May 25th, 2010 - Last week, we received a news release from Polaris Industries, Victory Motorcycles' parent company, outlining a new strategy for its manufacturing operations. Part of the plan included opening a new production facility in Mexico, but another portion of the strategy mentioned the closure (or sale) of the Osceola, Wisconsin plant, where the Freedom V-twin engine is manufactured. Victory Motorcycles spokesman Robert Pandya elaborated, saying that Victory Motorcycle assembly will remain at the Spirit Lake, Iowa facility, while assembly of the Freedom V-twin engine will also move to the Spirit Lake factory in the very near future. This allows all Victory manufacturing and assembly to occur in a single location, and lets the manufacturer continue to state Victorys are "American-made motorcycles". Pandya also said there are "planned investments going into the Spirit Lake plant as it becomes the Victory Motorcycles Center of Excellence."
The full, official Polaris news release follows
MINNEAPOLIS (May 20, 2010) - 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 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. 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 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 resources. In addition, certain manufacturing processes and equipment are intended to be sold to suppliers whom will continue to supply components to Polaris. 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 agencies to offer employment assistance.
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 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.
About Polaris
With annual 2009 sales of $1.6 billion, Polaris designs, engineers, manufactures and markets off-road vehicles (ORVs), including all-terrain vehicles (ATVs) and the Polaris RANGER™, snowmobiles and Victory motorcycles for recreational and utility use and has recently introduced a new on-road electric powered neighborhood vehicle.
Polaris is a recognized leader in the snowmobile industry; and one of the largest manufacturers of ORVs in the world. Victory motorcycles, established in 1998 and representing the first all-new American-made motorcycle from a major company in nearly 60 years, are rapidly making impressive in-roads into the cruiser and touring motorcycle marketplace.
Polaris Industries Inc. trades on the New York Stock Exchange under the symbol "PII,".
Information about the complete line of Polaris products, apparel and vehicle accessories are available from authorized Polaris dealers or anytime from the Polaris homepage at www.polarisindustries.com.