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Trump threatens Harley-Davidson over European production move

By Doina Chiacu and Rajesh Kumar Singh

WASHINGTON/CHICAGO (Reuters) - U.S. President Donald Trump threatened Harley-Davidson Inc (HOG.N) with higher taxes on Tuesday and said the motorcycle maker, which he previously hailed as a model of American manufacturing, would suffer from a public backlash if it went ahead with a plan to move production for European customers overseas.

Trump's attack, the latest in a series of criticisms of U.S. companies, was an about-face for the president, who hosted company officials and gleaming Harley-Davidson bikes on the White House lawn shortly after his inauguration.

"A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them," Trump said on Twitter, without providing any evidence. "If they move, watch, it will be the beginning of the end - they surrendered, they quit! The Aura will be gone and they will be taxed like never before!" Trump said.

It was unclear what taxes Trump was referring to, and why the company might have to pay them, since it will maintain production in the United States for U.S. customers. The White House did not respond to a request for comment on Trump's tweet.

Harley-Davidson shares closed down 0.6 percent at $41.32, after falling nearly 6 percent on Monday.

The Milwaukee-based company said on Monday it will move production of motorcycles shipped to the European Union from the United States to its international facilities and forecast that the trading bloc's tariffs - introduced as a counter to Trump's tariffs on some EU-produced metals - would cost the company $90 million to $100 million a year.

Harley-Davidson said it had no comment on the president's tweets. But company spokesman Michael Pflughoeft said it was assessing the potential impact of the production shift on its U.S. facilities.


'AN EXCUSE'

In a series of Twitter posts on Tuesday morning, Trump suggested the famous American brand was using trade tensions over tariffs as an excuse to move production.

"Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand. That was long before Tariffs were announced. Hence, they were just using Tariffs/Trade War as an excuse," Trump said.

In January, Harley-Davidson said it would close a plant in Kansas City, Missouri, due to a sharp drop in U.S. demand for its motorcycles, but said it would consolidate work done there into its plant in York, Pennsylvania.

The company is setting up an assembly plant in Thailand, a move it announced in May 2017, but that would put together bikes only for the growing Southeast Asian market.

The Thailand plant had no connection with the closure of the Kansas City facility, Harley-Davidson Chief Executive Matt Levatich told Reuters in an interview in February.

The factory in Thailand, which will open later this year, would let Harley-Davidson avoid the country's up to 60 percent tariffs on imported motorcycles and help it get tax breaks while exporting to neighbouring countries, according to the company.

Harley's announcement of the Thailand plant came months after Trump pulled the United States out of the Trans-Pacific Partnership, which would have lowered import tariffs on the company's bikes in some of the fastest-growing motorcycle markets in Asia.

Besides Thailand, Harley-Davidson has two more assembly plants outside the United States, in Brazil and India. The company has said ramping up production overseas could take at least nine to 18 months.

As U.S. customers age and loyalty to the brand wanes, Harley-Davidson has been aiming to make up for falling U.S. demand by boosting overseas sales to 50 percent of annual volume from about 43 percent.

Rising trade tensions and retaliatory tariffs could pose serious risks for Harley-Davidson, rating agency Moody's said on Tuesday. Morningstar Equity Research said in a note that the tariffs might "temporarily" hamper some of the company's planned growth initiatives.


BIKERS FOR TRUMP

Trump first responded angrily to the Harley announcement on Monday, saying he has supported the 115-year-old manufacturer and was surprised by its plans, which he described as waving the "White Flag."

"I fought hard for them and ultimately they will not pay tariffs selling into the E.U., which has hurt us badly on trade, down $151 Billion. Taxes just a Harley excuse - be patient!" Trump said in a post on Twitter on Monday night.

Trump enjoyed the support of a group called "Bikers for Trump" in his 2016 presidential campaign and he invited Harley-Davidson representatives to the White House in February 2017 shortly after he took office, greeting them with the words "Made in America, Harley-Davidson."

The company is only the latest targeted by Trump for various reasons.

The president has repeatedly attacked Amazon.com Inc (AMZN.O) over what he sees as its unfair treatment of the U.S. Postal Service, and he has complained about the high costs of Boeing Co's (BA.N) replacements for Air Force One aircraft, urging the federal government to cancel the order.


(Reporting by Doina Chiacu and Rajesh Kumar Singh; Editing by Frances Kerry, Jeffrey Benkoe and Tom Brown)

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