Wabash National Corp. on Feb. 28 announced several initiatives to further optimize the company’s manufacturing cost structure. As part of this effort, the company is planning to build a state-of-the-art production facility in Franklin, Ky., 45 miles north of Nashville, Tenn.
Construction of the new facility will commence as leading market indicators dictate. Additionally, the company will begin to make improvements to its facilities in Lafayette, Ind., to streamline production flow and enhance manufacturing efficiency. These efforts are focused on optimizing existing production capabilities and do not involve the addition of new capacity.
“We are very pleased to announce our plans for the new Kentucky plant and improvements to our existing Lafayette facilities,” says Dick Giromini, president and chief executive officer of Lafayette-based Wabash National. “These efforts significantly advance our lean manufacturing and operational excellence initiatives, improve our margin expansion potential and strengthen our competitive position over the near and long term.”
Together, Wabash says these initiatives are expected to:
“While the trailer market faces current headwinds, we are taking steps today to improve our long-term cost position,” Giromini says. “Even at cyclically low production levels, these initiatives are expected to favorably impact our margins. When the demand for trailers improves, as industry experts expect over the next 12 to 24 months, we will be positioned to take full advantage of the benefits resulting from these initiatives.”
On Thursday, Feb. 28, the company received an incentive package from the State of Kentucky to build its production facility. Current plans are to begin construction in late 2008 or early 2009, dependent on market conditions, with production ramp-up to begin following completion of construction. The 300,000-square-foot facility on 60 acres will have the capability to produce both DuraPlate and FreightPro dry van trailers.
“We are beginning a restructuring of our manufacturing footprint in Lafayette that will free up additional floor space, allowing the company to consolidate warehouse space, update assembly line configurations, improve material handling processes and take on new strategic growth initiatives,” Giromini says.
The cost of the Kentucky plant will be about $25 million and is expected to be financed through a combination of industrial revenue bonds, lease arrangements and operating cash flow. Full-time staffing levels are expected to remain unchanged at the Lafayette plant, while incremental fixed costs at the Kentucky plant will be minimal as shared services from Lafayette will be utilized. The company expects to realize cost savings driven by a lower average production cost per trailer, which is expected to decrease by about 80 to 100 basis points per trailer once the changes to the Lafayette facilities are complete and the new Kentucky facility is fully operational.
“The Kentucky facility is a key building block of our long-term strategic growth plan,” Giromini says. “Our goal is to create a business and manufacturing process that is more efficient, less complex and better suited to generate long-term shareholder value.”