hong Kong.

By contrast, many of those nations charge steep tariffs on foreign-made goods like Harley motorcycles.

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Mr Trump in February used those trade barriers to illustrate the obstacles US manufacturers face when they sell abroad, a central argument as he pushed to renegotiate US trade deals. Four weeks after the Harley-Davidson executives visited the White House, the president said in a speech to congress that he had asked them about international sales.

“They told me – without even complaining, because they have been so mistreated for so long that they’ve become used to it – that it’s very hard to do business with other countries because they tax our goods at such a high rate,” he said.

“They weren’t even asking for a change,” he added. “But I am.”

But the month before, citing its potential impact on US workers, Mr Trump killed the Trans-Pacific Partnership, a trade deal that would have slashed the tariffs Harley-Davidson faced in Vietnam and Malaysia to zero. The company had been a supporter of what would have been the 12-nation pact.

“The big opportunity for Harley, growthwise, is in Asia, and a lot of the work with the TPP addresses some of the barriers that are in the way of our growth in Asia,” its chief executive, Matthew S Levatich, said last year in a television appearance.

The new Thai plant is moving into an area already populated with foreign names in the eastern province of Rayong, near the manufacturing operations of Ford, Ducati, General Motors and Suzuki. The plant will initially employ about 100 people assembling motorcycles mainly from imported kits when it opens late next year.

Mr Akaravech said he would not expect there to be a big difference between motorcycles made in Thailand and ones made in the United States. But he expressed concern that an influx of cheaper, zero-tariff, locally made Harleys would bring down valuations for used ones – like those he collects.

“It’s going to hurt the sentiment of the market,” Mr Akaravech said. “If the price is going down, that discourages riders from buying.”

By Neil Gouh – New York Times

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Ryn Jirenuwat contributed reporting from Bangkok.