1225 Highway 169 North
For almost 50 years, Polaris has been making machines that not only take you out there, they offer you a way out. A break from the routine. An escape from the ordinary. A moment of freedom. Snowmobiles came first in 1954 and quickly established a track record for advanced engineering. All-terrain vehicles followed in 1985, and since their introduction have set the standard for performance and innovation. 1992 saw the arrival of our personal watercraft and their unprecedented combination of power and comfort. Then in 1997, the Polaris RANGER was born, creating a whole new class of off-road utility vehicles. In 1998 we introduced Victory motorcycles and Cycle World named them "Best Cruiser"; in 1999 Motorcycle Cruiser named them "Cruiser of the Year." Of course, there's more to having a great time than just a great ride. So we also make parts and accessories designed to match our machines better than anything off the shelf, and a full line of garments and collectibles to stylishly capture the spirit of Polaris. We even offer financial services to make getting on our machines, and out into the open, easier than ever. Today, we have over $1 billion in sales worldwide, with engineering, manufacturing and distribution facilities all across the Midwest, and wholly-owned subsidiaries in Canada, Australia and New Zealand. It's been a fun ride, but then, after all these years, that's what we're all about.
Polaris Industries Inc. is the largest manufacturer of snowmobiles in the world and a major competitor in all-terrain vehicles (ATVs) and personal watercraft (PWC). It introduced a line of motorcycles in 1998. A pioneering force in the U.S. snowmobile industry, Polaris has since its inception enjoyed a strong reputation for quality and innovation. In 1989, for instance, the "MacNeil-Lehrer News Hour" called Polaris America's version of Mercedes-Benz.
The snowmobile industry leader has had its share of troubles during its history, however. In 1964 it nearly went bankrupt with the failure of the Comet, its first front-engine sled. During the late 1970s and early 1980s--a period of flagging sales and sell-offs that shook the industry as a whole--Polaris's future looked just as grim. A mid-1981 leveraged buyout that took the form of a limited partnership prevented an otherwise imminent plant shutdown, but it was several years before Polaris was again running smoothly, this time as a revitalized company uniquely situated in a far leaner industry. A decade later, on December 23, 1994, Polaris completed its transformation from a limited partnership to a corporation. Headquartered in Minneapolis, Polaris operated manufacturing facilities in Minnesota, Wisconsin, and Iowa; it sold its products through approximately 2,000 North American dealers and a network of international distributors that marketed Polaris products in 116 countries around the world.
Polaris Industries was born in Roseau, a small community within a few miles of the northernmost point in the contiguous 48 states. This relatively remote area, located closer to Winnipeg, Manitoba, than to Minneapolis, inspired a climate of persistent innovation. Hetteen Hoist & Derrick, the forerunner of Polaris, was established in 1945 not for the manufacture of snowmobiles, however, but as a problem-solving job shop that became known for its fabrication of one-of-a-kind machinery for farmers in the region. Metal supply was at a premium at the end of World War II, and Edgar Hetteen was a skilled and inventive metal worker who could help people make do with what they had. Close friend David Johnson bought into the company while he was still serving in the navy, and Edgar's brother Allan Hetteen became a partner in the early 1950s. The company produced farm equipment, including straw choppers, portable grain elevators, and sprayers, but also depended on welding, grinding, and general repair work in the off-season.
Given the area's climate, the seasonal nature of the original business, and the fact that the founders were avid outdoorsmen, it was perhaps inevitable that the idea of snowmobile production would eventually transform the company. At the time, trips to fishing, hunting, and trapping areas in the winter had to be navigated by cross-country skis or snowshoes. Although inventors had been toying with the concept of snow machines since the 1920s, no reliable machine was readily available that could be used for such utilitarian purposes. Not until the 1950s, in large part because of the work of Johnson, did the general notion of creating a snow-going vehicle steered by skis begin to take shape as an industry in the United States. The company sold its first machine, a rough, virtually untested model, to an eager Roseau lumberyard owner in 1954. There was then no clear development plan to guide the company in this new area. Indeed, Edgar Hetteen was focused principally on selling the company's mainstay straw choppers and was lukewarm on the idea of snow machines until he saw the considerable interest generated when the company's first snowmobile customer demonstrated his powered sled.
