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As an American icon Harley-Davidson symbolizes independence, freedom, and resilient, but it also stands for much more: integrity. Harley-Davidson’s reputation was build on its truly American roots; however, its reputation was immortalized in the 1980’s when the company, facing bankruptcy, reversed its reputation of producing unreliable and low quality motorcycles into the legacy it is today.
In Milwaukee, Wisconsin 1901 William S. Harley, better know to some as Bill, designed an engine for a pedal bicycle. Over the next two year Harley worked with Arthur and William Davidson to transform his paper design into reality. Upon completion Harley and the Davidsons found that their creation was unable to climb the Milwaukee hills without its pedals and set to work on their next design. The following year, the first fully functional Harley-Davidson motorcycle was assembled in a ten by fifteen foot shed in the Davidsons’ back yard. The first Harley-Davidson factory was built in Wisconsin in 1906 where the company still remains headquartered today and the company was incorporated just one year later. Over the next ten years Harley-Davidson became the manufacturer of the “All-American” motorcycle that would be used in World War I, World War II, and Vietnam.
By 1920 Harley-Davidson had become the largest motorcycle company in the world, producing 28,189 motorcycles sold in 67 countries that year. The company continued to be successful during the 1920’s until sales plummeted during the Great Depression from which only two American manufacturers survived until 1948 when only Harley-Davidson would remain. In 1952 as competition from English motorcycle manufactures increased Harley-Davidson petitioned the United States International Trade Commission (ITC) for a 40% tariff on all imported motorcycles, but was denied.
In 1969 Harley-Davidson was bought by American Machinery and Foundry (AMF) who, trying to make a quite fix, cut some of the expenses of Harley-Davidson by streamlining production and cutting the workforce, resulting in labor strikes that almost pushed the company to bankruptcy. Under the management of the AMF Harley-Davidson produced nearly three times as many motorcycles as before to keep up with Japanese manufacturers, in particular Honda, Yamaha, Suzuki, and Kawasaki. This increase in the quantity of production resulted in a decrease in the quality of production. Inferior Harley-Davidson motorcycles still remained more expensive than faster and more reliable Japanese motorcycles. In 1978 the AMF petitioned the ITC for heavy import duties on Japanese motorcycles, but was denied. Three years later AMF pulled out, selling Harley-Davidson to Vaughn Beals rather than compete with the Japanese.
In September 1982, Beals petitioned the ITC for a tariff on Japanese motorcycles larger than 700 cc based on belief that Japanese motorcycle companies posed a serious threat to domestic industry. On April 1, 1983 the ITC granted Harley-Davidson a five-year period during which high tariffs on Japanese motorcycles would decrease, providing Harley-Davidson time for new designs and market strategies. During these five years the tariff rates on imported Japanese motorcycles was to be increased from 4.4% to 49.4% the first year, then lower to 39.4% in the second year, to 24.4% in the third year, to 19.4% in the fourth year, and to 14.4% in the fifth year, after which the tariff rate was to return to 4.4%, while the first 6,000 motorcycles shipped to the United States would be shipped at the old rate.
At this time Willie Davidson, grandson of William Davidson, began to research what previous Harley-Davidson motorcycle owners were looking for in a motorcycle. Davidson found that people were looking for a reliable motorcycle with a classic, retro look. Harley-Davidson redesigned the look of their product and began outsourcing certain parts, while being careful to retain its “made-in-America” image. Later that year Harley-Davidson launched its first truly reliable motorcycle and formed the Harley Owners Group (HOG), open to anyone in the United States purchasing a new Harley-Davidson motorcycle to link the company to their buyers. As Harley-Davidson became a more reliable motorcycle its popularity and success increased. Just four years later in 1987 Harley-Davidson appeared on the New York Stock Exchange and petitioned the ITC to lift the tariffs on Japanese motorcycles a year earlier than agreed upon, demonstrating their confidence in their revamped product to compete on the open market.
In matter of years Harley-Davidson transformed itself from a backyard project into the world’s leading motorcycle manufacturer. Then a few years later when the company was on the verge of bankruptcy Harley-Davidson petitioned the United States International Trade Commission for higher tariffs on imported Japanese motorcycles larger than 700 cc for five years to give the company the time it needed to reevaluate the strengths and weaknesses of their production and implement solutions so that they would be able to compete on the open market once again. It is its unique history that has secured Harley-Davidson as an American legacy for future generations. When faced with superior competition Harley-Davidson worked hard redesigning its product into something of quality and reliability, while simultaneously lowering costs. When Harley-Davidson accomplished their goals a year ahead of time they petitioned the International Trade Commission to lift the tariff on the imported Japanese motorcycles as a sign of their willingness and ability to compete, as well as of their integrity by refusing to have an unfair advantage in the market. Few companies ever have embraced competition the way that Harley-Davidson has which is why the company will forever remain an American icon and legacy.
sources:
http://www.bikernet.com/bookcase/hogfeve…
http://en.wikipedia.org/wiki/Harley_Davi…
http://www.cato.org/pubs/pas/pa032.html
http://www.harley-davidson.com/wcm/Conte…
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Powerful story for how tariffs can be used productively to make a domestic company stronger and more competitive. I wonder, though, if this is the exception or the rule? How many other US companies have been successful at retooling themselves under tariff protection? My sense is that few are successful, but I could be wrong.
Comment by sgreenla 11.27.07 @ 10:21 pm