Maybe we are missing the boat on something here. How can a corporation get a nice sizable tax break from the government, then announce a stock buyback plan and still close a plant with 800 employees?
This seems to be the situation with Harley-Davidson. Supposedly after receiving a tax break and closing a plant in Kansas City shareholders got an option to buyback stock. What in the world going on? According to reports the tax break wasn’t enough to keep the organization from making the changes they made and keep a plant open and saving people’s jobs.
Well we’ll just have to let this one play out and see how things will go in the future.
Read more as reported by Vox:
The motorcycle maker in January told Kansas City workers it would close a plant there. Days later, it announced a nearly $700 million stock buyback plan.
In September 2017, House Speaker Paul Ryan traveled to a Harley-Davidson plant in Menomonee Falls, Wisconsin, to tout the Republican tax bill, which President Trump would sign later that year. “Tax reform can put American manufacturers and American companies like Harley-Davidson on a much better footing to compete in the global economy and keep jobs here in America,” Ryan told workers and company leaders.
Four months later and 500 miles away in Kansas City, Missouri, 800 workers at a Harley-Davidson factory were told they would lose their jobs when the plant closed its doors and shifted operations to a facility in York, Pennsylvania — a net loss of 350 jobs. Workers and union representatives say they didn’t see it coming.
Just days later, the company announced a dividend increase and a stock buyback plan to repurchase 15 million of its shares, valued at about $696 million.
It’s a pattern that’s played out over and over since the tax cuts passed — companies profit, shareholders reap the benefits, and workers get left out. Corporate stock buybacks hit a record $178 billion in the first three months of 2018; average hourly earnings for American workers are up 67 cents over the past year. Harley-Davidson is an American symbol, and President Trump has trotted it out as an example of business success. But as it’s getting its tax cut, it’s outsourcing jobs and paying shareholders.
The tax cuts aren’t saving jobs at Harley-Davidson
It wasn’t just Ryan who made promises to Harley-Davidson. Trump in February 2017 met with Harley-Davidson executives and union representatives at the White House. He thanked the company for building in America and predicted its operations would grow.
“I think you’re going to even expand — I know your business is now doing very well, and there’s a lot of spirit right now in the country that you weren’t having so much in the last number of months that you have right now,” Trump said. He added that impending changes to “taxing policies,” health care, tariffs, and trade would only make things better.
The tax cut, at least, came through. The Republican tax bill, which slashes the corporate tax rate to 21 percent from 35 percent, is giving Harley sizable tax savings this year. The company estimates its effective tax rate — the amount it pays — will be 23.5 percent to 25 percent this year, about 10 percentage points lower than it would have been without the tax bill.
That’s a significant savings: The company makes about $800 million to $1 billion in pre-tax profit, according to Seth Woolf, an analyst at North Coast Research.
Just over a month after Trump signed the tax cuts into law, the Kansas City closure was announced. Workers found out when they arrived at the plant that morning: They were kept in the hallway, informed that the factory would be shut, and sent home for the rest of the day without pay. The union had no advance warning, said Greg Tate, a staff representative for the United Steelworkers District 11, which represents about 30 percent of the Harley-Davidson plant’s workers. (Harley-Davidson and the two unions that represent most of its production employees last year terminated their 22-year partnership agreement.)
“We really never had any belief that they were going to shut the Kansas City facility down,” Tate said. The announcement was “the first anyone found out about it.”
The company will cut 800 jobs at the Kansas City plant when it closes by the fall of 2019 and says it expects to add 450 full-time, casual, and contractor positions in its York facility — a net loss of 350 jobs.
The median household income in York is much lower than in Kansas City, and Tate said that hiring a casual workforce there — temporary workers brought in to boost production during peak season — will be easier and cheaper for Harley.
“This is a decision we did not take lightly,” Harley said in a statement. “The Kansas City plant has been assembling Harley-Davidson motorcycles since 1997, and our employees will leave a great legacy of quality, price, and manufacturing leadership. We are grateful to them and the Kansas City community for their many years of support and their service to our dealers and our riders.”
Harley-Davidson is also expanding overseas
Meanwhile, Harley-Davidson is opening up a plant in Thailand, where it plans to start production later this year. (The company also owns and operates facilities in India and Brazil, and it is closing a facility in Australia.) The company says the Thailand plant isn’t meant to outsource jobs but to boost its international business and avoid tax and tariff burdens. Trump’s proposed steel tariffs could pose a threat to Harley and add an estimated $30 million to its costs, and the European Union has threatened to impose a tariff on the company’s motorcycles in retaliation.
Source: see more at Vox