Polaris Opening Mexican Assembly Plant
Realignment of manufacturing will see eventual closing of Wisconsin facility
Dan Crummett
Published: May 21, 2010
Polaris Industries says it's realigning its manufacturing operations to include a Mexican assembly plant that will ultimately save the company around $30 million a year.
The move, announced in a press release and subsequent conference call with members of the media today, will eventually see the cessation of operations at the company's Occeola, Wisconsin plant. Operations currently done there will be integrated into Polaris's Roseau, Minn., and Spirit Lake, Iowa, facilities and within 24 months to a new facility in the Monterrey/Saltillo, Mexico area.
Polaris CEO Scott Wine says a significant savings in labor costs and logistical advantage of having off-road vehicle assembly close to the Southern United States (where a major portion of OR sales occur) are driving forces behind the move, along with a desire to "penetrate the Central and South American markets" with Polaris off-road equipment sales.
The project begins immediately and is expected to be complete within two years, Wine explained. Meanwhile, Polaris is negotiating to sell some of its support-related manufacturing to local entities in the Osceola area, but ultimately plans to see its engine and exhaust manufacturing and assembly located in the other three plants.
Wine said the company is planning to build in a measure of duplication on engine assembly at the three facilities to ensure quality control and to provide flexibility to meet demands that might occur in different regions from time to time. Basically, however, snow equipment engine assembly will be concentrated in Roseau, Victory motorcycle engines in Spirit Lake, and off-road vehicle engines produced in all three facilities.
Over the next two years the Roseau and Spirit Lake locations will be retrofit to take on the extra work coming from closing the Osceola plant, and the rest will be assigned to the Mexican facility.
Asked if crossing the border would cost Polaris -- a firm which has traded on its "Made in USA" heritage -- anything in branding, Wine explained: "We certainly considered that. As you know we currently have our youth products being manufactured outside of the United States. And, we think as we deliver quality and performance (through the Mexican facility) we'll be able to work through this from a brand perspective."
The company expects to record pre-tax transitions charges to its income statement in the range of $20 million to $25 million and incur capital expenditures of up to $35 million over the next few years related to the realignment plan.
Wine says savings from the move should begin occurring in 2011, and will be significant to the company's bottom line in years thereafter.
The company's business goals call for Polaris Industries to be a $3 billion company with at least an 8% growth rate by 2014.
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