By Glenn Fleishman
October 23, 2018

Harley-Davidson saw its worst drop in U.S. motorcycle united sales in eight years in its latest quarterly earnings. The company had a 13.3% plunge in U.S. unit sales in the third quarter of 2018 compared with a year ago. But unit sales don’t tell the whole story.

The company’s revenue was up from $962 million to $1.12 billion, and net income including one-time expenses rose 70%. Earnings per share climbed from $0.40 to $0.68. And international retail unit sales rose 2.6%. Worldwide, it sold over 59,000 motorcycles in the most recent quarter compared to over 64,000 a year before, with over 60% of those sold in the U.S.

While Harley-Davidson is an icon of Americana, the company has found itself in overlapping crosshairs of politics and demographics. It’s suffering from dependence on an aging baby boomer population that long formed the core of its revenue, and from a trade war with the European Union started by the Trump administration—as well as backlash from trying to remain viable by shifting some production overseas.

After the Trump administration imposed tariffs on steel and aluminum imported from the European Union, Canada, and Mexico in May, the EU struck back with targeted duties on products and industries near and dear to GOP politicians’ hearts—and to their constituents’ wallets.

That included whiskey, produced in Senate Majority Leader Mitch McConnell’s home state of Kentucky, and Harley-Davidson motorcycles, as the company is based in Milwaukee, Wisc., which is just north of the border of House Speaker Paul Ryan’s district. The tariff on imported motorcycles rose from 6% to 31%, adding about $2,200 to the cost of an average model.

When Harley-Davidson discussed moving additional production overseas to avoid the EU tariffs and maintain sales, President Donald Trump said on Twitter that he would support a boycott of the firm.

The company only sells motorcycles in the U.S. that are manufactured within the country, but the units it sells worldwide have a mix of origins and assembly. Its EU-related manufacturing shift might lead to some U.S. job losses, but the company hasn’t confirmed that. A loss of sales to the EU would almost certainly mean some workers would lose their positions regardless.

It’s unclear what percentage of third quarter’s drop in unit sales in the U.S. and its small increase internationally can be attributed to its aging audience, a boycott, or reduced units sold in the EU, but they all appear to contribute to a rockier road ahead.

The company has almost a billion dollars in cash and equivalents on hand, providing a strong cushion against prevailing winds.

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