Generating Power from Waste Gas

Milwaukee -- February 28 -- When satellite photos showed bursts of light coming from the black night sky of rural North Dakota, it raised awareness about the practice of "flaring" wasted natural gas from the Bakken oil fields.

Huge flames light up the sky as the gas, a byproduct of oil production, is burned off day and night where there's no economical way to capture and use it.

In some places, "You can't see the stars. The sky is kind of a dark orange," said Sean Arithson, spokesman for Dakota Resource Council, an environmental group based in Bismarck, N.D.

Generac Power Systems of Waukesha and Kohler Power Systems, a division of Kohler Co., have equipment that captures some of the gas and turns it into usable electricity.

The portable generators, some roughly the size of a large pickup truck, burn the gas as fuel and provide electric power to the oil pumping operations.

The equipment captures "a fair amount of fuel" that otherwise would be burned off into the atmosphere, said Terry Dolan, a Generac executive vice president.

Generac and Kohler make generators for commercial and industrial uses as well as backup power for homes. Some of the largest units can provide enough emergency power to run an oil refinery or hospital.

The Bakken oil field units, which run 24 hours a day in remote areas of the Dakotas, are a growth area for Generac, Dolan said.

"A lot of these places are really far from where the utility lines go, but they need the electric power. With the flared gas, they have a constant flow of fuel coming out of the ground," he said.

Generac and Kohler sell the gas-driven generators to companies in the oil fields, which set them up to provide electric power that otherwise would come from diesel-powered generators.

A diesel-powered unit would burn 9 gallons of fuel an hour, 24 hours a day, to provide the electricity that comes from a generator burning the waste gas, said Mark Wald, president of Blaise Energy Inc., a Bismarck firm that provides the equipment and uses Generac products.

"It's crazy. There's a great big flare and fuel going up in smoke, while right next to it you have a diesel generator using fuel that has to be trucked in," Wald said.

Oil companies say they've spent more than $13 billion to capture the waste gas, mostly through pipelines, rather than burn it into the sky. But sometimes they have difficulty obtaining permission from landowners to place pipelines on their property, and it's cost prohibitive in remote areas.

North Dakota is considering state legislation that would drastically cut the time oil companies can burn off natural gas. It would require companies to begin paying royalties and taxes on wasted natural gas within 14 days after an oil well begins production. Companies are given a year now, but often they receive extensions because of the high cost of moving the gas to market.

The burned-off gas is valued at more than $1 million a month in lost state revenue, according to an Associated Press article.

"We want to get this gas, no question about it," Ron Ness, president of the North Dakota Petroleum Council, said in a recent hearing on the issue.

The Generac and Kohler generators use only a small amount of the waste gas from an oil well, but the units provide valuable power in areas where it would cost millions of dollars to run a utility line. They run year-round even in the harshest weather.

Reliability is important. It can cost a petroleum company $10,000 an hour in lost revenue if an oil well is not pumping because the generator shut down or something else went wrong.

Kohler has dozens of the gas-powered generators in the Bakken oil fields, said Nolan Landes, a senior products manager for the company's generator product line.

The units also are used in oil fields in Texas, Oklahoma, Canada and overseas.

Once a well is established, the waste gas is essentially a free source of fuel, Landes said.

But it's difficult to maintain machinery in remote locations, where the temperature can drop to 30 below zero. Also, the gas coming out of the ground from an oil well contains impurities that have to be removed before it's suitable for powering a generator.

"It's not like the gas that comes out of a pipe into your home," Dolan said.

Sensors in the generators are constantly checking the fuel quality and adjusting the units to run on it. Backup systems, such as propane tanks, can be used if a problem arises with the gas coming out of the ground.

The gas is valued at only a fraction of the value of the oil being produced. But there's still incentive to capture it as an energy source, Blaise Energy's Wald said.

With lower oil prices, "Everybody's looking at trimming costs," he said. If an oil field operator can save money by replacing diesel generators with gas-driven units, they're moving in that direction.

"We are not slowing down with the drop in oil prices," Wald said.

"We have seen significant growth in the call for generators to use the waste gas that's been flared for years," Dolan said.

http://www.jsonline.com/                        Rick Barrett

Generac Acquires Pramac America Assets

October 23 -- Waukesha-based Generac Power Systems has acquired some assets of Kearney, Neb.-based Pramac America LLC, from Siena, Italy-based Pramac Industries Inc.

The transaction price was not disclosed.

Pramac America manufactures and distributes portable generators, water pumps and other related products under the Pramac, Powermate, DeWalt and Porter Cable brands under a licensing agreement with the U.S., Canada and Mexico.

Generac purchased the Powermate brand, working capital and equipment from Pramac. It will also assume the licensing agreement for the DeWalt and Porter Cable brands. The entity will be renamed Powermate America LLC.