Other orders followed that year and the company, which renamed itself Polaris Industries after the Latin name for "north star," worked on improving the original concept with each consecutive model. Five machines were built in the winter of 1954-55 (all of which sold for less than $800), 75 in the winter of 1956-57, and more than 300 in 1957-58. The earliest models were called Sno-Cats, then Sno-Travelers, and were purchased primarily by outdoorsmen and utility companies. The sleds, propelled by a rear-end four-cycle engine, featured a toboggan-style front with a steering wheel and control levers. The early production line yielded one-of-a-kind machines, with components varying from one vehicle to the next. Skis were fabricated from bumpers of Chevrolets and steering wheels were appropriated from cars and trucks. Not surprisingly, the early machines were heavy and utilitarian. The Ranger rear-engine prototype and the Ranger model, manufactured between 1956 and 1964, formed the basis for Polaris snowmobile development.
When the bulk of the business shifted from fabricating farm equipment to designing, building, and testing snowmobiles, Edgar Hetteen was faced with a marketing problem. The company needed to broaden interest in the machine beyond utilitarian to recreational use. In short, Polaris had to convince people it would be fun to ride around in the middle of winter in a small, open-air vehicle. As Jerry Bassett wrote in Polaris Partners, "Edgar Hetteen, as the first president, had to establish a sales network for a product that could only be sold in places which got snow to people who weren't totally certain that they needed his product." During a promotional trip Hetteen made in 1958, according to C.J. Ramstad in Legend: Arctic Cat's First Quarter Century, "Hetteen got a real taste of the enormity of the problem that year when he set up an exhibit at a sport and travel show. Full of enthusiasm, he hustled show goers into his booth and eagerly showed them his new `snow machine.' The curious public thought the machine somehow produced snow. They wanted to know which end the snow came out!"
Then, inspired by a friend's suggestion, Hetteen decided to make a snowmobile trip across Alaska to demonstrate both the durability and recreation his company's product offered. In March 1960 Hetteen and three others covered more than a thousand miles in about three weeks on one Trailblazer and two Rangers. The adventure yielded national publicity, but Hetteen was shocked to find that it had also created dissension at home. The negative response of some of the company's backers to Hetteen's trip, viewed by them as unnecessary, even frivolous, resulted in his selling out his controlling interest in Polaris. After a trip back up to Alaska he returned to Minnesota, this time west of Roseau to Thief River Falls, where he started the company that became Arctic Enterprises and later Arctco Inc., producer of Arctic Cat snowmobiles. His younger brother Allan, 31 at the time, became president of Polaris.
Running a nearly parallel course to Polaris was another company that contributed to the early industry history. In Canada, Joseph-Armand Bombardier developed and patented the sprocket-and-track assembly in 1937 and developed a one-piece molded rubber track in 1957. In 1958, the first year of Ski-Doo brand manufacturing, his company produced 240 snowmobiles, while Polaris manufactured about 300 that same year. The early 1960s marked the beginning of snowmobiling as a sport with the front-engined Bombardier Ski-Doo. Such vehicles were used for recreation as well as competitive racing. The testing of the first Polaris front-engined machine, the Comet, looked promising, but the 1964 model failed in production. The company's very survival was suddenly at stake.
Polaris co-founder David Johnson later joked, "We made 400 machines and got 500 back." But it was the value of his word and reputation at the time that convinced the creditors to give the company breathing room and a second chance. Johnson and Hetteen redoubled their efforts by converting the Comets to rear-engined machines while they worked on a new front-end model. They hit pay dirt with the front-engined Mustang, which enjoyed successful production from 1965 to 1973 and brought the company into the sporty racing vehicle arena.
Corporate in the 1970s
After its one stumble, the company grew rapidly in the boom years of the 1960s. So pronounced was the growth that it outstripped the management skills of the owners, who had to decide whether to hire professional managers or sell the company. In 1968 Polaris was sold to Textron, a diversified company holding E-Z Go golf carts, Bell helicopters, Talon zippers, and Schaefer pens. The company kept Polaris in Roseau and continued snowmobile manufacturing, but also began limited research and development on watercraft and wheeled turf vehicles. Herb Graves of Textron became president and Johnson stayed on as vice-president to oversee production.
During the 1970s Polaris began to solidify its reputation for high-performance snowmobiles. In pre-Textron years, Polaris had purchased its snowmobile engines from a number of suppliers. With the entry of Textron, Polaris was able to bring on Fuji Heavy Industries as its sole supplier. Fuji engineers went to Roseau to work on building a high-quality engine specifically for Polaris. Increasingly, the Polaris product lines were being noticed. The TX Series set a standard for power and handling in racing and gained popularity with recreational riders. Introduced in 1977, the liquid-cooled TX-L was a strong cross-country racing competitor. Polaris also introduced the RX-L in the mid-1970s, which carried the first Independent Front Suspension (IFS) and produced winners on the racing circuits shortly after its debut. The 1970s also marked the opening of corporate offices in Minneapolis, with product development and production staying up north.
