How Briggs Is Revving the Engines
Briggs & Stratton Corp. was at a crossroads. Since 1955, the company had been cranking out small gasoline-powered engines by the millions at a titanic 2-million-square-foot factory outside Milwaukee. The setup paid off for the longest time, enabling Briggs to claim two-thirds of the U.S. lawn-mower market and helping it post a profit every year except 1988, when drought scorched sales.
In 1993, though, Briggs executives concluded that the plant had become a millstone. Organized labor had pushed up costs just as retailers, trawling the global market for cheaper goods, were demanding lower prices. The facility itself had grown so unwieldy that no one could even tell which products were making money. "We had become a battleship," says John S. Shiely, chairman and CEO.
Check out Briggs today. The company is on track to build 10.4 million engines -- more than any other manufacturer in the world. Despite a lackluster economy, Briggs has made money every year since 1988. In fact, net income is forecast to surge 32%, to $75 million in the fiscal year ending June 30 on record revenue of $1.6 billion, with exports accounting for 25% of sales. Briggs is also getting into new products, including outboard boat motors and portable power generators, at prices that undercut those of Japanese competitors by nearly half.
The secret? Instead of scurrying to China and other low-wage countries as many other U.S. manufacturers have done, the Wauwatosa (Wis.)-based company relocated its assembly work to a clutch of factories in America's rural South. The facilities are all nonunion, which means much lower labor expenses. The new plants are also smaller and focus on only one or two product lines, making them more manageable. And they're highly automated, allowing Briggs to cut jobs and bring the union at its headquarters plant to heel. "Briggs wouldn't be in business today with the old system," says L. Michael Braig, an equity analyst with A.G. Edwards & Sons Inc. in St. Louis.
Management decided to go all out with its Southern strategy in 1993, after the company's union -- now Local 7-232 of the Paper, Allied-Industrial, Chemical & Energy Workers International Union (PACE) -- refused to go along with pay and benefit concessions. Briggs now operates a total of six "focus factories" (table). They may not match China's rock-bottom wages, but the plants keep Briggs in the game.
Take its Murray (Ky.) factory, which each year produces about 3.4 million basic 3- and 4.5-horsepower engines for walk-behind mowers. The plant employs about 950 people, including 80 to 90 students from Murray State University, who are let go every summer when demand ebbs. Pay starts at $9.64 an hour, plus productivity bonuses that add $1.72 an hour to the base wage. Because of that incentive, "our workers go to extremes to take even a half a cent of cost out of each engine," notes Paul M. Neylon, senior vice-president for engine products. Engines that took one hour to build at the old plant now require just 30 minutes.
The company's new ways have also hurt many people. To compete with the nonunion shops, PACE now allows Briggs to pay new hires at Wauwatosa $11 an hour -- instead of the going union rate of $16 an hour or more -- and to exclude them from retiree health-care benefits. Still, Briggs continues to shrink the facility's payroll. By next year, total head count will fall to roughly 1,000, down from 6,000 hourly workers in 1984. "It just seems like corporate greed," charges Local 7-232 President Gregory Gorecki. He warns the company's nonunion workers that Briggs will abandon them, too, if their pay and benefits rise too high.
CEO Shiely acknowledges that Briggs may, in fact, transfer assembly work to Asia one day. Already, the company outsources components from low-wage foreign manufacturers and has a joint venture in China that builds engines, primarily for Asian markets. But for now, he says, Briggs intends to rely on its new plants. Granted, the company's payroll is smaller, but its factory jobs are still largely in America. That's something fewer and fewer U.S. manufacturers can claim.
By Michael Arndt in Wauwatosa, Wis.