Pride & Power

Posted on Mar 1, 2010 :: Cover Story
Margaret LeBrun
Posted by , Insight on Business Staff Writer

Robert Bohn, Oshkosh Corp. chairman and CEO

Bob Bohn enjoys a perk like few other CEOs of major corporations. After an intensive week – meeting clients from Asia, answering questions from top military brass, prodding his team for more innovations and promises to meet ever tighter deadlines – he can climb into a newly minted, high-tech military truck and take it for a test drive.

“I’ll just walk out of my office about once a week and go over to the test course and drive vehicles,” says Bohn, chairman and chief executive officer of Oshkosh Corp. “It’s a wonderful stress reliever. If you’re going to be answering to people on Wall Street about the vehicles and what you do as a company, you’ve got to know how to drive them and what their capabilities are.”

A lot of what you might call “good stress” has been flowing through Oshkosh Corp. this past year – and the effects have rippled through 1,400 Wisconsin firms that supply to the state’s fourth largest manufacturing employer. A global manufacturer of specialty trucks and truck bodies for the fire and emergency, defense, commercial construction and refuse hauling markets, Oshkosh Corp. employs 12,500 worldwide, including 6,400 in Northeast Wisconsin.

The company won a tremendous boost with the recent news that after a two-month challenge from its competitors, a $3 billion, five-year contract to build up to 23,000 vehicles and trailers for the Army’s Family of Medium Tactical Vehicles (FMTV) will go forward. Test vehicles will be delivered this year and beginning in 2011, the contract will help sustain about 2,000 jobs at Oshkosh – not to mention hundreds of jobs for suppliers in the region.

“The mood in our community and around the region is definitely one of excitement,” says Rob Kleman, executive director of the Oshkosh Area Economic Development Corp. “The great news from this new FMTV contract is there is a trickle-down effect for the supply chain – not just for our community here in Oshkosh but the entire New North region.”

MCL Industries of Pulaski is among supplier companies thriving thanks to work from Oshkosh Corp. MCL, which supplies electrical control and power distribution systems for Oshkosh Corp., has added 20 employees since last December and is building a 27,000 square-foot addition.

“It’s great stuff,” says Gary Lofquist, CEO of MCL. “The whole supply chain is going to get re-energized again.”

The trucks that have kept Oshkosh and its suppliers busy this past year are mine-resistant, ambush-protected All Terrain Vehicles (M-ATVs) engineered specifically for the war in Afghanistan. Since June 30, Oshkosh has received a series of contract awards valued at more than $4 billion to deliver a total of 6,619 M-ATVs as well as spare parts kits and aftermarket in-theater support to be completed by June 2010.

To say the Oshkosh Defense work has kept his company busy is an understatement, says Kris Van Dalen, general manager at Fastenal in Oshkosh.

“The M-ATV has been intense for us,” he says. Fastenal, which supplies fasteners for building the trucks, has doubled its space to 44,000 square feet and increased employees from 45 to 60 since last fall. “Since it was such a short ramp-up, it’s been go-go-go for six months.”

Bohn says the military contracts are vitally important to Oshkosh Corp.

“They couldn’t have come at a better time,” he says during an interview in the Oregon Street, Oshkosh headquarters, where he may be found when he’s not walking a factory floor or flying to Oshkosh Corp. plants in 13 other states and 11 countries.

Times were tough – “the toughest in the company’s history,” he says – when the opportunity came to bid on the M-ATV in late 2008. The market for its construction-related vehicles had tanked. Demand for its refuse trucks and fire and emergency vehicles had begun to stall. Everyone, company-wide – including Bohn – had taken a pay cut and curbed expenses to the bone. Some 10 percent of workers were laid off worldwide in August 2008, and though no layoffs occurred locally, non-union salaried employees endured furloughs for some weeks as well as every other Friday for months.

“We hit a wall in June, July of 2008,” Bohn recalls.

But Oshkosh had powerful innovations in its arsenal. It had spent millions on research and development in the past decade on such patents as its TAK-4 independent suspension system and logged 7,500 miles of testing on its new M-ATV. The company was ready to vie for substantial new business with the U.S. Defense Department.

