INVESTOR'S READER OCTOBER 25, 1950
Continued from Press-Magazine page.....
Despite rumors of big war orders, only one-fifth of Fruehauf’s backlog is from the Government. And president Fruehauf does not expect any more: “During War II [sic] we made some practice bombs and cut armor plate for tanks. Mainly we kept making trailers. The Government used them for tank carriers, tank retrievers, dental clinics, buses to carry soldiers and food, for radar equipment and portable machine shops * * * Since the Korean situation looks pretty well buttoned up, I think defense efforts will be directed towards planes, tanks and that type of equipment. It takes very little time to requisition trailers and build up an automotive force.”
The principal reason for Fruehauf’s trail-blazing gross is higher octane in operations plus shrewd pruning of expenses. This has taken place under the keen eyes of 42-year-old Roy Fruehauf. In good family fashion, president Roy holds numerous confabs with 58-year-old brother Harvey who is board chairman and 57-year-old brother Harry who is vice-president. Says Roy: “We have one department to control overhead and it is right next door to my office. Our operating margins are infinitely better * * * Our sales force is also much improved. We have a big school in Detroit where we have been re-educating our 500 branch managers and salesmen in Fruehauf sales techniques.”
Daily Reports. With eight U.S. plants, one Canadian factory, 85 factory sales and branch offices and 8,300 employes [sic], this has been no easy task. One answer: a report on president Roy’s desk every morning by 10 a.m. covering everything from the number of trailers produced and sold to inventories, commitments, purchases cleared, accounts payable and cash. (When he can grab a moment off from his job dynamic Roy is a first-rate sportsman and enthusiastic farmer. He also belongs to numerous clubs, including The Tavern and the Grosse Point Yacht Club.)
Though running things these days is almost a busman’s holiday, there have been plenty of headaches in the past. Like most automotive companies, Fruehauf has its share of labor problems. But “all contracts are settled and we have agreed not to talk pensions for two years.” And Fruehauf’s deal with bankrupt Lustron Corp. also has worked out satisfactorily. When Lustron failed, the housemaker’s hauling contractor owed Fruehauf $2,500,000. Actually, president Roy points out, the debt is now “far less” and “if the situation should blow up” Fruehauf can dismantle the trailers and realize a tidy sum—“the fifth wheels” alone are worth over $2,000,000.
In fact the big problem at Fruehauf is meeting orders for its steel, stainless steel and aluminum trailers. About one-third of all Fruehauf trailers are stainless steel and Roy Fruehauf is not voluble about aluminum trailers. He feels: “Stainless steel is our No. 1 line. Demand for them has more than tripled this year. Customers who can’t afford the 5-to-10% price difference between them and aluminum ask for aluminum. But stainless steel will last for ten years or more. Just the other day a customer who had bought two stainless steel trailers from us eleven years ago sold them at a good profit.” Nonetheless some of Fruehauf’s biggest competitors specialize on aluminum trailers and have been doing handsomely.
Fruehauf claims it has “half or better” of the U.S. commercial trailer market. It is also the industry veteran. The company started in 1893 when August Fruehauf opened a blacksmith and wagon shop. When it looked as if autos would banish Dobbin to the barn, astute August decided to adapt the principle of horse and wagon to the “new-born, gasoline-driven horse—the motor truck.” That was 1914. As the horse and wagon before it, the truck and trailer increases payload capacity. This has been the basis of most Fruehauf improvements since (unlike passenger car makers) Fruehauf does not bring out new models each year.
Emphasizes Roy Fruehauf: “Our large research and engineering department is constantly making improvements and suggesting changes. And we are always trying to increase payload capacity by decreasing the weight of the trailer without sacrificing strength.” On specific improvements Roy Fruehauf is mum, prefers to keep the competition guessing.
One specific improvement however is quite well known. It is the Gravity Tandem suspension which carries maximum loads with a minimum of strain on the trailer and a minimum of wear on tires and undercarriage. “It is an entirely new conception of tandem axle design, proved by millions of miles of service under actual driving conditions,” Roy Fruehauf says. Then he describes: “Axles are independently sprung and spring action is achieved through four torsion bar springs.”
Despite popular belief cut-rate truckers are running the railroads out of the freight market, experienced Roy Fruehauf does not agree. But neither is he alarmed by the spurt in freight car orders: “Much of the traffic hauled by truck * * * is not railroad business anyway. Lcl freight is the meat of the trucking business but carload freight is a railroad dish * * * While truck transportation has grown from 4% of the nation’s tonnage in 1920 to the point where it now carries 13% of the country’s volume, rail transportation is also at a high point in its 120-year history.” Because the average railroad haul is much longer, the railroads collected $7 billion freight revenues last year against $3.1 billion for the truckers.
A healthy portion of Fruehauf’s volume comes from accessories like fifth wheels and service and parts. These currently bring in $2,000,000 a month. Fruehauf also has a 100%-owned finance company to handle customers’ instalment [sic] payments on new trailers. This subsidiary has outstanding debt of $50,000,000 though “receivables are way up.”
In Manhattan last week for the annual confab of American Trucking Associations, busy Roy Fruehauf was ensconced in a Waldorf Towers suite. Between conferences, well-wishers and telephone calls, serious Roy talked about his company’s future: “Barring any drastic shortages of materials or any other obstacles, we’re going straight up. No matter what happens, we could stand an awful drop because our expenses are so well controlled. The dividend policy is up to the directors. But I favor a conservative and continuous policy rather than paying out all our earnings * * * We need to conserve our cash to pay for any future expansion even though we contemplate none at the moment. The market is there and we mean to get all we can.”
