Tough sledding for Minnesota industries
Northern Minnesota is home to two of the largest snowmobile and ATV manufacturers in the world -- Arctic Cat based in Thief River Falls, and Polaris with a manufacturing base in Roseau both released their quarterly earnings Thursday.
Both companies are feeling the pinch as consumers tighten their belts.
In the past week, Polaris laid off 460 employees and Arctic Cat cut 100 workers.
"Not as many people are able to go out and get this fun piece of equipment."
Today Arctic Cat CEO Chris Twomey announced the company is suspending the payment of dividends to shareholders, instead investing that money in the company. Arctic Cat reduced its losses compared to last year but the company is still in the red.
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Twomey says company sales began to tumble last month.
"North American retail sales of Arctic Cat snowmobiles were better than last year through November," said Twomey in a teleconference. "However, in December they caught the same retail bug that affected all the other recreational vehicle categories. As a result, Arctic Cat sales were down slightly on the year to date basis through December."
In an effort to stay profitable, Arctic Cat will cut production at its Thief River Falls plant, trim employee benefits and Arctic Cat executives will take a five percent pay cut.
Polaris made money but sales and profits declined slightly from a year ago. CEO Scott Wine says despite the economic downturn, the company has cut production costs and increased the profit margin.
Like many companies Polaris is using what's called the lean manufacturing model that looks for ways to make production more efficient. Wine says he's pleased with four percent earnings in a tough economy.
"I'm equally pleased with the opportunities I see for us to get better," Wine said. "It's the talent, the focus on innovation, really the things that have made Polaris tick for years that gives me confidence we'll weather this storm just fine."
Still, Wine predicts sales in 2009 will be down 20 to 25 percent and profits will fall as well.
Both Polaris and Arctic Cat are also seeing strong international sales slump as the economic crisis spread across Europe and Russia.
The companies biggest market is still North America and people like Bruce Bekkerus are their core consumers.
Bekkerus has bought 14 snowmobiles in the past 16 years. But he most likely won't buy one this year. It's partly financial, and partly because he's not riding as much.
"A lot of snowmobilers are aging," Bekkerun explained. "Even myself, as I get over that bump of 50 years old I think, you know, maybe I won't go outside because it's darn cold today. "
Bekkerus runs an auto repair shop in Moorhead. He is also treasurer of the Minnesota United Snowmobilers Association.
He says statewide membership in the club is falling because fewer people can afford the cost.
"Technology and emission standards imposed by the government has driven snowmobile prices through the roof," he said. "It has definitely separated the buyers, so that not as many people are able to go out and get this fun piece of equipment. "
If not as many people buy new snowmobiles or ATVs, more manufacturing jobs could be lost. But the industry has a much wider economic impact. Those snowmobile and ATV riders spend hundreds of millions of dollars traveling the state.
