Paccar's Plimpton Credits Long-Term View for Success

J.D. Power and Associates presented its Founder's Award to Paccar, with Tom Plimpton, Paccar vice chairman, accepting the award from Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates, prior to his speech.

The Founder's Award is a discretionary award presented periodically that recognizes individuals or companies demonstrating dedication, commitment and sustained improvement in serving customers. During the 40-year history of J.D. Power and Associates, only 23 companies or individuals have previously received the award. Past honorees include Toyota, The Ritz Carlton Hotels, USAA and Progress Energy.

Paccar brands have consistently received awards for customer satisfaction with product and dealer service in two annual J.D. Power and Associates studies-the Heavy-Duty Truck Customer Satisfaction Study and Medium-Duty Truck Customer Satisfaction Study.

This award "really should be celebrated by our 18,000 employees, our suppliers, our dealers that are out there on the front line every day," Plimpton said.

Despite the economy, 2008 was a good year for Paccar, Plimpton noted, marking the company's 103rd year in business and its 70th consecutive year of net profit. "You notice I say net profit," he said. "Too many firms are caught up measuring operating profit and EBITDA. Paccar's paid dividends yearly since 1941."

Plimpton emphasized that the company has grown and thrived by expanding globally.

"In 1996, the year we acquired DAF, we were essentially a U.S. company," he said. "Today, 68 percent of our revenues are located outside the U.S." Paccar, he said, is the third largest truck manufacturer in the world, second in North America and fourth in Europe.

"Over the last 10 years, Paccar's heavy duty market share has increased significantly in every market in which we operate," Plimpton said. "Paccar's grown DAF, Peterbilt and Kenworth market shares by offering an extensive product line. You see Paccar in fleets large to small and in every operating segment."

This year, Plimpton predicted, heavy-duty truck sales in the U.S. and Canada should be 130,000 to 170,000 units - although, he noted, "Trying to predict the future is like trying to drive down a country road at night with no lights and looking out the back window."

"The world is in the grip of a challenging recession," he said, explaining that Paccar, like many companies, has responded by rigorously reducing operating expenditures.

The good news, he says, is that the average age of heavy trucks in the United States is up. This means the truck industry is generating good parts and service business due to the aging fleet, and that the industry is poised to rebound as soon as the economy turns around. "We need to make sure we are all collectively ready for that rebound."

Plimpton emphasized the importance of not making decisions solely based on the current situation. "Paccar takes the long-term view on capital investments, asset growth and product development. At times like these Paccar's balance sheet and cash flow have enabled ongoing investment."

Plimpton said this year Paccar is reducing its capital investments and research and development budgets to make them more in line with where the economy is, "but we're looking every year at a healthy R&D and capital budget."

He also noted that Paccar is using its capital to help suppliers invest in new technology.

"When we first started doing that five years go it was somewhat of a unique thought," he said. "We'd say to a supplier, how about if we buy a million dollar machine and put it in your facility. We own it, you maintain it, it'll help with quality, cost, productivity. It caught on slower than I thought it would, but it's caught on well at this point in time."

One key to being able to maintain that long-term perspective at Paccar, Plimpton said, is the longevity of its leadership team. He himself is now on his sixth economic downturn. "We're on [only] our fourth chairman in 103 years, and that gives great continuity," he explained.

"At Paccar, every year we're looking for 5 to 7 percent increase in productivity, and that's in good years and not so good years," Plimpton said. "You have to have an unwavering approach to those metrics; it can't be this year's a down year so we're going to take our eye off that. When you lose that ground, you have to fight to retake that ground."

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