Fleetwood RV Inc., a new company launched last year as the successor to the Fleetwood brand, kicked off its 2010 National Dealer Meeting Tuesday night (Aug. 24) with a rousing address by Fleetwood President and CEO John Draheim at the Grand Wayne Center in downtown Fort Wayne, Ind.
Fort Wayne is located less than a half hour north of Fleetwood’s new Decatur, Ind., headquarters and is a fitting site for a more low-key event that Fleetwood RV prefers versus the kind of glitzy annual dealer meeting that Fleetwood’s predecessor, Riverside, Calif.-based Fleetwood Enterprises Inc., used to hold in Las Vegas prior to the Great Recession.
Make no mistake about it, this is a “new Fleetwood,” Draheim reiterated in his address to a room full of attendees, including 30 vendors (24 of them with displays), three banks and about 100 dealer personnel from 45 dealerships. Draheim said Fleetwood’s focus today is on “creating partnerships” with dealers to whom he extended “a heartfelt thank you for helping us restart our company and be profitable.”
“We really do appreciate all the support that you’ve given us over the past year,” said Draheim, standing on a stage amid a display of 2011 product.
One of the company’s main missions in the near term is to explore new market opportunities, he reported, whether that involves extending existing brands or launching altogether new ones.
“We’re going to do that by looking for new market spaces that we’re not in that we can go into and both make money,” said Draheim, a veteran of Thor Industries Inc. and Monaco Coach Corp. before assuming the reins at Fleetwood RV. “We do that through providing exceptional product value that allows you to make money. We do that by trying to align ourselves with all the bankers in the room and promoting quicker retail turns because, after all, that’s what they’re looking for — quicker turns.”
Toward that end, GE Capital, Commercial Distribution Finance announced yesterday that it will be the exclusive wholesale lender for an aggressive new Fleetwood inventory stocking program designed to promote high turnover of new inventory. The program provides a competitive interest rate on financed inventory for 120 days and allows dealers to be reimbursed by Fleetwood for 100% of interest charges on new inventory financed through GE Capital and sold in 60 days or less.
Another key mission in rebuilding the Fleetwood brand, which soon will be part of a new consolidated Allied Speciality Vehicles Inc. (ASV) unit under the continued ownership of American Industrial Partners Capital Fund IV LP (AIP), is projecting an “extended family” atmosphere through which the company’s management, retailers and 1,200 employees can work amicably through any issues that inevitably surface in building a new company from scratch.
Lean production practices, warranties and Fleetwood’s new management team were all part of Draheim’s Power Point presentation. In addition to Draheim, that new team currently includes CFO Debra Pak, Vice President of Operations Luis Ortiz and new Vice President of Engineering, Development & Design Colin Roberts.
Draheim, by the same token, talked about how Fleetwood has gone about answering dealer requests to consolidate its product offerings. The result is that the company’s brands have been reduced from 27 in 2010 to 14 in the 2011 model year.
Fleetwood’s new approach to developing a dealer body was also on Draheim’s mind. Rather than assembling a big dealer body — Fleetwood currently has about 80 dealer locations, a tiny number vs. the 1,800 Fleetwood Enterprises once had — the company is more focused on establishing links with a smaller group of retailers that holds like-minded “core values.”
Draheim says that’s been a consistent theme with AIP and a real key to launching a new enterprise in these strange economic times. Keep in mind, he noted, that AIP and Fleetwood launched Fleetwood RV in 2009 in the middle of a daunting recession. “Now imagine in that environment, with the economy, fuel prices, the lending environment, the oversupply of product in the marketplace, the inability of most retailers and OEMs to hold margins, who in their right mind would start a new company?” he asked, rhetorically.
“Well, we did,” Draheim continued. “And we’re here to talk about it, and we’re profitable. That is a heck of a statement. We have no debt. We’re generating positive cash and have been for some time. We have engaged some of the industry’s best suppliers. We’ve developed relationships with the industry’s key lenders — both wholesale and retail. We’ve grown a dealer network, some of which we’ve had prior, some that we didn’t do business with prior.
“And if you gave that dealer list today to somebody who was familiar with the motorhome business today, they would tell you ‘this is a who’s who of motorhome dealers across the country,’” said Draheim. “We feel extremely humbled and confident in the quality of our dealer chain. And at the end of the day, it’s all about the quality of the dealer who creates the experience for the retail customer. So we’re honored that you’re here and that we’re in business with you.”
Fleetwood’s meeting agenda included a tour of the company’s Decatur facilities and an afternoon of meetings. The meeting ended Thursday with an awards luncheon.
Most of the nation’s recreational vehicle makers, whose factories are clustered in northern Indiana, crashed in the recession. But not Thor Industries Inc., owner of Four Winds, Airstream, Dutchmen and seven other units that sell nearly 50 RV brands in all, according to the Wall Street Journal.
After months of slashing jobs and closing factories, Thor is hiring again, and it expects to open two new factories before the end of the year. “The nadir in this industry is definitely behind us,” says Richard Riegel, chief operating officer of Thor, the nation’s biggest RV maker by sales.
Fierce, fast cost-cutting and a structure dominated by many small factories that were easy to open and close almost overnight helped Thor avoid the financial disasters that led to bankruptcy filings by its two big rivals. Those companies — Fleetwood Enterprises and Monaco Coach Corp. — had accounted for half of the industry’s preslump shipments.
