Bull Of The Day: Spartan Motors (SPAR)

When the average investor thinks about the Automotive industry, they probably start with the “Big 3” automakers – Ford (F - Free Report), General Motors (GM - Free Reportand Fiat Chrysler (FCAU - Free Report). They might consider upstart electric auto manufacturer Tesla (TSLA - Free Report), and overseas companies like Toyota, Nissan, BMW and Volkswagen.

All of those companies are doing functionally the same thing – designing and building mass-market passenger cars, trucks and SUVs for the consumer market.

As those name-brand companies with hundreds of billions in collective market capitalization duke it out in a never-ending battle to sell the most cars, it’s easy to overlook a much less obvious(but often very profitable) niche market – specialty vehicles and parts for industrial markets.

North Carolina-based Spartan Motors (SPAR - Free Reporthas been consistently growing earnings by selling high-quality and dependable vehicles to the emergency response, government service, defense and delivery markets. They design and manufacture the chassis’ and entire vehicles you see on the road as fire trucks, ambulances, municipal service vehicles and delivery trucks.

To understand how Spartan Motors got to where they are today, we’ll need to examine a bit of the company’s history. During the 1970’s The Form-Rite Corporation had supplied millions of dollars’ worth of molded plastic parts to Diamond REO trucks, which was filing for bankruptcy protection. During the bankruptcy proceedings, Form-Rite learned of a significant contract that soon-to-be-defunct Diamond REO had secured to build custom fire truck chassis.

Recognizing the potential value of that agreement, a small group of Form-Rite executives and engineers joined forces with former Diamond employees, obtained the contract and incorporated Spartan Motors, leveraging basically their entire personal net worth to build their first chassis.

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