Pramac previously announced it will close its Kearney facility. That closure will still happen, Generac said, but it will retain the Marietta, Ga. location and operate the business from there.

Generac acquired the assets to expand its portable engine powered tools offerings.

“It will provide even greater distribution opportunities for both companies and allow Generac to leverage our combined scale and strength to create value for our customers in sourcing, distribution, manufacturing and product design,” a Generac spokesman said.

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Generac to Hire 100 Statewide

MILWAUKEE -- September 24 -- Waukesha-based Generac Power Systems Inc. today announced it will hire 100 employees in Southeastern Wisconsin, the Fox Valley, Berlin and Oshkosh.

The company, which designs and manufactures generators and other small engine powered products, said the positions will be in customer support, inside sales, engineering and operations. It is encouraging applicants of all levels to attend a job fair tomorrow at its Whitewater facility, 757 N. Newcomb St., from 10 a.m. to 3 p.m.

Generac, which announced the hiring plans at a media day in Whitewater today, also revealed changes to its manufacturing plant that are aimed at attracting a younger workforce that wants tech-savvy careers. It has updated its manufacturing lines to digital machinery. The company said it has had some difficulty recruiting employees in southeastern Wisconsin.

Generac has more than 70 percent of the home standby generator market share nationwide. It has benefited from the rapidly growing residential generator market that has resulted from a rising number of power outages that generator manufacturers attribute to aging power grids and several severe storms that have knocked out power to large areas of the country.

In an October 2013 interview with BizTimes Milwaukee, Generac president and chief executive officer Aaron Jagdfeld said he anticipates Generac's home standby business will grow at between 11 and 13 percent annually going forward.

The company also held a job fair in Oshkosh in May in an effort to fill 100 positions company wide. The majority of the  positions announced today are new, said company spokesman Art Aiello.    

The new positions are "simply part of our continued growth," Aiello said. "Nothing in particular triggered this. We just want to make sure we are staffed appropriately.

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After Decades of Exodus, Companies Returning Production to the U.S. (Generac)

May 13 -- In 2001, Generac Power Systems joined the wave of American companies shifting production to China. The move wiped out 400 jobs in southeast Wisconsin, but few could argue with management's logic: Chinese companies were offering to make a key component for $100 per unit less than the cost of producing it in the U.S.

Now, however, Generac has brought manufacturing of that component back to its Whitewater plant — creating about 80 jobs in this town of about ‎14,500 people.

The move is part of a sea change in American manufacturing: After three decades of an exodus of production to China and other low-wage countries, companies have sharply curtailed moves abroad. Some, like Generac, have begun to return manufacturing to U.S. shores.

Although no one keeps precise statistics, the retreat from offshoring is clear from various sources, including federal data on assistance to workers hurt by overseas moves.

U.S. factory payrolls have grown for four straight years, with gains totaling about 650,000 jobs. That's a small fraction of the 6 million lost in the previous decade, but it still marks the biggest and longest stretch of manufacturing increases in a quarter century.

Harry Moser, an MIT-trained engineer who tracks the inflow of jobs, estimates that last year marked the first time since the offshoring trend began that factory jobs returning to the U.S. matched the number lost, at about 40,000 each.

"Offshoring and 're-shoring' were roughly in balance — I call that victory," said Moser, who traces his interest in manufacturing to his parents' work at the long-closed Singer Sewing Machine plant in New Jersey. (He once worked there too.)

He now runs the Reshoring Initiative, a Chicago nonprofit that works with companies to bring manufacturing jobs back to the U.S.

Several factors lie behind the change.

Over the last decade, Chinese labor and transportation costs have jumped while U.S. wages have stagnated. The average hourly pay for non-supervisory manufacturing workers in the U.S. has barely kept up with inflation, rising on average just 2.3% over the last 10 years and by only half that since 2010, according to Labor Department figures.

Factoring in the rise in value of its currency, China's base wage, measured in dollars, has risen 17% a year, according to an April report by Boston Consulting Group.

Manufacturing also has become more automated, further reducing labor's weight in the cost equation.

The boom in natural gas production in the U.S., largely driven by fracking and other new drilling techniques, has led to a 25% decrease in gas prices in the U.S., contrasted with a 138% increase in China, Boston Consulting found.

And the rise of online commerce has made local control of supply chains more important, especially because many U.S. manufacturers report growing problems with quality control of goods made in China.

"We got to the point where everything we were bringing in had to be inspected," says Lonnie Kane, president of Los Angeles apparel maker Karen Kane, noting that his company used to check just 10% of goods from China.

"Now prices are escalating, quality is dropping and deliveries are being delayed," he says. In the last three years, Kane has shifted 80% of his production from China back home.

Expansion in the domestic apparel industry remains unusual because the labor-intensive work can be done in many low-wage countries. But in other industries, a growing number of domestic and foreign companies — including General Electric, Caterpillar, Toyota and Siemens — are opting to build or expand their facilities in the U.S., particularly in the Southeast, where labor costs are relatively low.

