When Oshkosh Truck Corp. (OTC) recently reported record third quarter earnings for 2005, it was probably easy for some people to dismiss. After all, there’s a war on and isn’t Oshkosh a military manufacturer?
Yet while there is no question that Oshkosh Truck’s defense business is booming–sales exceeded $774.1 million in 2004, an increase of 17.8% from the previous year–the success the company has enjoyed over the last few years is due to a lot more than military. Though the military business once accounted for more than 90% of Oshkosh’s revenue, it is now one part of what has become an extremely balanced product and market portfolio.
Oshkosh has three distinct business units comprising 11 brands that are dedicated to the commercial and fire & emergency industries, along with defense. Each is pulling in almost $1 billion ($850 million fire & emergency, $1.065 billion defense and $1.07 billion commercial) of the $2.9 billion in revenue that OTC is expected to finish with for 2005. In 2004, its fire & emergency business had sales of $599.7 million. Its commercial was another $907.3 million.
“We’ve grown from $683 million (in 1997),” said Robert Bohn, OTC’s chairman, president and CEO. “This year we’ll be somewhere around $2.9 billion and we’ll be going up from there next year.”
Growing essentially since its founding in 1917, the greatest expansion for OTC has been over the last 10 years, spurred in large part by the trail of acquisitions concentrated solely on expanding its fire & emergency and commercial industries.
“There is a formula,” said Bohn. “We make sure that we buy number one or number two in the industry, If we buy number two, we push hard in three to five years to get them at number one in market share.
“We look at distribution. We look hard at purchasing. Then the fourth thing we look at is technology innovations.”
Evidence of the formula is sprinkled throughout OTC’s acquisition history, but the story really starts in 1996 when the company began to look at diversifying its product line. Its first acquisition was Appleton, Wis.-based Pierce Manufacturing Inc., now one of OTC’s strongest brands in the fire & emergency arena. At the time, Bohn said, “we had 92% of our business in defense. We had always been building some crash fire rescue trucks for airports and dabbling in these commercial areas but we really weren’t serious.
“We began thinking that we wanted a way to leverage what we think we know and to diversify the company into avenues instead of just defense. So we actually put together real good business units.”
These units–operating today as the defense business, fire & emergency and commercial–have diversified over the years to include concrete placement, refuse, ambulances and wrecker vehicles, as well as a line of portable and stationary concrete batch plants.
Looking back at the Pierce acquisition, “at the time, they were number two in market share in North America,” Bohn said. “We were already number one in the crash, fire and rescue business with complicated sophisticated fire trucks for airports. This was an opportunity to sell to volunteer (fire departments) and municipalities, and have a broader spectrum of fire trucks to sell. And that’s why Pierce made sense.
“The other thing that made sense with Pierce is we saw that they were number two in market share and we thought because of our manufacturing expertise and our expertise in distribution, we could get them to number-one market share. We were able to do that.”
Today, the Pierce portfolio includes six custom chassis–the Quantum, Lance, Dash, Arrow XT, Enforcer and Saber; a series of aerial apparatus; pumper trucks; rescue vehicles; tankers; wildland trucks; and homeland security vehicles. This is in addition to its foam system and a range of innovative technology products, such as the TAK-4 independent front suspension and Command Zone advanced electronics system, which OTC integrates and markets throughout its product lines.
“Our real strategy is to lead in new product development and technology,” said Bohn. “We spend more money on research and development in our business units than our peers.”
Technology is also a key part of OTC’s acquisition review process, Bohn said. “We look at technology innovations,” he said. “Do they have technology we can use somewhere else? Do they have better multiplexing? Can they use our independent suspension? Can they use some of our components? This is added value to your company, so that’s important.”
This value can been seen with OTC’s other two fire & emergency purchases; the 2000 acquisition of Medtec Ambulance Corp., Goshen, Ind., and Brescia Antincendi International S.r.l., (BAI Companies), an Italian fire truck manufacturer bought in 2004.
Concerning Medtec, Bohn said, “we saw a trend in the industry once we bought Pierce. The firehouse and the chiefs started buying ambulances from some of the competition because we didn’t have ambulances. And some of the competition started selling fire trucks because it’s a relationship business. We said, okay, let’s go ahead and find an ambulance company so we can be a one-source solution.
“It took us two years to find an ambulance company making money, but we finally found Medtec and they built high-end ambulances, which fit well with what we do at Pierce. And we’re up to 500 to 600 ambulances a year now and we were building 200 to 250 when we bought it.”
Purchasing BAI not only offered high-end technology but it also secured its fire & emergency vehicle expansion into Europe. “They have number-two market share in Italy,” said Bohn. “They have very good technology, great distribution and they’re very solid, also, in the Middle East.”
Located in Bagnolo Mella, Italy, BAI manufactures both fire fighting and rescue trucks and their equipment for industrial, municipal, civil, emergency, airport, forest and specialty applications. Its line is primarily powered by Mercedes-Benz and MAN engines built on Mercedes-Benz Atego and Actros chassis.
The Medtec series is comprised of three levels (type I, type II and type III) of ambulances models available in field-duty, pro-duty or additional-duty models. While fully customizable, GVWR on the vehicles ranges from 9400 to 14,050 lb. using Ford, International, Freightliner and Chevy/GMC chassis.
Also adding to its fire & emergency business unit, OTC bought the assets of Nova Quintech, an aerial manufacturer based out of Quebec, Canada, in 1997, and then in 1999, purchased Kewaunee Fabrication LLC., Kewaunee, Wis., a heavy fabricator that at the time produced more than half of the aerial apparatus used by Pierce.
