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Polaris Goes WAY Out...to Mexico


(5/21/2010)

POLARIS UNLOADS PLANT IN WISCONSIN, MAKES A RUN FOR THE MEXICAN BORDER

Sign of the times? Smart leadership? Giving the people what they really want?

Or...

...does this represent everything that wrong with American manufacturing? And is this the beginning of the end?

 

The following is from Polaris Industries...

In an effort to improve its long-term competitive positioning, increase operational efficiencies and position the company for future growth, Polaris Industries Inc. (NYSE: PII) today announced plans to realign its operations and refocus on its core strategic manufacturing processes. The Company will create manufacturing centers of excellence for Polaris Products by enhancing the existing Roseau, Minn. and Spirit Lake, Iowa, production facilities and establishing a new facility in Mexico.

The Company is currently evaluating several possible locations in the Monterrey/Saltillo area of Mexico for the new facility. The realignment will lead to the eventual sale or closure of Polaris’ Osceola, Wisconsin manufacturing operations over time. The realignment allows the Company to dedicate capital for strategic investments in painting, welding and assembly operations by outsourcing certain non-strategic component manufacturing processes. The Mexico facility is expected to maintain Polaris’ industry leading quality while improving the Company’s on-time delivery to customers and provide significant savings in logistical and production costs.

“While this was a difficult decision for us, given the impact on our employees at the Osceola facility, we believe the creation of these manufacturing centers of excellence will strengthen our company over the long-term and enable us to maintain our lead in a competitive market,” said Scott Wine, CEO, Polaris Industries Inc. “Pursuing opportunities in new markets outside the United States, while concurrently evaluating our cost structure to improve our long-term competitive positioning are key components to our growth strategy. This decision was based on a thorough review of our worldwide operations and will allow us to improve our ability to meet the quality, delivery and cost standards desired by our dealers and customers.”

The realignment of Polaris’ manufacturing footprint will strengthen the Company’s position in the powersports industry, as it will enable Polaris to have production facilities closer to customers in the southern United States and global markets the Company currently serves or expects to serve in the future. When the manufacturing realignment is completed the Company will have capabilities to manufacture ORVs (both ATVs and side-by-side vehicles), which represents more than two-thirds of the Company’s sales, in multiple locations depending on customer demand.

Snowmobile assembly will remain in the Roseau facility and Victory motorcycle assembly will remain in the Company’s Spirit Lake facility. As part of the manufacturing realignment, certain Osceola manufacturing processes will be moved into the Roseau, Spirit Lake and Mexico facilities to more effectively utilize Company resources. In addition, certain manufacturing processes and equipment are intended to be sold to suppliers whom will continue to supply components to Polaris. Other non-strategic component manufacturing operations currently performed in the Osceola facility will be outsourced. The realignment will begin immediately and is scheduled to be complete in 2012. The Company will look to have the new production facility in Mexico operational beginning in the first half of 2011.

Polaris is currently in negotiations with several suppliers to sell certain non-strategic component manufacturing processes and equipment in the Osceola facility. If successful, Polaris’ intent is that the suppliers will continue to manufacture these components in the current Osceola location. Polaris will operate the Osceola manufacturing facilities during the transition period. Upon completion of the transition, Polaris will provide the affected employees severance benefits and work closely with the Wisconsin Department of Labor and other state and local agencies to offer employment assistance and other services.

The Company expects to record pretax transition charges to its income statement in the range of $20 million to $25 million and incur capital expenditures up to $35 million over the next few years related to the implementation of the manufacturing realignment. The Company expects the Osceola facility exit costs, comprising largely of one-time employee termination benefits, to amount to approximately a third of the total transition charges, while the start-up costs related to the new Mexico facility and other centers of excellence will comprise the balance. Transition charges to be incurred in calendar year 2010 are expected to be in the range of $8 to $10 million. The Company’s current earnings guidance of earnings per share of $3.48 to $3.60 for the full year 2010 will not change as a result of this announcement. The realignment is expected to generate pre-tax costs and expense savings in excess of $30 million on an annual basis when the transition has been completed. The Company expects to begin realizing some of the cost savings as early as 2011.

For more background info, read this story from StarTribune.

Waddya think?



Comments (13):

Mike says:
5/21/2010 2:19:00 PM

Looks like in efforts to lower their costs they just lost 300 or so customers/employees. If Americans don't have a quality job how can they buy thier product. May be Arctic will gain some market share out of this???
250 Tigger says:
5/21/2010 7:42:00 PM

Definitely sign of the times, smart leadership should have started a number of years ago and maybe it did. But go and take jobs to Mexico! One would think that there would be some other options. As a small business owner, the biggest expense is labor and benefit packages. Just a $0.50 per hour per employee in a company the size of Arctic Cat or Polaris would be huge, then you have to figure in the company's share of social security, work mans compensation insurance, unemployment and the list goes on. I live near Red Wing, Mn. and in the last 8 years Red Wing Shoe has cut production from 3 shifts at 2 plants to 1 shift at 1 plant. Dayco belts had a plant there and now is gone, many other businesses have left to because of labor or having to down size to cut costs. I don't like to see this happen to any business. Just my $0.02 cents
Mike says:
5/22/2010 9:43:00 AM

I really try hard to buy made in USA products. It is getting more difficult every day. I have been so proud to purchase Arctic Cat products over the years both new and collector sleds. You build quality products and I have spoke with many of your employees over the years and they are also very proud of the product they make. I hope that you will always build your products hopefully in Minnesota but at least in the USA. The people in the other country's don't contribute anything towards our local area or country. Everytime a job is sent out of the country someone loses a job. They are not going to be able to buy that new product or buy other things that contribute to our cities, counties, state, and local business. The end result is America loses out. Hang tough Cat and remember the USA. It will get you more business in the end. Look at what Ford has done because of the stand they took when times were tough.
Todd Ulschmid says:
5/22/2010 11:46:00 AM

