By Marilyn Odendahl, Truth Staff
modendahl@etruth.com
ELKHART -- Next to banks and automakers, the recreational vehicle industry might not seem like the ugliest girl at the corporate acquisition dance but, still, her dowry has become depleted in recent years by rising fuel prices and the credit crunch.
May -- a month when the weather turns warm and consumers get inspired to purchase an RV for the summer camping season -- only highlighted the struggles in the RV market. The industry witnessed steep declines, some near 50 percent, in wholesale shipments and retail sales.
The downturn has been severe enough to send Monaco Coach Corp. and Fleetwood Enterprises, two major RV manufacturers, into Chapter 11 bankruptcy. Just months after the companies filed, suitors appeared and snatched the RV divisions.
"We see a huge opportunity. We have complete confidence the RV market is going to rebound and we're going to resume a leadership position in that market," said Paul Bamatter, spokesman for American Industrial Partners. The private equity group bought Fleetwood's RV properties for $33.2 million.
This is not the first time that companies outside of the RV industry have bought operations with the intent of making and selling motorhomes and towables. For Monaco, which was purchased recently by Navistar International Corp. for $47 million, it's the second time around.
During periods from the 1960s to the 1980s, the industry made an abundance of cash at a rate that attracted big corporations to buy healthy RV companies. Everybody who had money to invest was getting into the RV industry, said Al Hesselbart, historian at the RV/MH Hall of Fame.
Among the major names that entered the RV building business were Beatrice Foods, which acquired Airstream, and W.R. Grace, which bought the Fan and Monitor brands from Franklin Coach. However, the dreams of cash cows evaporated for these outside companies and they nearly destroyed reputable, long-standing names in the industry, Hesselbart said.
Since an RV manufacturing operation does not require a lot of capital, starting a towable business is easy, said David Humphreys, attorney and former president of the RVIA. However, the key to success is understanding the importance of personal relationships among the RV personnel.
That emphasis on handshakes and friendly banter becomes most apparent during the National RV Trade Show held each year in Louisville, Ky. When dealers at the show give a nod to a particular unit, the manufacturers know with 90 percent accuracy that a sale has been completed, Humphreys said. However, the corporate guy in thick glasses working in the backroom, as Humphreys described him, does not understand and refuses to count it as an actual sale. Consequently, the dealer gets insulted over a manufacturer questioning his integrity.
"I think the main lesson to be learned," Humphreys said, "the main problem seemed to be they didn't really know how much of a people business this really is."
Some in the industry do not consider Navistar a true outsider because of the company's chassis manufacturing divisions. Moreover it got personal experience in the RV industry when it ran Custom Chassis Products as a joint operation with Monaco.
AIP is touting its experience in building specialty vehicles with its partners, manufacturing fire trucks, ambulances and buses. Knowledge of how to build those vehicles will apply to making the Fleetwood products, Bamatter said.
AIP is not the only private equity investment firm to get into the RV industry. After purchasing Western RV Co., Monomoy Capital Partners made a play to buy the former Pilgrim International in Middlebury but the agreement fell through in the final phase.
David Hoefer Sr., founder of Pilgrim, did not want to talk about history but he indicated there was clash in thinking. He described Monomoy and Pilgrim as both having "good people but different cultures."
Still the experience did not sour the industry veteran on outside investors. Hoefer sees these entities as bringing needed technological resources and new manufacturing systems to the RV plants. In addition, he said, these companies have the people and the contacts to move the industry forward in quality.
Pointing to the auto makers who can build a car that retails for $20,000 or $30,000 and does not need a lot of maintenance to keep it on the road for a long time, Hoefer wondered why a motorhome or towable can't be built like that. Customers think of RVs like autos, Hoefer contended. They want to use them and not worry about maintenance.
While Beatrice and W.R. Grace were definitely outside companies, Harley-Davidson Inc., would seem to understand the concept of producing specialty vehicles for recreational uses. The motorcycle manufacturer bought Holiday Rambler in 1986 for $155 million and eventually sold it nine years later to Monaco Coach for $50 million.
Despite the loss, investors cheered the sale, according to an article in The Wall Street Journal. Analysts described the RV company as an albatross for Harley-Davidson and said that institutional investors were not willing to purchase stock as long as Harley owned Holiday Rambler.
The demise of Airstream under Beatrice Foods led to the start of Thor Industries, which is a giant in the RV world today, owning several successful manufacturers. Wade F.B. Thompson and Peter B. Orthwein founded Thor in August 2008 with the acquisition of icon Airstream.
Thor's Web site hints at the condition of Airstream at the time of the purchase, noting "despite its venerable image," it "had not fared well during the economic downturn of the late 1970s."
Likewise, W.R. Grace, a chemical company, crippled the Franklin Coach brands so much so that Frank Newcomer, founder of Franklin Coach, bought both names back for 10 cents on the dollar, Hesselbart said. Then Newcomer rebuilt both brands and ended up selling the Fan division to Coachmen Industries and the Monitor to Holiday Rambler.
The problem wasn't the recreational vehicles, Hesselbart said, but rather outside corporations not understanding the industry.
"If an RV company goes out thinking they're selling a vehicle, they will not have success," Hesselbart said. "They're selling leisure time. They're selling family time. That's what the corporate giants don't understand. We're selling recreation and the vehicles are the tools to get there."