Tuesday, May 04, 2010

Harley and Taxes, Round II: It's the Spending, Stupid!

This morning, Jay Weber had another discussion of the Harley-Davidson situation.

Brief review: Harley had a bad year and has dismissed a lot of employees (around 2500 between production and staff/administration.) The Company is looking for cost-reductions and told Milwaukee production folks that they'd like to find $54 million in Milwaukee and Tomah or the plant(s) might be closed.

Some very respectable radio pundits and bloggers immediately landed on the new Wisconsin corporate tax (combined reporting) which surprised H-D to the tune of $22 million last year. It is their contention that the tax is a big factor in Harley's troubles; thus, it should be repealed. (Citations for much of this are available here.)

H-D execs evidently told Tom Barrett that they did not want this to become a 'political issue,' and Weber rightly observes that it is not very astute to pick a fight with the Mayor of Milwaukee especially if that Mayor could be the Governor of Wisconsin next year. Weber deduces that the tax IS a problem and mentioned that someone at H-D specifically blamed the tax for a 400-person layoff last year.

Well, there's no question that any tax is a cost of doing business, and a $22 million 'surprise' will hurt. Nobody argues otherwise. One suspects that even Mayor Tom will agree.

And there is no question that 13 other States do NOT levy such a tax--so there are 'greener pastures', tax-wise, if H-D chose to relocate its headquarters.

But $54 million is greater than $22 million. What Harley is looking for (besides a bunch of new customers who will buy bikes) is production-plant savings through more flexible labor contracts, and perhaps wage or benefit-cost reductions.

Sure, they'd be happy if the tax went away. So would a lot of other people.

Better to start at the top: Wisconsin spends entirely too much money, which ipso facto requires entirely too much tax revenue. EVERY Wisconsin Administration in the last 15+ years has over-spent, and Wisconsin will "owe" itself $3 billion or more on the very first day the next budget cycle begins.

Cut a few hundred million from spending, then eliminate the combined-revenue tax. On the same day, at the same time.

Let Harley resolve its production-cost problem. They will.


Billiam said...

Well, their bikes are a bit over-priced, compared to others. That is, when you get beyond the sportsters. If they were more competitive, they'd have a bigger base. I'd like to buy one, but I shop for more than a name. I'm just not willing to pay what they want, so, no sale here.

Anonymous said...

Anything with a Harley-Davidson Logo on it cost 10X more. Sell your t-shirts, hats and other stuff cheap. Get your brand out there on the streets. That will help sell your expensive bikes.

If you don't, then maybe you SHOULD have to eat it!

J. Strupp said...

You're both wrong.

Harley is a luxury brand. Wait, THE luxury brand in the industry. You're both advocating that Harley waters down it's brand to gain market share. That's an aweful idea.

You're basically telling BMW to start selling Honda Civics.

Let me tell you something. I was fortunate enough to spend some time in Europe and I can tell you that Europeans knew Milwaukee for one thing and one thing only (OK our cheese did get mentioned on occasion).....Harley Davidson. You water down the brand you kill the company. Period.

Tim Morrissey said...

I think the blogger's point was that taxes are too high because the gubbmint keeps spending money it doesn't have.

Harley's problems are not unique.

But we ALL have to deal with the tax-and-spend, spend-then-tax situation with our state government.

Billiam said...

Strupp, I did NOT suggest that Harley "water down" their product. I said be more competitive. There's a difference. They are over priced. Sorry if you don't like that. I know all about the name recognition and the re-sale, as in the past, some banks would finance 100% of a Harley, as opposed to 75% of other bikes. Annon is also correct about the inflated price for a lot of gear with the Harley logo on it. What the hey, if people got the extra jack, and don't mind paying more than they should, that's up to them.