INTERSTATE Trailers made the right move when it shifted its operation from a 1950s-era tin building on Interstate 20 in Arlington, Texas, to a state-of-the-art, 125,000-sq-ft, $3.5-million facility in rural Mansfield, 10 miles southwest of the old plant. CEO Steve Flowers is convinced of that.
Now he's just waiting for all the elements to come into place. Interstate moved in June 2000 — right about the time the trailer industry started experiencing a downturn.
“A funny thing happened on the way to Mansfield from Arlington,” Flowers says. “We moved into here and look what happened to the trailer business. I'm thinking, ‘Oh, my, what did I do?’ The end of last year was a little scary.
“We are producing more with less people here, and we haven't had any layoffs during the tough time. One company has laid off its entire sales force. I mean, that's crazy. Everybody knows orders for some companies are off 50%. Our sales are down 2.74%. I'm proud of that, given the industry.
“I love it here. We're still profitable. That's the bottom line. And believe me, in 1990-91, it wasn't the same story. The only thing I can attribute it to is that we've got one heckuva dealer network. We've got representation in every market. And we're not fancy. That's why we've survived through this downturn.”
Interstate will turn out 1,500 units this year: utility, tagalong, tiltbeds, and fixed-neck lowboys, with capacity from 4 to 50 tons. Its bread-and-butter are 9- to 25-tonners. Interstate builds 35- and 50-tonners, but not in the production-type mode for at least a few more years. It has agreements with other manufacturers on some large detachables — in turn, trading product out — but it does build fixed-neck lowboys up to 50 tons in Mansfield.
In 1991, Interstate's sales were $7 million. The company grew steadily to the point where sales had more than doubled, to $15 million, in 1998. Flowers projects sales of $14 million for 2001.
Flowers reaches into a file and pulls out a gray sheet of paper with a company letterhead.
“I knew I saved this for a reason,” he says.
On the back is a sketch of a manufacturing facility — theirs, as they envisioned it one afternoon while winding down from a long day. It would have all the things they wanted but hadn't been able to have.
To Flowers, it was reminiscent of the renowned origin of Southwest Airlines.
The nation's seventh-largest airline supposedly started with a drawing on a cocktail napkin. As the story goes, Rollin King, owner of a floundering commuter airline, was sitting with Herb Kelleher, his lawyer, in a San Antonio bar called St. Anthony's Club one afternoon in 1966 when they decided they would start a short-haul air carrier. King picked up a cocktail napkin and drew a triangle on it, with the words “Dallas,” “Houston,” and “San Antonio” serving as the corners. King said that Texas' booming economy was a huge plus, and with the diagrammed route network, the airline would not come under the regulation of the Texas Civil Aeronautics Board. Kelleher shouted, “Rollin, you are crazy! Let's do it!”
Interstate Trailers will never be confused with Southwest Airlines, but Flowers' point is that good ideas sometimes are manifested in unconventional ways. When the ideas start churning inside your head, nourish them and let them flourish.
Like kids drawing a football play in the dirt, Flowers, general manager Mike Laws, and plant manager Kenny Kirby came up with a rough plan of a 500'×200' production facility, including a two-story, 4,500-sq-ft office and 10,000-sq-ft steel storage area.
“The idea was to upgrade the building, duplicate the numbers as far as products, and insure the future for Interstate Trailers,” Flowers says. “I didn't want to have a debt load with the building. Ninety-nine out of 100 who build a building like this have debt load on the bottom line. They have $200,000 to $300,000 every year in parentheses when it comes to outside income, because they're paying off the bank.
“The other thing — and this will sound corny — is that I'm close to my people. We wanted to build a place and have everybody come with us.”
Anatomy of the Sale
Victor Vandergriff of Vandergriff Chevrolet and VT Corp approached Flowers at the end of 1998 and offered to buy Interstate's 17.7-acre spread in Arlington. Flowers turned him down because he says the offer was less than the going rate for the land.
By July 1999, they had a deal. Two months later, Interstate broke ground on 50 acres, 12 of which would be occupied by the facility and lots.
