Miller Industries, Inc.
Miller Industries, Inc.
Incorporated: 1991 as Miller Group
Sales: $292.4 million (1997)
Stock Exchanges: New York
Ticker Symbol: MLR
SICs: 4789 Transportation Services, Not Elsewhere
Classified; 3713 Truck & Bus Bodies; 3799
Transportation Equipment, Not Elsewhere Classified
Miller Industries, Inc. is the world’s leading integrated provider of towing equipment and services. The company manufactures bodies for tow truck and car carriers; operates a towing service called RoadOne; acts as a distributor of towing equipment; and offers financial services to customers, as well as to other towing and distribution companies. Formed by William Miller in the early 1990s, Miller Industries rapidly gained a 40 percent share of what had been a fragmented industry. Despite a strong showing in the mid-1990s, in 1997 it faced a series of challenges that included a class-action lawsuit (later dismissed) and a Justice Department antitrust investigation. Nonetheless, the company persevered, and made a forthright public relations response to the situation, issuing press releases regarding both legal challenges.
The Early Years: Resurrecting Dead Giants
Miller Industries Chairman William Miller—called “Bill” by clients and associates—grew up in Detroit, Michigan, in the 1950s and 1960s. Because his father, like many others in Detroit, worked at an auto-manufacturing plant, Miller planned to become a line supervisor for Ford Motor Company. His high school guidance counselor, however, saw further potential in him, and suggested that he obtain a college education. Yet it was Miller’s father who indirectly cemented his decision to go to college, when he made the comment: “At my plant, the guys with college degrees walk around all day doing nothing and making lots of money.” Miller enrolled at the University of Michigan in Ann Arbor, where he earned a degree in engineering, and later an M.B.A.
After college, Miller went to work for a variety of large companies, including Bendix Corporation, Neptune International, Wheelabrator-Frye, and Allied Signal—then called Signal Companies, Inc. In each case, he found work fixing troubled units for the companies, and in the course of this experience caught the entrepreneurial bug himself. Miller later told Forbes, in November 1996: “The big companies weren’t geared toward the shareholders. They were geared toward a bureaucracy.” His first position at the helm of a company came in February 1987, when he assumed the presidency of Flow Measurement, a maker of industrial flow meters. Miller assumed that role until April 1994, when he stepped down to focus his energies solely on Miller Industries, which he had been forming for a few years prior. Upon leaving Flow Measurement, however, Miller maintained ownership of 80 percent of the capital stock of the company.
The creation of Miller Industries came as the result of careful and thoughtful planning. After considering many different options, Miller decided that the best business strategy would be to find a once-great brand name in a fragmented industry, resurrect the brand name, and grow market share by consolidating smaller companies. Soon he hit upon the answer: tow trucks. In the manufacturing segment of that industry, there were three big names—Century, Challenger, and Holmes International—but each had seen better days. Suffering from debt incurred by leveraged buyouts, the three giants were dying, and around them had sprung up numerous smaller competitors. Surveying the situation, Miller decided that he would resurrect the three giants and once again gain control of the market.
Thus, in 1990 Miller began bringing these mordant giants back to life. First he bought Holmes, a bankrupt company that had once held a 75 percent share of the tow-truck industry in the United States. Soon thereafter he purchased Challenger and Century. Together the three became part of the newly formed Miller Group—for a total price of $25 million, of which Miller borrowed $20 million. He soon set about consolidating his acquisitions, shutting down three of the five existing production factories and getting rid of some 300 distributors. He also rationalized the production process so that in many cases the same part would fit in any Miller vehicle.
In 1991, the Miller Group lost $4.7 million, but this was perhaps to be expected, considering its several large acquisitions and the fact that the enterprise was just being launched. Just three years later, however, in the fiscal year that ended in April 1994, Miller showed a profit of $4.3 million. At that time, Miller Industries was formed using the foundation that the Miller Group had created.
In August 1994, Miller took his company public, with an initial offering of some 10.7 million shares—40 percent of the company—which yielded $30 million before fees. Five million dollars of this went to repay Miller’s personal investment in 1990; $16.5 million paid off debt incurred in the purchases of Holmes, Challenger, and Century; and the remainder went back into the business. According to a November 1996 Forbes article, “In just four years he had increased the market value of the company close to threefold.”