The main reason companies relocate out of California to places like Texas is the average home price in Dallas is $192,000 versus the average home price in Los Angeles which is over $500,000. The difference in taxes in minor compared to a corporations ability to hire the same worker in Texas who...

For the first time, some small contract manufacturers in the U.S. are beating bigger rivals in Asia, the center of global industrial production.

At Zentech Manufacturing in Baltimore, the company's president, Matt Turpin, recalls his skepticism when salesmen told him two years ago about their efforts to land a contract making 5,000 to 10,000 wireless printers. He was sure an overseas competitor would get the work.

"I don't know why you're wasting your time chasing that business," he says he told the sales force.

Zentech ultimately won the contract, and Turpin says the company added at least five full-time employees to his shop, where the front office window is draped with a large American flag.

William Davidson, a test technician at Zentech, now earns $17.50 an hour working on those printers and other company products. Before getting hired at Zentech three years ago, Davidson, 62, had been unemployed for 18 months. His previous employer, a Delaware repairer of cable boxes, had moved its operations to Mexico.

"The worst part of it was we had to help them pack things up for the move," he says.

Here in Wisconsin, a similar story has played out with Generac.

Aaron Jagdfeld, the company's chief executive, was the comptroller at the time of the offshoring. Jagdfeld, now 42, had grown up in the region and graduated from the University of Wisconsin at Whitewater with an accounting degree.

The offshoring "didn't feel right" because of the families affected by layoffs, he said, but the company needed to make the move to remain competitive.

Generac grew rapidly over most of the rest of the decade. Its sales rose to $1.5 billion last year, and it now has about 3,300 workers, including 720 in Whitewater, its largest plant. But the last decade also saw costs surge in China while they increased little in the U.S.

What began as a $100 gap in the cost of producing an alternator narrowed as the Chinese yuan jumped in value and Chinese wages and other costs soared.

The tipping point came when Generac had enough sales to justify investing millions of dollars in new equipment for the Whitewater plant. The company can now produce an alternator with one worker in the time it took four workers in China.

Although a small price gap remains, Jagdfeld figured that having greater control over delivery would make up the difference.

More frequent power outages —from Hurricane Katrina and Superstorm Sandy, not to mention this past winter's ice storm in the South — have brought bursts of orders for portable generators, challenging the company's inventory and delivery capabilities.

"We were constantly fighting a battle for what product was needed, and we were always guessing wrong," Jagdfeld said. "We kept saying, 'If we could just control the alternator, we'd have a better opportunity to respond more effectively.'"

Those sorts of calculations lead experts who have studied reshoring to see potential — particularly for makers of appliances, transportation equipment, electronics and machinery — to return jobs to the U.S.

Led by these industries, 21% of large manufacturers in the U.S. said they were already returning production or would do so over the next two years, according to a survey Boston Consulting conducted last summer.

"In 2012, companies told me 'you're crazy,'" said Hal Sirkin, a senior partner at the consulting group's office in Chicago. "Now they're doing it — maybe not all the way, but they're testing the waters."

www.latimes.com/business        Don Lee

Generac Expands, Set to Hire 100 Additional People

May 5 -- Generac Power Systems, maker of backup power generators, is expanding and will hire 100 employees for its southeastern Wisconsin, Berlin and Oshkosh locations, said Art Aiello, a Generac spokesman.

The company, based in rural Waukesha County, will host a job fair May 8 at its Oshkosh facility at 3815 Oregon St.

Some of the hiring is due in part to the company acquiring Baldor Electric in November. The Oshkosh facility makes larger industrial generators that are up to two megawatts. Generac also acquired Magnum Products LLC — which makes light towers, mobile generators and pumps — in Berlin in 2011. Both companies have been folded into Generac, Aiello said.

"The reason we're having the job fair in Oshkosh is because Generac is not well known in the Fox Valley," Aiello said. "All of this hiring is due to growth."

Areas of growth have come from Hurricane Sandy and the large power outages from the winter season as well as on the industrial side from expanding into new markets.

"We're also seeing growth internationally," Aiello said. "So the positions we're hiring for are intended to fuel that growth."

Generac will hire engineering, technical and some production workers. To find out specifics on the jobs or the job fair, please visit www.generac.com/careers.

Denise Lockwood    www.bizjournals.com/milwaukee

Wisconsin Manufacturers Turn to Long-Term Temporary Employees

November 14 -- More manufacturers are gearing up to hire temporary employees, sometimes for jobs lasting many months, as they need the help but are reluctant to make permanent commitments.

Thursday, Ariens Co. said it was seeking 150 employees to build snow throwers and lawn-and-garden equipment in Brillion. Also, the company says it will hire another 150 people in January and February.

