Good Start on Day One of the New Monaco RV LLC

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Sherman Goldenberg

 

The new Monaco RV LLC hit the ground running on Thursday (June 4), its first day in operation under ownership of Navistar International Corp., by hiring back an estimated 180 employees of Monaco Coach Corp.

Today, managers will begin contacting former MCC employees, who had been laid off sometime in the past year, to staff production facilities in Oregon and Indiana.

However, Monaco spokesmen have been noncommital as far as the timing of reopening any plants. “The timetable has to remain not specific right now,” one Monaco spokesman told RVBUSINESS.com.

Navistar announced Thursday that it had closed the deal to buy Monaco’s assets, including plants in Coburg and Harrisburg, Ore., and in Wakarusa and Milford, Ind., as well as its inventory, brands and intellectual property.

At $47 million, noted The Register-Guard of Eugene, Ore., the final sales price was $5 million less than what Navistar proposed to pay when the deal was first announced in March. Navistar said it was able to buy Monaco’s assets at a “significant discount” because the company was in bankruptcy.

In a news release, Navistar said the new company “will resume production at certain facilities in the coming months,” depending on market conditions, but offered no more details of its plans.

“When the time is right,” Navistar spokesman Roy Wiley said.

The Monaco logo shown above now appears on Navistar’s website beside other Navistar brands and contains a  link to the old Monaco site.

In anticipation of Thursday’s closing, Navistar placed a full-page ad in Wednesday’s Wall Street Journal.

“We’re proud to welcome Monaco RV into the Navistar Family,” says a large ad over a large headline that says, “Now We’ve Got all the Roads to Number One Covered.”

It added in smaller type:

“It takes a special company to become part of our portfolio. Monaco RV is certainly that. The number one producer of luxury recreational vehicles, Monaco RV joins our other category leaders: International Trucks, IC Bus and Navistar Defense. Together, along with our MaxxForce engines, parts, service and finance offerings, they further our mission to be the transportation company in the world. Something that separates our  company from the competition. Which is why we’re particular about who joins us on the road to fulfill our vision.”

After the closing, Jack Allen, president of Navistar’s North American truck group, said in a written statement, ”Providing the RV market with the right vehicles at the right time will be Monaco RV’s first order of business. Our management teams will spend these first few weeks ramping up the business at a pace commensurate with demand.”

The company, founded in 1968 in Junction City, Ore., endured a brutal 2008 in which it was battered by record-high gas prices, the financial meltdown on Wall Street, tight credit and woeful consumer confidence. It filed for Chapter 11 bankruptcy protection in March and laid off  most of its remaining workers.

Business and community leaders in Oregon and Indiana reacted hopefully to news of the deal.

“We’re optimistic they will resume production at Coburg,” said Jack Roberts, executive director of Lane Metro Partnership, an economic development group. “We think this is a good resolution to what was a bad situation.”

He said he has encouraged Navistar officials to consider using the Coburg plant to build not just Monaco RVs, but also some of its other products such as trucks and buses.

“It’s a great facility” and a good location because of its proximity to the large California market, he added.

Coburg Mayor Judy Volta said the city would welcome Navistar and the new Monaco as valued business partners.

“Monaco has been an excellent neighbor,” she said. “We look forward to a new day.”

While some observers have opined that the RV industry won’t be able to bounce back, Volta said she was optimistic about its prospects.

“We still have a leisure class,” she said. “Anyone with an RV knows it’s a viable way of life.”

Kevin Penn, a 17-year Monaco employee, said he was glad to hear the company had been purchased. He has been working part-time as a landscaper, fixing up a house and taking job-training classes, but he isn’t ready to turn his back on his long-time employer.

“I’ve been somewhat holding out, wanting to go back there if it opens up,” he said. “I still would like to go back to Monaco if the possibility is there.”

In Indiana, there also was a positive response.

Mark Bowersox, director of the Indiana Recreation Vehicle Council, called the purchase a “vote of confidence” for the entire RV industry, according to The Elkhart Truth.

“To the outside it would appear that somebody is saying this is a temporary low point in the industry,” Bowersox said.

Monaco Coach’s fortunes fell rapidly as a RV market deteriorated over the past 12 months, culminating with the company filing for Chapter 11 bankruptcy protection on March 5.

The manufacturer ended 2007 with sales of $1.27 billion and a net income of $12 million. However, through the third quarter of 2008 — the last quarter Monaco filed results with the U.S. Securities and Exchange Commission — Monaco posted sales of $620 million and an income loss of $90 million.

Pointing to the company’s past balance sheet, Bowersox said the purchase of Monaco for less than $50 million “is a bargain” and even Navistar noted it bought the RV division “for a significant discount.”

Navistar’s low bid initially incited Ableco Finance and Bank of America to oppose the sale. Although the two main creditors of Monaco are owed a total of $75 million, both were convinced to allow the acquisition to proceed.

Monaco and Navistar have a long-running business relationship. In 2007, Monaco and International Truck and Engine Corp., a Navistar subsidiary, formed a joint venture called Custom Chassis Products LLC to build rear-engine diesel chassis. Custom Chassis filed for Chapter 7 bankruptcy last month in U.S. Bankruptcy Court in Indiana, listing assets of $4.9 million and liabilities of $13.5 million. Companies file for Chapter 7 bankruptcy to liquidate their assets.

In addition, Navistar’s president and CEO, Daniel Ustian, has been on Monaco’s board of directors since 2003.

Navistar, which generated $14 billion in revenue last year, employs 17,000 workers at plants in Ohio, Alabama, Arkansas, Oklahoma and Canada.

Wall Street also had a positive take on the transaction. Navistar stock on the New York Stock Exchange closed at $40.37 a share Thursday, up $2.32 or about 6%.

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