Tornadoes would link the old facility with the new one.
On March 28, 2000, before Interstate started exiting the old plant, a tornado rocked Arlington. It was six miles long and a quarter-mile wide, and when it first touched down south of Interstate 20, it was gauged by the National Weather Service as an F3 (a category of storms packing winds of 158 to 206 mph). As it moved northeast past I-20, it missed Interstate's facility by 1,000 ft. It caused an estimated $300 million in damage, but nothing at all at Interstate's facility.
Starting in May, Interstate began moving into the Mansfield facility. The employees personally handled virtually the entire moving operation, hauling 423 truckloads while the other 30 were contracted out. In the one-month span while they operated out of both facilities, they lost just $250,000 worth of production, which Flowers says is “tremendous, from what people tell me.”
The grand opening was a festive affair at which Flowers entertained 37 dealers with mariachi and rock ‘n’ roll bands, a bagpipe player, a comedian, 40 gallons of margaritas, four kegs of beer, and a golf tournament.
Ten days later, a tornado moved through Mansfield, cutting a southwest-to-northeast path and causing what would turn out to be $3 million in damage. Flowers hopped into his car and headed for the facility, fearing the worst. He saw helicopters hovering near the building. But when he arrived in the lot, he discovered that the tornado had missed the property by 650 ft.
Two other businesses and 12 homes were damaged or destroyed. As much as a half-million dollars in damage was done to Kennedy RV and Boat Storage, where many of the boats and RVs were carried across an open field and smashed into homes of residents.
“Places were destroyed all around us in both tornadoes,” Flowers says. “It didn't move one piece of flat bar in either place. But I guess the moral of the story is, you don't want to be our neighbor.”
The heartening thing for Flowers was that he got his wish: Not one of the 70 employees left the company, even though some of them faced a slightly longer commute. The benefits of working in a bright, modern, comfortable facility — because of vastly improved insulation, the temperature on the production line is 92 degrees on the hottest day, as opposed to 125 — outweighed any commute-related factors.
In Arlington, the offices were housed in two mobile homes outside the manufacturing facility. Now, everybody — including engineering and production — is housed in separate offices that total 5,000 sq ft. Marketing manager Trish Flowers, systems manager Judy Wallace, sales coordinator Glenda Price, and controller Henry Borbolla III were instrumental in designing the offices.
Managers are able to exit their offices, walk down a short hall, and find themselves at the center of the production line.
“We're going from the 1950s to the year 2001 — that's the best way you can describe it,” Flowers says. “You walk into the sales offices of people and you see the individual pride. They have it decorated so that they've made it a part of their own personality.”
Says parts manager Holger Bauhaus, “The work environment is much better. You like coming to work. Steve went all-out in designing and building this. He did what not too many company owners would do. He could have pocketed the money. He didn't. I hope everybody appreciates it. Everybody should be happy. It's very hard to find a boss like that. He cares. He's a people person. You have to appreciate that.”
Interstate has 125,000 sq ft under roof: 100,000 for production and parts (56% of it under craneway), 5,000 for offices, 10,000 in loading, and 10,000 in storage. Flowers says they have so much space that they could quadruple their production.
They have four high-speed lines, with all raw materials starting in the northeast corner and then flopping over onto four assembly lines (as opposed to 2½ in the old facility). There are seven different stations, starting with fixturing and going to weldout, wiring, axleing, decking, final cleaning, and painting.
The work stations are more comfortable, the wiring longer so that when they decide to expand production, the capability is there.
“I don't believe we're reinventing the wheel,” Flowers says. “We are a very basic, simple company. Bring it in one end and out the other. That's all it is.
“Every college course in engineering that includes how to set up an assembly line will teach you the U-shape on the line. One day when we had an event with the city of Mansfield to draw people in here, one of the visitors was the head of engineering for University of Texas-Arlington. He was just amazed. He said, ‘It's just how I teach it.’ I feel good about that.”
The biggest difference in production comes in material handling. They have four forklifts — six fewer than they had in Arlington.
“We've cut material-handling time in half, probably more than that,” Flowers says. “If you saw the old place, we had forklifts running all over the place.”
