Briggs & Stratton to sell most of its products business

[ILENGINE]

Well I have been one corporate merger (buyout) when Burroughs off loaded its financial division. What a nightmare I hired into. When SRC got things under control they layoff over 300 field service techs that only 3 months earlier signed non compete contracts.

I also have seen several corporations just completely under when they started downsizing. Kinda learned to very wary when one start off loading assets.

Very true you need to be wary. I am now wondering if the Briggs parts fiasco was due to lack of funding to pay their parts suppliers. Looks like their stock dropped like 40% in August last year due to the slow sales and lower expected returns last year. Now Kohler is moving their tech support and warranty authorization in house at the end of the month instead of being through your distributor.

 

[bertsmobile1]

The writing is on the wall for Briggs.
They can not make engines cheap enough to compete with what is coming out of China thus their market share is only going one way & that is down.
Refinancing right now is a very good idea as money has never been so cheap they should be able to get the $ 200,000,000 at less than 2% so that will drop the existing interest payments substantially.
I do not know about the USA brands that Briggs bought but the Australian brand Victa was acquired because Victa was broke & defaulted on their payments to B & S then on top of that fitted Chinese engines and even got some of their push mowers made in China . The debt to B & S was secured against shares in Victa and under Australian company law any one who acquires 17% or more of the shares in a company is obliged to either make a full take over offer or sell down to less than 9 % . Victa at that time was being run by a hedge fund and loosing money hand over fist due to trash products so B & S would have never recovered the full debt by selling down thus it was a hostile take over .
I would imagine that the take over of Murray at least would have been along similar lines so these were more a case of debt protection rather than a long term strategic plan.
In the long term Briggs only have 2 ways to survive .
1) vertical intergration so they have a captive market for their engines which makes the finished product cheaper so possibly competative with imports and this includes buying out your suppliers so you own everything thus can opperate on a substantially reduced margins because all of the profit from every part comes back to you .
2) divest all of the mower companies and invest all of the money overseas ( China , India & South Africa ) while abandoning USA manufacture all together .

Full long term vertical intergration runs the risk of being undercut by cheaper imports on your end product . If I buy 200 or more I can get the current Murray , branded with my name for $ 450 ( US ) on the wharf out of China . And of course your customers who are now in competition with you for the end product sourcing their engines elsewhere as Toro & MTD have already done.

So it is a zero sum game.
Go broke protecting your market share by building your own whole goods or go broke because you loose so much market share for the engines it is no longer profitable to operate .

This is the end sum game of unregulated capitalism where everyone runs on unsustainably low profit margins to drive down prices and hopes to survive on a larger turn over of cheaper goods .
It is what killed Tecumseh and it is what will kill Briggs & Stratton. If they are only running on an 8% margin then they are kaput . Down here you could not even get an overdraft running on 8% .
I will imagine that they will sell the brands at a mark down price with the proviso that all of the brands continue to use Briggs engines exclusively for x number of years .
In the mean time they will invest in new plants in China and ultimately stop manufacturing in the USA completely .
Consolidated capital knows no patriotism just where to make the largest return to shareholders and the company laws force directors to chase the biggest return regardless of the ultimate effect on the company.
And when the big shareholders have sucked the last drop of blood out of Briggs they will just take their money somewhere else and suck them dry .
The company laws need a major upgrade , and that is world wide to force directors to value the longevity & security of the company not just this years dividend but considering the power of the large hedge funds , pension funds and other megga cash investors that will not happen .There are hundreds of funds that are so cashed up they could short sell Briggs ( or any other top 200 companies ) down to a 1¢ share price and not even notice it on their final return because they have been allowed to get too big
None of them care where anything is made just so long as they are getting maximum returns on their investments and if that means 30% of the population is unemployed the that just makes their investment dollars more powerful.

