Transportation Equipment Manufacturers Hope for a Prosperous New Year

Corporate Report Wisconsin, Mar 2007 by Crawford, Mark

From military trucks to motorcycles, from trailers to bicycles, plus motors, seats and myriad other parts, Wisconsin is heavily involved in the transportation equipment business, a $17.9 billion industry here, according to the 2002 Economic Census.

The past few years have been rough on transportation equipment manufacturing, especially automotive: slowdowns by the Big Three in Detroit, more foreign competition, escalating material costs, high gas prices, new EPA regulations, and labor issues.

Still, with all the different niche markets available, many segments of the transportation equipment manufacturing industry in Wisconsin are managing to thrive and grow. And although passenger cars are no longer made here, the state has a large presence in specialty trucks and SUVs.

Oshkosh Truck Corp. has reached $3.43 billion in sales by filling market niches in specialty trucks and truck bodies for the military, construction, hauling, and emergency services sectors. (It was featured in Corporate Report in March '06.)

Growth strategies that Oshkosh Truck has pursued include strategic acquisitions (15 in the last 10 years), research and development (robotics, hybrid-electric drive technology, independent suspension systems), and a companywide lean manufacturing initiative that eliminates waste, reduces variability, and enhances overall cost structure. It also recently invested $18.5 million to concentrate its fabrication operations in Appleton for its Pierce Manufacturing subsidiary, thereby improving final assembly flow at its main plant in Oshkosh.

Patrick Davidson, vice president of investor relations at Oshkosh Trucks said, "We assemble a diversity of vehicles on a single line - heavy military, medium military, snow-removal equipment, and concrete trucks - so our assemblers must have very high skill levels."

The Oshkosh plant plans to hire more than 200 new hourly employees in 2007, bringing the total number of workers to more than 2,500.

Oshkosh Truck recently purchased JLG Industries, McConnellsburg, Pa., a leader in aerial work platforms and telehandlers, for about $3.2 billion in cash. This acquisition alone will boost net sales to more than $6 billion in 2007 and give it a stronger international presence. Oshkosh Truck has also signed an agreement to supply Quzhou Airport in China with aircraft rescue and firefighting vehicles.

Contracts with the U.S. military include heavy tactical vehicles, medium tactical vehicles, and the "joint-like tactical vehicle, or JLTV, which will ultimately replace the Humvee," said Davidson. Oshkosh Truck is also helping the military develop unmanned, robotic ground vehicles for both desert and urban environments.

Wisconsin's presence in the SUV market is the General Motors plant in Janesville. Opened in 1919, this 4.8 million-sq.-ft. plant employs about 3,800 and assembles SUVs for the North American market, including the Chevrolet Tahoe and Suburban and the GMC Yukon and Yukon XL.

In 2006 GM Janesville rolled out more than 213,000 full-sized SUVs and nearly 5,700 Isuzus. Although demand has slowed somewhat, GM Janesville is still expecting a good year in 2007.

"We recently rerated our plant from 56.5 units per hour to 50 per hour to better align ourselves with market needs," indicated Mary Fanning, business communications integrator for GM Janesville. "When we launched the new 900 line in February 2006 we needed higher production rates to get the vehicles into the market as quickly as possible."

"Janesville is our only assembly plant in Wisconsin and is a profit center that's critical to our success in the U.S.," added Tom Wickham, a GM spokesperson in Detroit. "Our Janesville vehicles are also E85-compatible, which has helped keep sales steady."

Automobile engines are also made in Wisconsin. DaimlerChrysler has a 1.9 million-sq.-ft. plant in Kenosha that manufactures 3.5-liter and 2.7-liter V-6 engines. In 2002 DaimlerChrysler completed a $624-million, 450,000-sq.-ft. addition to the aging facility. The company is reportedly looking for a site near Kenosha to build a new $500 million engine plant.

Bodies and Trailers

Wisconsin is home to some of the largest truck-body manufacturers in North America, such as Johnson Refrigerated Truck Bodies in Rice Lake. With 25% of the refrigerated truck body market, Johnson is the largest player in the U.S. The main plant in Rice Lake employs 275 people and just completed a $2.1-million expansion in 2006.

"Our sales in 2006 were about $20 million," said Greg LaFrance, the company's director of sales and marketing. He indicated the company is still recovering financially from a serious labor strike in 2005. Profits have also been impacted by higher material costs that "have increased an average of 40% to 60% over the last three years, especially aluminum, stainless steel, and fiberglass and foam resins," he said.

Another factor in truck sales has been new emission regulations covering diesel engines that require low-sulfur fuel.

"The EPA has mandated cleaner emission standards for diesel engines in 2007," said James Simpson, president and CEO of Marion Body Works Inc. in Marion, which builds custom-engineered truck bodies, including all-aluminum cabs and bodies for custom truck chassis makers.