As the recalls pile up at Polaris, the trouble gets deeper and deeper

Three months after Matt Klebe bought his four-wheeler Polaris Sportsman ATV, it nearly burned him.

That day in 2015, he was bounding around Devils Lake, N.D., when he had to quickly turn off the engine and jump from the machine. It stank of burned plastic, and his leg was hot. The side panel hugging his leg had melted.

It happened again last month, just before Polaris recalled 19,200 other Sportsman vehicles for the same problem.

"I actually didn't really expect it to happen again. I thought this was just a fluke thing," the North Dakota resident said. The experience, he said, "may have made me change my mind toward a different brand."

Over the past two years, recurring product recalls have dealt a serious blow to Polaris' position as an icon of Midwestern manufacturing know-how. In all, the Medina-based maker of ATVs, snowmobiles and motorcycles has issued 12 rounds of recall notices that affected 338,800 vehicles.

It is a difficult situation for a company that started building its reputation in the early days of the snowmobile industry in the 1950s and early '60s, when co-founder Edgar Hetteen took one of his machines on a 1,200-mile journey across the Alaskan wilderness to demonstrate its durability.

Now Polaris is fighting to reassure its dealers and customers, many of them in Minnesota, where all season, off-road recreation has long been a popular weekend pastime. Reports of 247 fires and multiple injuries in two years on Polaris vehicles have led to falling sales and lower profits. The company's stock price has declined by about half since the problems emerged. Three riders also have died in crashes on Polaris vehicles, although the company is disputing claims that design deficiencies were the cause.

Polaris has acknowledged that it faces challenges, but the company has also said it has a culture that can deal with adversity and learn from it. CEO Scott Wine said in a statement earlier this month, when the latest two recalls were announced, that he expects fewer and less complex recalls as capabilities improve.

Company officials declined to comment for this article, citing a mandatory quiet period before an upcoming earnings announcement. But Wine said in an annual report the company released last month that safety and quality are its top priorities, and that it knows it has work to do.

"We will continue to closely monitor our vehicles' performance," Wine said. "When an issue arises, we will act swiftly to keep our customers safe."

The company will give an update on its situation this week, when it reports its latest quarterly results Tuesday and then hosts a shareholder meeting Thursday. Its legion of loyal customers and dealers will be looking for reassurance that it can get the problems fixed.

The recalls are not Polaris' only worry.

As Polaris has been dealing with safety issues, the industry as a whole went into a sales lull. Plus, competitors have gotten more aggressive, taking away market share.

"Polaris couldn't have picked a worse time to have unprecedented quality issues," said Wedbush Securities analyst James Hardiman. "Polaris is simultaneously wrestling with more challenges than at any time in the 10 years we have covered the company."

With all the issues, some dealers say they fear that Polaris could lose its position as the top U.S. seller of ATVs and popular side-by-sides. Even two years after the recalls started, they received two more sets of recall notices last month and another two this month.

Randy Knadle sees the effects at the service division he manages at Cannon Power Sports in Cannon Falls.

Walking through the service yard last week, he started pointing: "That's a Polaris recall. There's a recall. There's another recall. And there are five recalls on these Sportsmans right here," he said.

"I'm getting two or three units a day to fix. It's a bit overwhelming," he said. "Consumer confidence in the product is down. … Customers love the products, but there is a lot of fear involved" over possible safety issues.

Larry Stein, a service worker at Cannon Power Sports who has had to calm customers down, just had his own Polaris Ranger 2016 900XP recalled April 13.

"There are people who bleed Polaris," he said. "But if all they get is recall, recall, recall, that gets a little old after a while."

This is not the first time Polaris has faced big challenges. In the early 1980s, snowmobile makers such as Polaris and Minnesota rival Arctic Cat fell on hard times amid a recession and a series of light-snow winters.

But both survived and went on to diversify, creating new products that some think could be a big help to Polaris as it looks to get past the recent recalls. Polaris has been expanding with motorcycles, electric vehicles and retail stores. Arctic Cat, still struggling, was bought last month by golf cart and small airplane maker Textron Inc.

Polaris bought and revived the iconic Indian Motorcycle brand, putting a nice dent in Harley-Davidson's market share. Polaris also bought the 509 Inc. snowmobile helmet maker, the Taylor-Dunn utility vehicle maker and Transamerican Auto Parts, an industry giant with 75 stores, six distribution centers and 1,750 employees.

"Diversification is smart" and should help Polaris recover from "this really tough spell," said brand and crisis management expert Doug Spong, formerly with Carmichael Lynch Spong.

"If great brands like Toyota, Audi and Ford [Pinto] can move on from [massive product recalls], then I think that Polaris can move on from theirs as well," Spong said. "Its consumers are downright enthusiasts. They love that brand. They ride that brand."

But loyalty is not unlimited.

Dustin Seedorff said he's had one too many surprises. He bought his $15,000 Polaris Scrambler ATV last June. A month later, he said, he was riding through Cannon Falls at 30 miles an hour when the engine exploded, sending parts and flames flying.

Polaris paid for a new engine. Since then, the shock mounts cracked three times. The axle snapped. The four-wheel-drive mechanism fell off, and two wheel bolts disengaged.

"I asked the mechanic if Polaris manufactured this thing on a Friday afternoon when all the workers just wanted to get to their weekend," Seedorff said. "With all the problems I have had, I will never buy a Polaris. Never."

According to its annual report, Polaris paid $132 million in customer warranty costs and put another $194 million in reserves in 2016 as it scrutinized its entire fleet to find and fix potential fire hazards.

But problems keep appearing. Last month, Polaris recalled 32,700 Sportsman and RZR vehicles after consumers reported 47 fires and four burn injuries. Some of the engineering problems involved brand-new 2017 models.

On April 13, Polaris recalled 51,000 of its 2015 Ranger utility vehicles after riders reported 13 heat shields fell off, causing five fires. That same day, Polaris also recalled 3,800 2017 Sportsman and Scrambler models, citing power steering malfunctions but no injuries.

Some Polaris models have been recalled more than once for various problems — most related to fire risks.

In two years, Polaris vehicles were involved in 247 fires, three deaths, plus 30 burns and other injuries. More than six lawsuits from burn victims are pending — including one filed last week — while several others have settled. Separately, frustrated shareholders filed 10 class-action lawsuits against Polaris alleging breach of fiduciary duty after the stock price plunged.

"I hope they can get all this fixed and soon," said Knadle at Cannon Power Sports. "I love Polaris products. I just don't like the position we are in. We are the ones getting chewed out and yelled at by the customers."

Dee DePass • 612-673-7725