Some of the jobs could be temporary, but many new hires will stay on as year-round employees, said company spokeswoman Ann Stilp.

"The bigger challenge for us sometimes is our location," she said, since Brillion isn't a big town and residents also commute to work in Manitowoc, Appleton and Green Bay.

Recently, Harley-Davidson Inc. added 100 temporary jobs at its Menomonee Falls plant as the company prepares for the production of model-year 2014 motorcycles.

Harley says the employees have been hired for the work that runs from January until June at the powertrain operations on Pilgrim Road.

The company used staffing agencies and its website to recruit people for the jobs that pay roughly $16.75 to $23.30 an hour — similar to the pay scale at the York, Pa., motorcycle assembly plant that's seeking 400 temporary employees.

This summer, Harley completed its first year of seasonal surge production in York. That effort, also taking place at the company's other plants, is aimed at producing motorcycles closer to market demand, increasing manufacturing efficiencies and saving hundreds of millions of dollars in costs.

The company's plant in Tomahawk needs 60 more seasonal employees to work 10 months starting in January, said Harley-Davidson spokeswoman Maripat Blankenheim.

Wages at the Tomahawk plant are comparable with Menomonee Falls and the other plants, she said.

Some companies, such as outdoor power equipment makers, have long used surge production and seasonal hiring to build products close to demand and not carry excess inventory.

That's the case for Kohler Co., which hires seasonal employees to build engines in advance of the lawn-and-garden equipment season. In Waukesha, Generac Power Systems has used temporary hires to fill a glut of orders for generators after major power outages.

But more manufacturers are using the hiring strategy to fill year-round jobs while avoiding long-term commitments to employees, according to staffing agencies.

"Employers, especially Milwaukee-based manufacturing companies, seem to be favoring that because they're trying to get a handle on whether their growth will be sustained. Everybody is still in limbo about this economy. That's the bottom line," said Wendy Koppel, president and owner of Division 10 Personnel/AeroStaff, a Milwaukee staffing agency.

"Five years after the recession, this is the slowest recovery I have ever seen. One way employers are responding to this tentative feeling is they're opting for more long-term temporary employees," Koppel said.

Some companies use temporary hires as a way to try people out before they offer them permanent positions. It gives them more flexibility to fire someone if the job isn't working out or the work suddenly ends.

People hired for jobs that sometimes last only a few months should take the time they're with a company and get the inside track on permanent positions, said Jim Golembeski, executive director of the Bay Area Workforce Development Board in Green Bay.

"Even if you come in as a seasonal worker, companies are looking for people who stand out," he said.

A short stint at a manufacturing plant can be a way to sharpen your workplace skills and enhance your chances at getting permanent employment.

"One of the big problems with people who are out of work for a long time is their skills atrophy. It's a reason why many employers are reluctant to hire someone who has been unemployed for a couple of years," said Hank Cox, who recently retired from the National Association of Manufacturers in Arlington, Va., and is now a freelance writer on manufacturing issues.

"There's some good in it, and people adapt. But for most people, it can't be a good feeling to know their job is only for a few months. Overall, I think it's a negative trend that I hope doesn't become too prevalent," Cox said.

Rick Barrett                www.jsonline.com

Generac CEO Aaron Jagdfeld Generates a Champion

Jagdfeld's Keys

•       Has overseen Generac's 400% stock romp.

•       Overcame: The recession of 2008-09.

•       Lesson: Act decisively.

•       "Certain situations call for a healthy sense of urgency. If the situation is important enough, you have to be able to drive people forward at a fast pace."

August 27 -- Aaron Jagdfeld provides plenty of energy with his management style.

Good thing.

Running on his spark, Generac Power Systems overcame the power outage of the recession.

The timing for Jagdfeld was a drag as he started his stint as CEO.

Generac was North America's No. 1 maker of home standby generators, but it was September 2008.

The economy was tanking on the heels of the housing slump that began in 2007 — causing Generac to lose steam.

That was Jagdfeld's cue to rev up the business. Fast.

"I'm a very detail-oriented person and come from the angle of having to know all the details to help me make decisions" Jagdfeld, 41, told IBD. "I take the information and assimilate it quickly into making a decision."

Using that approach, he made the bold decision to re-enter the portable generator market in 2008.

Here's how they work:

Generac's standby generators operate on natural gas or liquid propane and are permanently installed with an automatic transfer switch, which Generac also manufactures.

Its portable generators are fueled by gasoline. They serve as an emergency home backup and are also used for construction and recreational purposes.

That 2008 move came a decade after Generac sold its portable business to Beacon Group.

A non-compete clause with Beacon expired a year before Jagdfeld became CEO — and he seized the chance to move back into the market.

"We needed to be there quickly because the rest of our markets were softening," said Jagdfeld.

By 2012, Generac had reclaimed its spot as North America's No. 1 maker of portable generators, a category it created when it was founded in 1959. Generac is also the leading maker of home and commercial standby generators.

