Polaris hopes innovation culture at Roseau will help drive company's future

ROSEAU, Minn. - The Polaris Inc. plant in this northwest Minnesota city is no longer the company's headquarters or even its largest plant. But it is still arguably its most important, providing an innovative through-line for the company's global footprint.

The operation has been the most versatile while building a variety of Polaris products including snowmobiles, off-road vehicles and in the 1990s personal watercraft. And the company called on its employees to train new workers across the company.

Roseau Mayor Dan Fabian said it's easy to explain why others would turn to Roseau workers for advice: "We don't wait for somebody else to solve [problems] for us."

Polaris is in a sweet spot these days. The pandemic fueled an increased interest in outdoor recreation, allowing the Medina-based company to increase its market share. In 2021, annual revenue grew 16.7% and exceeded $8 billion for the first time. The company, with 16,000 employees in 120 countries, also had record profit of $494 million. And it filed a record 70 new patents.

The company's continued success will depend on if it can keep the new customers it has gained. Introducing new products including new electric vehicles will help. So will the improved supply chain and dealer support developed through the pandemic and a renewed focus on powersports, according to the company and industry analysts.

How well the company does in the coming years, dealing with continued inflationary pressure and a leveling off of demand from the pandemic, comes down to continued innovation, they said.

"The heart of this company is innovation," CEO Mike Speetzen said at an event over the summer to honor the patent holders. "It's about the product you design and the experiences you create for our riders — and so everything you do is continuing to push this company forward."

Polaris' original product was used to raise power poles during the rural electrification era. But it's now a global powersports leader.

Originally called Hetteen Hoist & Derrick, brothers Edgar and Allan Hetteen and friend David Johnson founded the company in 1945 to make products that served the local agricultural and rural economy — despite material shortages caused by World War II.

All outdoors enthusiasts, they tinkered with building a snowmobile. That side project, which met with initial resistance from Edgar Hetteen, eventually became the foundation of a global manufacturer of powersports products including snowmobiles, ATVs, side-by-side vehicles, motorcycles and pontoon boats.

The company changed its name to Polaris in 1954. In its history, it has filed more than 2,000 patents.

The latest new category is electric vehicles. The Polaris Ranger XP Kinetic, being built in Huntsville, Ala., is the first product offered after signing a 10-year partnership with Zero Motorcycles, which is an expert in electric motorcycle production.

That record is what analysts like Morningstar's Jaime Katz point to in analyzing the company's stock.

"Unwavering consumer demand offers us confidence in our long-term forecast, which includes average sales growth of 3% and operating margins of 11% over the next decade," Katz wrote in a report this summer. "Innovation has allowed Polaris to take price increases," with more expected before the end of the year.

Operational changes lay groundwork for growth

Since Speetzen was named CEO in April 2021, he has made several changes to keep Polaris focused on continual improvement of its powersports lineups. Polaris changed its presold order program and added "rework" lines that allowed the sales and manufacturing process to adjust to recent inventory and supply-chain shortages.

Under Speetzen, the company also made several divestitures, including selling its Transamerican Auto Parts business at a steep discount from the purchase price it paid in 2016. Other sales included its GEM and Taylor-Dunn businesses, which made EVs that are primarily used for urban and industrial mobility purposes.

"We view them as being long overdue for a shift and refocus back on powersports," Miller said.

Company culture drives innovation

The business changes set parameters to allow for growth if managed well over the next few years and beyond. But the company culture, developed over decades, also does.

Mike Hetteen, son of founder Allan Hetteen, routinely walks visitors through the Polaris Experience Center next door to the manufacturing plant. Hetteen said in the 1980s and '90s the company realized the benefits of mentorship when they paired new engineers with 20-year veterans.

"At least once a week there were engineering rides," Hetteen said. Those still happen.

Engineers also have tested vehicles in places like Argentina and Russia.

"Folks from this area, they go around the world to make sure that they're testing product and developing product," Menneto said. "You know, that's just the snow business."

That ability to get out and ride helps inform Polaris engineers. "Because we ride, use the products, interact with our customers and dealers, and listen, that's where we can innovate quickly, because we can observe and watch," he said.

The parking lot at Polaris' R&D center in Wyoming, Minn., is often full of Polaris and Indian motorcycles and Slingshot vehicles.

Inside the Wyoming building are bays filled with advanced machinery and diagnostic equipment to help Polaris designers and engineers test new materials, components and vehicles. They can put parts or entire vehicles through years' worth of simulated usage with in days in order to test lifespans and modify products that often get heavy use in challenging terrain — or they can drive them on 12 miles of trails on the 620 acres around the facility.

Polaris said it remains committed to Roseau, where it employs 1,400 in a city with a population of 2,800. The main manufacturing plant there has been modified 38 times to accommodate growth. The latest modification is the addition of a $22 million, 28,000-square-foot robotic paint facility scheduled to open in the spring of 2024.

Altogether, there are three manufacturing lines in its main plant, two running almost constantly to make off-road vehicles, and one nearly year-round to produce snowmobiles. A fourth line in a separate building produces military off-road vehicles under government and defense contracts.

Fabian, a former Minnesota state representative who served five terms, is a big cheerleader for Polaris.

"What benefits Polaris benefits Roseau," Fabian said. "And what benefits Roseau benefits Polaris." That can-do feeling extends to the hospital and the school district and other parts of the community.

The company invested in new housing, including two apartment buildings and 16 mobile homes.

The company also works with the district in direct ways, sponsoring a robotics team, donating welding and CNC machining equipment, training teachers. At a pinched time, qualified Polaris designers and engineers even taught some classes at the high school, said Tom Jerome, superintendent of the Roseau School District.

"Our kids had a chance to work firsthand with people that work for Polaris Industries, and you know, that type of experience and that type of exposure schools don't often get — students don't often get." Jerome said. "We have students that will graduate with a degree of proficiency in areas like welding and robotic welding that if they choose to, can step right into very well-paying positions, and stay in their community."