Trade War Hits Home: Could Snowmobile Production Move To Mexico?

Could production of snowmobiles be moved out of the Snowbelt and to a factory in Mexico? That’s the question being posed after some strongly worded comments from Polaris CEO Scott Wine in relation to the burgeoning trade war between the U.S. and China.

In comments to CNBC yesterday, Wine called the proposed 25 percent tariffs proposed by President Donald Trump “downright catastrophic in terms of impact on the company and employees.” And, in an interview with Bloomberg, referred to the threatened levy on certain Chinese imports as “lunacy” that could cost Polaris nearly $200 million and cause it to potentially move jobs from its U.S. factories to its facility in Monterrey, Mexico.

Polaris has previously stated in financial disclosures that the current 10 percent additional tariff placed on some Chinese imports is projected to cost the company around $90 million in this calendar year. However, with a trade deadline between the U.S. and China looming for this coming Friday and dynamic tweets by President Trump on the topic stirring the financial markets, Wine said in the CNBC interview that the impact would increase to between $195 and $200 million.

“When we are hit with tariffs, that’s what I mean by impact to employees,” he said in the CNBC interview. “Through no fault of our own, one-third of our net income could go away.”

Here’s how it works: Polaris imports many components for its snowmobiles, ATVs, UTVs, boats, motorcycles and other products from China and assembles them into the whole goods as part of final production here in the U.S. The costs of those components would rise dramatically if the trade war continues to escalate. However, if those same Chinese components were instead imported to Mexico and assembled into vehicles at Polaris’ plant on the other side of the U.S./Mexican border, the assembled products wouldn’t be hit by the same sort of tariffs.

Referring to an assembly plant built by Ski-Doo/Can-Am maker BRP and a Polaris plant in Alabama within the last decade, Wine said, “What’s most ironic is I invested $150 million to build a new plant in Huntsville — at the same time our competitor built one in Mexico,” Wine said in the CNBC article. “They don’t pay the tariffs, and we do.”

“Ultimately if this was not resolved, we would have no choice but to move production to Mexico,” Wine said in the CNBC interview. “This would essentially be forcing me to push jobs outside the U.S.

“I’m paying tariffs because I hired American workforce and I’ve invested in American plants,” Wine said in the Bloomberg interview, “and I cannot stand for that.” Later he added, “It is not my desire to ever move a job out of the U.S. We have great employees here, we make great vehicles here, and that is what we’re trying to do.”

The company has also absorbed an almost $20 million impact on the Indian motorcycle side due to retaliatory tariffs enacted in Europe.

In the meantime, with all of this trade war talk going on, Polaris’ stock took a mighty hit on Wall Street so far this week – it was trading at $101.30 per share late last Friday but is down to $90.68 per share as this story is being posted on Wednesday afternoon. Varying reports seem to come out hourly related tot he likelihood that the U.S. and China will be able to broker a final deal, so the situation is evolving.

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10 thoughts on “Trade War Hits Home: Could Snowmobile Production Move To Mexico?

  • Time to manufacture the components in the US. Put more Americans to work and avoid the tariffs except for those on raw materials that can’t be sourced from the states.

    Reply
  • Such a shame that a company invested money into creating jobs for US citizens, is now getting penalized for it. Trump better get off his high horse, and take the humble road. Such a disaster!
    Harley Davidson had a similar situation. They moved their European models overseas. And Trump was complaining about that….

    Reply
  • I have an issue with Polaris buying so many items from China. An American company making American products with so many parts made in China does not make me feel warm and fuzzy. How about buying your parts from American companies? We can make anything in world right here in the USA. If all the price gouging companies want to sell their products to other American companies, then sell them at a reasonable price. Greed is the problem. Companies never make enough. People never make enough. Time to stop the nonsense.

    Reply
  • How about just making everything here in the USA? Would benefit everyone. Problem is, we as consumers want things at the cheapest price, so we all go to Wal-Mart. I would much rather pay a higher price for things made in the US if it benefits the US worker. Trump is NOT the problem. WE are! He is trying to make things right, yet all the nay sayers (Democrats) ares fighting him every step of the way. USA is NOT a socialist country, but all the naysayers want it as such.

    Reply
  • Well, USA, you have almost done it. Here I sit in Ontario.

    Canada and the US are essentially indistinguishable except for their governments.

    We should, by virtue of our locations if nothing else, be good neighbors, have a huge amount of common trade and all that.
    It still is this way when one deals person to person in either country but, very unfortunately, the USA government (if that is what you choose to call the latest iteration of fiasco) has chosen the route of an uneducated, insensitive and somewhat fat bully!

    This is very detrimental to all. I no longer feel friendly to the USA for example. I did not take my usual winter holiday into the USA last year and may never again. You treat everyone with a 5 second tweet, no thought, no context, no nothing but the big bully syndrome that flows (like the comb over) from the top. It gains nobody anything. You need to fix this and soon or the USA will be relegated to insignificance.

    Your not there yet, but at the rate Trump is going it won’t take much longer.

    Reply
    • Trump is actually trying to protect American workers in the long run. China has been taking advantage of weak minds (Obama) and stealing intellectual property, closing off their market to our products and making their bid to dominate world commerce. It won’t be a pretty picture of they have their way. There are political risks for Trump to hold form but he is doing the right thing. If you choose to believe the ND the media pushes about him then that is your choice, no matter how poor you reasoning. If a few tweets have you all riled up, just get ready for his next four years!

      Reply
    • Brian, turn off the mainstream media news and turn on your brain and you may see things differently. Our Canadian PM is a joke and has turned us into a laughing stock. Trump is putting his country and his fellow American’s first, like any good leader should. This Canadian supports him 100%.

      I didn’t realize Polaris used so many Chinese parts. Had I known that I never would have bought a Polaris ATV. Go ahead and move your plant to Mexico and pay the tariff when you try to sell the assembled vehicle in the US. It makes no difference to me, now that I know Polaris uses that many Chinese parts I won’t be buying another one.

      Reply
  • Just saying–the company is TRYING to keep jobs in America. If they could GET all the components made in the USA they would already be doing so. Are you volunteering to work for less than minimum wage so they can make small components here?

    Reply
  • Time to grow up and wear the bigboy pants. for all of you pledging to not buy a Polaris now that you’ve learned they source parts, you should know that your brand whatever brand it is is also getting a ton of components from china. if you want to only buy American with completely or even mostly American sourced parts, better not plan on having anything with any electronic components on it. And don’t you dare look at the label on the shirt your wearing right now. going amish could be your only solution.

    Reply

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