Nov. 8, 2010 – Catching up with demand

So how well has Polaris Industries’ four-wheel sales recovered from a challenging 2009?

The OEM has not only had to ramp up production once, but twice in the past seven months, Polaris President and Chief Operating Officer Bennett Morgan told Powersports Business.

Polaris, in fact, has added approximately 850 employees this year at its three Iowa, Minnesota and Wisconsin plants that assemble ATVs and UTVs to catch up with what has been a surprisingly strong consumer demand.

“All of those product families are beating what we thought,” Morgan said of the demand for the company’s four-wheelers. “The lion’s share is being driven by side-by-sides, but ATVs are up quite a bit from our estimates and from what we had modeled into the year.”

Of the 850 additional employees Polaris has hired this year, about 300 of them are permanent, full-timers, Morgan said.

“There’s a good possibility that some of those temps could be converted to full time based on what we see on retail trends as we go forward,” he said.

Looking back, Polaris went into 2010 with what Morgan described as a “reasonably conservative” production plan, not surprising since the company’s off-road vehicle division sales decreased 22 percent in 2009.

“Just because of the uncertainty that everybody in the world was facing, we built a pretty grounded plan based on some uptick in the fourth quarter (of 2009), but we didn’t want to bet where the trends would go,” Morgan said of Polaris’ 2010 production plans.

By early spring, Polaris was suddenly re-examining that production plan as consumer spending ticked up. Polaris, in fact, reported a 16-percent rise in its off-road vehicle sales in its initial 2010 quarter.

In reaction, Polaris not only added to its manufacturing workface, adding approximately 200, but also revised its workflow schedule to add to its production levels. Those steps, Morgan said, allowed the company to increase its four-wheel production by more than 20 percent.

But was it enough?

“In retrospect, we were too conservative,” Morgan said, although noting at the time it certainly didn’t look that way to Polaris, which was adding substantially to its production levels but also keeping its improved dealer and factory inventory levels in mind.

“We want to try to avoid making mistakes where you think it’s going to be way better than it is.”

The retail momentum, however, continued through the spring.

In late July, during the company’s second-quarter earnings report, CEO Scott Wine reported, “Market share gains across most our product lines, and particularly in our (off-road vehicle) business, continue to drive retail sales demand ahead of our expectations.”

In fact, far beyond Polaris’ expectations.

“We said it’s not enough,” Morgan said of Polaris’ initial production increase and the hires it took to get to that number. “Then we much more aggressively had to take some pretty significant strides to ramp up production further and that created a much more significant amount of jobs that we implemented around the beginning of the third quarter.”

Polaris, in fact, added second production shifts to three of its off-road lines, Ranger, RZR and ATV, at its three manufacturing plants. And in mid-October, the company announced the results of those efforts: Off-road vehicle sales for the quarter shot up almost 50 percent from the year-ago period.

Despite the dramatic increase in production and a continued challenging economy, Morgan said “dealer inventory is in good a shape as it has ever been. We’re not driving it up.”

As Polaris looks ahead, it may not be able to duplicate its dramatic rise in sales in the fourth quarter and beyond as sale comparisons gets tougher.

“We’re not sure that (sale increase) percentages will hold at the same level,” Morgan said, “but yet we’re feeling pretty good about the sustainability of our retail rates and our production at least off the volumes we’ve modeled in.” PSB