Cut taxes on businesses, families and let the jobs stay here in America. Hire hard working Americans, pay their wages, the employee spends the money back into the economy.....It's the wheel of the economy that has to keep rolling for our country to sucede. Once the jobs are gone. They are gone for good. Then what? Ask you local government officials, state government officials and federal government officials what their plan is to KEEP jobs in America.....First ask them if they have ever held a private sector job or have ever created a private sector job....NO MORE COMMUNITY ORGANIZERS IN GOVERNMENT!
flintstone says:
5/22/2010 9:03:00 PM

The mexicans as well as many other countries can produce more for less money. Look at Arctic Cats clothing line, have you guys seen where some of that stuff is made? These companies can have stuff manufactured in countries where there are fewer labor laws,etc.. they can use children and if the child becomes ill at work they can send the child home to die and not recieve medical treatment and hire another child to replace the sick one that died.... these garments are being made in places like bangladesh,indonesia and china to name a few... using children from the age 10 on up..

does it creep me out that companies like arctic cat,honda and polaris do this? you bet it does!!!!

I wouldn't trust any of those ceo's any farther then I could kick them!!
John Sandberg says:
5/23/2010 3:35:00 PM

I too fear the export of manufacturing jobs overseas, for the same reasons many of you have mentioned. But I also buy products at Target and Wal-Mart, knowing full-well that such products are likely manufactured somewhere other than North America. So in this sense, I'm part of the problem. I know that for companies like Arctic Cat and Polaris, their efforts to reduce retail prices on everything from clothing to machines (because we ask them to do so) results in outsourcing. How many people who proclaim that we must buy USA-produce have purchased Castle, Arctiva, FXR, HMK or other gear made in Asia-PAC?
kevin sebastian says:
5/23/2010 6:08:00 PM

Yes even the mighty Klim is producing gear in china,so who isn't ??What can we do as consumers? (Hope arctic is able to maintain stateside production of atv's and sleds!)
250 Tigger says:
5/23/2010 10:07:00 PM

I'am part of the problem to. It is very hard to buy a product that is totally made in the USA, and outsourcing is not going away any time soon if at all. The whole outsourcing issue is not going to be a issue if we can't get the people of this great country back to work, so they can buy the product to keep businesses like Arctic Cat going. I could go on and on about this subject but it turn into more of a rant than a comment. All we can do is buckle up, and hang on for the ride because it is going to be a rough one until the economy turns around.
todd f7 says:
5/24/2010 2:03:00 AM

Well i for one would just like to say THANK YOU to Arcitic cat while thay have started engine mfg here in minnesota!! polaris is moving to mexico. If you read carefully to there long "BUZZ" word of the day statement. thay are planning on mfg atvs down there also in the future!!! I too have been part of the prob. but i can say all my big ticket purchaces were made in the usa. it really dont matter to me who makes my little girls doll. or my printer paper. but i do TRY to buy all big ticket items from the us. Any how Thanks again cat you make us all proud of you every day!!! ps the jackets you made in theif were WAY better i know I still have some of them and after 20 years are still WAY better. And yes i would pay more for a prem. coat mfg there in theif......maby a second line of coats????? just a thought.
MELROSEMAFIA says:
5/25/2010 7:07:00 PM

LOL......I wonder how many of you HARDCORE CAT GUYS realize that most of the DVX line of CATZ sport quads are manufactured in Tiawan by KYMCO corp....Then rebadged with A/C stickers and imported here to the USA.....Do a side by side SPEC comparison of a 2009 A/C DVX 300 with a 2009 KYMCO MONGOOSE 300.....Their the exact same bike......The Boyz in TRF have been pullin the wool over peoples heads for longer than you realize.....
Kevin says:
5/25/2010 9:54:00 PM

Yeah that's pretty well known... but it makes some sense because it allows them to expand their lineup without having to build small quantities of such a bike so they can put more time, focus and R/D into their main lineup.

Buying motors overseas has always been a part of the sport - Fugi, Suzook, Kawasaki, Rotax, and all the old ones (Hirth, Sachs, JLO, etc...). Still, the Poo thing is different - in their attempt to be more competitive and please the bean counters and stock holders, they are selling out their identity. I predict that over the long term it hurts them because they lose their identity as the American made choice.
Justin Ohmann says:
5/27/2010 4:34:00 PM

One thing that worries me is that everyone will simply forget that Polaris made this move in a couple of years unless you live in Oseola of course. What a shame. I am an Arctic Cat Fan through and through but have always respected Polaris for there American made products. Now I am going to lose total respect for that company.
You guys are completely correct about manufacturing moving out. In just a few short years there will be a very small middle class in this country. Let's hope things change soon.
Greg says:
8/26/2010 6:49:00 PM

I think it's a huge mistake! I have always rode Skidoo and I was going to buy a 2011 Polaris Assault because they are made in
America, Not now! I was so Pissed off when I found out they were doing this I called Polaris and let them know how I feel about this move. I would suggest everybody does the same. I'm sick and tired of greedy ceo's that are willing to sale their soul just to make a few extra bucks. I am in no way anti capitalist. I understand that they are WAY OVER TAXED AND REGULATED, but don't Crap on Americans. We need to get these s*** bags out of office!!!

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