Alabama’s Latest Big Ride
CEO Scott Wine explains why Polaris Industries — the world’s leading powersports vehicle manufacturer — became Alabama’s biggest economic development news of 2015.
Polaris CEO Scott Wine says the company spends $150 million a year on R&D and could eventually add engineering services to the Huntsville plant.
Scott Wine, 48, is CEO and chairman of Polaris Industries, the world’s leading manufacturer of powersports vehicles — off-road vehicles and snowmobiles — with sales of $4.479 billion in 2014.
Headquartered in Minnesota, where it started making snowmobiles, Polaris would be totally foreign to Alabama except for all the Alabama hunters and farmers who own off-road vehicles, and the fact that Polaris announced in January it will build its 15th plant in Huntsville — expected to account for 20 to 25 percent of future revenues, employing 1,700 to 2,000 workers.
Polaris is a publicly traded company (NYSE: PII) with a market capitalization of $9.5 billion and a projected income this year of $500 million.
We have been growing our market share and unit volume quite significantly over the last five years. In 2011, we opened a plant in Monterey, Mexico, and we expanded a facility last year in Iowa, but, as we looked at our capacity and the demand for our side-by-side products, specifically our Ranger platform, demand outstripped our capacity. So we looked all over the country for the best place for us to put our next facility. We spend a lot of money on logistics, so where we put our plants in relation to our customers is important. And as we evaluated numerous states, northern Alabama and the Huntsville area just came out clearly on top.
Huntsville is going to be a very large plant for us — 1,800 to 2,000 employees — and it will be the primary source of Polaris Rangers, which is our number-one-selling vehicle in the world. The Ranger business itself is over $1 billion (revenue), and it’s part of our off-road vehicle business, which is over $3 billion, and total sales this year are expected to be right at $5 billion.
We are the leaders in off-road vehicles, and off-road vehicles include ATVs, which is our Sportsman product and our Ace product, which you ride on with handlebars. The other part of our off-road vehicle business, including the Ranger, is what the industry calls side-by-sides. Anywhere between two and six passengers can fit in them. This is a work utility vehicle. It is designed for farmers, ranchers, hunters and homeowners who just need to get work done, and they are extremely versatile in where they can go. The tag line is “Hardest Working, Smoothest Riding,” and, really, that’s what our Rangers deliver.
Polaris doubled its revenue and tripled its profits in the last five years, and the largest portion of that growth has come from our Ranger business, which is very indicative of why we’re building a plant in Huntsville. Because of the workforce and the technology and the location we believe the Huntsville location could become extremely competitive on cost and quality, better than any other plant that we have in the network.
The Huntsville location is almost perfect in terms of the proximity to our customers. We have gained more market share in the Southeast over the last five years than in other regions. In the southern United States, there are a lot people who have their little hobby farms, and they like to hunt.
We are moving dirt right now. We’re targeting March ’16, which is a little less than a year from now. The specific site location, around 500 acres, is right on the freeway, it’s seven miles from the airport, and there’s a rail line coming right into it, which provides almost optimal logistics for us. We have room for a test track, as well. It’s going to be a state-of-the-art manufacturing facility, and we’re going to add engineering capability there over time, because there’s just such a strong engineering work force there.
We’ve got a growing military business, and it’s possible that over time we would move some of our military work there (Huntsville) as well. It’s mostly sales to the special operations forces, the Seals and Rangers. They use our ATVs and our Rangers and Razors on the battlefield.
We have a very aggressive growth plan to become more of a global company. Within the next couple of months we’ll be launching a vehicle in India, with a joint-venture partner, Eicher Motors. They own the Royal Enfield business. (British, the world’s oldest motorcycle company.) We’ve got a small but growing business in Brazil, a good business in Mexico, Australia and China. And we’ve got about a $600 million business in Europe.
We’ve got two motorcycle brands: Victory, which we started ourselves about 17 years ago, and Indian, which we acquired in 2011, which is about a half-billion-dollar business now. And we have a three-wheel vehicle called the Slingshot, which is classified as a motorcycle. So, we have very aggressive growth plans for that business. All of our motorcycles are made in Spirit Lake, Iowa.
Research and development is the lifeblood of our business. We spend about $150 million a year on research and development. We’ve got a state-of-the-art R&D facility, some of the best testing and research, not to mention test tracks, you’d ever want to find. The absolute, most important aspect of our business is to continue to maintain an innovation and R&D lead.
We bought the Global Electric Motorcars business from Chrysler. We bought an electric motor company called Brammo that makes engines with a world-class lithium-ion technology, and we think that’ll be important for our products over time. We’re willing to make bold bets sometimes. In a way, this plant in Alabama is a bold bet. It’s a $150 million investment, and we’ve got to make sure it pays off. The main risk is the economy turning south, but even if the economy turns south, we need
I started (as CEO at Polaris) September 1, 2008, and Lehman failed on the 15th or 16th, so I got trial by fire for sure. But it speaks to the passion of our customers that our sales were only down 20 percent in 2009, and earnings were only down 13 percent. When times are tough, people like to do things with their family, they like to stay close to home, and our products are something that lets them do both of those.
During the recession, we were able to gain market share, and we did that significantly [from 11 percent in 2008 to 24 percent in 2014]. The Japanese — Honda, Yamaha, Kawasaki, who are a major part of our competitors — they took the recession as an opportunity to invest in other parts of the world selling motorcycles. We said we’re going to stay focused on our customers and dealers in powersports. You can see it in the charts. That’s really what drove our market share gain.
Chris McFadyen is the editorial director of Business Alabama.