Thanks to Jagdfeld's fast-paced style, Generac emerged from the downturn with vigor.

Business has surged since its February 2010 IPO. In 2012, sales climbed 48.5% to $1.176 billion. Profit leapt 47% to $3.19 a share. That followed a 33.6% rise in profit and 34% pop in sales in 2011.

Its share price has soared along with it, rising 400% since that first day of trading in February 2010.

"That decision to re-enter the portable generator business and speed of action in 2008 were absolutely critical to us staving off any major negative outcomes as a result of the rest of our company's business turning down during that period," said Jagdfeld, who's been with the company since 1994.

Complementing his speed, Jagdfeld weighed that decision to jump back into portable generators carefully, then re-entered the field with a clear understanding of its needs.

The CEO knew that Generac had a long history of making portable generators. And he had a strong knowledge of that product.

Portable generators can be stored and pulled out of storage when necessary. They typically run on gasoline and have outlets on the outside where owners can plug in extension cords and run them to the appliances they want to back up. The generators have to be operated manually during a power outage.

A standby generator is permanently installed and connected to the home's electrical service. When the power goes out, it detects the outage, starts up automatically and delivers power through the home's electrical system. These units typically run on natural gas or liquefied petroleum, so they have long running times and don't typically require refueling.

Jagdfeld knew his firm had heavy resources in engineering, operations, sales and marketing as he entered the portable generator market. Meanwhile, he developed one of the broadest offerings in the industry. And using Generac's long retail relationships, he quickly got its generators into stores.

With a stronger balance sheet after its initial public offering, Generac was able to invest in the inventory to meet heavy demand. That came in handy as buyers bulked up on generators during the massive power outages of Hurricanes Irene in 2011 and Sandy in 2012.

Jagdfeld has been high up the Generac food chain since 2002, when he became chief financial officer. In 2007 he rose to president, a job he maintains along with CEO.

Jagdfeld was instrumental in managing the sale of Generac to CCMP Capital Advisors in a leveraged buyout in 2006. And he led the company's transition to a public company with its 2010 IPO.

"He's had an excellent transition from a private-company CEO to a public-company CEO, which is a major transition,"said KeyBanc Capital Markets analyst Jeffrey Hammond. "The company went public in February 2010 at $13 per share and is now trading in the low $40s, and you have had two special dividends totaling $11 a share — $6 in June 2012 and $5 in June 2013. So the total shareholder return to date has made for a pretty compelling story."

Meanwhile, Jagdfeld planned to keep Generac No. 1 in the home standby generator category. He's done exactly that as chief executive, but it hasn't been easy.

Soon before he took over the firm's top post, rivals started knocking on the space more aggressively. Generac was "probably vulnerable" to this renewed push because his firm's product line hadn't been updated in years, he noted.

So Jagdfeld made his own push, ordering a redeveloping of Generac's products to create "the line of the future." The company changed the look of its products on its website. It added tech features to ensure the generator could be installed closer to the home, to adhere to national fire codes.

Jagdfeld also structured a sales team to better serve retailers.

"We made a big bet and spent millions of dollars to create a sales force," he said. "We put about 25 people into field at the time. That helped strengthen our relationships with distributors and helped fend off the competitive threat."

Thanks to those moves, Generac still holds the top slot among generator sellers with a 70% share.

Russ Minick, executive vice president of Generac's residential products, lauds his boss' management: "I have worked a few places and see Aaron as having a high-energy, high-pace style. We stretch and get a lot done compared to a lot of companies because of the pace he sets."

Jagdfeld admits 2010 probably wasn't the best environment for an IPO. The stock market wasn't making it easy for new issues.

But that didn't stop the man in his tracks. After all, his German name means hunting field. "We looked at it as though the company had a lot of long-term potential, but needed to fix the capital structure permanently," he said. "We saw an IPO as a way to pay down more debt and get the balance sheet in a better place. That's why we priced at the bottom of the range. We believed in the long-term opportunity."

The CEO and his team got that message across — and the IPO was on its way upward.

So was Jagdfeld, who uses his energetic communication to spark employees. "I can get people pretty excited about things by talking about the good things about the company," he said.

Generac, headquartered in Waukesha, Wis., produces inverter generators, commercial backup generators, industrial backup power systems and power washers. They're made across four facilities in southeastern Wisconsin. Instead of dealerships or stores of its own, Generac sells its machines in national home and hardware stores.

Jagdfeld, a native of Milwaukee, holds a bachelor's degree in business administration from the University of Wisconsin. He joined the audit practice at Deloitte & Touche and discovered Generac, which was a client. He saw its growth potential right away.

In 1994, after he had been with Deloitte a year, he got a call from Generac's chief financial officer to join the team. He leapt and got on board the firm's finance department that May.

