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Harley May Outsource Jobs to India

Published 11/05/09 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

It survived the Great Depression, intense competition from Japanese rivals and negative media depictions of its customers, but now iconic American motorcycle maker Harley Davidson may be succumbing to the pressure to outsource production to low-wage nations.   

Last week the company announced that it would be outsourcing hundreds of non-core jobs from a Pennsylvania plant, including sub-assembly, chrome-plating and stamping of parts.  Plans have not yet been finalized, and the company has said that those jobs may very well remain in America.   

However, on the heels of the company’s late August announcement that it would expand into the Indian market by 2010, the news is certainly not encouraging.   

"Given the rapid development of India's economy and physical infrastructure, this is exactly the right time to bring the world's greatest motorcycles to one of the world's largest motorcycling nations," said Mark Levatich, Harley's chief operating officer, in a statement. 

The company has already opened a subsidiary close to New Delhi and declined to rule out the possibility of manufacturing certain parts there.  Given the extremely high tariffs India places on imported American motorcycles, manufacturing in India would be a way to avoid the extremely high market barriers.  Indian tariffs can raise the sticker price of a motorcycle to twice as much as it would be in the U.S.   

The company, however, said that it would be willing to work around the tariff, and believes that it can still profit in the Indian market, which is the second largest in the world for motorcycles.   

“Waiting and continuing to work the tariff issue would have risked the market further developing within the leisure segment without our participation," Levatich said. 

The company is also considering closing down the Pennsylvania facility altogether and relocating it.  Possible locations being reported include Tennessee, Indiana and Kentucky.  If the plant were to close, it would affect roughly 2,000 employees.  

The Milwaukee-based company has been hit hard by the recession.  As sales have plummeted, so has the company's profit.  Its financing arm has lost $110 billion alone through the first nine months of the year, and the company has already shed roughly 2,000 jobs.   

Since its foundation in 1903, Harley Davidson has been an American staple, a symbol of American freedom, mobility and craftsmanship.  Soon, however, consumers may find themselves hitting American roadways on Harleys at least partially made in India. 

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Article Comments From Readers

biguru says "Education" on 11/06/09
Mr. Keith E. Wandell, the CEO has core education in Business Administration meaning a glorified secretary. The world has come a long way from 1972. Today even Mechanical Engineers who have graduated in 70s or 80s will have a tough time due to automation and advanced computers unless kept up in those fields.

And when the chain breaks, you know where the weakest links are. Same goes for our esteemed Representatives who have no fracking idea which end is up.

If you do not know how to do database queries and datamining personally or know how to do Calculus (for time domain analysis), you have no business being a leader in a very large corporation in this globalized world nor leaders of the largest economy of the world. These are like the cavemen running our country.

guest says "Productivity versus a fiat money system that can cause inflation in an instant" on 11/06/09
Very true that non-engineers should not be running an engineering company. Can be related to the saying that Congress full of lawyers should not be running trade policy.

Businesses have it hard in the US. They have up to a 35% tax bracket and soaring costs for everything due to inflation. Who controls the value of money, its Congress and the Federal Reserve who influences the commercial banks. Its real easy to increase the money supply by 50% but try to increase the production of real goods by 50%. Besides that, we are locked into terrible protectionist agreements against domestic US industries from NAFTA and WTO. With many forms of protectionism against US industries like from undervalued exchange rates, many industries have decided to leave over the years. So we have less production but certainly more money printing when more people live off credit when they can't find work.

So how do you compete with inflation that is created by the Congress and Federal Reserve? Well I don't think even Albert Einstein could compete with the current scenario of inflation causing soaring prices for everything, high taxes and every form of protectionism against US industries. The answer we get from Congress is that Americas have to be more productive. Well its hard in general to increase productivity by a few percent but inflation like an increase of the money supply by 50% is real easy instantly. So if this pattern continues there will be less production with complaints from business that Americans cost too much because of constant spending and when foreign competitors undervalue their exchange rate by money printing we get the complaint that its always cheaper overseas.

biguru says "Productivity" on 11/06/09
What happened to the "highest productivity" on the planet mantra that our government and media sings every time there is a job loss? Should not that saved Harley - or was that an out right lie...

When non-engineers run an engineered products company, quality suffers every time.

guest says "Quality..." on 11/05/09
This could be a bubble too... it always amazed me how a mediocore performing machine for many years has marketed their way to iconic status.

Every summer on a hot day I pass harley after harley on the side of the road because of various maintenance problems. If you are going to spend, in many cases $25,000, wouldn't you expect it to be super reliable.

However for half the cost you can get a better performing bike and pass those premadonna's on the side of the road...I think this is the ultimate slap in the face, but I am sure some "joe the plumber" harley rider will say, yes... this is a good move... yet upset at President Obama for shipping those jobs overseas...

Well maybe the stock may go up...

guest says "It's a risk Harley need to take to survive" on 11/05/09
I am not surprised about Harley decision. It's either go overseas and risk losing their technology or go bust with the high cost. If they go bust, they will lose everything; the workers, the brand name, the technology, everything. If they go to India, they can produce their bike cheaper and more competitive in price and the important thing, they may survive. The india may or may not be able to steal the technology but it's a risk they have to take. But if they go to China, the risk of losing the technology quadrupled.

guest says "The problem is "" Harley says so why not lobby Congress to change trade rules" on 11/05/09
If the problem with access to India's market is Tariffs why aren't they fighting tooth and nail with Congress to change trade laws. I thought India was part of WTO and whole purpose of joining the WTO was to eradicate trade barriers. What kind of non-sense is being a member of the WTO and that still in order to export in another country you have to setup factories there so the technology can be copied?

Mean while we have a Congress almost most educated in law and believe this is free trade? So there you see it, Protectionist agreements from WTO that cause stealth protectionism which leads to further closing down of US manufacturing and then all that is to use Credit created out of thin air from commerical banks to buy foreign goods that come in for free from Protectionist countries but US exports are taxed heavily. Additionally to keep industries flowing to their country maybe they will also keep printing money faster out of thin air.

It's Harleys decision and they should be able to setup shop wherever they want but if any company thinks that setting up shop overseas and allowing your technology to be copied will remain competitive for long, they have another thing coming. Instead of these companies blaming Americans for costing too much why don't they lobby Congress and the Federal Reserve for sound money whom debases the value of money by signing too many spending bills they don't read and money creation out of thin air for special interests.