Harley-Davidson Blames Trump for Tanking Profits. Is the President the Only One to Blame?

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source: Wikimedia Commons

Harley-Davidson, the Milwaukee-based manufacturer of the world famous heavyweight motorcycles, has blamed President Trump's tariff war for devastating its profits.

According to its regulatory filing, the company's profit, excluding tariff and restructuring costs, was 17 cents per share, significantly less than the 29 cents per share the analysts estimated. 

The firm reported revenue of $1.15 billion and a net income of $500,000 during the fourth quarter, compared to net income of $8.3 million on consolidated revenue of $1.23 billion in the same time last year. Harley-Davidson cited the restructuring charges, the higher recall expenses and the incremental tariffs as the main reasons for the unsatisfactory financial results.

Last summer, when Harley-Davidson decided to offshore part of its production in an attempt to avoid the regulatory tariffs imposed by the European Union, President Trump publicly supported the boycott of the company on Twitter. The tariffs in question were the Brussels' response to Trump's tariffs on steel and aluminum.

Apart from being involved in the tariffs wars, Harley-Davidson has also been suffering from declining sales and lack of consumer interest in its products. 

According to a recent report, the average U.S. Harvey buyer is a man entering its 50s. To him, having a heavy motorcycle is a hobby, part of a certain urban sub-culture. Millennials, unlikely the baby boomers, are more likely to buy vehicles for practical reasons, and not because of a particular lifestyle. 

As millennials often see bikes as a comfortable and more convenient method of transportation and are less interested in the massive and expensive Harley-Davidson models. Moreover, they tend to buy second hand or cheaper and lighter motorbikes.

In response to the changed market conditions, Harley-Davidson has implemented an ambitious plan called More Roads to Harley-Davidson, to attract two million riders within ten years. To achieve its goal, the company has already started establishing motor riding schools across the country. Plus, its plans also include an increased product offering, launching 100 new motorcycles by 2027. 

In addition to that, Harley-Davidson is planning to expand its international footprint by 50 percent. It is also finishing up its new entity in Thailand aiming to increase its sales within the European Union and China. The company plans to spend up to $245 million in capital expenditures in 2019.

Do you think that Harley-Davidson will keep its head above the water?