Jagdfeld was drawn to Generac because of its generator. "I liked to take things apart as a kid to see how they worked," he said. "I like to understand the details about the mechanical nature of products."

Generac's manufacturing environment and the process of making its machines especially piqued his curiosity. Now he's generating even more interest as CEO.

Marilyn Much, Investor’s Business Daily             www.news.investors.com          

Generac Is the One to Watch Out For

July 15 -- Power outages are getting more common in US and Canada.

The energy crisis has taken over the whole world and its adverse effects are encompassing the residential and commercial sectors alike. According to the estimates of U.S. Department of Energy, power cuts cost businesses an average $80 billion loss per year. This has opened the gates for standby energy source providers in the market to take advantage of this opportunity. The use of standby power generators are growing more popular each day. Companies providing such machinery are expected to experience exponential growth on the basis of growing demand. The companies are expanding their operations outside the U.S. so that they can cater a larger market. One company working on this principle is Generac Holdings.  Let’s see if investors can trust the company’s growth expectations or not.

Generac’s business outlook

Generac is a manufacturer and marketer of generators and other engine-powered machinery for residential, commercial and industrial markets. The company has a huge market share in the residential sector holding a 70% share of the domestic home standby market in the US. It has a huge distribution network of over 4800 dealers which acts as a competitive advantage and a barrier to entry for the new players in the market. The company’s sales rocketed up to the $1 billion mark for the first time in 2012, which was a 48% growth in sales from 2011. Along with this, the company’s 3 year average income growth stands at a huge 29.4% compared to the industry average of just 3.5%. The cash flows of the company increased from $105 in 2010 to $213 million in 2012.

Though it is performing better than the industry, the company has a lower return on equity and return on assets compared to rival Cummins.  But it may not be too worrisome for Generac, as Cummins has gone down with its revenues last year and its performance might deteriorate more in coming future due to the strict regulations recently introduced by the government on diesel engines. Briggs and Stratton on the other hand is a large cap stable company with little or no growth expected in near future. Thus it is unable to excite you with its margins or returns.

The company’s main focus these days is the optional standby power supply for markets, restaurants, healthcare institutions and telecom companies. This is because of the huge losses these places incur when power is cut and there is no secondary power source.  Hospitals cannot risk the life of patients by not keeping power generators. They are bound to keep power generators for emergency purposes. Moreover, the company is also considering working on a line of generators that use natural gas as the power source. This decision might be fruitful as natural gas prices have declined and demand for such products would be high.

Competitive situation

As mentioned above some of its peers are Briggs and Stratton and Cummins. Cummins gives Generac a tough time in the residential market whereas Briggs is present as a dominant force in the commercial sector. Moreover Cummins is not just confined to power generation; it has a number of other operations. Currently its diesel engine business is in a funk as the government has conducted some serious changes in the regulations for diesel engine vehicles. Cummins is currently working on Natural gas engines to take advantage from the low natural gas prices in the country.

Briggs on the other hand also has two segments i.e. engines and products. Most of its sales and profits are attributed to the engines segment whereas its product line of generators and power washers have reported losses since the past 3 years. Both these other companies have their primary focus on engines, but Generac is focused on the production of power generators only. This gives the company an advantage over its peers to increase its market share of the power generators market. Furthermore, both Cummins and Briggs provide a decent yield to their investors which Generac does not, but Generac does give out hefty special dividends to its investors. In June 2012 the company paid a $6 per share dividend which is huge compared to what you have to pay for the company’s stock.

Recent acquisition

In the last quarter of 2012 the company made a strong move to enter international markets by acquiring Ottomotores. Through this acquisition, the company would take over the operations of Ottomotores Mexico and Ottomotores Brazil in Curitiba. This would enable Generac to combine both companies which are involved in the manufacturing and selling of diesel generators from 15 kW to 2.5 MW. Ottomotores is a leading company in Latin American standby power industry. This would help the company to strengthen its grasp on the Latin American market where its competitor Briggs & Stratton is already present.

Conclusion

Power generators are an essential component for both residential and commercial users alike. With the energy shortage in different countries increasing, the market for these power generators is growing. Growing companies like Generac can make full use of this opportunity due to its exceptional presence in the market over more than 50 years and its strong profitability and cash flows indicating that the company can take a few leaps of faith. Furthermore, its acquisition of Ottomotores will help it to focus on its sales outside the US market and take advantage of synergies.

www.fool.com  

Generac Hosts March Job Fair

March 11 -- Waukesha-based Generac Power Systems Inc. recently hosted a job fair at its Whitewater facility to hire about 100 new employees.

About 20 of the positions are for Whitewater and the other 80 are for the company’s brand new Jefferson facility, said Nancy Schroeder, senior human resource manager in Whitewater.

Both broadened product lines and increased demand are driving the company’s growth, said Rhonda Matschke, vice president of human resources.