To encourage stock purchases, Miller had given each Miller employee a single share of the company at the time of the IPO. One employee who had received stock options from Miller told Forbes that his options—which at the time of the article in November 1996 were worth $11,500—would pay the college tuition of his son, who was then only six years old.
Moving Forward in the Mid-1990s
Given the scope of Miller’s achievements, it was perhaps no wonder that he and his company were accorded almost reverential status within the industry. In November 1996, a North Carolina tow truck distributor told Forbes that Miller “came along, and he healed the sick.” Miller himself, however, approached his success with humility: responding to reports that his company would show a profit of $13.5 million on sales of $225 million in the fiscal year that ended April 30,1997, he told the Atlanta Journal and Constitution, “You can’t look backwards; you have to constantly look forward.”
In the mid-1990s, Miller Industries grew dramatically through a series of acquisitions that gave it an increasingly large share of the towing industry. In 1996, it acquired two European subsidiaries, tow truck makers Jige in France and Boniface Engineering in the United Kingdom. Also acquired was Vulcan International, Inc., a leading U.S. manufacturer of towing equipment. In the period between July 1996 and July 1997, Miller acquired ten towing equipment distributors. The company announced its intent to use the new distributors in concert with its existing distributors to form a North American network for towing and recovery equipment, specialty truck equipment, and related components.
Miller Industries created RoadOne, a towing service company, in February 1997, and in less than six months it had acquired 34 towing service companies with combined historic revenues of $80 million annually. RoadOne was, from the beginning, the largest towing company in the United States, with service in 15 states. According to the company’s annual report that year, Miller planned to establish a national towing service network. In 1997, the company also set up its Financial Services Group, which offered equipment financing and other financial services to Miller Industries distributors and their customers. The company planned to continue its expansion into these realms of business in the following year.
On November 10, 1997, Miller announced the acquisition of its 50th towing service company under the RoadOne name. ‘In just eight months,” Bill Miller stated in a press release, “we have reached an important milestone in our RoadOne strategy. Acquiring our 50th towing service company in this short period of time is a tribute to the team of people that has come together to execute the strategy.”
By virtually any measure, it was impressive growth, and Wall Street responded. For some companies, a big step such as the introduction of a new product or service line might have caused at least a momentary drop in stock value, but on the day Miller Industries announced the establishment of RoadOne, its stock rose3/4, to 203/4. The Atlanta Journal and Constitution reported in February 1997 that Miller had been the biggest gainer among Georgia public companies in 1996. In May 1997, Robert Luke of the Atlanta Journal and Constitution wrote that “Wall Street thinks Miller can maintain the momentum, much like Bill Gates has at software giant Microsoft.” Whereas Microsoft’s shares were trading at 45 times estimated 1997 profits, Miller Industries’s stock was trading as high as 65 times earnings.
Miller told the Atlanta Journal and Constitution that he thought the company would top out at 70 percent market share. Diversification would be a key: “The company needs to be able to go in more than one direction in order to become a $1 billion company,” according to Miller. He also stated that he hoped to be able to show $100 million in profit by the end of the century. Miller Industries estimated that consumers were spending $2 billion annually on towing services, while businesses were spending an estimated $7 billion annually. With regard to RoadOne, Miller said, “We could see 10,000 affiliates.”
Miller Industries is the world’s largest integrated provider of vehicle towing and recovery equipment, systems and services with executive offices in Atlanta, Georgia and manufacturing operations in Tennessee, Pennsylvania, Mississippi, France and England. Miller Industries markets its towing and recovery equipment under the well-recognized Century, Challenger, Holmes, Champion, Eagle, Vulcan, Jige, and Boniface brand names and markets its towing services under the national brand name RoadOne.
Although the diversification strategy was necessary if the company wanted to increase the value of its stock, the broad reach of Miller Industries’ services would soon expose the company to legal liabilities. As it turned out, Luke’s favorable comparison to Microsoft—which itself underwent a widely publicized antitrust investigation in the late 1990s—would prove to be ironic.
