'Let's Have A Level Playing Field'
Not Even Harley-Davidson Can Penetrate China's Market
One of the country's most successful manufacturing companies is having a hard time breaking into some of the world's most lucrative overseas markets. Harley-Davidson, an icon of American brands, is battling tariff and non-tariff barriers throughout the world, but particularly now in China, says company chairman and CEO Jeffery Bleustein.
"We cannot sell a motorcycle in China today unless we are willing to manufacture it there and, frankly, I don't think Harley-Davidson with its Americana image and the kinds of quality and features we put into the motorcycle would have the same caché even in China if it were built in China," Bleustein told the recent winter meeting of the National Governors Association in Washington, D.C.
Bleustein said Harley-Davidson knock-offs are being sold in China's black market. But most people riding the fakes "want the authentic U.S. experience," he said. "They don't want one that was made in their country. They want the ones that were made where Harley-Davidsons are made."
Bleustein told the governors that this type of un-level playing field exists throughout the world in every product category. His examples "come from motorcycling but they can come from everyplace," he said. "I don't mind competing to sell motorcycles, but let's have a level playing field. We are far from a level playing field."
Bleustein's comments concerning China raised the ire of Pennsylvania Gov. Edward Rendell. "That doesn't violate WTO rules?" Rendell blared. "That should violate WTO rules! It's unfathomable that it doesn't."
Bleustein responded: "There are some things that really surprise you when you get into them. When it gets down to the politics of [trade] negotiations sometimes a decision is made to avoid a big conflict with an important political ally based on small commercial benefit for a small group of companies."
Rendell was surprised to hear that such trade negotiations become a "political choice," he said. "Where is the government? Where is the government banging the heck out of them?" With China's entry into the World Trade Organization those restrictions are set to go away in two- to three years, Rendell added.
But that's not soon enough for Harley. "We try to do business everyday, and waiting a couple of years is not pleasant," Bleustein replied.
Harley faces similar challenges elsewhere in the world. Japan, for instance, had a requirement that any person wanting to own a 400cc or larger motorcycle -- a Harley-Davidson -- had to pass a riding exam. "One of the tests was to ride a motorcycle across a balance beam," said the Harley CEO. "You see the difficulty a gymnast has in doing that, imagine trying to ride a large motorcycle along a balance beam? It was not quite as far off the ground, but if you fell off it was a special experience."
The pass rate for this test was about 2 percent. "Obviously it was couched as a safety requirement but its real purpose was to keep Harley-Davidson motorcycles out of the market" dominated by the company's four major worldwide competitors, all Japanese firms, Bleustein told the governors. "Fortunately, after many years of lobbying, we got that changed and it led to a very big increase in sales not only of our own but of other motorcycles as well."
Harley continues to battle the Japanese government on another non-tariff barrier that still exists. Japan has a ban on tandem riding on limited access highways, "which means you can't have two people riding on a motorcycle," Bleustein said. People wanting to ride two-up have to go on back roads and city streets to get anywhere. "As a result, people who tend to ride together are people who ride larger motorcycles -- families, husbands and wives, guys and gals who want to go someplace together," Bleustein said. "So the highways are open to young kids riding super high performance motorcycles, but more responsible riding is limited to the back roads and city streets."
Bleustein said that it is essential for U.S. companies to do everything they can to stay competitive in international markets. "To begin with, we need to relentlessly pursue operational excellence in our factories and offices by adopting the principles of lean manufacturing throughout the company, improving quality on a continuing basis and breaking down barriers between unions," he said. "Operational excellence is a never-ending pursuit and we must continue."
For companies to be successful they must leverage new technologies and designs and create different marketing approaches that cannot easily be duplicated. They must combine products and services in unique ways. "The possibilities are endless," Bleustein said. "We must find ways to de-commoditize our businesses."
Bleustein believes that improved productivity does not lead to the loss of jobs, as is commonly perceived. Since the early 1980s, Harley has achieved productivity gains at a "very high rate," yet now has 9,000 employees, up from 2,000 when it began. "Productivity doesn't lead to job loss, necessarily," he said. "People have different jobs, but they are still employed by the company. They had to be retrained to learn new skills. The real enemy of jobs is lack of competitiveness, not improving productivity."
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