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Wade Thompson has never owned an RV. But he has assembled the world's biggest RV maker with this strategy: When he buys your company, you better be ready to compete--against him.
When you think recreational vehicles, midtown Manhattan does not come to mind. It does not have the parking, or the right demographics, for 25,000-pound motor homes or 40-foot travel trailers. Yet this is where Wade Thompson, 63, chooses to run Thor Industries, the world's biggest recreational vehicle manufacturer. He's got a modest three-room office, decorated with paintings of Airstream trailers, on the sixth floor of an office building near Grand Central Station. Instead of spacious skies and amber waves of grain, Thompson looks out onto tight streets and flickering traffic lights. He's been an off-site chief executive ever since he bought his first RV maker in 1977, when he rented a one-room apartment with a single light and a black-and-white TV above a pizza parlor in Butler, Ohio (pop. 921) and commuted every week from New York.
Another oddity about Thompson: He doesn't own an RV. Driving a behemoth on the open roads, with lawn chairs strapped to the back, is not his style. He'd rather zip two hours north to his country home in Niantic, Conn. in his souped-up 2004 Mini Cooper, all 143 inches of it.
Thompson has assembled ten RV companies over the past two decades, propelling Thor to 23% of an $8.5 billion RV market that is soon to explode--thank you, aging baby boomers. But let other dealmakers babble about synergies. Thompson hews to more primal mantras:competition and cash. Yes, he brings economies of scale to his companies. But his acquired companies are surprisingly autonomous. They are run separately by their original managers and compete with Thor's other divisions. Thompson directs the company from his satellite headquarters, really just he and an assistant. This is not the kind of conglomeration you see at, say, Tyco.
Paychecks are the motivation. The top managers of each of Thor's divisions share 15% of the division's pretax profits, with no ceiling on the payouts. Factory workers likewise are often paid for how many RVs they turn out, not at some hourly rate. "I want every one of our company heads to feel like it is their business, in their control," Thompson says. "If they don't perform, they don't get paid very much. If they do, there is no cap to what they can make."
Last year six managers at Thor companies earned more than Thompson, who took in $1.1 million, according to SEC filings. A few made three times what Thompson did. "I am absolutely delighted if someone earns $5 million in a year at this company," Thompson says, "because it is based on the results of the operations they are running."
Indeed. His 31% stake in Thor is worth $515 million. And shareholders have seen a 450% price jump since 1998, compared with an average 170% rise in other public RV company shares. Thor has never had an unprofitable year--a rarity for an RV company--not even during the downturn in the late 1980s (though Thompson took no salary for two years to stay in the black). Over the last five years Thor's revenue has grown at an average of 18% a year, to $1.6 billion in 2003. Earnings have grown 26% a year, to $79 million last year. And new business appears strong. The company, which is legally based in Jackson Center, Ohio, recently announced a six-month order backlog of $499 million, up 83% from last year.
Now Thompson is expanding further into the big leagues with the manufacture of drivable RVs. These are more complex to build and sell than the lower-end towable RVs, a market that Thor now dominates. In drivable RVs, Thor will run head-on into the powerful 46-year-old firm Winnebago, which gets all its sales from drivable RVs. In a sideswipe at Thor, Bruce Hertzke, Winnebago's chief executive, says, "We want to be known as having the highest quality and being the most profitable company. If someone wants to buy the market, that's their business." Winnebago's net profit margin of 6% bests Thor's 5%.
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