“We took a measured risk on this business and we’ve had great rewards so far,” Bohn says. “I don’t know too many other CEOs or chairmen – during the worst recession in 70 years, where you’re measuring cash flow every day – who would say, ‘Let’s go spend a few million dollars and let’s go win this contract, let’s get it now!’” he says.

“We spent a lot of money on this up front,” he reiterates in a somber tone. Then he cracks a smile and adds, “So I looked half-way smart when we got it.”

In the first quarter of fiscal year 2010, Oshkosh Corp. reported $2.43 billion in net sales and record first-quarter profits, fueled by military vehicle sales that more than tripled. Sales rose 83 percent over the same quarter last year, which ended Dec. 31. Stock, which had bottomed at $3.85 in November 2008, closed at $39.80 on Feb. 16, the first trading day after the FMTV contract was affirmed.

Secretary of Defense visits
On a chilly November day, Oshkosh employees rev the engine of a new M-ATV and buzz around the demonstration lot, through a sand rut and briskly up a 30-degree concrete slope. If the Army’s full-scale Mine Resistant Ambush Protected (MRAP) vehicles are like St. Bernards as they haul cargo safely into war zones, the M-ATVs – a much lighter, more agile version of the same truck – are the pit bulls – tough, sturdy and smart. Halfway up the incline it comes to a full stop. It stands still for 5 full seconds before revving up and continuing up the hill as a crowd of reporters, company executives, elected officials and top military officials watch.

Among them is U.S. Secretary of Defense Robert Gates, who has just toured one of several Oshkosh Corp. manufacturing plants in the city of Oshkosh. Satisfied with what he’s seen at Oshkosh, Gates takes a permanent marker and signs his name under the mirror of the driver’s side door.

“What is taking place here is an amazing display of industry and dedication to the war effort,” Gates told a crowd of workers earlier that morning, adding that the pace of production on the M-ATV was unprecedented: The contract for the first 45 trucks was signed June 30, Oshkosh built 46 in July – ahead of schedule – and since the fall has produced 1,000 a month.

“The last time American industry moved from concept to full-rate military production in less than a year was WWII,” Gates said. “The M-ATV’s lighter weight, independent suspension system and greater off-road mobility is well suited to Afghanistan’s rugged terrain and will make a real difference in our operations there.”

The company has hired some 600 employees locally to keep with the contract, and called back another 600 that had been laid off in its McConnellsburg, Pa. plant. The FMTV contract will help Oshkosh retain those employees and likely result in more hires later this year. During Gates’ visit, Charles Szews, Oshkosh Corp. president and chief operating officer, said the FMTV “easily could turn into a long-term contract.”

Innovations make a difference
Innovations set Oshkosh apart in bidding for the military contracts, Gates said. The Army had deployed MRAP vehicles in Iraq for transporting troops in and out of zones riddled with improvised explosive devices (IEDs). But in Afghanistan, the MRAP was not suited to the dirt roads and rugged, mountainous terrain.

Don Verhoff, executive vice president of engineering technology, says the patented TAK-4 independent truck suspension is a lighter-weight version of the suspension Oshkosh began using in 1999 for larger military cargo carriers and later, for fire trucks. It allows the M-ATV to accept add-on armor and haul up to 4,000 pounds while maintaining agility. Each wheel is capable of sliding up or down as much as 16 inches as the truck drives over rocks or ruts, preventing the axles from breaking. The M-ATVs can handle 60 percent inclines in forward or reverse and lean 30 percent side to side. The tires in the Oshkosh M-ATVs can be centrally inflated with the push of a button in the cab. Oshkosh also trimmed considerable weight off the traditional MRAPs, reducing the weight by half, to just 25,000 pounds.

“One of our engineers was affectionately called Jenny Craig” because he was charged with keeping the weight of the truck as low as it could go without sacrificing the armored protection, says Oshkosh Director of Communications John Daggett.

The company is also installing its TAK-4 suspension system on existing vehicles, including those made by its competitors. Under the leadership of Verhoff and Gary Schmiedel, vice president of advanced product engineering, the M-ATV launch team at Oshkosh was a recipient of the 2009 Defense Manufacturing Excellence Awards from the National Center for Advanced Technologies and Verhoff received a lifetime achievement award.

