Glad That You Asked. Did The Reagan Administration US Safeguards Save Harley-Davidson in the 1980s?

At the beginning of the 80′s Harley-davidson was in financial distress with about 4% of the market it dominated in the 70′s. In 1981, Harley was in 5th position for market share behind  Honda (38%), Yamaha (25%), Kawasaki (16%), and Suzuki (14%). At the request of Harley-Davidson (the same request was denied a few years before) and to protect the last remaining US motorcycle manufacturer against Japanese imports, the Ronald Reagan administration accepted to impose “Safeguards” by which imported motorcycles were “tariffed” and heavily taxed for the years 1983 to 1988 (starting at 49.4% the 1st year to 14.4% the last year).

After receiving temporary import relief starting in 1983, Harley-Davidson came back stronger than ever and even asked the Reagan administration to lift the importation tariffs during the 5th year of the program. Its sales increased dramatically at an annual rate of 10% from 1983 to 1990. The Harley-Davidson case is now heralded as a great success of safeguard protection, although many economists have challenged Tariffs as the reason for the spectacular recovery.

They argue 1- that the motorcycles imported from Japan were mostly medium-weight bikes in the 700 to 850 cc range, that consumers realized that they were not substitutes for Harleys, and that anyway they were never directly competing with H-D products before 1983. 2- that Harley saved itself when it was bought by its management team and began operating independently of AMF in 1981. After H-D was bought back, the company quickly overhauled its styles, spent more on research and development to create new and more reliable models and strengthened its marketing and distribution channels. In the critics view, these managerial efforts that began in 1981, not the import relief, had much to do with Harley turnaround. That it was mere coincidence that it happened during the same period tariffs were in place. The debate continues…

Barnett Harley-Davidson

12 Responses to “Glad That You Asked. Did The Reagan Administration US Safeguards Save Harley-Davidson in the 1980s?”


  1. 1 m switzer May 29th, 2010 at 7:46 am

    I believe that the tariff was lifted in the last year more as a pr move. Harley said that they were so confident that they could compet that they didn’t need the “reduced” amount tariff. Of course this was at the same time as the British bike market was on its last legs. Many of us ran english bikes as a cheaper alternative to HD. I remember Regan being at the plant and starting up a sporty almost knocking it over and doing a pr progam-saying ” let your engines roar the USA is back on top”. It still amazes me that HD used such ugly design for the 100th instead of doing a red, white and blue “america” model that would have sold so fast, the black/gray 100ths had to be designed by Willy G grandkids

  2. 2 Woody May 29th, 2010 at 10:24 am

    I’m sure it was a combination of everything, including the fact that AMF had stuck a ton of money into re-doing all of the processes and adding the York Plant to set up an actual assembly line. If they hadn’t chaged the way the bikes & parts were made, I doubt if the Co. would’ve been worth buying back.

  3. 3 A 1 cycles inc. May 29th, 2010 at 10:46 am

    and also the japanese were so smart the reduced the bore of all of the 750cc bikes bikes the tarriff was aimed at larger bikes on a sliding scale so in 84 and 85 the new bikes were all 700cc even the same carry over models were smaller to avoid the high tarriff, they were very smart and no one missed the 50 cc in the size of the bikes..after the taxes were lifted they went right back to 750 cc

  4. 4 Grey Beard May 29th, 2010 at 4:50 pm

    They forgot to mention back in the early 70′s the bikes the japanese couldn’t sell to other countries were dumped on our market for cost.

  5. 5 fuji May 29th, 2010 at 9:09 pm

    Grey Beard,

    What is your point? I do not understand what the surplus of import bikes has to do with Harley Davidson.
    ——————————————————————————————————————————————————————————–
    Harley Davidson destroyed their own market….the imports did not. Proven fact and who knows maybe in the process of doing it again? Does history ever repeat itself? Being complacent that is.

    Harley Davidson suffered from “inefficient production methods and poor management ” and that includes before AMF, during AMF, and immediately after AMF.

    Harley Davidson took it upon themselves to travel to the Honda plant [Ohio] and carbon copy the plant settings, methodology/management skills and just on time [jot] aspects of the building and production.

    The one thing that they did not copy was/is the fact that at that time there are no unions at Honda

    Back when the Tariffs were put in place, certain camps believed that it actually cost more American jobs than it saved.

  6. 6 Grey Beard May 30th, 2010 at 12:18 pm

    fuji

    What’s an effective way to eliminate your competition ? Make an expectable product to meet a demand, sell it for alot less and flood the market with your product.

    I was around in the 60′s and 70′s. As per a full page news article in the Philadelphia Bulletin 1977 ( yr ?). The dumping on our market was also in the 60′s, which added to the hardship of several HD dealers in the area that couldn’t compete.

    You can look at HD’s management, but what lead up to this. Hollywood and the media fed on the dark side of Harley riders, this added more to the public fear’n the Harley riders. Back then if someone wanted a Harley but didn’t own one it was due to several reasons. They couldn’t afford a one, their parents wouldn’t let them buy one or they were afraid of them. Then along came the abundance of cheap bikes “You meet the nicest people on a honda”. This advertising statement went deeper then people realized. It made purchasing a motorcycle affordable, it calmed the fearful parent who didn’t want their child to become a big bad biker, and also made those who were fearful of riding the big monster motorcycle could now ride something they could handle.

