Polaris CEO says new China tariffs could be 'catastrophic' for company. Wine told CNBC that it would result in a loss of income and possible moving jobs to Mexico.
By Dee DePass Star Tribune
MAY 8, 2019 — 11:23AM
Polaris Industries stock has dropped this week after Chief Executive Scott Wine said new Chinese tariffs would be potentially "catastrophic" to the Medina-based business.
Wine told CNBC that the 25% tariffs — which would go into effect Friday (May 10) if the Trump administration and China don't reach a new agreement — would erase one-third of the company's net income.
The maker of all-terrain vehicles, snowmobiles and motorcycles is seeking an exemption to the increases.
The company has factored $90 million in costs for 10% tariffs into its projections. He said if the tariffs go up to 25%, the costs would more than double and could go up to $200 million.
The stock of the Medina-based maker of ATVs, motorcycles, snowmobiles and boats fell 2 percent to $91.11 Wednesday morning after Wine commented on Trump's surprise Tweets Tuesday.
The stock started falling after President Donald Trump tweeted on Sunday about the increase in tariffs on $200 billion worth of Chinese-made goods. His administration also announced tariffs on $325 billion worth of other Chinese-made goods.
Wine told CNBC that it sources a good number of its parts from China and assembles them in the U.S. He said the company might need to move work to Mexico if the tariffs go through.
Polaris earned $335 million on $6 billion in vehicle sales last year, so a hit of $200 million in tariffs would be a hard hit and "catastrophic" to the business.
Wine said the tariff shock could force the company to move production from the United States to Mexico, where Polaris has a factory in Monterrey. The company already started moving some European customer manufacturing from the U.S. to Poland in response to trade tariffs against European imports last year. That move, however was deemed small because it only affected customer orders for customers in Europe.
Future moves prompted by the new Chinese tariffs could be significantly larger, since a number of Polaris components are made in China and shipped to the United States, Wine said.
Polaris has manufacturing facilities in Roseau, Minnesota, Spirit Lake, Iowa, Osceola, Wisconsin and Alabama and is building a new distribution center in Nevada.
Dee DePass is a business reporter for the Star Tribune. She spent the last four years covering Minnesota's manufacturing and mining industries. She previously covered the economy, workplace issues and banking.