Spartan Sheds ‘Road Rescue’ Ambulance Line
Spartan Motors Inc. today (June 22) announced its intent to exit its Road Rescue ambulance operation as part of the company’s continuing review of all aspects of its business.
The exit will allow Charlotte, Mich.-based Spartan, which also manufactures Class A motorhome chassis, to focus its resources on the highest growth and profit opportunities. The exit from the underperforming Road Rescue operation is expected to be completed by the end of 2010. In addition, Spartan announced in a news release a number of actions designed to reduce expenses and better align its cost structure with current levels and mix of demand.
The exit from Spartan’s Road Rescue ambulance operation in Marion, S.C., is part of a long-term strategic review initiated at the beginning of the year of all parts of the company’s business. These actions are designed to focus Spartan’s resources on those operations with the greatest potential for sustainable growth and profitability. Spartan expects to complete the exit by the end of the year following the fulfillment of existing customer orders. The company is in discussions with potential purchasers to facilitate a sale of the operations or facilities as part of the exit plan. Road Rescue generated approximately $20 million in revenues in 2009 and it employs 132 full-time associates.
“We are strategically focused on providing compelling products that generate sustainable growth and profitable market share, highlighted by good momentum at Spartan Chassis and Crimson Fire, as well as our recently announced new commercial van product at Utilimaster and our collaborative efforts with Isuzu,” said John Sztykiel, president and CEO of Spartan Motors. “Over the last 12 months, Spartan has evolved, as has the emergency response market, and the Road Rescue operation is not large enough to justify the resource commitment when we have greater potential elsewhere. Road Rescue partnered with another ambulance company, where there is additional scale and product breadth, would be a real asset.”
Spartan also announced a number of actions to realign its cost structure. These included a temporary reduction in board of directors’ retainer fees, salary reductions for members of the executive leadership team and other senior leaders, some select work force reductions, and other actions as part of its continuing efforts to reduce fixed costs to better match its current level of business.
“Although these decisions are never easy, as they impact the lives of our associates and the communities we serve, we believe these actions will result in improved effectiveness in our operations. It also allows us to better focus our efforts in Spartan’s five core markets – emergency response, outdoor recreation/RV, defense, delivery and service, and specialty – while maximizing demand for Spartan chassis, aftermarket parts and assemblies and the Isuzu strategic alliance. We have tremendous strategic opportunity, and it is imperative we reduce our operational cost base to improve our position going forward.”
With the realignment actions and exit from Road Rescue, Spartan expects to incur pre-tax one-time charges of approximately $6 million to $7 million, the majority of which will be recognized in the company’s second and third quarter results. Management expects these actions to reduce the company’s permanent cost structure by $5 million to $6 million on an annualized pre-tax basis.
Joe Nowicki, CFO, added: “The actions we announced today represent our continuing efforts to right-size our operations based on the current business environment. Our exit from Road Rescue is a result of our ongoing evaluation of all areas of Spartan’s business and is an important next step in executing on our previously announced strategic financial plan. It will allow us to concentrate our resources and product development in our highest growth, most profitable opportunities, and we believe it was necessary to ensure our long-term success.”