    As for repeating history. Harley faced a phenomenon that Topps baseball cards, and Lionel Trains faced in the 90′s. The baby boomers wanted to recapture their youth causing a hype on their products. I feel if Harley is gonna survive, they have to cut the fat and concentrate on getting back to normalcy.

  7. 7 Ax May 30th, 2010 at 4:30 pm

    I agree that anyone who wanted a 750cc japbike back then just bought a 700cc japbike after the tariff went into effect, so the tariff had little, if any influence on sales of H-D bikes. Their success was due entirely to righting their own ship, greatly increasing quality, especially with the vastly improved Evolution engine, and taking back the company from the corporate types at AMF.
    Sadly enough, the company is once again being run by corporate types, including a non-biker CEO,and they have been cheapening and worsening much of the product for years (Twin Cam engine with its overheating, cam chest and bearing problems- noisy and expensive to repair six speed transmission, so noisy it requires a compensator on the rear axle- handling problems with the Dyna, Sportster, and the last touring frame, and the new touring frame is in two pieces!- the V-Rod disaster and so on. It’s hard to believe they could make the same mistakes AMF did, but they have. They need to change all these things and more to get the company moving forward again.

  8. 8 fuji May 30th, 2010 at 10:06 pm

    To punch big holes into the tariff is the fact that Europe was unaffected by this tariff. Germany, Great Britain and the Italians
    Reagan feared that if BMW had become subject to the tariff, anti-Americanism would have increased in West Berlin and relations with Germany would have worsened.

  9. 9 BigWave Jun 3rd, 2010 at 8:59 am

    One small factor in the over all sale of motorcycles late seventies to early eighties was the Carter administration and several other influenced driving the economy into the dumper. Prime rate was about 19% and you had to go on odd or even number days to get gas depending on the last digit of your license plate. Some shift in the overall market share was created by the few people who could afford to buy anything buying smaller displacement bikes just to save on gas.

    I thought the tarriff applied to bikes over 850CC to protect H-D since the 883 Sporty was their smallest displacement. I don’t recall Japanese bikes being reduced from 750 to 700 cc as some of you claim. If the tarriff was on bikes over 850CC then what would be the point of downsizing a 750 to 700?

    IMHO, the tarriff was a PR move when Reagan signed it, and an even bigger PR move when the Motor Company “asked” that it be lifted.

  10. 10 grayhawk Jun 3rd, 2010 at 11:13 am

    Another viewpoint, excerpt

    3/83 US ITC RECOMMENDS STIFF TARIFFS ON IMPORTED MOTORCYCLES

    In mid-January, 1983 the US International Trade Commission found on a 2-1 vote that Japanese motorcycle imports were damaging the US motorcycle industry. This was in response to a petition filed by Harley Davidson Co. last year. Although the company also is seeking restrictions on imported engines and components, the ITC did not find any injury caused by imported motorcycle parts. The management of Honda Motor Co. soon stated its firm belief that Japanese imports were not harming the US motorcycle industry. In the early 1970s, Harley Davidson, the only US motorcycle maker, had most of the US 700 cc motorcycle market, but by the first two months of 1982 that had fallen to 13%. The Japanese share of the US motorcycle market has increased from 71%. in 1977 to nearly 85% in 1982. Harley Davidson has laid off more than 800 workers at its York, Pa., plant. Senator John Heinz is seeking government protection for the industry. A few days later the ITC recommended that tariffs be raised for a period of 5 years with a 45% tariff the first year, a 35% tariff the second year, a 20% tariff the third year, a 15% tariff the 4th year and a 10% tariff the 5th year. All this would be on top the present 4.4% tariff. The ITC found that there was a 1 year inventory of imported heavy motorcycles, seriously affecting any chance of recovery for the US firm. In 1981, Honda sold 298,000 bikes in the US, Yamaha sold 201,000, Kawasaki 129,000, Suzuki 111,000 and Harley-Davidson 41,000. The president has 60 days to take action on the ITC’s recommendation, BMW, a German maker has asked President Reagan that it not be affected by the proposed tariff increase. The company sold 2,378 bikes in the US last year. BMW bikes are some 40% more expensive than Japanese models and the proposed 49·4% tariff would push their top bike prices to over $9,000 from $6,990, driving thee out of the market. This will affect the various Japanese firms differently. Honda and Kawasaki already have factories in the US. Suzuki and Yamaha do not. The tariffs of course will not be applied to bikes made in the US. If such tariffs are imposed, the Japanese state that it will make their exports virtually profitless, whereas they had been big cash cows for the companies before. They expect that Japanese bike exports would sharply drop. Thus Suzuki and Yamaha would probably give serious study to establishing factories in the US. This is particularly true as the 2% tariff would apply to imported bike engines and parts. The Japanese makers expect that President Reagan in the final analysis will impose far less severe measures, such as an orderly marketing agreement.. The Japanese makers also started talks on perhaps agreeing on some kind of increase in tariffs in order to help Harley Davidson. In 1982 total worldwide Japanese motorcycle exports fell by 18.l%, to 3,570,607 bikes, the first decline since 1978.

    THE JAPAN LAWLETTER. March, 1983. By Roderick Seeman

  11. 11 BigWave Jun 7th, 2010 at 12:59 pm

    Here’s a very comprehensive paper on the motorcycle import tarriff. Even mentions Harley’s Nova project from about the same time period.

    http://www.uwlax.edu/faculty/zang/articles/Taking%20America%20for%20a%20Ride.doc

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