By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
MIDDLEBURY -- Serious negotiations started about 10 days ago and ended Thursday night with officials from Coachmen Industries agreeing to sell the company's RV Group to Forest River.
The impending acquisition comes after months of headaches for Coachmen Industries. Not only was it put in the national spotlight as an example of the struggling recreational vehicle industry but it was the subject of countless rumors. At one point, Coachmen executive Mike Terlep described the gossip has having reached a "degree of ridiculous" that was "disruptive to the community" and "hurt the industry."
But continuing losses and a growing consensus that that economic downturn will get worse convinced Coachmen to sell the assets of the RV division.
"You just can't tell," said Tom Gehl, director of investor relations at Coachmen, "and you just don't want to take a chance with your work force and your company."
Although the agreement, which was announced Friday, must still be approved by Coachmen shareholders, Forest River is set to purchase the brand, production lines and manufacturing operations in Middlebury as well as Michiana RV in Elkhart, the dealership owned by Coachmen.
The RV Group has a payroll of 600 employees and about 85 percent are expected to be retained by Forest River. Some Coachmen executives will join Forest River.
"I think it's a very positive thing because it will ensure the employment and carry the brand into the future," Gehl said. The Coachmen name will continue to appear on towables and motorhomes after Forest River takes over.
As with many other executives throughout the RV industry, Forest River founder and chief executive officer Pete Liegl had worked for Coachmen and learned about the recreational vehicle business while there.
"I just think it's a good name, good people and a good company that over time, I believe, can be turned around and can be profitable," Liegl said. "There's no question we will turn it around."
Coachmen RV Group has been reducing costs and inventory dramatically but the division kept losing money. In the first, second and third quarters of 2008, the RV Group recorded increasing losses of $1.09 million, $6.99 million and $11.13 million, respectively.
After the sale, Coachmen Industries will be composed of its system-built housing division and its specialty vehicle business, ARBOC Mobility bus. Despite the downturn in the housing market, Coachmen's Housing Group has posted an operating income during the first three quarters of 2008 of $1.38 million, $3.10 million and $584,000, respectively.
Shareholders are scheduled to meet and vote on the agreement in December. Terms of the purchase have not been disclosed, but Liegl said the price was "more than I want to pay and less than what they want."
In October, Liegl publicly announced he was looking to acquire an RV manufacturer although he did not identify specific companies. Friday afternoon he said "serious negotiations" had been ongoing between Forest River and Coachmen for the last 10 days and that prior to those talks, he had never made any offers to buy the RV maker.
Moreover, Liegl said, Forest River, which has three bus companies, never discussed acquiring Coachmen's bus business.
Forest River, a subsidiary of Berkshire Hathaway, has curbed production and cut personnel as the recession has deepened but, Liegl said, the company has made money every month. He attributed his company's success to building the best RVs for the best price, not necessarily the cheapest price.
Liegl said Forest River and Coachmen share some synergies that will help both companies.
"They produce RVs like we do and hopefully everybody will get along, which I'm sure they will," he said.