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Polaris: Moving to Mexico to get closer to customers

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Recalled ATVs
An ATV model manufactured by Polaris Industries.
Images courtesy of the CPSC

Polaris Industries officials fleshed out the reasons behind its plan to shut down its parts plant in Osceola, Wis. The Medina-based company plans to shift much of the work and many of the jobs in Osceola to Mexico. 

The Osceola plant, about 25 miles north of Stillwater, employs 515 workers, who make parts for the company's snowmobiles, ATVs and Victory motorcycles. 

Officials say some of the work will be moved to company plants in Roseau, Minn., and Spirit Lake, Iowa.

Polaris CEO Scott Wine says the company is closing the plant and opening a facility in Mexico to get closer to key customers and to cut labor costs. He says many competitors have made similar moves.

"We have concluded that in order to remain competitive and position Polaris for growth in the global market, we must align our manufacturing operations closer to our evolving customer base and seek to lower our overall manufacturing and logistics costs," said Wine.   

The company expects the move will help it eventually save $30 million a year, with much of the savings coming from lower wages. Officials didn't detail how much lower the wages would be in Mexico, though. 

In Mexico, Wine says Polaris will be closer to states where its ATVs and related products have been selling especially well.

"Our ATV and side-by-side products represent over two-thirds of our total sales, with about 40 percent of that customer base located in the southern half of the United States," he said.

Minnesota state economsit Tom Stinson says such plant relocations have been going on for years, as companies try to take advantage of cheaper labor abroad.

"It's just part of the normal course of business. We just hope that we maintain the employment that we have in manufacturing," said Stinson. 

Polaris has been known as a made-in-the-USA brand. A Wall Street analyst asked CEO Scott Wine if the Polaris brand and sales might suffer because some products would clearly be made in Mexico, not the USA.

Wine said he doesn't think consumers care.

"Based on all the consumer goods that are bought in the U.S. that are produced in Mexico, we think that as long as we deliver the quality and performance our customers expect that we'll be able to work through this from a brand perspective," he said.

Wine said it's possible Polaris could further expand overseas operations in the future, depending on how foreign sales go. The company is especially keen on growing sales in Latin America.

"As we grow internationally ... we will likely need to have operations there to support that. But there are no current plans," said Wine.

Polaris saw its sales fall 20 percent in 2009 to $1.6 billion, as the recession dampened consumers' appetite for its ATVs, snowmobiles, motorcycles and other vehicles. Still, the company earned about $100 million last year. The company hopes to boost its sales to $3 billion annually by 2014. 

Polaris says workers at the Osceola plant will be allowed to apply for jobs at the other Polaris facilities in Minnesota and Iowa ---or with any companies that continue producing parts for Polaris in Osceola. 

Polaris is negotiating with suppliers to sell them equipment in the Osceola plant. Polaris says it wants suppliers to take over making parts there.