Paccar’s Pigott focuses on long-term success
Paccar announced the official introduction of its MX series diesel engines and the opening this summer of its new engine plant in Columbus, Miss., during a press event at the Paccar Technical Center in Mount Vernon, Wash., on Feb. 5.
Not many companies are taking such steps during “the worst economy in decades,” said Paccar Chairman and CEO Mark Pigott. He credited Paccar’s ability to invest more than $1 billion in its engine initiative over the last decade to “a conservative business approach and long-term focus.”
The MX series, which will be standard on all Kenworth and Peterbilt trucks, features an in-line, 6-cylinder design with four valves per cylinder. Five separate engines make up the MX series, with power ratings ranging from 380 to 485 horsepower and 1,450 to 1,750 pound-feet of torque.
Paccar recently completed its 71st year of profitability and has paid cash dividends every year since 1941, Pigott said. “When markets are booming, every company looks good. But when you turn the lights off, only a few are still shining and that’s Paccar.”
When Paccar realized the economy was slipping into a recession, the company made some “challenging decisions,” Pigott said. Those included closing down factories, reducing the company’s head count by 40 percent, going “line-by-line” through the capital budget and working with suppliers. “You have to align your business with the recession,” he said. “Every year we go in focusing: We’re going to make money,” he said. “Let’s figure out how we’re going to do that.”
When times get difficult, many companies let quality slip, Pigott said. But a key to Paccar’s ongoing success is following a “simple strategy – quality, quality, quality,” he said, pointing to the fact that Paccar brands have been ranked highest among heavy- and medium-duty brands 30 times since 1999 by J.D. Power and Associates.
Pigott also gives credit to Paccar’s network of 1,900 independently owned Kenworth, Peterbilt and DAF dealers worldwide. “We didn’t lose a single dealer through the recession,” he said.
Another reason for the company’s success is continual internal benchmarking, selecting the best practices from DAF, Kenworth and Peterbilt and replicating them, Pigott said. Paccar also benchmarks other companies such as Dell and Wal-Mart that excel in key areas such as manufacturing or offering multiple products to a large customer base. Pigott made a point of noting that Paccar does not benchmark any other truck makers.
Paccar’s financial performance has not gone unnoticed. The Harvard Business Review recently ranked Pigott 43rd on its list of the 200 “Best Performing CEOs in the World.” In its January/February 2010 issue, the magazine highlighted CEOs of publicly traded companies who over their tenure outperformed other firms in the same country and industry on the basis of stock returns.
“As a leader, you had to produce remarkable results to make it into our top 50,” the authors wrote. “On average, those CEOs delivered a total shareholder return of 997 percent during their time in office.” Over Pigott’s tenure as Paccar CEO, which began in 1997, Paccar delivered total shareholder return of 696 percent (compared to other firms in the same country) and 705 percent (compared to other firms in the same industry).