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September 01, 1999  |   Comments (0)   |   Post a comment

Tackling the Issues of Consolidation, Competition and Quality Control

Has manufacturer consolidation helped customers? What can be done to improve quality? Top manufacturers provide the answers.

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This is the first in a series of question-and-answer sessions with top officials at school bus body/chassis manufacturers. Although participants were interviewed separately, their responses were spliced together to maintain a common thread. The participants in this interview — Don Collins, president and CEO of Collins Industries in Hutchinson, Kan.; Paul Glaske, chairman of Blue Bird Corp. in Macon, Ga.; and John Thomas III, president of Thomas Built Buses in High Point, N.C. They were interviewed by SBF Editor Steve Hirano.

SCHOOL BUS FLEET: The 1990s has seen significant consolidation of body and chassis makers in the school bus industry. How has this consolidation affected the end users?

Don Collins (Collins Bus Corp. and Mid Bus Inc.): I strongly believe that the consumer will be the major beneficiary of this consolidation process. Competition is always good for the end user, and it produces better quality product and services at a more competitive price as the consolidation takes place. We have certainly participated in the consolidation with our acquisition of Mid Bus last December. But in our particular case, we continue to focus on the Type A market.

Paul Glaske (Blue Bird Corp.): The consolidation issue actually began in the ’80s, not the ’90s, when Navistar bought Ward. And the recent purchase of Thomas Built Buses by Freightliner, a subsidiary of Daimler-Benz, was really a spillover or continuation of the Navistar-Freightliner struggle on the Class 8 truck, the big truck. That’s been going on in the ’90s. And our supply agreement — which I guess is a phase of what you’re calling consolidation — with General Motors in 1992 occurred because Ford said it was going to get out of the business and GM said they were getting out of the Class 6 or 7 market, which is a conventional chassis. That left one supplier. In the free-market system, you need to have multiple choices. So I think the end user is well served to have at least three choices now — Freightliner, GM, Navistar. I don’t see it as a negative for the end user at all.

John Thomas III (Thomas Built Buses): I think the end user now is dealing with a bigger school bus manufacturer, which is still dedicated to the school bus industry. But this bigger school bus manufacturer now has more resources available to serve the end user’s needs. I think from that standpoint, the end user really has been the big winner in all of this.

SBF: Is the competition for marketshare any more rigorous these days than, say, five years ago?

Collins: Competition has always been intense in school bus manufacturing, but as a small-bus manufacturer for over 30 years, our commitment has been and will always be to our customers to just build the safest and most reliable product in the industry and be in compliance with all the state and federal regulations.

Glaske: Competition is typically intense in a mature market, which school buses are. It gets particularly bad if somebody who’s struggling to stay alive puts their pricing out at their cost or less, just to try to keep the doors open. That’s the worst kind of competition I have. I don’t know if competitive pressures have changed much for us over the past five years. It’s always been competitive, and it probably always will be.

Thomas: If the past few months is any indication, it’s about the same. I would say it’s been very competitive, and we operate in a very mature market that’s mainly a replacement market. We are, however, experiencing a very significant growth in the Type A market. We’re seeing growth in that market across the board, in public schools and non-public schools.

SBF: Are price pressures forcing your company to find new efficiencies in manufacturing?

Collins: I think this is true in business throughout the United States. In recent years, price increases have been difficult and hard to come by. However, inflation has been relatively low as well. In my opinion, pricing certainly should be stabilized to some degree in periods of low inflation. But we have looked to those areas that we can become more efficient and avoid passing undue cost along to the consumer.

Glaske: Well, that’s one of those things that goes on forever. You know, all the manufacturers in this country, in the world, need to look at processes and materials and consider all the ways they can to improve their efficiencies. Companies that don’t do that on a regular basis either don’t do well, limp along or they just go away.

Thomas: I think any manufacturer has to face an ever-growing need to find new efficiencies. For us, it’s not so much price pressure as a desire to improve, knowing that if you don’t focus on improvements, somebody else will, and you will be backing up from a competitor’s standpoint.

SBF: Sales volume of school buses has been relatively high in the past few years, yet I’m hearing that manufacturers are not realizing commensurately high profits. Is that accurate?

Collins: We’ve continued to invest in mechanization, new technologies and engineering. We believe these things will keep us competitive in the Type A market. But I must say, we’ve managed to maintain a reasonable profit. I think that’s important, because a profitable, financially stable company is always able to reinvest in technology and facilities, which will ensure their continued success for years to come and that they’re a good supplier to the industry.

Glaske: Well, I’ll go back to what I said earlier about a mature product line. Really, this industry has never been viewed as highly profitable, in the history of Blue Bird anyway. And all businesses have to have adequate revenue to pay competitive wages, maintain facilities and equipment and also to develop products or support products that the customers want. And then you have to have a little left over to pay your investors a reasonable return.

Thomas: It’s hard to judge how other manufacturers are doing from a profit perspective, but I would say that we here at Thomas make what we would consider to be a fair profit. I think that pressures within education and the competitive nature of the industry just won’t allow anyone to make a high profit or an unreasonable profit.

SBF: In a recent survey of school bus fleets in British Columbia, only 19 of 38 respondents said they were happy with the quality of the buses they’ve purchased in the past few years. Does this surprise you?

Collins: Well, obviously, I’m not in tune with this particular survey, but unfortunately, school districts sometimes take the lowest bid for a bus instead of looking at the lowest qualified bidder. And those issues need to be addressed up front in the bid process.

Glaske: I’ve gotten to the point where I’m not surprised by surveys. It depends on what is asked and how it’s asked. I would say, we’re not seeing that kind of problem in British Columbia that I’m aware of. In Blue Bird’s case, the buses in British Columbia would come out of our Canadian plants. That’s one of our very best plants, with a well-earned reputation for quality. If I heard it was Blue Bird, I’d be surprised. But from our perspective it’s not an issue.

Thomas: Because every manufacturer’s quality has improved markedly over the past few years, it would be a surprise to me if there’s still those big complaints about product quality. But on the other hand, maybe it shouldn’t be such a surprise to me because customer quality expectations increase every year at a faster and faster rate. The automotive industry has made great strides in quality. They’ve really focused in on that, and I think people equate automotive quality with bus quality and don’t understand why the same type of improvements can’t be achieved by what they view as a similar industry.

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