Harley-Davidson took its tax cut, closed a factory, and rewarded shareholders

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Leroy N. Soetoro

May 27, 2018, 3:13:19 PM5/27/18
What's the surprise? "American company" Harley Davidson had already
outsourced IT operations years ago. Foreign interests are influencing and
running the company.


In September 2017, House Speaker Paul Ryan traveled to a Harley-Davidson
plant in Menomonee Falls, Wisconsin, to tout the Republican tax bill,
which President Trump would sign later that year. “Tax reform can put
American manufacturers and American companies like Harley-Davidson on a
much better footing to compete in the global economy and keep jobs here in
America,” Ryan told workers and company leaders.

Four months later and 500 miles away in Kansas City, Missouri, 800 workers
at a Harley-Davidson factory were told they would lose their jobs when the
plant closed its doors and shifted operations to a facility in York,
Pennsylvania — a net loss of 350 jobs. Workers and union representatives
say they didn’t see it coming.

Just days later, the company announced a dividend increase and a stock
buyback plan to repurchase 15 million of its shares, valued at about $696

It’s a pattern that’s played out over and over since the tax cuts passed —
companies profit, shareholders reap the benefits, and workers get left
out. Corporate stock buybacks hit a record $178 billion in the first three
months of 2018; average hourly earnings for American workers are up 67
cents over the past year. Harley-Davidson is an American symbol, and
President Trump has trotted it out as an example of business success. But
as it’s getting its tax cut, it’s outsourcing jobs and paying

The tax cuts aren’t saving jobs at Harley-Davidson
It wasn’t just Ryan who made promises to Harley-Davidson. Trump in
February 2017 met with Harley-Davidson executives and union
representatives at the White House. He thanked the company for building in
America and predicted its operations would grow.

“I think you’re going to even expand — I know your business is now doing
very well, and there’s a lot of spirit right now in the country that you
weren’t having so much in the last number of months that you have right
now,” Trump said. He added that impending changes to “taxing policies,”
health care, tariffs, and trade would only make things better.

The tax cut, at least, came through. The Republican tax bill, which
slashes the corporate tax rate to 21 percent from 35 percent, is giving
Harley sizable tax savings this year. The company estimates its effective
tax rate — the amount it pays — will be 23.5 percent to 25 percent this
year, about 10 percentage points lower than it would have been without the
tax bill.

That’s a significant savings: The company makes about $800 million to $1
billion in pre-tax profit, according to Seth Woolf, an analyst at North
Coast Research.

Just over a month after Trump signed the tax cuts into law, the Kansas
City closure was announced. Workers found out when they arrived at the
plant that morning: They were kept in the hallway, informed that the
factory would be shut, and sent home for the rest of the day without pay.
The union had no advance warning, said Greg Tate, a staff representative
for the United Steelworkers District 11, which represents about 30 percent
of the Harley-Davidson plant’s workers. (Harley-Davidson and the two
unions that represent most of its production employees last year
terminated their 22-year partnership agreement.)

“We really never had any belief that they were going to shut the Kansas
City facility down,” Tate said. The announcement was “the first anyone
found out about it.”

The company will cut 800 jobs at the Kansas City plant when it closes by
the fall of 2019 and says it expects to add 450 full-time, casual, and
contractor positions in its York facility — a net loss of 350 jobs.

The median household income in York is much lower than in Kansas City, and
Tate said that hiring a casual workforce there — temporary workers brought
in to boost production during peak season — will be easier and cheaper for

“This is a decision we did not take lightly,” Harley said in a statement.
“The Kansas City plant has been assembling Harley-Davidson motorcycles
since 1997, and our employees will leave a great legacy of quality, price,
and manufacturing leadership. We are grateful to them and the Kansas City
community for their many years of support and their service to our dealers
and our riders.”

Harley-Davidson is also expanding overseas
Meanwhile, Harley-Davidson is opening up a plant in Thailand, where it
plans to start production later this year. (The company also owns and
operates facilities in India and Brazil, and it is closing a facility in
Australia.) The company says the Thailand plant isn’t meant to outsource
jobs but to boost its international business and avoid tax and tariff
burdens. Trump’s proposed steel tariffs could pose a threat to Harley and
add an estimated $30 million to its costs, and the European Union has
threatened to impose a tariff on the company’s motorcycles in retaliation.

Union leaders, however, have suggested that the Thailand plant opening and
the Kansas City plant closing are tied together.