Now you can all call me a pinko commie leftist liberal if it makes you feel happy but I have watched helpless while our highly adversary political party system destroyed manufacturing down here & I can see it doing the same thing over there .
Companies like Sears, Lowes & particularly Wallmart are destroying your country because they have been allowed to become too big & too dominant .
And I find this quite amazing as the USA was the very first country to evoke anti monopoly laws way back in the 50's because the governments then could see the problem of having too few players in a market thus reducing the competition that the capitalist free market system is supposed to nurture & protect yet in the past 3 decades seems to be encouraging monopoly situations.

 

[bertsmobile1]

And what I forgot to mention is in a case like Briggs is contemplating, what generally happens is Briggs sells the other brands so gets cashed up .
But befor they can retire debt or acquire more profitable assets the big investors step in and demand the lions share of the sales revenue to be distributed as a special distributiion , or buy back.
Thus they get the money & Briggs gets saddled with the debt.
IT is even worse down here because I can borrow every cent that I use to buy a company then transfer that debt to the company , essentially bankrupting it after I have stripped whatever asset , usually land or patients out of the company .

 

[tom3]

I suspect ultimately the B&S name will be sold to China entirely. Much like the top line electronics manufacturers. See RCA, Zenith, Magnavox, and so many others that used to be high quality US products are now Chinese BPC (black plastic crap) equipment. See Harbor Freight selling a Quantum Briggs powered lawn mower for $99. After reading the company's announcement I give them 5 years to bankruptcy.

 

[ILENGINE]

Bert you are correct about Murray. They owed Briggs like $47 million and purchased them to try to recover their loses. This occurred 3 months after purchasing Simplicity group. Also read that they are going to close their Tennessee plant and move that production to the Missouri plant. And they have just brought back their production of the Vanguard engines to the USA recently.

 

[Hammermechanicman]

Well I have been one corporate merger (buyout) when Burroughs off loaded its financial division. What a nightmare I hired into. When SRC got things under control they layoff over 300 field service techs that only 3 months earlier signed non compete contracts.

I also have seen several corporations just completely under when they started downsizing. Kinda learned to very wary when one start off loading assets.

My wife worked for NCR in technical support for low end point of sale systems. To improve margins on the low end products they decided to lay off all the sales force and move sales to the service reps. They expected service reps to cold call customers. Turned into an absolute cluster. After a year they dropped all support for the low end stuff leaving ma and pa stores screwed. My wife got moved to the Pizza Hut help desk for techs and customers. Bad thing was the low end stuff was PC based and the pizza hut systems were Unix based. "Here's a book on Unix and a pager you are on call for support." Dip$hit store managers never replaced the UPS batteries so when the power glitched off the system would crash requiring a scrape load. "Backup? No we haven't done that for a few months. " NCR started laying off people en mass and gave others jobs they had no idea how to do. When i hired on in 1979 there were 72 service reps for my company in Dayton. When i retired there were 4. They have to pull guys from another state to service some of the stuff i worked on.

 

[bertsmobile1]

Bert you are correct about Murray. They owed Briggs like $47 million and purchased them to try to recover their loses. This occurred 3 months after purchasing Simplicity group. Also read that they are going to close their Tennessee plant and move that production to the Missouri plant. And they have just brought back their production of the Vanguard engines to the USA recently.

I thought that was the case & would not be surprised if all of the others acquisions were debt protection as well .
It is a shame that they did not consolidate the various brands under a single management , set up a single R & D department for all of them and produce some better mowers as Murray obviously had the production capacity .
As for Vanguard , Japan has been an expensive place to manufacture since the late 90's and most of what we think as Japanese has been made in the Phillapines , Indonesia, Cambodia & Vietnam .
With the rise of the Chinese engine makers there would be little to no engine sales into China and what is made in Japan can be fitted with equivalent Chinese engines , if not better and definately not cheaper .
Thus moving back to the USA where the bulk of the market is ( for the time being ) makes sense in the short term .
Convincing Joe Public that a Vanguard is not a Briggs and is worth the extra 20% is the hard bit , particulalry as they have been pushing their Briggs branded professional series engines really hard so convincing a very similar looking engine is more than just the same engine with a red blower housing will not be easy .

