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Harley's skid is not over yet – Barron's



Harley-Davidson (HOG) learned last week what Trump Entertainment Resorts' shareholders learned through three bankruptcies – Donald Trump can be a big financier.

The legendary motorcycle manufacturer's shares slid by 9% at the start of the year as Harley entered the trade war between the Trump government and the European Union. Dangerous Harley stock fell from $ 44 to $ 40 after the company had warned Monday that new European tariffs could cost the company $ 100 million a year, unless it shifted production from the US

Trump's tweets were furious. "A Harley-Davidson should never be built in another country ̵

1; never!" The President wrote on Tuesday before adding: "If they move, watch out, it will be the beginning of the end – they have surrendered, they have quit! The aura will be gone and they will be taxed like never before!"


A year ago, in February, the newly-elected President welcomed Harley-Rider and union representatives to the White House in South Lawn and said, "It's great to have Harley-Davidson." Trump portrayed the Milwaukee-based maker as the kind of companies that would benefit from its plans to reduce taxes and grant "border adjustments" that favor US-made goods. The stock cost $ 56 at the time.

However, in a contemporary cover story, we noticed the challenges faced by the company due to a strong dollar and a steady decline in motorcyclist numbers, like the populations of middle-aged men who can afford expensive bicycles shrink. Despite Harley's efforts, motorcycle sales fell 7% last year, marking the third annual decline in a row.

And now it's in the middle of a trade war.

Europe's second largest market for Harley-Davidson 40,000 bicycles in 2017, about 16% of its retail sales. Harley's 8K notification on Monday said the EU imposed tariffs on its motorcycles of up to 31% in response to US tariffs on steel and aluminum from the EU to the US

Tariffs will average $ 2,200 Harley's bicycles were sold in Europe. In order to secure its sales there in the short term, Harley plans to maintain its wholesale prices and absorb these expenditures itself, at a cost estimated at $ 30- $ 45 million for the remainder of this year, and up to $ 100 million annually

To get away from the tariffs, the company said it needs to relocate production of Europe-bound bikes from the US. The move will require investment and take about nine to 18 months. Even before Europe announced the tariffs, Harley had planned to close one of its four US plants in response to declining sales.

The company told us that it will not comment on the revelations in its 8-K. More details will come, a spokesman said on July 24 earnings

In addition to the threat of president punitive tax and his prediction of the downfall of the company, a Trump Tweet suggested that Harley employees and customers were already "very angry." [19659004] The stock traded at $ 42 on Friday. With 12X earnings forecasts for this year, Harley's stock has seldom been so cheap. They will probably get cheaper. In a trade war one never knows who the victims will be.

The Dealer: When Momentum Begins to Fade

Email: editors@barrons.com


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