Somehow, it is difficult to imagine Morgan Firestone barrelling down the highway at the wheel of a giant recreational vehicle. The 61-year-old chairman and chief executive officer of Firan Corp., Canada’s largest manufacturer of recreational vehicles (RVs), is a silver-haired patrician with courtly manners and a good tailor. He is also a scion of the Firestone tire dynasty, who was educated at Princeton University and served as a second lieutenant in the U.S. army during the Korean War. After his father died in 1953, Firestone was groomed to take a top spot at the helm of the multinational empire founded by his grandfather, Harvey, in 1900. He moved to Hamilton from Akron, Ohio, where Firestone Tire’s head office was located, to run the family’s Canadian operations in 1968. But although he loved Canada, Firestone says he hated tires and loathed large corporations. As his 40th birthday approached, he decided to take his multimillion-dollar trust fund and run. “I was watching the clock from nine to five when I worked at Firestone,” he says, sipping on a tall tumbler of cola and ice in his office at Firan’s headquarters in Oakville, midway between Toronto and Hamilton. “I wanted to do something on my own. And I realized that I had to do it by the time I was 40 or it would be too late. I’d be locked in.” Despite intense family pressure to stay with the tire company, Firestone hired a secretary and in 1970 he began shopping for opportunities. “The only thing I knew then was that I wouldn’t be in the tire business,” he says. “I wanted something exciting and fun.” Starting with a 1972 investment in Graphico, a company that makes printed circuit boards for the defence industry, Firestone began to assemble an eclectic array of companies. He made Firan’s first RV investment when he acquired cash-strapped Glendale Corp. in 1978—although, he acknowledges, he had never before set foot in a motor home. Today, Firan’s interests include Graphico, a small specialty plastics company, the recreational vehicle manufacturing arm and two companies that produce sophisticated electronic equipment used for air traffic control and navigation. In fact, about the only thing that Firan’s businesses have in common is that Morgan Firestone finds them interesting. And even though investors are notoriously reluctant to back
broadly diversified companies, Firestone— who owns 52.2 per cent of Firan’s stock— flatly asserts that he has no qualms whatsoever about the hodgepodge of assets. “Investors may not like it, but we like it,” he says.
Still, there is more than whimsy at work in the structure of Firan, which now employs 1,200 people around the world. Each of the company’s two basic divisions—RVs and electronics—has a strong international sales component and a distinct niche market. Furthermore, the highly cyclical nature of the RV business is offset by the steady—and growing—demand for Firan’s high-tech electronics equipment. In 1993, the company’s sales revenues increased 60 per cent from $99.5 million to $159.5 million. (About 55 per cent of those revenues came from international sales.) In that same period, Firan’s net income climbed 484 per cent from $413,000 to $2.4 million.
Based upon his experience working with the “pawns and cogs of middle management” at Firestone Tire, Morgan Firestone— who is now a Canadian citizen—insists that he does not want Firan to grow too large. He
has set Firan’s target at achieving $250 million in annual revenues, but there are no plans to expand beyond the two core business units and the existing management team. “I learned at Firestone Tire that it’s a mistake for the boss to try and call all the shots,” he says. “People in the field tend to know what will work and I believe that you
have to give them authority.” He adds that Firan’s lean organization—there are only three corporate officers—makes the operation flexible and responsive, compared with its more cumbersome competitors.
With a tight-knit team and a controlling stake in the company, Firestone is also able to exert a personal touch. Among Firan’s directors, for example, is Dr. Nathan Epstein, a professor of psychiatry at Brown University in Providence, R.I. “I met him through Firan’s charitable foundation. He wanted to come on the board, so I said all right,” explains Firestone. “Maybe more corporate boards should have a psychiatrist on them.” In fact, the only people that he says he would never consider working with are family members.
But however individual Firestone’s corporate vision and style may be, it appears to work. Much of Firan’s recent financial performance is directly attributable to its soaring RV sales. Some nine million North American families already own motor homes, and in 1993, total retail sales of RVs exceeded $13 billion across Canada and the United States. Through its network of 130 independent dealers, Firan’s total motor home sales almost doubled in 1993, and in Canada—where Firan claims a 40-per-cent market share—sales were up 30 per cent. In the first half of 1994, Firan’s North American RV sales climbed another 38 per cent over the same period a year earlier.
According to Firestone, the end of the economic recession and the aging North American population have both contributed to the upswing in earnings. The typical motor homeowner is middle-class, 55 years old, and has sufficient disposable income to pay $50,000 for a basic RV to $180,000 for a vehicle like Firan’s topof-the-line EuroPremier model. Over the next 20 years, there will be about 25 million more “mature” customers as the prosperous baby boom generation hits middle age. And it is this segment of the population that Firestone is counting upon to steadily build the demand for Firan RVs. “Whatever other variables are at play, the straight demographic trend is fantastic for RV sales,” says Greg McLeish, an investment analyst with Marleau Lemire Securities in Toronto, who follows Firan. “Morgan may be a dabbler, but he dabbles well and with reason.” One variable that has clearly worked in Firan’s favor over the past year is exchange rates. Because the bulk of its RV manufacturing is in Canada, Firan’s exports into the United States have cost relatively less in that
‘I wanted to do something on my own. And I realized that I had to do it by the time I was 40.’
market. Currency exchange rates have also meant that Firan’s principal U.S. competitors, Thor Enterprises and Winnebago, are less competitive when they attempt to sell their U.S.-made product in the Canadian market. Last year, Firestone’s determination to dominate the North American RV market led Firan to acquire Champion Motor Coach—now renamed Firan Motor Coach—located in Elkhart, Indiana.
While the RV business booms, Firan is also expanding its electronics division. Last February, it acquired control of Fernau Avionics Ltd., a British manufacturer of ground-based airline navigation equipment Firan has owned 75 per cent of Denro Inc. of Gaithersburg, Md., a company that produces customized communication switching systems for air traffic control, since 1990. Although the two companies will remain as separate divisions, Firestone says they share the same customer base and can, therefore, co-ordinate their sales and marketing functions. And even though Firan confronts such global giants as Thomson CSF and Litton Systems in the electronics sector, Firestone notes that Firan has focused on a narrow, highly specialized niche within that broader market.
While Fernau strengthens Firan’s European business base, Denro has major contracts with the U.S. Federal Aviation Administration, which is currently spending $46 billion to upgrade the equipment at several U.S. airports. The budget for that program is based, in part, on a special airport tax and, as a result, is not subject to the same budget constraints as most other infrastructure projects. Says Firestone: ‘That equipment needs to be upgraded and improved every seven to 10 years. And it’s one area where no one is willing to cut corners.” He also says that such emerging economic powers as China and India are also creating new markets for equipment made by both Fernau and Denro.
As the electronics arm of Firan matures, Firestone says he may eventually separate it into a distinct corporate entity—a move that investment analysts support. “Such a decision would make most sense after the electronics division attains a larger critical mass,” says David Beck, who analyzes special situations for Research Capital Corp. in Toronto. ‘We would view such a restructuring as being quite positive.” But whatever turns lie ahead down the road for Firan, there is no question that Morgan Firestone will be in the driver’s seat.
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