In this online, DVD, gene-splicing, high-tech world, we're missing something very important. Trucks. Big trucks.
Bet you haven't given them a thought in the past millennium. Well, the time has come, good buddy -- and the "20" for the most interesting truck company around isn't the U.S. There are some pretenders in Europe:
is owned by
makes the only custom, handmade big rigs in the world. Ask any trucker which truck he or she would like to own or drive, and a new 400-horsepower (standard) Western Star
is probably at the top of the list. And now, after years of dominating Canadian trade, Western Star has started to elbow its way into the larger U.S. rig market.
Trucking has long since left the realm of bleary-eyed, caffeine-crazed drivers barreling down the interstates from truck stop to truck stop. With global locaters as standard equipment, efficiency and schedules have been honed to a fine edge. A customer can know within minutes when a supplier will arrive, and plan distribution, loading and unloading to a new level of precision. Critical to the success of any business is timing, and the trucking industry has become as competitive as any mode of transport.
Moreover, performance and dependability of these highway hogs have also become extremely important.
Western Star is a custom truck builder and markets primarily to "entrepreneurial fleets" of half a dozen trucks or less. It's flexible, handling everything from in-house financing/leasing, to custom production (5,000 possible configurations), to drive-away. This way, the company can ride out industry declines (production down 35% this year over last) and, with the extremely well-priced (C$61 million) acquisition of
ERF of Britain
last year, expand into the large European market. Since the acquisition, Western Star has increased ERF's U.K. market share from 10% to 12%. R&D synergies between WS and ERF will further increase design and efficiency for all of Western Star's products.
Also, WS has introduced the new Constellation line of trucks -- the first major truck redesign in 25 years. Dealer and customer acceptance has been very strong, and as the truck market strengthens, WS is improving computer systems for design and parts distribution, which will allow its profit margins to increase exponentially.
The jewel in Western Star's crown is the acquisition of the
company from the government of Ontario. At the time WS acquired it, Orion was rolling out about one bus a week and was faltering on its knees. In two years, Western Star has turned it around to produce 20 buses a week this summer and has a growing order backlog that will keep output at capacity for nearly two more years. WS' rationale for the acquisition was similarity of technology and diversification of markets. Given the North American preoccupation with mass transit, both perceived and government-mandated, the business should only get stronger in the years to come.
The man behind the resurrection of Western Star, ERF and Orion is Terry Peabody. Although he owns in excess of 40% of the stock, he takes no salary.
With 12.5 million shares outstanding, WS has a market cap of about C$462 million (US$337). The current share price of C$37 (US$27) represents a price-to-earnings ratio of about 12 times 1996 earnings (C$3.08) and less than 10 times projected 1998 earnings of C$3.80. By comparison,
of Bellevue, Wash. -- maker of
trucks -- trades at about 16 times current earnings.
PCAR has about 20% of the truck market, just behind German-owned Freightliner. Western Star plans to grab 2% to 3% of the U.S. market share. With its improved efficiencies and custom, as opposed to mass-produced, approach in a low-interest-rate, low-inflation "big-rig" market that is getting stronger, the mix is right. The time looks opportune for Western Star to muscle its way into the U.S.
As part of my research for this article, I spoke to a friend of mine who belongs to the
Corvette Club of Canada
. He was really PO'ed when I mentioned Western Star. Years ago, he used to race Corvettes in Western Star's massive -- and, at that time, empty -- parking lot. No more. For about three years now, the huge lot has been continually full of spanking new trucks. And they've all got sold signs on them. Bummer¿
Beaty, a regular contributor to
Beaty & Co.
, the Canadian personal finance area on