The sport of snowmobiling grew by leaps and bounds in the early 1970s; enthusiasts in the snowbelts of the United States and Canada now numbered more than a million. The growth rate for the industry was 35 percent per year, versus 20 percent for other recreation industry manufacturers. In 1970, 63 companies manufactured snowmobiles in the United States, Canada, Europe, and Japan. Bombardier held 40 percent of the market, with an additional 40 percent shared by Arctic Cat, Polaris, Scorpion, and Sno Jet. About one-third of the machines manufactured in North America in the early 1970s were made in Minnesota.
Factory-backed racing teams found Polaris support in the days of Allan Hetteen and Textron, but the death of a Polaris team member in 1978 effectively ended the program. From 1981 on the company sponsored a modified racing program with independent racers. Hill climbs, stock and modified oval racing, snow and grass drag racing, and cross-country endurance racing tested the limits of the machines and appealed to customers. Racing was an important part of engineering research and development as well as public relations and product marketing.
Yet in the late 1970s, despite everything that favored the industry--including regular improvements in safety and an expanding trail system that would eventually rival the U.S. Interstate Highway System in total miles--the snowmobiling boom was about to go bust. Companies began shutting down or selling off their snowmobile divisions in the face of declining sales. Names such as Scorpion, AM, Harley-Davidson, Johnson & Evinrude, Chaparral, and Suzuki would no longer be seen on snowmobile nameplates. By 1980 even Arctic Enterprises, the number one manufacturer, was in trouble. High energy costs, economic recessions, snowless winters, and overexpansion eventually drove all but three manufacturers of snowmobiles out of business. Industry sales slid downhill from 500,000 units annually in the early 1970s to 316,000 in 1975; 200,000 in 1980; 174,000 in 1981; and 80,000 in 1983.
Management Buyout in 1981
Textron wanted out of the snowmobile business, too. Textron president Beverly Dolan, who had been president of Polaris during its first years with Textron, told Polaris's then-president, W. Hall Wendel, Jr., to sell off the company. A deal to sell the Polaris division to Canada's Bombardier fell through, however, because of the threat of antitrust action by the U.S. Department of Justice. Liquidation was on the horizon. This opened the door for a management group leveraged buyout led by Wendel, who believed that there was a market for snowmobiles and that seasonal snowfalls would rise again. Polaris Industries was created in July 1981, and a shutdown of the Roseau plant was avoided. (Still, the company began production with just 100 workers after the buyout.) Also at this time, plant workers voted the union out and Polaris proceeded to establish a Japanese labor model of worker participation, with a crew that had firsthand knowledge of the machines and their capabilities. Times were still tough, though: the 1982 product line consisted of the 1981 model with some detail changes, and barely more than 5,000 machines were built that season. The same year as the buyout, Polaris attempted to purchase Arctic Cat. When the deal failed, Arctic Cat shut down, leaving Polaris, at least for a while, as the only American snowmobile manufacturer.
The first years following the management buyout from Textron were lean and characterized by a skeleton factory crew and tight budgets. But the Textron debt was paid off ahead of schedule and the snowmobile line was expanded and improved. The company also expanded into Canada to become more price competitive and to create a stronger dealer network. Five years after the buyout the company had reached sales of $40 million and employed 450 people. A Polaris innovation of the early 1980s was the "Snow Check" early deposit program. Polaris encouraged its dealers with incentives to make spring deposits on machines for preseason delivery. For the first time snowmobiles were built to dealer orders rather than manufacturer forecasts, which had been resulting in excess inventory. Other factors helping the industry along at the time were advancements in clothing technology, winter resorts welcoming snowmobilers on winter vacations, and new engineering on the machines producing quieter, more reliable vehicles. By 1984 there were 20 million snowmobilers in the northern snowbelt and mountain regions using the vehicles for rescue and outdoor work as well as recreational and sporting events.
One of the highlights of the 1980s was the introduction of the Indy line of snowmobiles, which became so popular that other high-quality Polaris sleds, such as the Cutlass, were phased out. Good suspension, special features (such as handwarmers and reverse drive), powerful engines, and reliability all pushed Polaris into the number one position in the market. The Indy 500 was named the "sled of the decade" by Snowmobile magazine.
