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Analyst: Plenty for Polaris to like about Monterrey plant

March 22, 2012
Filed under Features, News

Polaris Industries is benefitting from its Monterrey, Mexico, plant in a variety of ways, according to a research note provided to Powersports Business from Baird analyst Craig Kennison. Kennison and other analysts met with Polaris leaders in Texas and Monterrey, Mexico, where the group toured Polaris facilities.

Kennison reports that Polaris broke ground on the Monterrey facility in 2010 and began production nine months later. “Today, Monterrey employees are producing [approximately] 200 sides-by-sides each day on two lines at quality levels that exceed U.S. standards.”

Kennison goes on to write that Monterrey “reduces logistical costs (one to two days faster delivery in southern U.S.) and provides a duty-efficient platform through which to expand in Latin America (especially Brazil) – a major growth opportunity.”

Kennison also reports that with MVP, “Polaris has worked to reduce order cycles and dealer inventory to build a sustainable operational advantage.”

“We see Mexico as an important step as Polaris transforms itself into a global leader in the markets it serves,” Kennison said. “Monterrey proved that management can execute on a global scale. We gained confidence that Polaris leaders will successfully 1) expand the product portfolio into electric vehicles, commercial SxS, military and motorcycles, and 2) expand distribution in China, India and Brazil and other parts of the world. We are raising our price target to $85 as investors begin to appreciate Polaris’ superior operations and expanding addressable markets.”

Kennison also learned that Monterrey leadership includes eight employees with advanced degrees, and employee turnover is half the 25 percent that is typical in the market. In addition, Monterrey’s warranty cost per unit is the lowest in the company. Kennsion also said that Polaris operates two lines in Monterrey, with expansion to a third line likely coming.

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