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Lane County Suppliers Hit by OEM Bankruptcies

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March 16, 2009 by   Leave a Comment

As Country Coach LLC and Monaco Coach Corp. developed into major employers and economic powerhouses during the past 25 years in Lane County, Ore., an intertwined web of independent businesses grew up around them, providing the RV makers with paint, steel, upholstery, electronics and other materials and services required to build the luxurious land yachts.

As reported by the Register-Guard, Eugene, many of these local and regional companies came to rely on the money they made from the RV makers.

And, now that the RV manufacturers have fallen on hard times, many of their suppliers have lost a big chunk of business. A number of them are owed a lot of money — money they worry that they may never see with both Country Coach and Monaco in Chapter 11 bankruptcy proceedings.

But the impact of the near collapse of the RV industry in Lane County hasn’t been the same for all of the companies that previously grew along with the RV makers. Some of them say they’ve diversified enough that they’ve not been hurt too badly by the erosion of RV manufacturing. Others say they have had to lay off workers and scramble to find new business.

“They just hung us out to dry,” said Ken Millard, owner and president of Aries Engineering, which makes heated mats that go under tile floors in high-end motorhomes. “It’s devastating.”

His top three customers were Monaco, Country Coach and Fleetwood — all three of which are in Chapter 11 bankruptcy.

Sales at the company are 10% to 20% of what they were a year ago, he said. He’s had to lay off three of his six employees. While not among the top creditors, Millard figures his company is owed a total of $125,000 by Monaco and Country Coach.

“The loss of sales is tough,” he said. “What’s tougher is the loss of cash. They didn’t just stop ordering mats. They stopped paying for mats they ordered and that were shipped.”

Millard said he’s trying to branch out into the residential market for heated floors, but competition is stiff.

“I’m lucky to still have a company,” he said. “We are working furiously to generate a living revenue.”

The Bill Benetreu Co., a metal fabricator in Springfield, has been doing business with Country Coach since the early 1980s, building steel and aluminium parts such as hinges and brackets and storage bay doors, said Dawn Kosinski, the company’s CFO. Country Coach has been one of the company’s biggest customers, she said.

“We were prepared for a substantial downturn with them,” she said. “We did not anticipate a complete and sudden death of an entire industry.”

According to the Register-Guard, the company is among Country Coach’s top 20 unsecured creditors, with outstanding bills of $200,574, according to documents Country Coach filed last week in U.S. Bankruptcy Court in Eugene.

About two years ago, the firm had 50 employees. Today, it’s down to about 30. In recent months, the company has imposed extended furloughs and gone to alternating work weeks, Kosinski said.

“We’re doing what everyone else is doing and just trying to be as prudent as possible and continue to ride out the economic storm,” Kosinski said. “We do have other industries we serve and we continue to serve those and foster those relationships. We’re trying to look for hot spots in the economy.”

When manufacturers spend money with a supplier, it doesn’t just sit there — it ripples through the economy, in what economists call a multiplier effect. The supplier, in turn, buys goods from other businesses. And it pays employees, who in turn buy groceries, pay rent, buy shoes or make a car payment.

But the opposite also is true. If the supplier loses a major customer, as has happened with the RV industry, and has to lay off employees, those workers don’t have the money to spend, and the economy suffers.

“It’s one of those domino things,” University of Oregon economist Tim Duy said. “One domino falls and the other falls after it. That ensures that the impact from this downturn is not limited to just the jobs at Country Coach or Monaco. It magnifies to the suppliers in the industry.”

TNT Speciality Advertising in Eugene is an example of a company on the periphery of the RV industry, but one that’s been hurt by its decline. The business, which produces promotional and marketing materials, sued Country Coach in November alleging the RV maker never paid for $91,734 worth of polo shirts, caps, travel mugs and other items emblazoned with the Country Coach logo.

“We were greatly affected,” company president Kim O’Brien said. “We’re still in business. We’re not going under, because we were able to absorb that hit over time. But we did have to let go of an office person who had been with us for six years.”

TNT had done business with Country Coach for about four years, and the RV maker represented about 35% of TNT’s business, O’Brien said.

O’Brien, who was working part time, has gone back to full time, and the business is out “beating the pavement” trying to drum up new accounts, she said.

On the other end of the spectrum is Guaranty RV, the Junction City dealer that’s been selling Monaco and Country Coach RVs since the 1970s. The dealer is among the biggest creditors of both Monaco and Country Coach.

Guaranty General Manager Shannon Nill said the rapid fade of the two RV makers is “still a shock.”

“Country Coach unraveled slowly, but no one expected Monaco to do this,” he said.

With the two companies in Chapter 11 and unable to pay bills, “It affects us greatly,” he said. “It hurts our financial capacity to do the things we’d like to do.”

Other, smaller vendors say they see a silver lining in the dark clouds around the RV makers. If people aren’t buying new RVs, that means they’re hanging on to their older models and might be willing to spend money to repair and update them.

The Register-Guard reported that the decline of the RV industry has forced Innovative Coach Works in Junction City, formerly Soundsational, to focus more on the after market, retrofitting older RVs with new electronics, said Matt Rossiter, owner of the Junction City business that specializes in RV electronics.

Country Coach often would hire the shop for custom jobs after the sale of a coach. Rossiter wouldn’t say how much his company is owed by Country Coach, other than it’s “enough to buy a new vehicle.”

While 2008 was a record year, Rossiter said he’s recently been forced to lay off four of his five employees, including family members — the first time in 13 years in business he’s had to let anyone go because of the economy.

He said he and other RV vendors are trying to put together a consortium that would market Junction City as the place to come for after-market service and maintenance.

“Regardless of the manufacturers, this is still the place to get your RV worked on,” he said.

“This is new for everybody. No one has ever seen the manufacturing base so low,” he said. “We’re looking forward to the summer months when people are coming back through.”

Steve Skiller, owner of Countryside Interiors in Junction City, said his business hasn’t been hurt too badly by Country Coach and Monaco’s problems because it already has diversified into after-market service. His business specializes in RV interiors, including reupholstering furniture and installing carpet. At its peak, the business had six employees. Today it has three full-time workers.

“The aftermarket is alive and doing well,” he said, although business is slower than it has been. Like Rossiter, he’s hopeful things will pick up this spring and summer.

“We have a bright outlook for the after market,” he said. “People are going to fix up what they have instead of buying new.”

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