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Spartan Motors, Inc. (SPAR) |
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CEOCFO Current
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This is a printer friendly page! Spartan
Motors – 27 years of steady growth, well positioned for the future in the RV and
Emergency Rescue markets BIO: The Spartan Motors, Inc. board of directors elected
John E. Sztykiel as the chief executive officer in June 2002. Prior to the election, John served as the president
and chief operating officer of Spartan Motors, beginning in 1993, and as a director since
1988. During that time, he also held the position of president of the
company’s largest subsidiary, Spartan Motors Chassis. John has been with the company since 1985, serving in
a number of operations, sales and marketing positions during his tenure. He was also
instrumental in Spartan Motors’ entry into the motorhome market with its rear-engine
diesel pusher chassis in 1985. Before coming to Spartan Motors, John was employed by
Burroughs Corporation (now Unisys) and also worked for Eaton Corporation for five years. John Sztykiel is a graduate of the Michigan State
University sales and marketing division, as well as a former Michigan State University
hockey three-letter winner. He and his wife Joni have four children. His
outside interests include golf, hockey, skiing, and community projects for children. CEOCFOinterviews: Mr.
Sztykiel, where was Spartan Motors, when you became its CEO and what changes did you
orchestrate? Mr. Sztykiel: “We established a more formal operating structure between the parent company and the three subsidiaries. We have a defined corporate group, which consists of approximately six people. We have three separate operating subsidiaries, being SpartanŽ Chassis, Crimson FireŽ, and Road RescueŽ with presidents in each group. Prior to that, I was COO of Spartan Motors Inc., and President of SpartanŽ Chassis. I realized I was trying to wear two hats with two responsibilities and it was very difficult if one wants to do an effective job in both areas.” CEOCFOinterviews: Will you give us a breakdown of what Spartan is all about and what changes you are making? Mr. Sztykiel: “We are a specialty vehicle manufacturer and chassis manufacturer, where our two markets consist of chassis for RVs and fire trucks and fire truck and ambulance bodies. Currently the breakdown today is about 60% RV chassis, and 40% of our rescue related products. In the last twelve to eighteen months, we have gotten out of markets where they were not aligned with those two core markets, and now we are a very focused company. We have abut 5% market share in the total markets that we compete in between RV and emergency rescue and we are very focused on growing that market share.” CEOCFOinterviews: Do you see the 60/40 split as continuing? Mr. Sztykiel: “I think the 60/40 split will probably change overtime. The emergency rescue market represents a tremendous growth opportunity for us. When we look at Crimson FireŽ, they have only about 3% market share. When we look at Road RescueŽ, they have only 5% market share in the ambulance business. Emergency rescue market is probably our largest growth opportunity from a company perspective. Due in part to 9/11 there is now a tremendous focus in the emergency rescue part of the marketplace.” CEOCFOinterviews: Will you tell us about the Emergency rescue markets? Mr. Sztykiel: “The markets are very small relatively speaking, but they are also very profitable. For example, there is only about 5,500 fire trucks bought each year in the U.S. It is a customized market though in that 80% of the districts are volunteer fire townships. The ambulance business is also about 5,500 units a year. Each market is small in number, but they are also customized and very unique to each particular fire district or emergency rescue district.” CEOCFOinterviews: How much can one fire truck differ from another? Mr. Sztykiel: “Last year, in 2002, we painted over eighty different shades of red. If you look across the U.S. alone, there are about 26,000 registered emergency rescue districts being fire and ambulance. Each district has its own desire, operating structure, buildings etc., so it ranges from engines, transmissions, the size of the ambulance body, the color, the equipment on board; it is a customized market. To give you an idea of what the customization does to the competitive side of the market, for example, there are over fifty different fire truck manufacturers in the U.S. today, and over thirty-five different ambulance manufacturers.” CEOCFOinterviews: Why should people be choosing one of your products? Mr. Sztykiel: “The biggest difference from Spartan, and where we really differentiate ourselves, is in the performance of the product and the after-sales support as a company. Over 10% of our workforce of approximately a total workforce of 750 people, are involved in engineering. Since our inception 27 years ago, we have been noted for innovative vehicle performance. The other differentiating part of us as a company, is the after-sales support; we are known as a relationship company; for example I spend a significant amount of time each week meeting with individual end-users of our product, whether it be an RV owner or an emergency rescue fire department, ambulance operator. It is the innovation from a technology perspective, driven through a highly engineering company, and a relationship orientation driven which delivers our results.” CEOCFOinterviews: Will you give us an example of the innovations that you may have come up with? Mr. Sztykiel: “A perfect case in point was in 1987. It used to be that fire trucks were open on the back-end, and we brought to the market a concept called gladiator EURO-SPACE, where we fully enclosed the cab and put two doors on the side. Our backlog went from a six-month backlog to a fourteen-month backlog. Our production went from twelve trucks per month to twenty-eight trucks a month. From a motor home fire truck perspective, we were the first manufacturer in the world to bring an independent front suspension system on a vehicle and a GW over 16,000 lbs. Most recently, we have introduced an active suspension, which is currently available on our Mountain Master RV and next year it will be available on emergency rescue chassis. While you can get an active suspension on a car or SUV in the