Spartan Blasts Higher
By Melissa Davis
Senior Writer
5/21/2007 7:17 AM EDT
URL: thestreet.com
Less than two years ago, Spartan Motors (SPAR) was an obscure stock that sometimes traded no more than 10,000 shares all day.
But ever since it broke into the military vehicle business, forging strong partnerships with the likes of Force Protection (FRPT) and BAE, the Charlotte, Mich.-based manufacturer has seen its fortunes rise -- and its stock take off.
Surging demand for the company's military chassis, used in blast-resistant vehicles protecting soldiers in Iraq, have helped push the shares up nearly 250% over the past year alone. Spartan shares have doubled in 2007 and traded within a dollar of their 52-week high Friday at $32 and change.
But Spartan CEO Bill Sztykiel says the once-bankrupt company isn't done yet. Rather, the company is vastly expanding a popular military unit that -- if current momentum continues -- could surpass its longstanding fire truck and RV divisions to become its largest business of all.
Sztykiel, who has been with the company almost from the start, recently shared his ambitions in an interview with TheStreet.com.
TheStreet.com: How did Spartan break into the military vehicle business and start supplying chassis for companies like Force Protection?
Sztykiel: We already had a very good name and a very good reputation in the specialty business. Then, in 2005, Force Protection came to us and asked, "If we send you the hulls, can you install the automotive platform?"
Within 12 months, we went from nothing to a production line. Right now, we're producing four to six units a day. But by the end of July, we'll be moving into two new buildings that are focused strictly on the military, and we'll be able to produce in excess of 20 units in a day. We're doing a lot of things right now so that, if big orders do come, we can react in a timely manner.
Are you currently seeking deals with other major defense contractors besides Force Protection and BAE?
Too often, companies see opportunities and overcommit and underdeliver. We don't try to partner with everyone. We just focus on serving our partners extremely well. So we seem to have more good days than bad.
The Army recently indicated that it may order far more blast-resistant vehicles than most people imagined. Will Spartan be prepared if Force Protection continues to land the bulk of the awards?
It would be difficult, but we believe we would be able to grow our volumes to support their volumes. Over the past two-and-a-half years, we've met every commitment that's been laid in front of us. If we don't keep out commitments, we're not going to get very much business. It's that simple.
Are you surprised by the Army's plans to significantly escalate their orders for blast-resistant vehicles?
I was not surprised by the statement. But I was surprised by the number. If somebody had asked me a year ago whether I expected business at these kinds of rates, my answer would have been no.
Do you worry that waning support for the war in Iraq could kill that demand?
As I look out over the next three to five years, I believe that [blast-resistant] vehicles will be in demand just because of all the conflicts we're involved in throughout the world. Individuals who want to hurt others look at what's successful. And more and more, they're looking at IEDs [improvised explosive devices] . They can buy a land mine for $5 today. That's astounding. That's less than the price of a pizza.
So do you see a day when Spartan's military division could become the company's biggest business?
If current growth rates were to continue over the next 18 to 24 months, absolutely. It could become our largest market.
How will you find the necessary labor if that happens?
One of the things that makes Michigan an ideal location for us, as a company, is that we're blessed with a very, very good workforce. They're very automotive-literate. And the unemployment rate is about 7%. So while the state is struggling, their struggles represent a perfect opportunity for us.
As CEO of Spartan, how do you spend your own workdays?
I'm very interactive with our stakeholders, whether it's the investment community, our associates, our customers or our suppliers. I spend most of my time after-hours looking at data. But during the day, I'm visiting with people. I enjoy it very much.
What do you like best about your job?
Society changes every day. Four years ago, this military product didn't even exist. Today, we're looking at [demand for] 17,000. How many businesses can you be involved in where you know that change will happen -- no matter what -- and you have the opportunity to be a part of it?
What keeps you awake at night?
A lot of companies have successful runs. Then all of the sudden, the culture changes, the passion goes out and the results diminish. I want to make sure that we are doing the right things to ensure that our culture gets better. Some companies miss the boat by focusing on products and processes instead of people. When people really enjoy what they do, problems disappear and opportunities happen.
What gives you confidence that Spartan's impressive momentum can continue?
We've had some severe and difficult challenges laid in front of us over the last 24 to 36 months. But our performance has been very, very good. We've just got to make sure that Spartan's culture continues to move in the right direction.
We don't want to become just another large company where people say, "It's no big deal. You know what? This [order] is just another number." When you're born out of bankruptcy, you never want to go back. |