A lot of it comes back to the idea that the public are fools , you market is loyal & you can feed them any tosh & they will believe you .
What should be done is advertisements designed to teach the buying public what they have forgotten, the difference between throw away & quality by highlighting all of the weak points that we all see every day of the week working on the mowers .
Some jingoistic advertising to force home that the new mower you buy equals a job for some one else who can also be your customers would not go astray either .
If people see Simplicity , Murray , Snapper as people , friends & neighbours it makes a big difference to buying one of them as it makes the purchaser feel good .
Unfortunately the MBA goons that run most big companies have fallen victim their own PR and started to believe that the only important thing is the brand name and where something is made is insignificant .
Humans like to deal with humans and the more human you make a product the better it will be accepted & even appreciated en mass .

 

[StarTech]

The very reason I will not use those robotic cashiers.

 

[bertsmobile1]

My wife worked for NCR in technical support for low end point of sale systems. To improve margins on the low end products they decided to lay off all the sales force and move sales to the service reps. They expected service reps to cold call customers. Turned into an absolute cluster. After a year they dropped all support for the low end stuff leaving ma and pa stores screwed. My wife got moved to the Pizza Hut help desk for techs and customers. Bad thing was the low end stuff was PC based and the pizza hut systems were Unix based. "Here's a book on Unix and a pager you are on call for support." Dip$hit store managers never replaced the UPS batteries so when the power glitched off the system would crash requiring a scrape load. "Backup? No we haven't done that for a few months. " NCR started laying off people en mass and gave others jobs they had no idea how to do. When i hired on in 1979 there were 72 service reps for my company in Dayton. When i retired there were 4. They have to pull guys from another state to service some of the stuff i worked on.

Seen the same thing hundreds of times down here .
The problem is you get an accounting or economics or commerce graduate to do a 2 year upgrade at the sausage factory and out pops an MBA moron.
"And they all look like ticky tacky and they all think just the same " comes to mind as the best way to describe every MBA I have had dealings with .
Like Gen Y ( and latter ) who live in their phones , MBA's live in their spread sheets and eventually forget that the numbers are people and people do not react all the same .
Prime example was photoshops attempt to cash up by charging their customers rather than modifing their advertising policy .
They will be gone in a very short time . No one will ever pay a cent for what they have been getting for free and after the photo hostage , no one will ever trust them again.
It was so simple on the spread sheet money needed = number of customers x $ 498 .
The MBA's get taught that a business is a business is a business and they are all the same and the way you run them is all the same and with nothing but an MBA you know everything that you will ever need to run any business and you can run any business regardless of what it does , so Unix, Dos Basic all the same just different ways of instructing the machines to do the same thing .
I once signed up for a HF Co-axial communications package ( phone internet & TV ) when the installation was finally done, the tech could not get me on line.
He was a Windows wonk and I had a Mac / Linux network . His handbook had no instructions for Linux at all and the Mac instructions was for system 8 not the new unix based system 10 .

The only way to run a long term successful company is to bring in youths as management cadets and run them through every department & every plant then from them pick the best & brightest to go on and become managers . However it comes back to those big investors who want and instant result so they can make their KPI's this week so when new management is needed the solution is to parrachute in some one from an apparently profitable company , which will cause the other "little boxes" to buy shares which pushes the share price up so obviously you made the correct decision .
Well there was no doubt it was the correct decision because you have an MBA so every decision will be the best one .

 

[PTmowerMech]

