Entrepreneur of the Year Jerry Ehrlich manufactures truck trailers with innovation, efficiency, and quality.
Seven years ago Jerry Ehrlich started manufacturing truck trailers -- a commodity product in a declining industry. But by breaking out of the industry mold through innovation, partnerships with customers, and a flexible work force, Wabash National has become one of the largest companies of its kind in the world
It's hard to think of anything more prosaic than truck trailers. See one of these metal boxes on wheels hammering past you on the highway and you've seen them all. The product has "commodity" stamped all over it, and the industry that makes it is in a serious slide. Last year U.S. truck-trailer manufacturers produced 140,500 units, down from 214,300 in 1988. Compounding the woe, the buyout fever of the 1980s ravaged many manufacturers, leaving them hung over with debt and ill equipped to modernize their plants to meet the brave new world of manufacturing in the 1990s.
Donald J. "Jerry" Ehrlich saw all this up close as the president of Monon Corp., a $250-million trailer manufacturer in Monon, Ind., that was quietly doing its thing before the Wall Street sharks came swimming around. Monon was a subsidiary of a Rustbelt metal bender, Evans Products, whose principal stock in trade was making railcars. In 1983 Evans caught the attention of the predatory Victor Posner as an undervalued play. Posner bought Evans, using a lot of debt; then, to stay ahead of his junk-bond payments, he stripped off assets and sold them. As Ehrlich watched Monon, starved for working capital, decline, he repeatedly tried to liberate the division by getting Posner to sell it to him. And Posner repeatedly refused.
Ehrlich finally left Monon -- which continues to limp along -- and went 30 miles down the road to Lafayette to start up a new company, Wabash National. He took with him two fellow managers, and soon after, another 14 key employees would follow.
One early employee was Rod Ehrlich, Jerry's brother, now head of engineering at Wabash. He says of his brother, "Jerry sees through to the core of whatever the problem is. He grasps the basic concept and doesn't chase tangents." Jerry Ehrlich, a welder by trade and a college dropout by necessity, has spent the last 35 years of his life building trailers. In starting Wabash, Ehrlich, 55, cast his discerning eye past the industry's declining fortunes to focus on a more hopeful reality.
The transportation industry in the United States, at $360 billion in annual revenues, is mammoth, and trucking accounts for 80% of that. Trucking was once a very predictable and highly regulated industry. If you lacked the necessary permit from the Interstate Commerce Commission to truck, say, oranges from California to New York, then you were simply frozen out of that market.
But that ice jam finally broke in mid-June 1980, when Congress deregulated the industry, effectively allowing any carrier to truck any commodity anywhere it wanted. Although the overall truck-trailer industry wasn't growing by much, within it there was sudden and considerable jockeying for the myriad niches deregulation created. That created a demand for trailers that met the needs of a new breed of specialized shippers. And it was into this dynamic market that Ehrlich knew he could drive his company.
Ehrlich found manufacturing space in a factory that had been recently abandoned by a bankrupt builder of prefab houses and more recently used by nearby farmers to store their corn. In the summer of 1985 he and his fellow renegades from Monon built their first trailer on a set of sawhorses, having started Wabash earlier that year, on April Fools' Day. What then ensued proved to be no joke.Jerry Ehrlich figured that if Wabash turned out 5 or 6 trailers a day, he could make money -- and also have time to work on his golf game. Today Wabash cranks out 100 trailers a day, at its 58-acre, 740,000-square-foot Lafayette facility, making it the world's largest trailer-manufacturing site. Revenues this recessionary year will come in at almost $300 million, up from $191 million in 1991, with net margins at more than 6%, high for a mature manufacturer. For each of the first 1,000 days of its existence, Wabash added one employee and $100,000 in revenues, meaning that in less than three years it had become a $100-million company. This year sales per employee will equal $180,000.
Those are dramatic numbers, especially when you consider the industry's careening fortunes. In 1986 manufacturers produced 156,000 trailers, a figure that rose to 214,300 by 1988 -- and then plunged to 140,500 in 1991, an 11% decline during the five-year period. More significantly, the three leading manufacturers fared much worse. Fruehauf's production declined by 64% between 1986 and 1991; Great Dane and Strick were down 25%. Wabash's output rose by 150%, and its market share rose from 3.1% to 10.1%. The company, which didn't exist eight years ago, will this year produce close to 20,000 units -- likely making it the largest truck-trailer manufacturer in the world.
That signal success can be attributed in part to luck and contacts. The luck was simple; the company had the luxury of starting from scratch. "One advantage we had was that we were able to 'clean out the closet,' " says Ehrlich's other brother, Charlie, Wabash's head of manufacturing. "We knew we could learn from our past mistakes and build a product that was superior in design and manufacture."
As for the contacts, Wabash's first customer was a not-unheard-of retail chain by the name of Sears, Roebuck & Co., which had worked with the Ehrlichs at Monon. Sears ordered 10 trailers from Wabash, promising that if the company didn't blow it, it would order 370 more. That first job enabled Ehrlich to buy equipment -- much of it at fire-sale prices from bankrupt Rustbelt companies -- and start hiring.
Because Ehrlich had work from the outset, his cost of sales was negligible and he was able to start up, relatively speaking, on a shoestring: with $2 million in equity from outside investors who knew his reputation in the industry, an industrial revenue bond (essentially a tax abatement) worth $3 million, and a $5-million line of credit at the local bank. A year ago Ehrlich took the company public, raising $39 million. The initial public offering wiped out virtually all long-term debt, raised stockholder equity to $53 million, and by year's end had provided Wabash with $36 million in working capital.