“We are in a growth period of time,” Matschke said. “We’ve seen growth as a result of the increased demands due to severe storms.”

About 80 percent of the open positions have been filled. About 125 people came to the job fair, and the company expects to be finished hiring this month, Schroeder said.

The job fair format is more efficient for hiring a large group and the company can show the potential employee the facility and see where they might be working, she said.

The new employees will bring Generac’s total job count to 3,200 globally, 2,700 of which are in Wisconsin.

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Judge Denies Generac Request for New Trial in Patent Infringement Case Against Kohler

MILWAUKEE -- March 11 -- A judge last week denied Generac Power Systems Inc.’s request for a new trial in a patent infringement case the company brought against Kohler Co. in late 2011.

The decision by U.S. District Court Judge J.P. Stadtmueller upheld a jury verdict in favor of Kohler and its distributor, Total Energy Systems LLC, and rejected post-trial motions filed by Generac, according to court documents and a Kohler press release.

Generac had claimed Kohler infringed on a patent related to control systems on generator sets. The court found one of Generac’s claims invalid prior to trial, and the jury later determined that Kohler and TES did not infringe on Generac’s patent, and that the “remaining asserted claim of the patent was invalid,” Kohler said.

The court last week denied Generac’s post-trial motions seeking a “judgment as a matter of law” and a new trial, court documents show.

Kohler Power Systems president Larry Bryce said in a written statement that the company is grateful for the outcome of the litigation and hopes the ruling means “the matter is put to rest.”

“While we are disappointed with the jury’s findings in this particular case, we will remain diligent in aggressively protecting our company’s intellectual property rights,” said Aaron Jagdfeld, Generac president and CEO, in a written statement to The Business Journal. “As we evaluate our options to appeal this particular decision, we will also turn our attention to yet another pending case regarding the infringement by Kohler of a Generac patent.”

Generac is a Genesee-based generator and engine-powered products manufacturer.

Kohler is a Kohler-based privately held company whose products include standby generators.

Jeff Engel     www.bizjournal.com  

Milwaukee Business Journal Executive of the Year: Generac's Aaron Jagdfeld

Executive of the Year: Public Company

Aaron Jagdfeld

President and chief executive officer, Generac Holdings Inc.

Age: 41
Family:  Wife, Christy, an accountant; daughters, Abby, 16, Meghan, 11; son, Adam, 14 
Education: Bachelor of business administration degree in accounting, University of Wisconsin-Whitewater
Grew up: Milwaukee and Hartland
What book is on your nightstand? “Actually on my tablet, as I am trying to go paperless, is ‘The Complete Short Stories of Ernest Hemingway.’” 
What other profession would you like to try and why? “For the longest time, I really wanted to be a high school teacher so that I could teach U.S. history and coach high school track. I’ve always been a big history buff and the desire to coach is something that comes from my high school and college track career.” 
What was your first job? Newspaper delivery
Favorite film? “Planes, Trains and Automobiles”
What’s something about you that would surprise people? “I really hate to golf. Most people assume that a CEO spends all of his or her spare time on a golf course, but the truth is that I would rather be running or biking.” 
Favorite vacation spot?  “We are fortunate to have a place in the north woods of Wisconsin that has been in my wife’s family since the 1940s and even if it’s only for a weekend, the opportunity to unwind and relax on Pelican Lake has always been my favorite retreat.” 
Biggest perk of your job? “That one is easy: I get to spend every day doing something I really enjoy.” 
What is playing on your iPod? “Every Beatles song imaginable” 
iPhone or Blackberry? BlackBerry. “I’m still tied to the physical keyboard on the BlackBerry. I just haven’t found myself to be quite as productive with emails on an iPhone.”

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ARTICLE

A year or two ago, Generac wasn’t exactly a household name around the country.

But times have changed.

After going public in February 2010 and a seemingly endless string of major storms and massive power outages, particularly on the East Coast, the Genesee-based company and its line of generators have been thrust firmly into the spotlight.

“We’ve been kind of this quiet little company out here in western Waukesha County for a long time. And I think that changed overnight,” said Aaron Jagdfeld, president and chief executive officer of Generac Holdings Inc., parent company of Generac Power Systems Inc. “Now with all the outages and the categories of product being top of mind for people and our brand being so strong in the marketplace, we’re really, I think, capitalizing on that today in a way that we just couldn’t before. It’s going to launch us in a place we’ve never been before as a company.”

Founded in 1959 by Robert Kern, Generac grew sales more than 33 percent in 2011 to almost $800 million. The company said in October it expects to grow more than 30 percent in 2012, surpassing $1 billion.

“Coming into this year I don’t know that I really thought that we would be able to achieve the kind of success that we had last year. But we have completely outdone ourselves,” Jagdfeld said. “We’ve hit a number of milestones this year that I think are really important for us.”