The writing is on the wall for Briggs.
They can not make engines cheap enough to compete with what is coming out of China thus their market share is only going one way & that is down.
Refinancing right now is a very good idea as money has never been so cheap they should be able to get the $ 200,000,000 at less than 2% so that will drop the existing interest payments substantially.
I do not know about the USA brands that Briggs bought but the Australian brand Victa was acquired because Victa was broke & defaulted on their payments to B & S then on top of that fitted Chinese engines and even got some of their push mowers made in China . The debt to B & S was secured against shares in Victa and under Australian company law any one who acquires 17% or more of the shares in a company is obliged to either make a full take over offer or sell down to less than 9 % . Victa at that time was being run by a hedge fund and loosing money hand over fist due to trash products so B & S would have never recovered the full debt by selling down thus it was a hostile take over .
I would imagine that the take over of Murray at least would have been along similar lines so these were more a case of debt protection rather than a long term strategic plan.
In the long term Briggs only have 2 ways to survive .
1) vertical intergration so they have a captive market for their engines which makes the finished product cheaper so possibly competative with imports and this includes buying out your suppliers so you own everything thus can opperate on a substantially reduced margins because all of the profit from every part comes back to you .
2) divest all of the mower companies and invest all of the money overseas ( China , India & South Africa ) while abandoning USA manufacture all together .

Full long term vertical intergration runs the risk of being undercut by cheaper imports on your end product . If I buy 200 or more I can get the current Murray , branded with my name for $ 450 ( US ) on the wharf out of China . And of course your customers who are now in competition with you for the end product sourcing their engines elsewhere as Toro & MTD have already done.

So it is a zero sum game.
Go broke protecting your market share by building your own whole goods or go broke because you loose so much market share for the engines it is no longer profitable to operate .

This is the end sum game of unregulated capitalism where everyone runs on unsustainably low profit margins to drive down prices and hopes to survive on a larger turn over of cheaper goods .
It is what killed Tecumseh and it is what will kill Briggs & Stratton. If they are only running on an 8% margin then they are kaput . Down here you could not even get an overdraft running on 8% .
I will imagine that they will sell the brands at a mark down price with the proviso that all of the brands continue to use Briggs engines exclusively for x number of years .
In the mean time they will invest in new plants in China and ultimately stop manufacturing in the USA completely .
Consolidated capital knows no patriotism just where to make the largest return to shareholders and the company laws force directors to chase the biggest return regardless of the ultimate effect on the company.
And when the big shareholders have sucked the last drop of blood out of Briggs they will just take their money somewhere else and suck them dry .
The company laws need a major upgrade , and that is world wide to force directors to value the longevity & security of the company not just this years dividend but considering the power of the large hedge funds , pension funds and other megga cash investors that will not happen .There are hundreds of funds that are so cashed up they could short sell Briggs ( or any other top 200 companies ) down to a 1¢ share price and not even notice it on their final return because they have been allowed to get too big
None of them care where anything is made just so long as they are getting maximum returns on their investments and if that means 30% of the population is unemployed the that just makes their investment dollars more powerful.

Now you can all call me a pinko commie leftist liberal if it makes you feel happy but I have watched helpless while our highly adversary political party system destroyed manufacturing down here & I can see it doing the same thing over there .
Companies like Sears, Lowes & particularly Wallmart are destroying your country because they have been allowed to become too big & too dominant .
And I find this quite amazing as the USA was the very first country to evoke anti monopoly laws way back in the 50's because the governments then could see the problem of having too few players in a market thus reducing the competition that the capitalist free market system is supposed to nurture & protect yet in the past 3 decades seems to be encouraging monopoly situations.

This is why I try to stay out of politics. For the simple fact that it's all a charade. Come election time, it's "my pecker is bigger than yours" for months and months. And when it's all said and done, nothing gets better. And all those voters stand around scratching their heads wondering why nothing changed.
And of course saying it must be the other party's fault.
If voting worked, they wouldn't let us do it.


BTW, my cousin who lives down under, says that Australia doesn't really manufacture much. That almost everything is imported. How true is that? Our manufacturing is what made us what it is. But with China, Mexico and other low wage countries, $8hr is an upper middle class wage. Here it's a poverty wage.
You're right about one thing in particular, about consolidated capital not being patriotic. We had companies forcing their employee's to train immigrants, so that they could shut their US operations down, and move to the country of the immigrants. And they did it, just to keep their jobs a little longer.

If Briggs goes under, I don't think it'll be anytime soon. If/when it does, I suppose we'll already be well trained on the chinese crap, like Powermore engines.