The 1990s and Beyond
Into the 1990s Polaris continued to improve the performance, ride, and reliability of its machines by introducing such features as the triple-cylinder and high-displacement engines, extra-long travel suspensions, and specialized shock absorbers. The machines of the 1990s were a long way from the industry's early noisy, pull-start models, with uncertain braking and questionable reliability. In 1990 Polaris held 30 percent of the snowmobile market, manufacturing 165,000 units. Arctco Inc. held 25 percent of the total market, followed by Yamaha and Ski-Doo (Bombardier, Inc.), both at 22.5 percent.
Just as the snow outside Polaris's doors had provided a proving ground for snowmobiles, the summertime swampland of the far north provided a place for testing wheeled turf vehicles. The company built and sold two-wheel tractor-tired bikes in the middle to late 1960s as it was testing diversification into such areas as lawn and garden products, single and two-person watercraft, and snowmobile-engined go-carts. The Textron acquisition and merger with E-Z Go golf carts ended formal ATV product development, so testing stayed underground until after the buyout. The company then tried but failed to sell private-label ATVs to other large companies. Still hoping to better utilize its manufacturing facilities, the company brought out two ATV designs, a three-wheel and a four-wheel with automatic shifting, which caught the interest and commitment of distributors. Added features such as racks and trailers appealed to farmers, ranchers, and lawn maintenance workers. ATVs made perfect sense for Polaris in that they shared engines and clutches with snowmobiles, could be marketed through the same dealers, and represented a seasonal line manufactured in fall and winter months for sale in the summer, just the opposite of snowmobiles.
When Polaris entered the ATV market all the major manufacturers were Japanese, led by Honda. Polaris ATVs, a combination recreation-utility vehicle, avoided direct competition with the leaders. The majority of the two million ATVs in use in the mid-1980s was in the United States and Canada. The first production run of the Polaris ATVs was a resounding success and quickly sold out to dealers. Eventually, production of three-wheel vehicles would be curtailed by all manufacturers, in response to reports of rising accidents and deaths and action by the Consumer Product Safety Commission. Polaris ceased manufacture of its three-wheel adult version after its first year of ATV production. In 1990 the retail cost of a four-wheel ATV ranged from $2,400 to $4,000 and Polaris controlled about seven percent of a shrinking market. By the end of 1993, however, ATV sales made up 26 percent of entire sales by product line. ATV manufacture was now year-round, with a dedicated production line, and had the potential to surpass snowmobile production. Because of marketing and distribution that now extended beyond the snowbelt to tractor, lawn and garden, used car, and motorcycle dealers, Polaris had become a key national as well as international player in the broader market of recreational vehicles.
Polaris introduced its first personal watercraft (PWC) in 1990, becoming the first major U.S. company to enter that industry. The recreational vehicle started off with a splash due to its speed and handling. Just as it had in snowmobiles and ATVs, Polaris emphasized machine stability, coming up with an entry in the market that was wider than most and was a sit-down rather than stand-up model, which by then was declining in popularity. In the late 1980s personal watercraft was the growth segment of the marine industry and the trend was toward machines requiring less athletic ability and targeting a broader age range. The recreational vehicle was similar to the snowmobile and the ATVs in terms of engine type and channels of distribution. By testing competitors' products Polaris identified the qualities it wanted in its entry: a machine that was fast and fun to drive, with good handling and stability, as well as better boarding in deep water than the competitors'. The company's first model was a success and drew high-income, first-time buyers. By the end of 1993 PWC made up nine percent of total Polaris sales.
In 1994 Polaris employed 2,400 people companywide, had a sister plant in Osceola, Wisconsin, and was planning another plant in Iowa. Polaris Canada, a wholly owned subsidiary, provided 25 percent of total sales, or about $100 million. Since 1991, $70 million had been spent in plant improvements and new product development. David Johnson, the only person to see Polaris through all its incarnations, commented in Bassett's retrospective, "The biggest strength of Polaris is the people. ... Everybody who's involved at Polaris, whether it's with the watercraft, or with the ATVs or the snowmobiles, they want to make the best machine they know how." Polaris's partnership with its employees meant not only sharing in making the best product possible, but sharing in the benefits. Profit sharing began in 1982 with an average of $200 per employee. By 1993 employees shared $6.8 million.
In December 1994 Polaris converted from a limited partnership to a public corporation for several reasons, including its desire to maximize shareholder value, its need for greater flexibility, and the approaching 1997 deadline for relinquishing its partnership tax status. The small company that began up along the Canadian border 40 years earlier had since transformed itself, through a series of rebirths, into a worldwide leader, with annual sales of more than $800 million.
