Too little water, and then too much. That's a very abbreviated description of the conditions in the United States that tugged at Briggs & Stratton (IW 500/350) in 2012. For the outdoor power equipment company, drought and then flooding had very different results.
Last year, a light snow season impacted Briggs & Stratton's sales of snow blowers and also helped set up the most severe drought to hit the country in 50 years. According to the Department of Agriculture, approximately 80% of the agricultural land in the country was impacted by drought conditions.
Briggs & Stratton's CEO, Todd Teske, 47, notes that 2012 started off hopefully as there were signs that the U.S. housing market had begun to recover. That and a warm spring helped company sales get off to a good start. But then came the drought and lawnmower sales tanked. "I didn't mow my lawn for seven weeks," he recalls.
Briggs & Stratton's second largest market, Western Europe, didn't fare much better. "Europe had been extremely strong for us up until 2012," says Teske, but austerity measures in Greece and other parts of the eurozone took a huge bite out of consumer confidence. Teske says sales in the European market were off 15% year over year.
The company finished its fiscal year 2012 in July with sales of $2.1 billion, down 2.1% from fiscal 2011. The first quarter of fiscal 2013 fared even worse, as sales dropped 22.2% to $309 million.
Still there were bright spots last year for Briggs & Stratton in Australia and emerging markets such as Latin America. They reinforced Teske's decision to pursue global diversification as one element of a three-part strategy that also included growing the company's core engine business and focusing on higher margin products. That strategy, announced in April 2012, prompted a series of restructuring moves. The company will no longer sell lawn and garden products at national mass retailers, though its engines will still be found in garden equipment OEMs who sell through those channels. Instead, Briggs & Stratton will focus on higher margin products sold through its Simplicity, Snapper and Ferris dealers.
Teske also announced that Briggs & Stratton would reduce in 2012 its white collar workforce by 10% (approximately 210 employees), explaining that the company does not expect the lawn and garden market to return to the peaks seen in 2004-05 "for the foreseeable future."
Briggs & Stratton shifted production of horizontal shaft engines -- typically used in power generators and pressure washers -- from its Auburn, Ala., plant to its factory in Chongqing, China or to third parties in Southeast Asia. Those engines are sold in both China and the U.S. In 2007, Briggs & Stratton had moved manufacturing of smaller horizontal shaft engines to the Chongqing plant. The company laid off 250 employees as a result of the move.
The company had already decided to close its plants in Newbern, Tenn., and Ostrava, Czech Republic. It also downsized the workforce by 210 and reconfigured its Poplar Bluff, Mo., factory.
As a result of those restructuring moves, Briggs & Stratton expects to save $30 to $35 million in fiscal 2013 and $40 to $45 million in fiscal 2014.
Teske says he has been communicating constantly inside and outside the company to make sure that workers and investors understand what the plant closings represent. "Simply because we are downsizing doesn't mean that we are in trouble. It means we are refocusing and making sure we are a really great company going forward," he says. "This is an exciting place to be."