Harley-Davidson Shareholders Shrug As EPA Settlement Announced

Harley-Davidson Inc HOG and the Environmental Protection Agency (EPA) have struck a deal in which the former will pay a civil penalty of $12 million. The company will also spend about $3 million on a project to ease air pollution with cleaner-burning stoves in local communities, according to the EPA.

As part of the deal, Harley-Davidson will stop selling its competition–only turner in the United States. However, the company is allowed to continue to market a performance-turner meant to retain its 50-state and EPA compliance about on-road emissions. The company clarified that the settlement would not affect any other product performance offerings except aftermarket turning product meant to calibrate motorcycles of closed-course competition.

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The allegation against the company was that it enabled dealers and customers to tamper with motorcycles used on public roads. However, the company refuted the allegations, stating that the Pro Super Tuners were sold in an after-market competition-only product to suit the engine's specifications.

Harley-Davidson Government Affairs Director Ed Moreland commented, "This settlement is not an admission of liability but instead represents a good faith compromise with the EPA on areas of law we interpret differently, particularly EPA's assertion that it is illegal for anyone to modify a certified vehicle even if it will be used solely for off-road/closed-course competition."

Key Issues

Key issues between the company and EPA include the following:

• The EPA charged Harley-Davidson of violating the Clean Air Act by selling 340,000 turner devices, which allegedly enabled users to modify engine function.
• According to the EPA, the company sold over 12,000 motorcycles, which failed to receive certification.
• The settlement will result in Harley-Davidson ceasing sales of the tuners and repurchasing the devices from dealers in order to destroy them.
• The company agreed to get California Air Resources Board certification for any tuners in the future.
• Harley-Davidson will conduct tests and provide results to the agency.

Following the news, the stock dropped as much as 8.04 percent to $50.1 and once the damage was quantified, shares recovered most of the losses. At time of writing, shares were down 1.68 percent at $53.59.

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