The plant has 10 new cranes — nine have five-ton capacity, one has 10-ton capacity. The old plant had eight cranes, all with five-ton capacity. Flowers saw no benefit in moving them.
“By the time you break the crane down, transport it and put it on a different span, you're better off going new,” he says. “Same with the paint booths. We sold them off and put the money back into the new building.”
Interstate now has four SBS dry-filter, drive-through booths that are 54'×16' and operate with a high-solids, airless system. One is located at the end of each assembly line, which enables Interstate to run four models at a time without having to change out fixtures.
Flowers is excited about the capabilities of the Wheelabrator, which shot-blasts the steel structural beams before they are assembled.
“It has made a big difference,” he says. “It shot blasts all the mill slag. Your finished product looks so much better. That mill scale promotes rust from the inside out.”
Interstate plans to use the new facility to aggressively attack the parts market. They have doubled their inventory to include about $100,000 in parts, and they expect to do $600,000 in sales this year — $160,000 more than they did in their best year in Arlington. The municipal governments of Arlington and Fort Worth have become regular customers.
“One of the things Holger and I have talked about is increasing our presence regionally,” Flowers says. “With so much of the trailer parts business, you have to have a presence regionally to grow, because of freight charges and the fact that there are so many trailer parts houses on a national level. We've increased our markets and the word is starting to get out. We've done mailers, ads, yellow pages, and warranty registration cards of anyone who has bought trailers in the area. But we've got a long way to go.
“When we were in the old place, the parts department was like a service to our national dealers. We'd do $400,000 by accident, just taking care of our existing dealers. Now we've got guys walking into a place we can show off.”
Bauhaus says walk-in business frequently involves customers who do not have an Interstate trailer. He feels that by doing that, the customer might return to Interstate to buy a trailer. Either way, he wants to show the customer that service is a priority at Interstate.
“A trailer down means money lost,” he says. “We try to get these guys back on the road as fast as possible. If it means we have to go to different stores — since we can buy wholesale — we'll do that. It's added customer service. Who knows? Maybe in the future they'll know what we do for them and they'll buy an Interstate trailer. You never know.”
Bauhaus says if a part is available, he can get it to the customer in three to five days, or one to three if it's in-state. He'll use major trucking companies that offer Interstate a freight discount, and pass that discount on to the customer. (Please turn page)
“Sometimes a customer will fax an order over and say he wants it shipped UPS,” Bauhaus says. “Well, you can ship it UPS, but it's going to cost a heckuva lot more, and it'll take four to five days to get there. If I put it on a skid, it'll cost 50% less. They appreciate that. You're not only taking orders, you're taking care of customers. That's our main goal in the parts department: Take care of customers so they have what they need. It's not only sales. Anybody can do that.”
The parts area in the Arlington facility was an attachment to the shop. There were a number of challenges: ceilings were bowed down because of water damage; there were two small entrance doors, so everything had to be moved by hand; and it was half the size of the new parts area, forcing Bauhaus to stack boxes everywhere.
“We did the best with what we had,” he says. “It's just that space-wise, the way it's set up makes it so much easier. The old place, we had two people stepping on each other's feet.”
Bauhaus' staff is now set up to accept credit cards, which has increased the volume of buyers. They also have UPS' online shipment network, which means they can efficiently track the progress of shipments in a matter of minutes — as opposed to their old system of manually tracking through a toll-free number.
One of the problems Flowers faces in the Dallas area is finding enough welders and skilled workers. The unemployment rate in the Metroplex is 3.5% — well below the national rate of 4.9% in August, the highest since September 1997.
Beyond that, he's looking forward to an economic turnaround. The US economy was already weak when the nation was rocked by terrorist attacks in New York City and Washington, DC, and many economists said the nation could slide into recession as a result. Like everybody else, Flowers has been tracking it with a cautious eye.
“I guess you could say I'm conservative,” he says, “We have homes for our trailers. You wont see any inventory in finished product. Every trailer you see at the end of production is sold to somebody. It has a home.”
And so does Interstate.