Those milestones include topping $1 billion in sales, initiating a $10 million headquarters renovation and expansion, buying back a former Generac manufacturing facility in Jefferson that recently went operational, acquiring a company that gives Generac its first international operations and adding more than 800 jobs through organic growth and acquisition.

The company’s 2012 success under Jagdfeld’s leadership led The Business Journal to name him Executive of the Year in the public company category.

“Aaron Jagdfeld has been instrumental in Generac’s success story,” said Michael Halloran, a Milwaukee-based financial analyst with Robert W. Baird & Co. Inc. who follows Generac.

Halloran said Generac’s 38 percent compound annual growth rate since 2010 is “impressive amid the slow growth environment in the U.S.” and is driven in part by “strong management execution to capitalize on recent major power outage events” and Jagdfeld-led efforts to improve the company’s marketing and distributor penetration.

Jagdfeld, 41, started working at Generac 18 years ago in the finance department. He was named CEO in 2008.

He is perhaps perfectly suited for the top role at a generator manufacturer. His accounting background gives him the chops to run the business, and the self-proclaimed “gear head” understands how the products work.

Jagdfeld, who comes from humble roots on Milwaukee’s northwest side, has built a reputation as one of the hardest workers at Generac. He made a point throughout his career of never going home before his boss left.

“That created for me a way to, I think, get the most out of the people that started working for me,” Jagdfeld said. “People really appreciate when you lead by example. People respect that if you’re the guy who’s in the office last, you’re turning the lights out last and you’re the first guy in the morning to get there and turn the lights on, people will work incredibly hard for you.”

That work ethic hasn’t changed now that he doesn’t have a boss. It helps that he loves his job.

“I feel like my role, and I’ve told my board this, if you didn’t pay me anything I’d still be here because I like what I do,” Jagdfeld said. “I ended up in a role where I’m happy to be building something.”

Tim Sullivan, former president and CEO of mining equipment giant Bucyrus International Inc.and new member of Generac’s board, said Jagdfeld has “unlimited potential.”

“I think the responsibilities he’s been given at his age, learning what he has in his career so far, positions him better than most young CEOs that I’ve met,” said Sullivan, who spent 35 years with Bucyrus in South Milwaukee. “I think he’s got all the attributes to be one of the best ever. I think he has that desire and that drive to be one of the best.”

Generac chief financial officer York Ragen said he knows few people with the same level of drive and energy that Jagdfeld possesses. Jagdfeld has made an impression at investor conferences in Generac’s early stages as a public company.

“(Investors and analysts) talk to a lot of CEOs obviously, and there’s a lot of people that don’t come to the table with the same level of passion,” Ragen said. “If you want to talk about intangibles, those are probably things you spend 30 minutes talking with him, (and) the energy radiates as you talk to him.”

Jagdfeld, an avid sports fan, talks about his strategy for Generac in terms of building a strong program that attracts top talent and has a certain aura of success surrounding it.

Key to that strategy are acquisitions. Ragen said Jagdfeld has led that charge over the past two years, which have seen Generac’s first acquisition in its history and its first international presence.

“It’s a huge world out there, and it’s something that I think if we continue to be shrewd about it, I think we can really add scale to this company over the next few years,” Jagdfeld said. “This is one of those situations where success breeds success.”

Generac Holdings Inc.

Company: Manufacturer of generators and other engine-powered products

Headquarters: Town of Genesee

Employees: 3,000

Top executive: Aaron Jagdfeld, president and chief executive officer

2012 projected sales: Nearly $1.2 billion

Generac’s 2012 in review

Generac had arguably its most successful year to date. Here are some of the highlights:

• Feb. 1: Generac announces one of its subsidiaries acquired Gen-Tran Corp., a transfer switch and portable generator accessory manufacturer in Alpharetta, Ga.

• Feb. 7: Generac says it will invest as much as $10 million to remodel and expand its corporate headquarters in the town of Genesee, create a technical center at the location and add more than 200 jobs.

• Feb. 22: Forbes names Generac’s Aaron Jagdfeld one of the 20 most powerful CEOs who are 40 years of age or younger.

• July 30: Generac says it will sell its automatic home backup power systems and other products in Australia and New Zealand through a distribution contract signed with Allpower Industries of Victoria, Australia.

• Oct. 1: Generac raises its 2012 guidance to about 30 percent sales growth over 2011, which would push it past $1 billion in annual sales.

• Oct. 31: Generac says it will hire more than 100 production workers and start manufacturing operations in a Jefferson facility that it initially intended to use for warehousing and distribution, driven by superstorm Sandy’s impact on the short-term demand for Generac’s portable generators and the expected long-term demand for its home standby generators.

• Nov. 20: Generac announces $46.5 million purchase of Ottomotores UK Ltd., which includes Mexican and Brazilian affiliates. The acquisition, completed Dec. 8, adds 500 employees and gives Generac its first international manufacturing operations.