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Possible Harley dal causes union concern

June 28, 2004
Filed under Features

On June 8, Harley-Davidson, Inc. announced the signing of a Memo of Understanding with China’s Zongshen Motorcycle Group in what Motor Company officials described as a move to facilitate the company’s entry into the Chinese motorcycle market — gaining a better understanding of the business practices, markets and distribution channels — while enhancing Zongshen’s capabilities in its home market.
Both companies emphasized the MOU provides a framework for a potential relationship, but that many details have yet to be discussed before a formal agreement is committed to.
“Harley-Davidson’s primary objective is to export our American-made motorcycles to China and to develop political and motorcycle industry alliances in anticipation of the market becoming more accessible,” Harley-Davidson Chairman and Chief Executive Officer Jeffrey Bleustein said in a prepared statement. Bleustein said he does not believe it will be necessary for Harley-Davidson to manufacture its motorcycles in China in order to be able to sell them there, but said Harley would share certain technology of a non-competing nature, as well as marketing philosophies and practices with Zongshen.
Officials from the two unions representing the majority of Harley-Davidson workers have expressed concern about the announcement that the Wisconsin-based motorcycle manufacturer has signed a Memo of Understanding with Zongshen Motorcycle Group of Chongqing, China.
The Paper, Allied-Industrial, Chemical & Energy Workers International is one of two major labor unions at the Milwaukee-based firm. The other is the International Association of Machinists and Aerospace Workers, based in Washington, D.C.
“I don’t want to overstate this, but clearly we are concerned,” Richard Krause, president of PACE Local 7209, told the Milwaukee Journal Sentinel. “Any time that you get engaged with a country like China, that has failed miserably in playing by the rules, there are risks.”
“I have seen this too many times. Companies find success here in the United States, and then take their good fortune and gamble it away overseas,” Tom Buffenbarger, president of the machinist union, told the newspaper.
The announcement came during a visit by Bleustein and other company officials to Zongshen’s headquarters. While in China, Bleustein is also pressing Harley-Davidson’s case for market entry with government officials.
Harley-Davidson currently has one dealer in Hong Kong but none in mainland China.
The day before his visit to Zongshen, Bleustein met in Beijing with China’s Vice Minister of Commerce, Wei Jianguo, to urge the easing of official and unofficial trade barriers that limit Harley-Davidson’s ability to sell its premium American-made motorcycles in China.
Those barriers include a 50% import duty on motorcycles. The duty is scheduled to drop to 30% by January 2005, a level which is still onerous according to Harley-Davidson. In addition, local governments in China often limit the number of motorcycle licenses they will grant, and motorcycles are singled out for outright bans from operating in many of China’s largest cities. psb

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