A bigger cut of the cutaway market

Oct. 1, 2003
It's been a difficult market in recent years. The pie has shrunk. In order to grow, American Cargo Corp has been executing a plan designed to get a bigger

It's been a difficult market in recent years. The pie has shrunk. In order to grow, American Cargo Corp has been executing a plan designed to get a bigger piece of the pie.

By management's count, six major van body manufacturers are within 20 miles of the American Cargo location in Goshen, Indiana. All vie for customers in the Northeast and Midwest, particularly the high-cube van market concentrated along the East Coast between Boston and Washington.

The company, which specializes in van bodies for cutaway chassis, is increasing its market share with a growth plan that includes three components:

  • Growing geographically

    American Cargo took a major step in this area when it acquired some of the assets of Babb Body Company, a van body manufacturer in Social Circle, Georgia.

  • Growing its products

    The company expanded its product lines with some new van bodies geared to address the multiple price points of the market.

  • Growing its promotional efforts

    Adopting an idea similar to that being used in recent years by truck manufacturers, American Cargo has introduced a special program specifically for dealers who are serious about selling commercial trucks.

“These are all new efforts,” says Rich Ryan, president. “Given the condition of the market, it's been difficult to tell just how effective they have been. We've seen an increase this spring, but the second half of this year will give us a better idea how well our ideas are being accepted in the marketplace.”

Babb Body Company has been in the Southeast since 1958. By acquiring some of the assets earlier this year, American Cargo obtained inventory and equipment, a recognized brand, 47,000 square feet of additional manufacturing space, new fabrication capability, and entrée into the Southeast market.

“To be competitive in the van body business you have to service a regional market because of freight expense,” Ryan says. “No one can compete nationally without regional manufacturing plants.”

The acquisition of Babb assets gives American Cargo its first manufacturing plant outside its base in Goshen, Indiana. It also gives the company fabrication capability that American Cargo previously did not have.

Spreading out

The Georgia company had closed its doors only a month before American Cargo purchased the assets. Because of the relatively short time that the plant was closed, American Cargo was able to hire the best former Babb employees when production resumed.

As part of its goal to grow its product line, American Cargo has introduced several new models in recent months. With them, American Cargo offers a choice of FRP cutaway body or aluminum sheet and post design. Each body style has a high-spec model or one with an entry-level set of specifications. And within each of these, a variety of options are available.

While all are designed for cutaway chassis, the base-model FRP van (the Spirit) in particular is designed to compete with the cargo van produced by truck OEMs.

“About 70,000 van bodies and 15,000 high-cube vans are built each year,” Ryan says. “But the commercial van market buys about 230,000 OEM vans per year. We would like to be able to convince 10% of those buyers that cutaway van bodies like ours are a better choice.”

Ryan points out that a cutaway chassis equipped with a van body enables people to stand up as they work inside the cargo area. He also notes that the cost of a cutaway chassis is less than that of a completed OEM van, helping to offset the cost of the installed van body.

American Cargo has developed a combination service body and van, also a product for cutaway chassis. The steel service body is produced by a third party. American Cargo assembles the sidepacks and mounts the body and then attaches its own van shell to it. These service body/van combinations are becoming increasingly popular because they tend to offer the easy outside access of a service body with the high volume interior cube of a van.

Dealing with dealers

American Cargo markets its products through truck dealers, fleets, and leasing companies. The company recently developed a program designed to increase sales through truck dealers.

“A lot of car dealers sell trucks, but only a few hundred really emphasize selling commercial trucks,” Ryan says. “Just like Ford and General Motors have done, we have developed a program that targets those dealers.”

The company's All-American Dealer program provides qualifying dealers with several benefits, including year-end rebates based on volume, American Express coupons for the truck dealer salesman and sales manager, and faster delivery times.

“Delivery is usually the top priority for dealers, especially when times are good,” Ryan says. “Under our program, we guarantee our All-American dealers faster deliveries — 15 working days on our rapid spec, or we pay the freight.”

The financial incentives are designed to refute the idea that truck dealers make money only on the sale of the chassis and do not benefit from the sale of truck bodies and equipment. Under the All-American program, incentives go to the principals of the dealership as well as to those actively involved in making the sale.

To qualify for the program, dealers must agree to stock chassis equipped with American Cargo bodies. The number of stocked vehicles is a function of the size of the dealer.

Maximizing the plant

As long as the company has been in business, it has concentrated on assembling its products, rather than fabricating them.

“Our idea has been to be in the truck equipment business, not the fabrication business,” Ryan says. “Besides allowing us to produce more in our plant, outsourcing our components gives us a better idea what our costs are. If we were to fabricate a part, it's more difficult to calculate the cost because of the number of variables that go into making that part. If we pay someone $47.50 to fabricate a bumper, that's the cost of that bumper.

“The auto industry has been moving toward outsourcing in recent years. It works in those areas with a lot of fabricators — and there are plenty where we are located.”

With the acquisition of selected assets of Babb — including some significant fabrication equipment — the company may do more fabrication than it has in the past. But one thing management considers important is knowing its costs.

“It's so easy to underestimate what costs are,” Ryan says. “For any company, we need to define the services we offer before, during, and after the sale. Then we need to determine what it costs to offer that service. We can't just dump the costs of a high-tech service onto a low-tech product.”

Not if the plan is to get a bigger cut of the cutaway market.