Here to Stay
Western Star Trucks’s strong financial turnaround in the past year has made it somewhat of a darling among investors. Just ask the government of British Columbia, which last month pumped $60 million into the company, equal to a 6% stake. The proceeds will be used to build an industrial park and new assembly plant in Kelowna, B.C., that will produce 40 trucks a day starting in 2001.
The deal may have sparked debate over whether the truck and bus maker should have received government money, but in the short-term, anyway, it looks like a good risk. There’s an apparently unyielding demand for heavy trucks in North America, Western Star’s class-8 order book is 6600 units strong, net income and revenue for the first nine months of the fiscal year (ending June 30) were up sharply from a year ago, and recovery continues at the company’s Mississauga, Ont.-based Orion bus division.
But for B.C. Premier Glen Clark and his government, the key figure here is 1300. That’s how many manufacturing jobs Western Star represents to Kelowna and the economically struggling Okanagan Valley region of the province.
The investment cements Western Star’s commitment to Kelowna, where it has been a corporate citizen since 1967, when, as White Western Star division of White Motor Co., the company built workhorse trucks for the logging, mining, and oil and gas exploration companies that anchored the local economy. Now Western Star is viewed as an economic grappling iron for the region.
While Western Star CEO Terry Peabody says his company never threatened to leave the region, the current, cramped quarters in Kelowna have been unable to give Western Star the kind of manufacturing clout it feels it needs in order to substantially increase market share in the United States.
Class-8 sales in the U.S. have been blistering hot, yet Western Star could move only 3017 class-8 trucks in the U.S. last year, a 1.4% share. That’s up just one-tenth of a point over 1997 even though the company sold roughly 500 more trucks.
Western Star’s Kelowna facility recently increased production to 29 trucks a day, and the company is continuing to investigate methods to further increase production there.
“Our number-one priority is to move that needle in the United States like we’ve been able to do in Canada,” explains John Nelligan, vice-president of North American sales.
“We feel like we’re on the brink. We have a great product in the Constellation series trucks, and we’ve worked hard to improve our dealer network and build our presence. But for us, the difference is that the new Charleston factory will let us to put 40 more trucks a day onto the market.” That assembly plant, under construction near Charleston, S.C., is a $40-million, 330,000-square-foot endeavor scheduled to start production next year.
The facility initially will produce 20 trucks a day, with the capacity to build 40 a day within a year of opening. It will focus on highway tractors for the first year; as the plant reaches capacity, Western Star plans to add more vocational vehicles to the mix.
When expansion in Kelowna is complete, Western Star will be the only North American truck manufacturer with new plants on both the East and West Coast. Both facilities also will help the company launch production of a new class-3 vehicle, the Western Star “Warrior.”
Meantime, Western Star is trying to build its brand identity so buyers will be ready when all those new trucks are. “The trick is to get drivers into the seats of our trucks and our name in front of the guys who own small and medium fleets, to get them to know who we are,” Nelligan says. “When you’re so limited in terms of what you can produce, it’s difficult to deliver on the true potential of your trucks and of your sales and service organization. It’s not a position we’re content with, especially with the market running so strong.”
Given their desire to see a return on a $60 million investment, it’s not a position taxpayers in B.C. will be content with, either.
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