Verhoff describes another notable innovation developed by Oshkosh, its patented ProPulse hybrid drive technology, which optimizes engines according to required energy demand, providing 20 to 50 percent higher fuel economy, reduced emissions and less noise. Among the engineers who developed it was Ron Zhang, whom Oshkosh recruited from GM, where he was a lead inventor of the EV1 (featured in the film, “Who Killed the Electric Car?”).

On the futuristic front, Oshkosh has developed technology for autonomous vehicles, putting the company in a good position to help meet the Defense Department’s goal to have a quarter of the Army’s fleet autonomous by 2015. The technology enables vehicles to drive, unmanned, across battle zones to deliver supplies to troops, with the capability to detect roads, waterways, obstacles, animals and humans. Installed on the trademarked TerraMax, it has performed well in robotics competitions by Defense Advanced Research Projects Agency. A year ago, Oshkosh Defense signed a three-year research and development agreement with the Army to refine the technology.

“We are considerably ahead of that schedule,” Verhoff says. More testing is under way before the technology is ready for full deployment in the field.

Verhoff credits Bohn with driving innovation at Oshkosh.

“All of this started when Bob took over as CEO” in 1992, says Verhoff. “He said, ‘You know, I want this company to lead in technology in all its business units. That is your task.’ I swallowed hard and said, ‘Yes sir!’”

Lean and innovative
Bohn, who grew up in Indiana, majored in criminal justice and education with a minor in engineering at Ball State University. He was recruited to Oshkosh from Johnson Controls, where he had spent six years running the company’s European operations. He spent his first two years at Oshkosh focused on lean manufacturing and just-in-time principles.

His efforts are evident in the production systems still in place. Touring the Harrison Street plant with Gates, Bohn and Andy Hove, Oshkosh Corp. executive vice president and Defense president, visitors saw the different models of military vehicles in simultaneous production. In the South Plant, Oshkosh manufactures military vehicles side by side with its commercial and emergency rescue vehicles.

Capitalizing on synergies among different product lines has given Oshkosh an edge over its competitors.

“We can flex from one line to another, and other companies can’t do that,” Bohn says. “I’m nothing more than a manufacturing person, that’s what I’ve done my whole life, whether it was in Europe or Canada or Mexico. The first two years I worked here, I spent most of it on the floor in the factory, just fixing things.”

A highly-skilled workforce with a strong work ethic makes his job easier, he says. In December 2008, when everyone at Oshkosh was compelled to step up to the plate and win the M-ATV bid, employees worked long hours through the holidays.

“We were the first ones at the proving grounds in Aberdeen (Maryland) for testing (the M-ATV), and we had a very competitive price,” Bohn says.

Last fall, two of the company’s fiercest competitors for defense contracts challenged the August 2009 Army contract for the FMTV, arguing that Oshkosh’s bid was too aggressive in production times and pricing. From the get-go, Bohn and his team were confident the challenge would be thrown out.

“I’m not shocked, or surprised or disappointed,” Bohn said in mid-December, within days of the Government Accountability Office’s decision that the Army review the bids from Oshkosh, Navistar and BAE Systems and issue the contract within 60 days. He called the protests political; 25 legislators from Texas pressured the Army to rebid the contract, since a BAE plant in Sealy, west of Houston, was at risk of closing without the FMTV work.

“Anytime you try to take a contract away from a Texas company that has been building these vehicles for 17 years and has built close to 50,000 vehicles, it’s never easy,” Bohn said.

The Army had issued a “stop work” order but Oshkosh continued to prepare for the FMTV program, including site work for the construction of a $51.5 million, 150,000-square-foot electro-coat paint facility necessary to fulfill the contract. To help pay for the facility, the city of Oshkosh pledged $5 million in tax incremental financing (TIF) and the state, $35 million in state tax credits and incentives over 12 years.

Oshkosh executives gave no indication of fear they would lose the FMTV contract, but no doubt anxiety levels were high during the last weeks of the two months they waited. Some suppliers put holds on their own plans to expand or hire.

Finally, at the 11th hour – at the end of the day on the 60th day – the Army said they could keep the job. The other bids could not compare: Oshkosh received excellent ratings for production and delivery requirements and expects to save the U.S. government $440 million in five years over the competing bids.