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Despite rumors of big war orders, only one-fifth of Fruehauf’s backlog is from the Government. And president Fruehauf does not expect any more: “During War II [sic] we made some practice bombs and cut armor plate for tanks. Mainly we kept making trailers. The Government used them for tank carriers, tank retrievers, dental clinics, buses to carry soldiers and food, for radar equipment and portable machine shops * * * Since the Korean situation looks pretty well buttoned up, I think defense efforts will be directed towards planes, tanks and that type of equipment. It takes very little time to requisition trailers and build up an automotive force.”
The principal reason for Fruehauf’s trail-blazing gross is higher octane in operations plus shrewd pruning of expenses. This has taken place under the keen eyes of 42-year-old Roy Fruehauf. In good family fashion, president Roy holds numerous confabs with 58-year-old brother Harvey who is board chairman and 57-year-old brother Harry who is vice-president. Says Roy: “We have one department to control overhead and it is right next door to my office. Our operating margins are infinitely better * * * Our sales force is also much improved. We have a big school in Detroit where we have been re-educating our 500 branch managers and salesmen in Fruehauf sales techniques.”
Daily Reports. With eight U.S. plants, one Canadian factory, 85 factory sales and branch offices and 8,300 employes [sic], this has been no easy task. One answer: a report on president Roy’s desk every morning by 10 a.m. covering everything from the number of trailers produced and sold to inventories, commitments, purchases cleared, accounts payable and cash. (When he can grab a moment off from his job dynamic Roy is a first-rate sportsman and enthusiastic farmer. He also belongs to numerous clubs, including The Tavern and the Grosse Point Yacht Club.)
Though running things these days is almost a busman’s holiday, there have been plenty of headaches in the past. Like most automotive companies, Fruehauf has its share of labor problems. But “all contracts are settled and we have agreed not to talk pensions for two years.” And Fruehauf’s deal with bankrupt Lustron Corp. also has worked out satisfactorily. When Lustron failed, the housemaker’s hauling contractor owed Fruehauf $2,500,000. Actually, president Roy points out, the debt is now “far less” and “if the situation should blow up” Fruehauf can dismantle the trailers and realize a tidy sum—“the fifth wheels” alone are worth over $2,000,000.
In fact the big problem at Fruehauf is meeting orders for its steel, stainless steel and aluminum trailers. About one-third of all Fruehauf trailers are stainless steel and Roy Fruehauf is not voluble about aluminum trailers. He feels: “Stainless steel is our No. 1 line. Demand for them has more than tripled this year. Customers who can’t afford the 5-to-10% price difference between them and aluminum ask for aluminum. But stainless steel will last for ten years or more. Just the other day a customer who had bought two stainless steel trailers from us eleven years ago sold them at a good profit.” Nonetheless some of Fruehauf’s biggest competitors specialize on aluminum trailers and have been doing handsomely.
Fruehauf claims it has “half or better” of the U.S. commercial trailer market. It is also the industry veteran. The company started in 1893 when August Fruehauf opened a blacksmith and wagon shop. When it looked as if autos would banish Dobbin to the barn, astute August decided to adapt the principle of horse and wagon to the “new-born, gasoline-driven horse—the motor truck.” That was 1914. As the horse and wagon before it, the truck and trailer increases payload capacity. This has been the basis of most Fruehauf improvements since (unlike passenger car makers) Fruehauf does not bring out new models each year.
Emphasizes Roy Fruehauf: “Our large research and engineering department is constantly making improvements and suggesting changes. And we are always trying to increase payload capacity by decreasing the weight of the trailer without sacrificing strength.” On specific improvements Roy Fruehauf is mum, prefers to keep the competition guessing.
One specific improvement however is quite well known. It is the Gravity Tandem suspension which carries maximum loads with a minimum of strain on the trailer and a minimum of wear on tires and undercarriage. “It is an entirely new conception of tandem axle design, proved by millions of miles of service under actual driving conditions,” Roy Fruehauf says. Then he describes: “Axles are independently sprung and spring action is achieved through four torsion bar springs.”
Despite popular belief cut-rate truckers are running the railroads out of the freight market, experienced Roy Fruehauf does not agree. But neither is he alarmed by the spurt in freight car orders: “Much of the traffic hauled by truck * * * is not railroad business anyway. Lcl freight is the meat of the trucking business but carload freight is a railroad dish * * * While truck transportation has grown from 4% of the nation’s tonnage in 1920 to the point where it now carries 13% of the country’s volume, rail transportation is also at a high point in its 120-year history.” Because the average railroad haul is much longer, the railroads collected $7 billion freight revenues last year against $3.1 billion for the truckers.
A healthy portion of Fruehauf’s volume comes from accessories like fifth wheels and service and parts. These currently bring in $2,000,000 a month. Fruehauf also has a 100%-owned finance company to handle customers’ instalment [sic] payments on new trailers. This subsidiary has outstanding debt of $50,000,000 though “receivables are way up.”
In Manhattan last week for the annual confab of American Trucking Associations, busy Roy Fruehauf was ensconced in a Waldorf Towers suite. Between conferences, well-wishers and telephone calls, serious Roy talked about his company’s future: “Barring any drastic shortages of materials or any other obstacles, we’re going straight up. No matter what happens, we could stand an awful drop because our expenses are so well controlled. The dividend policy is up to the directors. But I favor a conservative and continuous policy rather than paying out all our earnings * * * We need to conserve our cash to pay for any future expansion even though we contemplate none at the moment. The market is there and we mean to get all we can.”
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