Polaris had a great year in 1994: sales rose 56 percent to $826 million and profits climbed 66 percent to $55 million. Its share price fell drastically, however, after Barron's ran an article in January 1995 wondering whether a light snowfall would affect the company. Sympathetic analysts pointed to the new areas of the company's business that were not snow-related, such as ATVs and watercraft, where the company had captured market shares of 20 and 15 percent respectively.
In fact, Polaris had become the perfect diversification success story. In spite of Barron's worries, all product segments set records in 1995, leading to total sales of more than $1 billion in 1995. Revenues had more than tripled in five years. Snowmobiles accounted for 40 percent, down from 67 percent in 1990.
Polaris opened its own engine plant in Osceola, Wisconsin in October 1995. The company had previously bought Japanese engines from Fuji Heavy Industries and had set up the Robin ATV engine joint venture in Hudson, Wisconsin in February 1994. The new plant gave Polaris some flexibility in dealing with currency fluctuations.
Another record year followed in 1996, although snowmobile and watercraft sales slipped. Still, snowmobiling was reaching new highs in popularity, revitalizing the economy of sleepy Minnesota resorts that would otherwise have closed for the winter. Other related businesses popped up, supplying snowmobile trailers or hauling the finished goods to market. Demographics and a lack of new trails led some to believe that the boom was coming to an end, however. Concurrent with the rediscovery of the snowmobile was an explosion in personal watercraft sales, which tripled between 1991 and 1996. Makers of larger powerboats felt that they were spoiling their business, though.
As the revitalized Harley-Davidson could not make its famous "hogs" fast enough, Polaris decided to develop its own big, heavy cruiser class motorcycle priced below the Harleys. Made in Iowa, the first Victory V92C rolled off the line on July 4, 1998. Wendel noted that the company had already shown it could compete with the Japanese bike makers in other categories. The Harley mystique would be difficult to approach, although the Victory bikes received generally enthusiastic reviews. Others began making American bikes at the same time: Big Dog Motorcycles of Sun Valley, Idaho, the reborn Excelsior-Henderson Motorcycle Mfg. Co. of Minnesota, and numerous smaller shops.
W. Hall Wendel, Jr., stepped down as CEO in May 1999, remaining a major shareholder as well as board chairman. Thomas Tiller, president and chief operating officer since the previous summer, became the new CEO. Tiller had spent 15 years at General Electric, learning from its legendary leader, Jack Welch. When appointed, Tiller announced plans to double the company's sales within four years.
Polaris had made huge strides growing organically, and several record years gave Polaris plenty of cash for acquisitions. But the company stuck with joint ventures instead. In 2000, it contracted with Karts International Inc. to make a line of Polaris mini-bikes and go-carts for children. It also marketed a child-sized snowmobile to compete with Arctic Cat's Kitty Cat and began developing a snowmobile video game for kids to "burn Polaris into their beautiful little brains," as Tiller put it. Polaris took aim at hunters with a special camouflaged ATV co-branded with Remington firearms. Other promotions with DeWalt Industrial Tool Co. and NASCAR helped publicize the brand in the South.
In March 2000, Edgar Hetteen and David Johnson, joined by current Polaris chief Tom Tiller and seven others, recreated the epic Alaskan journey Hetteen had taken 40 years earlier to promote the snowmobile. This time the trip raised funds for Lou Gehrig disease research.
Dark clouds were just over the horizon: the Department of the Interior banned snowmobiles from most national parks in May 2000. "The snowmobile industry has had many years to clean up their act and they haven't," said an official. Polaris and Arctic Cat countered that both had been working to cut emissions and noise for years, but were waiting for the Environmental Protection Agency to announce a new emissions standard in September 2000 before retooling their production lines. The Park Service also complained of the potential for disturbing wildlife that snowmobiles offered.
Principal Subsidiaries: Polaris Industries Inc. ("Polaris Delaware"); Polaris Real Estate Corporation of Iowa, Inc.; Polaris Real Estate Corporation; Polaris Industries Export Ltd. (Barbados); Polaris Industries Ltd. (Canada); Polaris Acceptance Inc.; Polaris Sales Inc.; Polaris Sales Australia Pty Ltd.
Principal Operating Units: All-Terrain Vehicles; Snowmobiles; Personal Watercraft; Parts, Garments and Accessories.
Principal Competitors: Arctco Inc.; Bombardier Inc.; Honda Motor Co., Ltd.; Suzuki Motor Corp.; Yamaha Corp.