The following is a column authored by Tom Walsh of the Detroit Free Press offering a look at Spartan Motors Inc.’s ability to roll with the times.
“Adapt. Evolve. Lead.”
John Sztykiel, president and CEO of Spartan Motors, kept repeating that mantra during our breakfast last week.
It may be the only way for him to keep his sanity.
In a topsy-turvy business world typified by last week’s stock market spasms, few companies have endured more extreme ups and downs in the past few years than Spartan Motors.
When I wrote in 2007 about Spartan — a builder of custom chassis and motor vehicles — the company was on a roll.
The Iraq war was in full swing and Spartan had suddenly become a favored supplier of Mine Resistant Ambush Protected (MRAP) armored vehicles to the U.S. military.
For a modest outfit whose previous product mix was mostly fire engines, ambulances and motorhome chassis, “it was like a gold rush,” Sztykiel recalled.
Employment at Spartan, based in Charlotte, about 20 miles southwest of Lansing, doubled to more than 1,000 within 20 months. Sales jumped 89% in two years, but then, as the Iraq war wound down and MRAP orders dried up, plummeted from $844 million in 2008 to $409 million a year later.
Net profit plunged from $42 million in 2008 to $12 million in 2009 and $4 million last year. Spartan started this year with two quarterly losses. Its stock price, near $25 per share in 2007, fell 90% to barely $2 in late 2008 and ’09, and has recently traded near $5, closing Friday at $4.51.
Changing the mix
Sztykiel and his team have had to reinvent Spartan — and they appear to be making progress. Order backlogs have risen 33% so far this year to $179 million.
The big move to shift away from reliance on military orders was the acquisition in late 2009 of Utilimaster, an Indiana-based maker of delivery and service vans.
“Internet shopping and other changes in society are working in their favor,” Sztykiel said of Utilimaster vans used by such companies as UPS and Federal Express.
An alliance with Isuzu followed. Three months ago, Spartan began assembling Isuzu N-series commercial trucks in Charlotte. The N-series had been built at General Motors’ Janesville, Wis., plant until it closed in 2009.
Meanwhile, Isuzu and Utilimaster are partnering on a next-generation commercial van called the Reach, which promises 35% fuel-economy improvement in the segment.
“In 2008,” Sztykiel said, “89% of our business was government-related, including military and emergency-response vehicles. Now it’s only 45% government and 55% private.”
Spartan’s employment in the Charlotte area fell to around to 600 with the decline in MRAP orders, but the ramp-up of Isuzu N-series work has recently added 56 jobs and total Spartan employment is expected to reach 1,750 by year-end, with the biggest clusters in Michigan and Indiana.
Sztykiel expects a return to profitability the second half of this year.
And true to his adapt-evolve-lead mantra, he’s scouting for new revenue streams.
The step-van truck segment where Utilimaster is a market leader “is about 12,000 trucks a year,” he noted. “But the larger market for commercial vehicles, where Ford and Nissan and others play, is about 225,000 units a year.”
“Now if we snag just 2% of that, it would be nearly 5,000 units a year and 400 or 500 more employees …”