“Part of my job is being moved to York, but the other part is going to
Bangkok,” Richard Pence, a machinist at the Kansas City plant, told the
Milwaukee Journal Sentinel earlier this month when in Washington as part
of a meeting between House Minority Leader Nancy Pelosi and members of the
Association of Machinists and Aerospace Workers, which represents about 70
percent of the Harley-Davidson workers being laid off.

The Kansas City plant closing will cost Harley up to $200 million through
2019, according to Bloomberg’s estimates, and should result in annual
savings of $65 million to $75 million after 2020.

Tate, from the steelworkers union, suggested the tax savings Harley reaped
from the GOP bill might have actually freed up the cash for it to go ahead
with the US restructuring plan now. “They have the capital now to move
Kansas City, to shut it down,” he said. “All of that money really came
from the tax cut plan, so it kind of had the opposite effect of what it
was supposed to do.”

Woolf, the analyst, said he wasn’t sure that was the case. “I think what
this reflects is that they’re finally coming to grips with the fact that
the US market is contracting,” he said. Harley-Davidson has been
struggling in recent years — sales have declined as its core demographic,
baby boomers, ages and as millennials shy away from big bikes. The decline
has been particularly acute in the US: Harley-Davidson’s motorcycle sales
declined 8.5 percent in the United States in 2017 and 3.9 percent abroad.

The tax cuts let Harley reward shareholders
Meanwhile, since the tax cut, the company is managing to reward
shareholders. Just days after revealing the decision to shutter the Kansas
City plant, the company announced a dividend increase and a stock buyback
plan to repurchase 15 million of its shares, valued at about $696 million.

On a call discussing the company’s first-quarter results in April, chief
financial officer John Olin indicated that shareholder primacy will
continue. “Beyond what we invest in the business, we will return and
continue to return all excess cash to our shareholders,” he said. The
company this year shut the media out of its annual shareholders meeting.

Harley-Davidson is one of a string of companies to announce major share
buybacks since the tax bill was passed in December. Apple in early May
said it would buy back $100 billion of its shares. The tech conglomerate
Cisco in February said it would put an additional $25 billion toward a
stock buyback. Troubled megabank Wells Fargo in January announced about
$22 billion in buybacks. Pepsi announced a $15 billion buyback, Amgen and
AbbVie $10 billion, and Google’s parent company Alphabet $8.6 billion.

Harley-Davidson isn’t the only company to shutter a US plant since the tax
cuts were passed in December. The same day Kansas City workers found out
their plant was closing, about 900 workers at an Electrolux plant in St.
Cloud, Minnesota, found out the facility they were working in would be
shutting down too. The Swedish home appliance company will consolidate its
freezer production in South Carolina, where Joe Baratta, a representative
for International Association of Machinists (IAM) Local 623, told me
starting wages are lower.

He described a recent trip to Home Depot. “I see products that we were
building here last year that say ‘Made in China’ with the Frigidaire name
on it, they’re already in stores,” he said. “It’s a tough pill to swallow
to go into every store in town looking at a product and saying, ‘There’s
150 jobs we lost. There’s another 200 jobs we lost.’”

Since Harley-Davidson announced its Kansas City plant closure in January,
Trump — who made a big deal of saving jobs at a Carrier plant in Indiana
in 2016 — hasn’t had anything to say about it, even when asked. IAM
President Robert Martinez Jr. sent a letter to the White House asking him
to save the Kansas City facility in March.

“For decades, hard-working Machinists Union members have devoted their
lives to making high-quality, American-made products for Harley,” he
wrote, later adding, “America’s working men and women deserve better than
being thrown out onto the street. Our nation deserves better.”

An IAM spokesperson said Martinez met with White House trade adviser Peter
Navarro on April 11 about the Harley closure, and he promised to follow up
with the company’s CEO. The union had not received an official response
from the president.

Unions kill more jobs.

Donald J. Trump, 304 electoral votes to 227, defeated compulsive liar in
denial Hillary Rodham Clinton on December 19th, 2016. The clown car
parade of the democrat party ran out of gas and got run over by a Trump

Congratulations President Trump. Thank you for cleaning up the disaster
of the Obama presidency.

Under Barack Obama's leadership, the United States of America became the
The World According To Garp.

ObamaCare is a total 100% failure and no lie that can be put forth by its
supporters can dispute that.

Obama jobs, the result of ObamaCare. 12-15 working hours a week at minimum
wage, no benefits and the primary revenue stream for ObamaCare. It can't
be funded with money people don't have, yet liberals lie about how great
it is.

Obama increased total debt from $10 trillion to $20 trillion in the eight
years he was in office, and sold out heterosexuals for Hollywood queer
liberal democrat donors.
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