By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
LOUISVILLE, Ky. -- Perhaps the most remarkable thing about the Fleetwood and Monaco booths at the 47th annual National RV Trade Show was that both manufacturers even had displays. Just nine months earlier, the two companies had filed for bankruptcy and announced they were looking for buyers, but in Louisville, with booths positioned at opposite ends of the exhibition hall, they have new owners and a new inflow of capital.
Once towering giants, Fleetwood and Monaco may represent the boom, the bust and the uncertain recovery of the recreational vehicle industry.
In filings with the U.S. Securities and Exchange Commission, the former Fleetwood Enterprises and Monaco Coach Corp. each billed themselves as "a leading manufacturer" of recreational vehicles. Yet in March 2009, both filed for Chapter 11 bankruptcy. If Monaco's decision the previous summer to slash operations and work forces in Indiana and Oregon signaled the entire industry was in trouble, the red ink that drowned Fleetwood and Monaco demonstrated how deep that trouble was.
The financial turbulence experienced by Fleetwood and Monaco landed the pair on Robert Salomon's list of Notable Bankruptcies of 2009. Salomon, an associate professor of management and organizations at New York University, explained that he included the RV makers because they are sizable companies that failed, both had thousands of employees and multiple facilities in different states.
However, he was not surprised the manufacturers stumbled given the motorhomes they produce were affected most harshly by the economic downturn as consumers curtailed spending on discretionary items.
What did surprise the academic was how quickly the RV divisions of Fleetwood and Monaco were purchased.
During the summer, Navistar International Corp. bought the RV assets from Monaco for $47 million and renamed the company Monaco RV, while American Industrial Partners Capital Fund IV took the motorhome and towable business from Fleetwood for $33.2 million, dubbing the new enterprise Fleetwood RV.
The purchases did not put either buyer into completely unfamiliar businesses. Navistar makes commercial trucks, school buses and diesel engines. Also, it had previously joined Monaco Coach in 2007 to launch Custom Chassis Products, a joint venture that manufactured chassis for the RV and commercial step-van markets.
American Industrial Partners is a private equity group with an extensive portfolio that includes large vehicle manufacturing. The investment group owns Collins Industries, a maker of ambulances, buses and road construction equipment as well as E-One, Inc., a supplier of fire rescue vehicles.
Along with buying the assets, Navistar and AIP kept some of the management personnel who had overseen the operations of the former RV manufacturers.
The recovery
At the Louisville RV show at the beginning of December, Monaco's booth spanned a corner and was anchored by a hulking black Navistar truck at one end and the company's military transport vehicle at the other. In between there was a spread of motorhomes and towables.
Monaco officials Jim Sheldon and Richard Bond declined to talk to the media, deferring to a Monaco spokesman. In turn, the spokesman referred all inquires to Roy Wiley, spokesman for Navistar.
By contrast, the Fleetwood booth was smaller and filled with only motorhomes. Pointing to a Class A in the center of the display, Fleetwood chief executive officer Chuck Wilkinson said the new coach, the Encounter, billed as a crossover that combines the best elements of Class A and Class C motorhomes, had been designed and built since American Industrial Partners took ownership.
"We think if we have the best product, the best work force and the best relationship with dealers," Wilkinson said, "the market share will come."
Even so, by focusing on the motorized segment of the RV market, Fleetwood could struggle. The upturn in the RV industry has been led by wholesale shipments of towables, while motorhome shipments continue to lag behind 2008 levels by 61 percent. Also, dealers and manufacturers note that banks are still unwilling to make consumer loans for motorhomes.
AIP only invests in American companies that make things people can put their hands on, Wilkinson said. In taking over Fleetwood, the private equity group instituted lean manufacturing methods and flattened the management organization to where anyone in the sales, production or engineering departments can walk down the hall and talk to either Wilkinson or the president John Draheim.
On July 20, AIP flipped the lights on for Fleetwood RV, locating the headquarters and production in Decatur, Ind. At the end of November, the company had 940 employees, Wilkinson said.
Wiley called Monaco RV "a work in progress" but emphasized Navistar maintains a strong commitment to the RV maker.
"We didn't buy the business to sell the assets. We bought Monaco to grow the business," he said, although he conceded if a particular asset does not fit the company's plans, then, perhaps, it would be sold.
He did not have information on new or revamped products that Monaco displayed at the trade show and cited Navistar policy against disclosing the current employment at the Monaco facility in Wakarusa, Ind.
Glen Perkin, owner of Perkin RV Center in Hudsonville, Mich., often works as a consultant for potential RV buyers, helping them find the unit that best meets their needs. At the show, he examined the motorhomes built by Monaco and Fleetwood and had praise for the products of the former.
"I think there's some high quality in it," Perkin said. "It's not a unit that is going to fall apart down the road."
Holdover from the past
At the entrance to the Newmar Corp. booth, the luxury coach maker had a placard propped on an easel asking dealers, "Did you get burned?" The sign went on to read, "While some RV manufacturers walked away from their warranty commitments and burned their dealers, Newmar stood strong."
Touting Newmar's behavior during the economic struggle, the posters, perhaps inadvertently, highlighted different decisions made by Navistar and AIP. Namely, AIP opted to uphold the warranty agreements on RVs made by the former Fleetwood Enterprises and Navistar chose the opposite for the products built by the defunct Monaco Coach.
"We honored the warranties because, honestly, it's the right thing to do," Wilkinson said. "We know a lot of these customers personally."
Meanwhile at Navistar, Wiley said he received several e-mails from Monaco customers immediately after the acquisition but since then has not gotten any complaints regarding the warranties.
"To me," Wiley said, "it's a non-issue now."
Standing outside the Newmar display, Perkin agreed with Wiley. The RV dealer said unhonored warranties are common when other kinds of businesses get bought.
"You're going to get those types of things in any company that goes bankrupt," Perkin said, adding companies should think what they would decide to do if they were in the same situation.
The future
That both companies are backed by moneyed organizations makes Perkin confident for the future. He expects Fleetwood and Monaco to be more attentive and accountable to finances, which will help wash out the stain of bankruptcy.
In addition the pair have good products that meet customers' needs and desires, Perkin said, along with "knowledgeable people" at the helm, putting the companies in position to succeed.
Salomon at NYU is not as sure. He believes this recession has caused a fundamental structural change in consumer habits, making buyers more cautious about when and how they spend their money. As consumers give more consideration to their purchases and shy away from big-ticket discretionary items like motorhomes, the RV business could take several years to rebound and AIP along with Navistar will have to be patient before they see a return on their investments.
The lesson of being successful may come from Apple. Salomon noted the technology company is not suffering in this recession because it makes "killer products that everybody wants." For Fleetwood, Monaco and any RV company to survive, Salomon said, it will have to create products that have value for consumers.
Ultimately, what RV consumers deem valuable will likely depend on economic factors the industry cannot control such as fuel prices, consumer confidence and credit requirements.