By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
In a move that has knocked the wind out of Elkhart County, Monaco Coach Corp. announced the closure of plants in Elkhart, Nappanee and Wakarusa and job cuts impacting about 1,400 hourly and salaried workers.
It is also inducing many to call upon the federal government to do something to rein in rising fuel prices.
The recreational vehicle manufacturer, headquartered in Coburg, Ore., told its employees of its decision and issued a press release Thursday. Operations are expected to permanently cease in the three cities by mid-September.
"We deeply regret the impact that shutting down these operations will have on our employees and their families as well as the communities in which they live and work," Kay Toolson, Monaco chairman and chief executive officer, stated in the announcement.
Shortened work weeks, reduced hours and layoffs have become a regular occurrence in the RV industry as the national economy appears headed toward recession but the Monaco layoff and closure will be the largest since the downturn began.
The news stunned even weathered RV businessmen.
Lawrence Thomas, president of JSI Corp., a supplier to the RV industry, was still a teenager when he began his career by sweeping floors and cleaning toilets in RV plants. He has seen the industry struggle during the recessions in the 1970s and early 1990s but this latest round of economic troubles is new territory.
"I've never seen our industry like it is right now," Thomas said. "I've been around a long, long time and this is the worst I've seen it."
The Monaco reorganization will be as follows:
* From the Wakarusa plant, the production of Class A diesel motorhomes will go to facilities in Oregon. The Class A gas-powered motorhomes and fifth wheels will be moved to the Warsaw plant.
* From the Elkhart plant, the joint venture production of diesel chassis with International Truck and Engine Corp. will be moved to Oregon.
* The Nappanee cabinetry shop will be closed.
* The Goshen plant, which makes Roadmaster brand utility trailers, and the Milford plant, which makes Bison brand horse trailers, will not be impacted.
These moves, once completed, are expected to reduce costs by more than $12 million per quarter, according to Monaco Coach. One-time costs associated with the reorganization will be about $7.5 million, including employee compensation expenses, and affect the third-quarter results.
In the meantime, production will continue for another 60 days in order to finish the units already on the line, said Craig Wanichek, spokesman for Monaco. When the operations finally do cease, the buildings in Wakarusa, Elkhart and Nappanee will be listed as for sale.
Wanichek stopped short of saying the closure would forever end Monaco's presence in the three cities. The RV maker believes the market will come back, Wanichek said, and when it does the company will "definitely consider building motorhomes again in Wakarusa but we have several plants available to do that."
Monaco blamed high fuel prices, declining consumer confidence and tightening credit markets for the consolidation. In the letter sent to employees, CEO Toolson wrote the government "can do more to facilitate a recovery in our nation's economy" and, in particular, he noted government officials "should be taking steps toward making our country energy self-reliant again through drilling for oil, building refineries and encouraging greater use of alternate energy."
He then encouraged his employees to write to their congressional representatives and ask them to "support legislation that will assist in returning our nation's economy to a position of strength."
Following Monaco's announcement, state Rep. Jackie Walorski, R-Elkhart, sent a letter to Indiana Gov. Mitch Daniels, naming high fuel prices as the main contributor to the downsizing.
In an interview Thursday afternoon, Walorski said she was appalled neither of the presidential candidates nor members of Congress are addressing the pain at the pump and called for elimination of the state gas tax. She said she had talked to the state budget office about issuing an executive order to temporarily suspend the state sales tax on the purchase of RVs during the Elkhart County RV Show in August but was told such an action has to come from the Legislature. Consequently, she intends to propose a bill dealing with the sales tax when the Indiana General Assembly reconvenes in January.
Elkhart Mayor Dick Moore also pointed to the need to get gas prices under control.
"Until we do that," he said, "it's a pretty bleak future."
While $4 a gallon gas is making headlines, Thomas said he is worried about $5 a gallon gas. He also pointed out that at the time his business is feeling the downturn, property taxes on his plant rose from $10,000 in 2006 to $20,000 in 2007.
The rising costs of fuel and food, along with the mortgage crisis, call for government regulations or price controls to allow consumers to gain some confidence, Thomas said.
"It's out of everybody's hands," he said. "This is now something where our federal government needs to step in."
However, Mark Bowersox, director of Indiana Recreational Vehicle Council said while fuel prices are a large contributing factor, the current contraction in the RV industry is caused by a combination of things including the stock market, the housing market and the banking system.
Both Thomas and Bowersox predict the industry will not turn around for another 12 to 18 months. The RV industry is the first to feel a recession and the first out of a recession, Thomas said, but this time, the business will take longer to recover. Layoffs and closures will continue, Thomas predicted, so that when the economy does pick up, the RV industry will be smaller but stronger with fewer manufacturers meeting consumer demand.
Even as he, too, noted the RV industry is cyclical and will swing back up, Wanichek conceded Monaco's realignment is an indication of the condition of the market and the length of time expected before the recovery.
"Our take is," Wanichek said, "this is such a major step. If we thought it was going to turn around in the near term, we wouldn't have done it."