Challenges at the Century’s End
In August 1997, Forbes once again praised Miller’s recent accomplishments, but added a cautionary footnote, stating: “No question that Miller has been a hot growth company. But the picture’s changing.” By purchasing distributors, Miller had begun competing with the companies which purchased its equipment. This meant, in effect, that it was competing with its own success. Furthermore, Forbes noted that by embarking “on a consolidation binge in towing services,” it was again competing with its customers. Finally, a number of motor clubs—which were typically a large source of towing-service income—were “wary” of Miller Industries.
Two months later, in October 1997, the news was even worse. A group of stockholders brought a class action suit against the company, charging that Miller himself, along with several of his officers, had “disseminated false financial statements” about the company’s growth in order to sell stock. While Miller Industries was still in the throes of this legal challenge, it received word in January 1998 that it faced an even more formidable adversary: the U.S. Department of Justice, which had initiated an antitrust investigation. At the crux of the government’s probe was a charge which turned Miller’s strategy of diversification into a liability. Apparently, by purchasing so many companies in various segments of the tow truck industry, the Justice Department held that Miller was in danger of creating a monopoly.
Miller Industries responded to the legal challenges, as well as to concerns about its stock, with a forthright public relations campaign. In a press release, for instance, it noted that its earnings in the third quarter of 1997 were lower than expected. It also issued communiqués reporting the progress of the Justice Department investigation. President and CEO Jeffrey I. Badgley said, “We believe that this industry is highly competitive, and are prepared to support our belief. We will cooperate fully with any investigation if asked to do so. In the meantime, we intend to continue to focus on operating our business for the benefit of our customers and shareholders.”
In taking a positive approach to a negative situation, Miller Industries was—perhaps without recognizing the fact—borrowing a page from Georgia’s own Ivy Ledbetter Lee (1877-1934), often referred to as the “Father of Public Relations.” While he was working as a public relations consultant for the Pennsylvania Railroad in 1906, a train owned by the company had an accident. The railroad followed standard procedure, which was to pretend that nothing had happened; Lee, however, went against tradition by inviting reporters to visit the scene of the accident—at the railroad’s expense, no less—and promised to provide them with all the information they needed. Soon the newspapers were printing positive stories about the company, and the railroad executives realized the wisdom of Lee’s innovative approach.
In mid-1998, it remained to be seen whether Miller’s forthright strategy would yield similar results. Certainly there had not been a spate of negative news stories in the Atlanta Journal and Constitution or elsewhere, and though the antitrust investigation continued, the company had good news to report on another front. According to a May 20, 1998, press release, a Tennessee judge had granted Miller Industries’ motion to dismiss the class action suit. Half the legal battle was over, and Miller would continue its public relations campaign and carry on business as usual until the results of the antitrust case—and the company’s future—were decided.
Century Holdings, Inc.; Champion Carrier Corporation; Miller Industries International, Inc.; Boniface Engineering Limited (U.K.); Jige International (France); Miller Financial Services Group, Inc.; Vulcan International, Inc.
Abram, Malcolm X., “Antitrust Inquiry for Towing Firm,” Atlanta Constitution, January 10, 1998, p. E5.
Foster, Christine, “The Tow Truck Savior,” Forbes, November 4, 1996, pp. 184-86.
Keaten, James, “Miller Industries to Buy 32 Towing Companies,” Marietta Daily Journal, February 5, 1997, p. B4.
Kerfoot, Kevin, “Miller Industries Acquires Greeneville Facility,” Tennessee Manufacturer, April 1997, p. 1.
Luke, Robert, “Georgia-Based Wrecker Manufacturer Prepares for More Bang-Up Growth,” Atlanta Journal and Constitution, May 19, 1997.
Quinn, Matthew C., “Miller Industries to Buy 30 Towing Services in 15 States,” Atlanta Journal and Constitution, February 5, 1997.
Waxier, Caroline, “Lifts Needed,” Forbes, August 25, 1997, pp. 268-69.