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."
While drought severely impacted Briggs & Stratton in 2012, the company has benefited from damaging storms that knocked out power and boosted the sales for both portable and standby generators. Its fiscal 2012 results were helped by both Hurricane Irene and major snow storms that hit the east coast.
Teske tells IndustryWeek the company typically keeps a "storm stock," an inventory of portable generators in strategic locations around the country. Working with its channel partners, those generators are put on trucks and shipped to where a storm is occurring.
Superstorm Sandy followed a typical pattern in spurring portable generator sales, Teske observes. "We were moving generators from throughout the country to the affected areas on the east coast," he says. But he adds that it was unusual in that it was a late season storm, occurring when inventory stocks were typically being depleted so it did not have the same magnitude of impact on sales as an earlier storm would have had.
Storms such as Sandy also prompt consumers to purchase standby generators, Teske says. "A lot of people say they want something that is more permanent. They say, 'I don't want to have to do anything when the power goes out. I want an automatic solution.' The standby generator sits next to your house, turns off and on once a week to make sure everything is good and when the power goes out, everything is automatic."
Briggs & Stratton admits that the potential impact of drought and storms could "cause wide variability in our sales results for fiscal 2013." The company has projected sales at $1.95 to $2.15 billion for the current fiscal year.
The company is trying to fight some of this unpredictability by expanding into growing markets. Last month, it announced that it had purchased Companhia Caetano Branco in Brazil for $57 million. Briggs & Stratton said Branco is a leading brand in the Brazilian light power equipment market, producing generators, water pumps and light construction equipment. The company sells its products through a network of 1,200 dealers throughout Brazil.
"With Branco's brand strength, employees and customer base, we will have an established, well performing company in a country that has aggressive infrastructure needs and a history of higher growth opportunities, which can only add to the operating performance of our company," says Teske.
The company is also betting heavily on innovation to drive improved results. In October 2010, Teske moved the company's research and development operations out of the individual business groups and had them report directly to him.
"Over the last year, we have made tremendous headway in filling the innovation pipeline," says Teske. "This upcoming season, we are introducing 40 new models of lawn and garden and outdoor power equipment for our dealer channel. We have never done that much."
Teske says the company doesn't typically take a blue sky approach to innovation. "We have user-driven innovation. We do a lot of consumer research. We also do a fair amount of going out and observing the users of our products and really trying to figure out the problems they are having. We come back and ask, 'How can we solve their problem?' That is how we look at product development."
Teske says Briggs & Stratton also tries to be "as simple as we can in new product development." He notes that there are many companies "are viewed as innovative, but really what they are doing is taking what is out there already and repurposing or repackaging it. When you look at it, it was pretty simple but at the end of the day it was really innovative."
"Focusing on the consumer of the goods is the key to product innovation," says Teske.
While the company is focused on innovation, Teske says it holds to its traditional belief in the importance of U.S. manufacturing. On December 3, 2012, the company announced that it had produced its 70 millionth small engine at its Murray, Ky., plant since its opening in 1985. The 300,000-square-foot facility performs die casting, machining and assembly of engines and related components.
Teske says the company's U.S. workforce is "very productive and very efficient." Still, like many other U.S. manufacturers, Briggs & Stratton has been investing in advanced tooling in an effort to boost its productivity.
"It really comes down to helping our workers be more productive," Teske says. "I have been with company 16½ years. When I would tour one of our plants back in 1996 when I started, we would have a handful of robots. Now there are a lot more robots, perhaps more robots in one cell than we had in an entire plant back then. Obviously, the cost of robotics and automation has come down dramatically over the last several years and it makes it more economical. What that has caused us to do is enhance skill sets and go out and look for people who have different skill sets than we had in the past."
Teske has been involved in a number of efforts at the local, state and national level to address the skills gap. "It's real," he says emphatically. "As technology becomes more important in our plants, we're doing a lot to train our workers and to work cooperatively with those who can help educate and develop those skills so we can have a pipeline of workers that meet the needs of today's manufacturing environment."
After three years as a CEO, Teske says he has learned that constant, consistent communication is critical to his job. "It is really important to make sure our employees understand where we are headed and what we need them to do. Being available to our employees and making sure we are doing all the right things -- that is absolutely critical."
Teske employs a variety of means to facilitate that communication. "We have quarterly meetings with our employees. We shut down the production floor for an hour or two and I talk to all of our employees. I do video blogs every two weeks on different topics. We post those on our Intranet. We have lunches where we'll get 10-15 employees together once a month, at random. We sit around and talk about what is going on and take their questions. It is one of those things where as a CEO from an internal perspective, you just can't communicate enough. And then also you need to meet with customers on the external side, to make sure you understand what is going on in the field."
Now, at the start of a new year and new political season, Teske says he hopes there is "an understanding and realization by policymakers that manufacturing is really important. It is not just clean tech or high-tech. It is basic metal bending, metal forming, metal machining that makes this country great. Policies and regulation and legislation that support that are significantly important to the future of our country."