By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
MIDDLEBURY -- The credit crunch financially choked Coachmen Industries into selling its RV group and soured management on any hopes of a quick rebound for the industry.
Coachmen officials detailed their reasons for selling the company's recreational vehicle division to Forest River and outlined their optimism for the restructured Coachmen Industries during a conference call Monday afternoon with investors. The company announced earlier it was selling the RV Group for about $42 million to Berkshire Hathaway subsidiary Forest River.
"Despite a proud 44-year heritage as an RV company, the time has come for Coachmen Industries to exit the RV manufacturing business," said Richard Lavers, president and chief executive officer. "This is a conscious decision to exit a segment suffering from terrible business conditions at a time when it is clearly undesirable to be in that segment for at least the next two years."
The company's troubles began in 2005 when problems with the material it used for RV sidewalls was defective and, Lavers revealed, adversely affected sales, warranty costs and market share in 2006 and 2007 and depleted the company's available cash reserves.
Although Coachmen was happy with its first quarter 2008 results, it had little ability to weather any dramatic change in market conditions. That change came mid-year as banks and financial institutions began pressuring RV dealers to reduce their inventory, which caused many dealers to shy away from buying new RVs to replace the units they had sold.
With its own inventory rising and some dealers in its network failing, Coachmen had to join its competitors in discounting units. It also cut costs and curtailed production, but the market continued to slow as customers could not get financing to purchase RVs.
Then its own lenders revised the formula to value Coachmen's assets, reducing the company's available capital. Following the September market crash, Coachmen received demands for additional securities for bonds that, Lavers said, were critical to the business's operations. The credit markets dried up on all levels.
"Where there is no credit, there are no RV sales," Lavers said.
Coachmen was coping with mounting losses in the RV business even when the industry as a whole was posting record years in shipments. From September 2004 through September 2008, the Coachmen RV Group manufactured 55,000 RVs but accumulated $121 million in pretax losses.
"Coachmen Industries Inc. is in the business to make money," Lavers told investors. "It is not in the business to make RVs. ... Truth of the matter is, we have made a lot of RVs but we have lost bucketloads of money in the process."
Lavers said while Coachmen fulfilled its commitments and reduced costs significantly, the RV market continued to dissolve and management had to confront the brutal realities of the situation.
After the sale of the RV group, which must be approved by the shareholders, Coachmen estimated it will have about $20 million with which to operate. The restructured company, comprising the housing group and the specialty vehicle division, could record a profit in the first quarter of 2009, Lavers said.