Today, a WSJ Article (Thor Industries: On The Road Again) highlights a bright spot in the embattled automotive industry. Sure, they had layoffs, but they didn’t have debt – which was key. Thor Industries is a Phoenix company, that will emerge from the 2008-2009 great recession stronger and more profitable than ever. Two of its mega competitors have either failed or been parted out by private equity firms. In the end, Thor picks up market share and top talent.
How did they do it? They stayed lean in production and fat in creativity. They used much smaller factories (75,000 is a very small RV factory) that could easily close when demand softens. Their IKEA like design acumen also allows it to scale up if/when demand takes off again. This results in less debt, faster turnaround times and better morale.
While many businesses have done this recently, they’ll likely behave like Thor’s competitors during the next expansion – sprawling out production to capture economies of scale. They’ll be exposed to downturns and slow to react to innovations. I guess it is really hard for modern leaders to stay lean and mean during expansions, but that’s what Thor Industries did — and will likely keep doing in the future.
Takeaway: When your industry takes off and you are filling up your boat with fish, remember to keep your debt obligations small and focus on design based scale. Many companies are realizing this, and getting out of the “making-things” businesses and into design/marketing — a much lighter model to support.