It’s been almost two and half years since Navistar International Corp., a leading truck and engine builder, completed the purchase of certain assets of Monaco Coach Corp. for about $47 million. The motorhome builder was renamed Monaco RV LLC and, according to the plan, would operate as a wholly owned affiliate of Warrenville, Ill.-based Navistar Inc., Navistar’s principal operating company, and would be headquartered in Coburg, Ore. To gauge the progress forged by Navistar since the June, 2009, acquisition, “Capital Talk,” an Internet TV show co-sponsored by RVBUSINESS.com and RVNN.TV, seized the opportunity last week (Oct. 19) to chat with Andrew J. (A. J.) Cederoth, executive vice president and CFO of Navistar International Corp. Here, with Monaco Director of Marketing Ryan Lee sitting in on the interview, are the edited nuts and bolts of that conversation.
Capital Talk: Looking back, A.J., how have things gone since June of 2009 when Monaco, a very proud brand in the North American motorhome business, was picked up out of Chapter 11 bankruptcy by Navistar in the middle of a recession.
Cederoth: Well, it’s gone really well. I think we’ve looked at the opportunities to integrate our manufacturing philosophies and our engineering philosophies together with the Monaco brand. And I think you touched on it very well.
It’s a brand that we’re happy to have, and we looked at that as an opportunity in 2009 to branch out into a new business for Navistar and to attract a new customer base for Navistar and to do that in a more cost-effective way, leveraging the scale that we can bring to the market, and then also leveraging a little different approach to design and manufacturing that we think can create a competitive advantage around the Monaco brand.
Capital Talk: So you’ve found that truck building and motorhome building are compatible skill sets.
Cederoth: Yes, we have.
Capital Talk: Having said that, is Navistar as committed today to this market as it was in the middle of that recession when they picked up the Monaco brand?
Cederoth: Oh, I think we’re more committed to it than ever. I think what you’ve seen us do with Monaco is introduce the Vesta (Class A motorhome in July of 2010) and put a new product out in the marketplace that I think really distinguishes the Monaco brand.
And then of course, we’ve gone out and we’ve added leadership to the team. We’ve added Bill Osborne (who succeeded Monaco President Kay Toolson this past summer in overseeing Monaco as vice president of custom products for Navistar Inc.’s Truck Group) to our team. He comes to us from Ford Motor Co. with a little different bent on the industry – more toward the consumer market than the traditional truck market.
And I think Bill’s experience at Ford and in manufacturing and marketing through his opportunities that he had at Ford really gives us the leadership that we need to take Monaco to the next level.
Capital Talk: The relatively recent announcement of the consolidation of Monaco in Wakarusa, Ind., and the departure from Oregon was big news in this business niche. How is that going?
Cederoth: It’s going really well. And I think that’s just us taking our strategy to the next level, combining our loose chassis business with the manufacturing of our RVs and bringing them closer together so that we can take advantage of the natural synergies of the management team — streamline our communication, bring the business a little closer to Chicago where they can be closer with our design engineers; and really facilitate the execution of our strategy.
And Indiana is really where 80% of the RVs are made, anyway. So that was the natural place for us to put that business.
Capital Talk: The advantages to this move to consolidate motorhome operations in Wakarusa?
Cederoth: Well, I think it just gets down to the basics, right? I mean, we can more efficiently manufacture the chassis closer to the RV facility and decrease the transportation cost and the amount of working capital that it takes to run that business. I think by bringing it into Indiana, we get closer to our design engineers here in Chicago. We’re able to leverage that cooperative effort a little easier when we’re only two hours apart. And then of course, bringing them closer allows us to put a little more effective control around that business and leverage the purchasing scale that we think we bring to the business.
Capital Talk: So, how does the simultaneous closing of the Workhorse (commercial truck chassis) operations in Union City, Ind., relate to this gameplan?
Cederoth: Well, it just allows us to take advantage of the synergies — get a little more efficient with the manufacturing of our loose chassis and bring that closer to the manufacturing elements of our RVs.
Capital Talk: As for dealer support, we noticed a story rather recently from Guaranty RV in Oregon — Shannon Nill — in which he stands by Monaco through these transitions and is very vocal about it. How has the dealer support been nationally of late?
Cederoth: Well, as you’ve said, we’ve been moving through a very difficult part in the economy and we appreciate the support that we’ve had from the dealers who have stuck with us from June of ’09 through today. And I think this is a business that’s dependent on a good relationship with the dealers, and I think what we’ve seen is we’re trying to put the best product we can in the marketplace that not only meets our customers’ needs, but is a product that the dealers would be proud to sell.
Capital Talk: We’re looking shortly at RVIA’s National RV Trade Show in Louisville at the end of November, first of December. Can you tell us what the industry should look for at the Monaco exhibit down there?
Ryan Lee: Sure. I can step in there and talk a little bit about that. For the 2012 RVIA show we’re going to have a new 2012 Monaco Dynasty that no one has seen before. We’re very excited to bring it back. It’s an iconic nameplate. We’ve also done a great job in bringing back the 2012 Endeavor, which can be built fully from the ground up through vertical integration — from chassis, engine, and house — all built by Navistar.
And then our total line we’ve done a really good job of revamping. R-Vision has brought back the Trail-Lite nameplate. We have a travel trailer and a fifth-wheel that’s going to be debuted. And then on the Holiday Rambler side, we’ve taken the Aluma-Lite nameplate and we’ve brought that from a fifth-wheel to a travel trailer, now to an ultralight product.
So I think coming to our display, you’re going to see some great 2012 products. But most importantly, to the point that A.J. made earlier, we’ve taken that Vesta DNA look and we’ve brought that across the Monaco brand; and then with the new Trip (Class A, a companion product to the Vesta), we’ve also taken that DNA and brought that across the Holiday Rambler brand.
So you’re going to see a family resemblance for our diesel product that is unlike anything else in the industry, and we encourage everyone to come to the display. We’re going to be at booth 3000, and we feel like we’ve got the best lineup for the next generation of RVs.
Capital Talk: And so the Vesta (the first motorhome developed in a collaborative effort between Navistar and Monaco) was really the rallying cry for new product development at Monaco, was it not?
Lee: Yeah. I mean, the product development, the look and the feel, it is a rallying cry. And we’ve been able to take the design engineers and the design team from Navistar and we’ve brought that look and that feel into the Monaco scenario.
I believe that with the overall strength that Navistar brings for purchasing, the product design, the look and feel, we’ve brought products to the marketplace that are unlike any others out there. And we wouldn’t have been able to leverage that or do that without the strength of Navistar behind us.
And as we move into our new facilities and with Bill’s background — coming from Ford, but most importantly, as an engineer — he’s really brought a lot of new techniques and new ideas to the team. And I think you’re going to continue to see new products and new looks coming from Monaco, Holiday and R-Vision that are going to be unlike the competition can match.