Thor’s turnaround is helping to resuscitate the region, where unemployment reached 20%, making it a favorite destination of President Barack Obama as he pushed for economic-stimulus dollars. More than a dozen RV start-ups have emerged — most of them rising from the ruins of companies that went under — in northern Indiana, where about 70% of U.S. RVs are made and the RV Hall of Fame and Museum is housed.
Sales of RVs — ranging from simple, tow-behind trailers to land yachts outfitted with flat screens and full kitchens — peaked at more than 390,000 units in 2006, aided partly by a surge in hurricane-related sales. But they started to stall even before the recession because of $4-a-gallon gasoline. The industry’s problems quickly snowballed as consumer confidence evaporated and banks stopped lending for big-ticket purchases, including RVs.
Riegel recalls driving along Elkhart County’s back roads in the predawn cold last winter. “It’d be dark, it’d be nasty, and I’d see these fathers standing at the end of driveways with their kids waiting for the school bus,” he says. “I knew many of them were our workers” who were suddenly jobless.
This year, analysts predict sales will be 150,000, a 60% decline. But business is looking up as credit loosens and dealers restock inventory-drained showrooms. Shipments of RVs have increased in the last two months, and analysts now expect them to be up 25% next year.
That has helped Thor, as well as the new ventures that have emerged. Truck maker Navistar International Corp. bought parts of Monaco, creating a new RV division. Portions of Fleetwood were bought by New York-based American Industrial Partners Capital Fund IV LP, a private-equity group.
Evergreen RV, in Middlebury, Ind., is a start-up that took over a factory formerly owned by Coachmen Industries Inc., which sold its RV business to Forest River Inc., a unit of Warren Buffett’s Berkshire Hathaway Inc., in late 2008. Evergreen, which touts an “eco-friendly” trailer made of recycled and light-weight materials, now has 60 workers.
Doug Lantz, Evergreen’s chief operating officer, says that when word of the factory reopening spread, job seekers lined up. “We had hundreds showing up and blocking the doors and the parking lot,” says Lantz, who posted a sign on the road saying applications weren’t yet being accepted.
For Thor, which is based in Jackson Center, Ohio, hardship created opportunity. Ron Fenech, president of Thor’s Keystone division, which is based in Goshen, figures he gained at least 1.5 percentage points of market share as competitors faltered, giving his division more than 22% of the market.
“There were six months when the whole industry was in lockdown,” he says. But Keystone, which shed nearly 30% of its 3,000 workers in the last year, has hired back 400 since the summer.
The company, which makes towed trailers, is opening four production lines in its two new factories in Goshen. Trailers are generally less expensive than motorhomes, and sales in the segment have revived faster.
Thor’s secret is speed. The company is willing to expand or contract rapidly, lengthening or trimming shifts daily. Two factors have made that possible: the relatively small size of its factories and the production incentive offered to its workers. By contrast, its failed rivals took on debt, and some built sprawling, expensive plants.
In Goshen, Keystone operates a network of 16 factories, most of them no larger than 75,000 square feet, which is somewhat smaller than 1½ football fields.
The process uses a basic platform bought from an outside supplier that is pushed on a dolly to groups of skilled craftsmen. At different stations, plumbers, electricians and carpenters install pipes, wiring and cabinets.
Many employees are Amish craftsmen who ride bikes to work or are transported from nearby farms by hired drivers.
The workers are paid slightly more than minimum wage, but they still covet the jobs and the productivity bonus. It’s not unusual for RV workers to earn as much as $60,000 a year, Fenech says.
Fleetwood Enterprises Inc. reported Tuesday (June 2) that it has signed an asset purchase agreement to sell its motorhome business to American Industrial Partners Capital Fund IV LP (AIP) of New York.
The Riverside, Calif.-based RV and manufactured housing builder is operating under Chapter 11 bankruptcy and has been actively looking for buyers of its various business units.
AIP is a middle market private equity firm which makes control investments in leading North American-based industrial businesses. Last week, the U.S. Bankruptcy Court approved sales procedures for an auction to explore whether any higher or more qualified bids could be obtained, according to a news release.
AIP’s $53 million bid is subject to reduction for the assumption of certain liabilities not to exceed $18 million, including warranty obligations on Fleetwood motorized products. The price is also subject to an adjustment for the amount of current assets purchased at the time the transaction closes.
Under the bidding procedures, any competing bidders must submit qualifying bids by June 18, and if the company receives qualifying bids, the court will hold an auction on June 22. The court hearing to finalize the sale is tentatively scheduled for June 24.
The offer from AIP includes two motorhome manufacturing facilities, two motorhome service facilities and Fleetwood’s Gold Shield supply subsidiary, all located in Decatur, Ind. It also includes intellectual property for Fleetwood’s existing motorhome brands and certain machinery and equipment , but does not include the company’s motorhome manufacturing facilities in Riverside and Paxinos, Pa., or its travel trailer plants, brands, and intellectual property.
“We are pleased to have signed an agreement to sell our motor home operation. AIP is a very capable and qualified organization,” said Elden L. Smith, Fleetwood president and CEO. “Since the sale process under Chapter 11 enables other bidders to come forward, we cannot say for certain what the outcome will be. We do expect, however, that the final purchaser will seek to take advantage of the Fleetwood name and legacy, as well as endeavor to preserve as many jobs as possible.”
Fleetwood is also pursuing buyers for its manufactured housing business.
Management believes that it continues to have adequate cash to fund operations until its businesses are sold.