automotive arena; you cannot find an active suspension on a vehicle over 6000 lbs., until you come to Spartan. We are unique not just in the U.S., but also in the world market, from an active suspension perspective. As a company, we not only bring innovation to the marketplace, but ironically enough, suppliers come and talk to us because they look at our innovation and work to apply those concepts to other markets worldwide.” CEOCFOinterviews: How do you sell the fire trucks and ambulances? Mr. Sztykiel: “The process is a very direct and one-on-one approach. Typical marketing is that you advertise, you work with your distribution, then you go to the consumer; we do just the opposite. We focus on the consumer (the end-user). The company will go to over a hundred shows in 2003, with an actual product, and at this point in time, we probably have twenty-five demonstrator units running around the country working with dealers and direct sales force to demonstrate to the consumer what makes our Spartan, Crimson FireŽ, or Road RescueŽ products different.” CEOCFOinterviews: Do people look at your trucks and say “we really should be thinking about making a change?” or do they start to shop when there really is a need? Mr. Sztykiel: “The former is the case most of the time. Ironically enough, in the U.S., very few, of the emergency rescue products really wear out unless it is a very large city. The reason we have so many demonstrators and the reason we go to so many shows is people look at our product and say to themselves, “Boy! There are a lot of features there, where I can really see the benefits.” The product they have may be eight or fifteen years old, and they think about upgrading their body to a SpartanŽ, Crimson FireŽ or Road RescueŽ product. By spending a lot of time on the road with the product one-on-one with the consumer, we are able to illustrate just how much the product has changed over the years. We work hard to encourage the customer to analyze what their current product make-up is and then decide if it is right for them to purchase something else.” CEOCFOinterviews: What about financing, is that up to the individual? Mr. Sztykiel: “Yes, it is up to the city or the end-operator, most of the people purchase their equipment; there is a small amount leased, but most is bought.” CEOCFOinterviews: You mentioned volunteer fire departments and rescue, what about cities such as New York or Los Angeles, do you deal with those as well? Mr. Sztykiel: “We deal with quite a few large cities. We have a very good reputation in the large cities because our products are known for performance. It is the same one-on-one personable approach, whether it is a large or small city.” CEOCFOinterviews: I know you are doing some consolidation of your facilities around the emergency vehicles, will you tell us about that? Mr. Sztykiel: “First we consolidated Crimson FireŽ, which prior to November of last year, was Luverne and Quality, two separate fire truck companies. Separately, it was difficult for them to negotiate attractive purchasing. Their engineering groups, sales, and distribution groups were also separate. As two separates, they were basically dysfunctional; growing, but not growing profitably quickly. On the ambulance situation, we had two facilities, one in Marion, S.C., and one in St. Paul, MN. While the facility of St. Paul was profitable, the cost of doing business was very expensive and as we looked into the future and did the analysis, what we saw in St. Paul was that over time we would lose market share and margins. St. Paul would become obsolete from a manufacturing perspective. Now, we are consolidating all of our ambulance production in to one facility in Marion, S.C.” CEOCFOinterviews: Please tell us about the RV side of the business. Mr. Sztykiel: “The
RV side of the business we have been into competing since 1987, and we are noted as a
custom manufacturer, very focused on innovative performance with a strong support in
after-the-sale. Our product horsepowers range from 300 hp to 500hp; the chassis cost can
range from forty thousand dollars to a hundred thousand dollars. What makes the RV part of
the market very attractive to Spartan is the interaction with the consumer (end-user.) We
spend a lot of time directly with the consumer, the people that actually use the motor
home. For example two weeks ago we had over 400 motor homes here in Charlotte, Michigan
where we manufacture the RV chassis and people spend approximately three hundred and fifty
dollars for four days worth of training and education of the chassis; how to service and
maintain. CEOCFOinterviews: Please tell us about the ME-2 line. Mr. Sztykiel: “Our ME-2 product line is the next evolution of an RV chassis, in that it is a mid engine. The beauty of the mid engine relative to an RV chassis is that it gives you two abilities, and one is that you can have a garage in the back of the vehicle where you can still tow up to a vehicle yet still carry a couple of motorcycles, or a wave runner etc. Eighty seven percent of all motorhomes tow a vehicle or some kind of object, but what the ME-2 allows you to do, is to also have a garage and take along your other large toys. The other benefit of a mid engine is that because the engine is in the middle, we make it disappear below the floor. A body manufacturer can now create a motor home that would have two bathrooms, a large master bedroom suite in the back, and that is difficult to do that now with a front engine or a rear engine.” CEOCFOinterviews: Do you maintain a large inventory? Mr. Sztykiel: “No, we are very focused on managing our inventory, keeping it low. We do manage a lot of inventory. At Spartan, we purchase 99.9% of our parts on the outside, so we are not a vertically integrated manufacturer. How we manage our parts is very critical to our success because the average lead-time for an RV chassis is about 36 days and nothing is built for stock. We spent a lot of time managing the material control to ensure that we don’t have too much or too little inventory and it is just right.” CEOCFOinterviews: What is the financial position of the company? Mr. Sztykiel: “The financial position is very strong in that we are a debt-free company, we have approximately eight million dollars of cash in the bank and we run on a very conservative framework. Spartan was born out of the bankruptcy of Diamond Reo Trucks, in 1975. When you are born