Even Harley-Davidson Can’t Resist the Tug of Overseas Factories

Even Harley-Davidson Can’t Resist the Tug of Overseas Factories

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

“Why couldn’t we build them in the U.S. 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 labor costs.

Akaravech Chotinaruemol, a Harley collector in Bangkok, said he worried that lower prices might hurt the value of his motorcycles.

Credit
Luke Duggleby for The New York Times

“It’s a slap in the face to the U.S. 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, Pa., 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 American 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 U.S. and exporting them does not get us the benefits that we’re talking about when it comes to the tariff barriers,” said Mr. 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 only ride 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.”

Mr. Akaravech’s most expensive Harley, a custom 2013 Road Glide, cost roughly $60,000, 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.)

Harleys at the Bangkok Hot Rod Custom Show. Harley-Davidson hopes to make half its sales international over the next decade.

Credit
Luke Duggleby for The New York Times

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 percent; by contrast, sales in the United States fell 3.9 percent.

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 percent 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.

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