in power

I stopped by the Ariens display at Equip Expo and was lucky to find Dan Ariens. I have met Mr. Ariens once or twice, so he kinda recognized me (but I will admit that AriensCo is one of those companies that I don’t yet have a deep relationship with). I have been anticipating this conversation, fascinated by manufacturing relationships like the one Dan Ariens and the family signed recently with Yanmar. So we got right into it.

In Power

Let’s talk about where this Yanmar-and-Ariens partnership came from. Is there a short answer to why that came about?

Dan Ariens

The shortest answer to that is, they [Yanmar] have not been able to figure out how to build their business in North America. They approached us to make them a zero-turn mower, private label, which we did. As we were finishing that contract, they said, ‘hey, would you ever consider joining forces?’ I said, ‘what does that mean?’ And then we got talking.

I didn’t want to give up the whole company. We still do own a significant portion, but we’re not the majority owner anymore. They’re a private family business like us. I’m in a very small community and we’ve been there since 1893. It’s important that we maintain our footprint. They’re the only partner we could probably align with in this kind of a transition.

Have you been looking for a deal like this?

In Power

Has a deal like this been on your mind for a while and Yanmar came along? Or was it more serendipitous than that?

Ariens

Honestly, I’ve watched the industry consolidate. I wrote my shareholders their last letter last week, so this is fresh on my brain. When my grandfather was the chairman of the OPEI, at that time in the 1960s, there were about 70 manufacturers of residential mowers. There was no commercial business. Today, if you look around and you look at the major companies remaining; there are four or five, right? John Deere, Toro, DeWalt, now call it Stanley Black and Decker. And then there are guys like us and a couple others about our size. There are a lot of different products here, but North American manufacturers, there are few. So I might have had that in the back of my mind.

How are we going to go to five generations and then six? I don’t like the private equity route at all. I think that’s just going to kill the community, kill the brands, kill the company. This business is really tough. And I just don’t want to put the community and the employees through that. So we’re back to, how do I find a private company that’s like us? And when Yanmar called, I thought, this is the one company like us that I could line up with.

Oct. 28: Yanmar announced a new collaborative manufacturing relationship with Hitachi, where the two OEMs have agreed to manufacture compact track loaders for Hitachi at Yanmar’s facility in Grand Rapids, Minn. I will report more on this when I can speak with Yanmar.

How do Ariens and Yanmar align culturally?

In Power

How’s the cultural integration?

Ariens

It takes years to really get people on the same page, but we had very good first meetings with our executive team and their executives. It’s funny; we have a set of core values and I have a vision statement I’ve had for a long time. It’s on our website, everywhere. Our employees talk our core values all the time. Be honest. Be fair. Keep our commitments. Respect the individual. Encourage intellectual curiosity. Yanmar has their own core values, and if you parse the words, they say the same thing. They just use more words. I like simple. You can remember things. But we line up very well on paper. So now we have to get it in practice.

How about dealer contracts and relationships?

In Power

Dealer relationships, are those changing?

Ariens

No. I think the only change will be upside. The reason they wanted this footprint in North America is they don’t have a dealer base in Yanmar’s brand. There are just over 100 dealers in North America. We’re 10X that or more. For our dealers, our premium dealers, our dealers that are upscale and large that have diesel mechanics and want to be in the diesel business, we’ll be bringing products that are Yanmar brand. And we’d like to pull that into our dealer channel and give them a reason to be more aligned with us – Ariens company, Gravely, and Yanmar, and the brand. The hierarchy for us will be: Yanmar is premium, Gravely is a premium professional, and Ariens is a premium residential. So we speak premium to different customers.

How about Ariens employees?

In Power

Employee-wise, were their staff cuts or changes?

Ariens

No cuts. In fact, we’re hiring. I think we have job openings for nearly a hundred across the plant. And in the salaried workforce, we have open positions close to 50. We’re not changing any of that. And then in the Yanmar case, they’re actually going to leverage Ariens and Gravely in our family to leverage what they do in the North American market. I don’t see anybody changing in Atlanta’s headquarters for Yanmar. I see Ariens in Wisconsin and Yanmar in Georgia aligning together. I think one plus one will be three or four, not two. I’m very optimistic. I’m having a hard time finding a downside to the arrangement.

Will this deal improve buying power?

In Power

I’m curious about cost pressures today, tariffs or steel or supply chain inputs in general. Does this alleviate some of that?

Ariens

No, but it gives us more options to be able to consolidate, or not so much consolidate but combine our supply chain strengths. We think they’re going to be much stronger in terms of container freight. We do a lot of container freight. They do as well. We’ll put more containers together. We’re better at over-the-road trucks. So we’ll be able to leverage our strength there.

We buy a lot more steel than they do, a lot more steel in the U.S. We’ll try and leverage their purchases. You know, their construction division is in northern Minnesota, Grand Rapids, Minnesota. They buy heavy gauge, big steel, we buy a lot of sheet metal. Combined, we’ll see what we can do on steel. I mean, the inflation right now is on freight. It’s on steel, it’s on aluminum. It’s on some rubber.

Then the tariff stuff, we’ve kind of all absorbed that already. So we’re living with that. Now it’s the Iran war, it’s Ukraine, it’s Russia, it’s the global supply chain that’s pressuring things. I think there’s a hump, and we’re in the middle of the hump. We need to get over that.

In Power

Anything you want to add that I didn’t ask about this new relationship?

Ariens

It’s more the theme of, you said serendipitous. It is really serendipitous for me because we weren’t out looking. And every time I’ve gone to Japan, I’ve learned more about how we’re so closely aligned. This is a really good thing. This is a great partnership, and I see us growing tremendously from here.