At the other spectrum of OTC’s product portfolio is a full array of commercial vehicles. “We build what I call the dogs and cats of the industry,” said Bohn. “These are the vehicles that are vocational and they take a licking. Whether it’s a garbage truck or a mixer truck or a military truck, they take a kicking.”
Similar to the fire & emergency business, much of OTC’s commercial growth was led by acquisition. It added McNeilus Companies Inc. in 1998, refuse body builder Geesink Norba Group in 2001, wrecker OEM Jerr-Dan Corp. in 2004 and concrete batch plant producer CON-E-CO in 2005.
“We had been building front discharge concrete trucks since 1972,” said Bohn. “McNeilus had number-one market share in the rear discharge business. And, 75% of the market is rear discharge and 25% is front. So what an opportunity gained to get into the real concrete market.”
Bohn added, “we didn’t know how to build batch plants and we didn’t have the McNeilus distribution system that has helped us tremendously. So, it was an opportunity to leverage what we were doing but also to gain number-one market share.”
The McNeilus acquisition also created one-source servicing, offering both concrete placement vehicles and a full lineup of concrete batch plants and a series of refuse trucks.
The Dodge Center, Minn.-based McNeilus lineup includes 4.5 to 15 cu.yd, rear discharge mixer trucks, the sliding mixer system (SMS) which extends 13 ft., compressing at the rear of the truck as it pours, and the Revolution mixer drum.
The most recent technology innovation to come out of McNeilus, the Revolution drum incorporates a composite material design that the company said is 2000 lb. lighter than standard concrete drums, allowing for additional payload on the vehicle.
Its refuse line includes the front-loading Atlantic and Pacific series, rear-loading M5, Heavy-Duty and XC Extra Capacity vehicles and a full line of side-loading refuse trucks. All are available with manual or automated loading, McNeilus’ tag axle for additional GVR and are built on Mack and Peterbilt chassis or customized as requested.
The line of stationary and portable concrete batch plants are now sold by subsidiary CON-E-CO, Blair, Neb., purchased by OTC in 2004. “We woke up one day and said in every one of our businesses we need to be a one-source solution,” said Bohn. “So, if you are going to be a one source solution, you’re going to need to be able to get the concrete to the trucks.” And Bohn added, “the avenue to get the concrete to the trucks is small and large batch plants.”
Expanding its refuse business, OTC acquired Geesink Norba, a Netherlands-based refuse truck OEM in 2001. As a producer of refuse collection bodies, it meshed well with OTC’s refuse vehicles sold under the McNeilus brand, also giving it reach into Europe.
“Geesink Norba has number-one market share in the refuse business in Europe,” said Bohn. “We had already grown to number-one market share in the refuse business in North America. They had the best technology in Europe and we really liked its product line but when we bought them, Europe went into a recession and the business went down 20%.
“It still continues today to be number-one market share, and we’ll be profitable the fourth quarter of this year and profitable next year, but we lost money there the last two years.” But Bohn said, “we’re into it for the long term and it also gives us outlet for distribution for concrete placement in Europe and other products.”
A more recent acquisition is Jerr-Dan Corp., Greencastle, Penn., which may have spurred OTC into a new commercial market but it was one it knew well from its defense experience. “The reason we bought Jerr-Dan is, why not?” said Bohn. “We build 2500 wrecker and recovery trucks for the U.S. Army, so why don’t we get into the commercial industry?”
According to Bohn, Jerr-Dan has number-two market share with about 30% of the industry. Its vehicle lineup includes light-, medium-, heavy-duty and heavy-duty retriever wrecker trucks and both auto and industrial carriers in the 5, 7.5, 10 and 15 ton classes.
Also rounding out OTC’s subsidiary list are Viking Truck and Equipment (1999), a truck distribution center which at the time supplied 78% of OTC trucks throughout the Midwest. And more recently, London Machinery Inc., a commercial truck distributor, which gives OTC reach into Canada. “We didn’t have a distributor up in Canada for mixers, parts and service and for refuse,” Bohn noted. The acquisition took place March of 2005.
While its fire & emergency and commercial business has been growing, OTC is also in high gear with its defense line, producing more than 20 vehicles a day at its Oshkosh, Wis., facility.
“Our vehicles are the backbone of the military for carrying ammunition, carrying troops, JP jet fuel for the Apache helicopters, for the Abrahams tank,” said Bohn. “Our vehicles are really being tested over in the war. We’re seeing in the war today that one month of service in Iraq is equal to 12 months’ service anywhere else in the rest of the world with our trucks.
“Something we do with our defense business is when we go to war we go to war with them for training, for service and support, logistics and logistics support. We’re active today in Afghanistan, very active in Iraq and very active in Kuwait. We have at any given time 4000 to 6000 trucks in theater.”
Sold under the Oshkosh brand, OTC supplies both medium- and heavy-duty trucks to U.S. Army, Marine Corp., Navy, Air Force and the U.K. Ministry of Defence. The line includes the HEMTT (heavy expanded mobility tactical truck), HET (heavy equipment transport), MTVR. (medium tactical vehicle replacement), PLS (palletized load system), TFFT (tactical fire fighting truck).
OTC also offers complete remanufacturing on all its defense vehicles at 75% the cost of new, said Bohn, and has just recently expanded operations with a $4 million investment in a local 300,000 sq.ft. production facility, which will be used to remanufacture these military vehicles.
For OTC, defense, fire & emergency and the vast commercial vehicle industry have meshed together because, as Bohn noted, “what we like is complicated, sophisticated bodies that go on the back end of trucks.”
But down the road, he said, “we’re going to be a much larger company. We’re going to have much better technology leader and we’re going to continue to lead in all our markets, but we’re going to have more of a global presence. Over the next several years, we are going to grow in Europe and South America and we’re going to grow in Asia.
“And we’d like to do a nice-sized acquisition every year or two.”