Fire trucks, the ‘coolest’ vehicles
The defense work has been a game changer for Oshkosh Corp. and its suppliers. The construction market had been especially strong outside the U.S., and before the recession, global markets accounted for one-third of Oshkosh’s business.

“We’re everywhere,” Bohn says, including sales and service distribution centers in 120 countries.

Sales for JLG Industries, the company’s Pennsylvania-based manufacturer of access equipment, were off by 65 percent last year, much of that international. But JLG is poised for growth and is building a new factory in China to manufacture aerial lift vehicles for the Chinese market.

“We really think once OSHA (safety regulating) takes place in China, like it did in Europe and North America, you’re going to need a device like that to safely work in heights,” Bohn says.

Oshkosh Corp.’s McNeilus brand, which is headquartered in Minnesota and makes rear-discharge concrete mixers and refuse trucks with automated arms, was knocked back by the recession. Meanwhile, thanks to a flood of contracts for fire and rescue vehicles signed in 2008, Pierce Manufacturing – which commands a 40 percent market share – had a record year in 2009, with 20 percent of its sales to new customers.

Pierce President Wilson Jones, who serves as executive vice president of Oshkosh Corp. and president of the company’s Fire & Emergency group, credits parent company Oshkosh for helping the division grow. Based in the Town of Menasha, Pierce employs 1,925 and draws an estimated 14,000 visitors to the area each year from municipalities and airports looking to purchase fire and rescue equipment. Pierce recently signed contracts from China for six Pierce pumper fire trucks.

“When Oshkosh acquired it in 1996, Pierce was battling it out with a 20 percent share,” Jones says. “It was a great company but Oshkosh just made it that much better.” Innovation has made all the difference, he says, and then describes a Striker airport fire and rescue truck – featured in Car and Driver magazine last year – with the enthusiasm of a kid dreaming of being a firefighter when he grows up.

“If you are ever at an airport and see that big monster truck with six or eight wheels on it – It’s a truck on steroids,” Jones says. Bohn concurs.

“The coolest vehicle we build is the Pierce fire truck,” he says. “It’s just a piece of art, it’s a wonderful piece of equipment. It fights fires, it saves lives.” Then he qualifies his statement: Even with that would be the M-ATV for Afghanistan. “Wait until you ride in this thing. I mean, it goes. It goes.”

The drive for growth
Pierce is among 16 companies that Oshkosh Corp. has acquired during Bohn’s tenure. Founded in 1917, the company was called Oshkosh Truck until it changed its name in February 2008 to reflect its diverse product lines. In Northeast Wisconsin, it also bought Kewaunee Fabrications in 1999, which employs 270.

“Once you take a look at it, you will see our trucks somewhere every day, no matter where you are, whether it’s a garbage truck or wreck-and-recovery vehicle, a satellite vehicle broadcasting the Super Bowl game, a broadcast business, ambulances. …”

Bohn recalls that in his first year with Oshkosh, sales were about $400 million.

“We’re a multi-billion dollar company today. We’ve grown. And we’ve tried to put our culture in place in all these businesses.”

Never mind that “we’re only as good as our people” is a cliché – it’s ingrained at Oshkosh, Bohn says. He’s humbled by the hard work he’s seen by employees, especially through all their sacrifices in the past two years.

“It was really rough for a lot of families,” Bohn says. As the M-ATV ramped up to full production last fall, furloughs ended and employees saw their pay restored.

With many employees in the Army Reserves serving in Iraq and Afghanistan, Oshkosh has made a special effort to support their families, making up the difference between their military salaries and their civilian pay and staying in touch with spouses who need assistance. For its “exceptional” support of employees on active military duty, Oshkosh received the 2008 Secretary of Defense Employer Support Freedom Award, the highest recognition given by the U.S. government to employers for their support of employees in the National Guard and Reserve. Little wonder that 3,500 people applied for the 600 openings at Oshkosh in 2009.

“Manufacturing creates great jobs, it creates long-term jobs and value, it creates communities,” Bohn says. “If you have manufacturing and if the people are competent and they’re cost effective, you should be there a long time.”

Margaret LeBrun

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