out of a bankruptcy, you learn that you never want to go back. As a company we try to run a very conservative debt-free operation within all three subsidiaries and the corporate structure as a whole.” CEOCFOinterviews: Two of your objectives are to become the most desired brand and to become the total low-cost producer. What are your challenges to accomplish that? Mr. Sztykiel: “For the most desired brand, the biggest challenge there is from a marketing/information format; we have a very strong direct sales force. From a marketing/advertising perspective over the last four or five years, we have not been that strong; our website has been inadequate, or brochures have been inadequate as well as mailings. As a company, we need to overcome those challenges but also be able to measure the success. We need to ask ourselves if the Spartan name is becoming the dominant name within the RV or emergency rescue business. From the lowest cost producer perspective, our biggest challenge there is to develop the right people whether it be at SpartanŽ Chassis, Road RescueŽ, or Crimson FireŽ, to ensure a consistent focus on reducing the waste and how we operate whether it is in the office or in the shop. In the end, it revolves around the fact that great people make great things happen.” CEOCFOinterviews: You’ve made the 2003 listing of 100 best corporate citizens; what is this all about and how do you go about getting there? Mr. Sztykiel: “The list is composed of about four or five different areas, which talk about operational excellence, which in 2002, we had an excellent year, and were in the top 5% of all public companies in North America. The second part has to do with associate turnover and ratings as it relates to associates and how suppliers and other people in the community receive Spartan Motors, Inc. In 2002 for the first time, everything came together in such a manner that we were able to become a member of the top 100. It is really four or five criteria, which while one part is operational excellence, the other parts relate to how we operate as a company among the many associates, suppliers and communities in which we operate. It is the benchmark of the entire operational structure and the perception of the company.” CEOCFOinterviews: You have a stock buy-back plan; why are you doing that and what are you doing with the stock? Mr. Sztykiel: “The stock buy-back plan is a plan that allows us to repurchase shares out in the market place as we deem appropriate at any point in time. Over the past eighteen years since we have been public, this is our fifth buy-back program. It allows us to purchase shares as we perceive them to be a wise investment relative the growth and future of Spartan Motors, Inc. What is interesting is, as a public company over the last eighteen years in 2002, we were able to obtain our highest stock price ever, after adjusting to a couple of splits over the last eighteen years. Secondly, when people looked at our market share, our growth and profitability, our debt-free balance sheet and income statement, people came away with the perception that we are a very strong company with a strong opportunity for the future.” CEOCFOinterviews: What demographics do you find favorable? Mr. Sztykiel: “As more people get older, and it has been said that approximately four million people each year, turn sixty in the U.S. This drives two primary markets, one of which is the RV market; the core buying audience of an RV is in the age group of about fifty and sixty years. We have more people with greater wealth coming into that potential pool. The second part of the age demographic has to do with the emergency rescue ambulance business; as more of us get older, we are going to take a ride in an ambulance whether we want to or not and typically with each ambulance call now, it is not just and ambulance that shows up, but a fire truck as well. Age is clearly the number-one demographic that is driving our two primary markets.” CEOCFOinterviews: Two of your objectives are to become the most desired brand and to become the total low-cost producer. What are your challenges to accomplish that? Mr. Sztykiel: “For the most desired brand, the biggest challenge there is from a marketing/information format; we have a very strong direct sales force. From a marketing/advertising perspective over the last four or five years, we have not been that strong; our website has been inadequate, or brochures have been inadequate as well as mailings. As a company, we need to overcome those challenges but also be able to measure the success. We need to ask ourselves if the Spartan name is becoming the dominant name within the RV or emergency rescue business. From the lowest cost producer perspective, our biggest challenge there is to develop the right people whether it be at SpartanŽ Chassis, Road RescueŽ, or Crimson FireŽ, to ensure a consistent focus on reducing the waste and how we operate whether it is in the office or in the shop. In the end, it revolves around the fact that great people make great things happen.” CEOCFOinterviews: Why should potential investors be interested? Mr. Sztykiel: “The
first thing that people need to look at is the growth opportunity. In our two core markets
of RV and emergency rescue, we only have 5% market share and that is in the U.S., which
means we have a tremendous amount of opportunity to grow. When they look at our financial
performance over the last seventeen years our balance sheet and debt-free structure, what
that indicates is that as a company, we have been able to work through some very difficult
economic situations, yet grow and prosper; 2001 and 2002 are no different. As I look at
investment, I try to look at the soundness of the management team and whether their growth
is in the future or are they into a mature market. As investors look at us, they see a
tremendous amount of room for growth, and they see very sound financial management. CEOCFOinterviews: In closing, what would you say has been critical to the success of Spartan Motors? Mr. Sztykiel: “If people look at us as a company, they see a focus on people, relationships, innovation. Innovation not just with the product, but also in the process as to how we operate. That is how the company was founded 27 years ago and it is no different than today; great people working to make good things happen.” disclaimers |
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