This is the latest in our “Masters of Manufacturing” series, presented in partnership with The Indiana Economic Development Corporation. Each month we share insights and ideas from innovative, growth-minded manufacturing CEOs from across the nation as they navigate this tricky time in history.
Jason Lippert has headed into a downturn in the recreational-vehicle industry this time around much better prepared than last time. LCI Industries, a $2.5-billion supplier of components to the leisure-vehicle and mobile-transportation industries headed by Lippert, now relies on RV builders for only about 58 percent of its revenues compared with 90 percent when LCI lost about 60 percent of its sales in the wake of the Great Recession.
“Our diversification plan is working, helping to mask a pretty significant downturn in the RV business” recently, Lippert tells Chief Executive. “If you’d asked me a couple of years ago, before any downtick [in RV sales], what a tough downturn in that industry would look like, I would have said ‘20 percent.’ And that’s what we have seen over the last 12 months.
“But our operating profit for our last earnings release is better than our historical average, so our diversification plan is working,” he adds. “We’ve got a double-digit operating profit, so we’re operating pretty well even in a tough environment. And we have a better capability of lasting through some kind of cycle, be it recessionary or economic or an inventory cycle.”
Growing up as the grandson of Lippert Components founder Larry Lippert, Jason Lippert was a recent graduate of Miami University in Ohio when he joined the family company in 1994 – as a welder at one of its mobile-home chassis plants. Eventually it was he who pushed for the company’s diversification into RV components in the first place. “They’re just smaller houses on wheels,” he says.
Tapping into the burgeoning RV-assembly industry in northern Indiana, Jason Lippert developed strong relationships with industry stalwarts, and soon LCI was making not only chassis but also slide-outs, awnings, axles – “there was nothing that we weren’t willing to try,” he says.
Meanwhile, LCI became a publicly traded company in 1997, just as the transition between Doug Lippert, the CEO, and son Jason Lippert was taking shape. Jason Lippert continued to help build the company into the largest supplier to the RV industry — and had moved the headquarters to Elkhart, Indiana, the world capital of the recreational-vehicle industry — when the bottom fell out.
“We had gotten the business to about $700 million from about $100 million” when he became CEO in 2003, Lippert recalls. “Then the recession hit and took 60 percent off our top line, and that made it challenging to move the needle.”
Coming out of the recession, Lippert says, he pledged that “we can’t have 90 percent of our sales in RVs.” So he focused the company on a massive diversification effort that included incursions into the original-equipment bus, marine and specialty-vehicle-parts markets, as well as the aftermarkets for those businesses. He expanded geographically as well, into Europe. Now LCI makes hundreds of separate products that range from leveling systems to mattresses, horse trailers to luggage doors, with more than 9,000 employees in more than 70 manufacturing facilities.
“RVs are still a pretty substantial part of business, because the RV business has grown every year for the last nine years,” Lippert says. “So we’ve experienced big growth in other parts of our business.”
But the keys to the company’s continued success have included more than just wisely diversifying in a strategic sense. Lippert also points to other factors, including an ability to provide product innovations to customers in the new markets that have helped the company establish and grow footholds there.
LCI drew that strategy from lessons in its growth in RVs. “We grew through that industry’s cycles because we were always innovating and asking customers what they wanted that they didn’t have, or which suppliers they wanted to replace,” Lippert says.
Here’s an example of how he’s been applying the same approach to new markets for LCI. “We make $200 million in RV furniture every year,” Lippert explains. “So we say the next logical step for us would be to provide furniture in boats, like pontoon boats. Then we add lights and heated and cooled seats to pontoon boats. It’s not necessarily a new product, but we’re increasing the content of existing products and gaining market share in products like pontoons where we’d never been before.” LCI also has made strong incursions into the aftermarket in its various market segments, and in selling direct to consumers.
On the manufacturing side, LCI has automated much of its chassis manufacturing. “It helps in quality, safety and efficiency,” he says. “We’ve eliminated a lot of the most dangerous jobs and made it safer for team members as a result.”
And the company’s attention to the safety of employees is just one aspect of Lippert’s increasing attention to workplace culture at LCI. That has included recent adoption of a platform for caring more genuinely for employees, inspired by Robert Chapman, CEO of Barry-Wehmiller, a diversified manufacturer based in St. Louis, and co-author of Everybody Matters: The Extraordinary Power of Caring for Your People Like Family.
Lippert called his program Everyone Matters, and it has included his own meetings with each of his top four dozen front-line leaders once a week, creating clear “leadership values,” and hiring leadership and “personal-development” coaches for LCI’s top 800 leaders. In turn, they’re expected to create an “everyone matters” climate in the operations they oversee. The results have included plunging attrition and a more dedicated workforce.
“We feel that if we can build up our culture and all but eliminate attrition, if people really want to come to work at LCI and if people stay with the business, then efficiency, quality, innovation and safety always get better,” Lippert says. “That’s been a competitive advantage over the last several years.”