Luxury motorcoach manufacturer Country Coach, Junction City, Ore., today (July 20) announced the creation of a partnership with Recreation Live LLC, an RV wholesaling firm. The new partnership has a goal of enhancing the company’s financial strength and collaborating on the establishment of Country Coach factory-direct sales, according to a news release.
The plan will include developing upscale factory-direct stores and service centers in key locations across North America.
Company CEO & President Jay Howard commented on the partnership: “As part of our factory-direct strategy, we continue to pursue better ways to serve our clients. This new partnership with the professionals at Recreation Live enhances our customer care offerings substantially by providing conveniently located and complete factory-direct sales and service.”
Howard also noted that both partners share the goal of establishing three new Country Coach factory-direct sales and service centers within the partnership’s first year. He also stressed that the partnership is an integral part of Country Coach’s reorganization plan, which is subject to court approval. The company intends to present its plan for approval by creditors before the end of the summer.
Dan Inman, president of Recreation Live LLC, an RV wholesaling firm with locations in Pompano Beach, Fla., and Schertz, Texas, shared his company’s readiness to contribute to the new partnership.
“Our shared goal is to complete the Country Coach promise of ‘The World’s Finest ‘by delivering a research, purchase and ownership experience second to none. We are ready to go to work,” said Inman, who spoke briefly with RVBusiness today while en route to the Family Motor Coach Association (FMCA) Convention in Bowling Green, Ohio.
Jim Howard, Country Coach’s senior vice president of sales and service, emphasized the improved customer care benefits of the new partnership.
“A visitor to any Country Coach factory -irect location, whether in Florida, the Midwest, the Southwest or in Junction City, Ore., will experience a high level of care that extends far beyond the coach purchase. No matter the location, our factory-direct clients will have direct access to expert factory trained specialists and service technicians, as well as enjoying the collective support of the dedicated craftspeople that designed and handcrafted their custom motocoach.”
A bankruptcy judge gave final approval Monday (April 13) to a complex financing agreement that gives new life to Country Coach Inc., at least for the next few months.
The new Country Coach is far smaller than the old Country Coach, according to The Register-Guard, Eugene, Ore. Whether the Junction City, Ore., company can survive and emerge from bankruptcy depends on whether it can find enough customers willing to part with $300,000 or more to buy its luxury motorcoaches at a time when the economy remains deeply mired in recession.
U.S. Bankruptcy Judge Albert Radcliffe approved the financing deal between Country Coach and Wells Fargo Bank, which runs through the end of the year. He gave the parties until Aug. 31 to provide an update on how the plan is working.
Jim Howard, a Country Coach vice president, said the news was welcome but not unexpected. Radcliffe had given the deal preliminary approval two weeks ago.
“The bottom line is, it’s a lot better for everybody if we continue than if we don’t,” Howard said.
The company’s Junction City factory resumed production last week, working to finish partially completed coaches at a rate of one per week.
The company’s first 2010 model, a 43-foot-long Inspire 360, was to depart today for “The Rally” this weekend in Albuquerque, N.M.
About 94 employees were at work Monday, Howard said, close to the number that Country Coach expects to employ for the foreseeable future. At its peak in 2006, the company had about 1,800 workers.
When Country Coach idled its factory in November, about 500 employees were put out of work.
Country Coach entered Chapter 11 bankruptcy in February after Wells Fargo moved aggressively to seize the company’s assets. Country Coach had defaulted on an $8 million loan balance, and the bank sued in an effort to collect on the debt, intending to liquidate the company’s assets.
The bankruptcy filing gave Country Coach some breathing room, including time to negotiate with Wells Fargo. Last month, the two sides agreed on a plan in which Wells Fargo would give the company access to a $3.2 million revolving loan fund to allow it to carry out a plan to sell its coaches directly from the factory, rather than through a dealer network.
Radcliffe approved the deal despite a number of concerns raised by Rebecca Kamitsuka, attorney for the U.S. Trustee’s office. Several of Kamitsuka’s objections involved consumer protection issues.
For example, she said down payments for new coaches should go into escrow, so customers would be able to get their money back if the company were to fail. She said if the company is planning to honor warranties for its new coaches, it should have a warranty reserve fund. And about 238 2006-08 Country Coach models are subject to a recall because they would lose their power steering – perhaps the company should set aside money to pay for that work, she said.
David Levant, attorney for Country Coach, said down payments will be segregated into a separate bank account that Wells Fargo should not have access to if Country Coach defaults. He said Country Coach has budgeted funds to perform warranty work and plans to offer customers third-party warranties. As for the recalls, Country Coach will address those as part of its normal course of business. If the financing plan was not approved, the company would not be able to perform any recall work, he said.
In approving the agreement, Radcliffe said no deal is perfect, and he noted that Douglas Schultz, attorney for the unsecured creditors committee, expressed his support for the plan.
“The court places great weight on the creditors committee’s support,” he said.
Country Coach has about nine completed 2008-09 models ready to be sold, and about 40 coaches in various states of completion that would be sold as 2010 models, Chief Financial Officer Mark Andersen told the court two weeks ago.
Jim Howard expressed optimism that the company will be ready to emerge from bankruptcy by the end of August.
While the market for RVs remains difficult, he said only about half of coach buyers finance their purchases, and usually not for the whole amount. Nationwide, people have been buying an average of 2½ to three Country Coaches a week from dealers during the past four to five months.
To spur sales, Howard and his sales crew have systematically been contacting 6,500 people who already own Country Coach motorhomes. They’re specifically targeting about 800 people who own 2006 models who are most likely to want to trade in for a 2010 model, he said. They’re using e-mail, letters, a revamped website and even a new billboard on Interstate 5 to generate interest, he said.
Wells Fargo Bank has agreed to loan Country Coach up to $11.5 million so it can build up to 43 coaches during the next 10 months, according to an agreement filed in U.S. Bankruptcy Court in Eugene, Ore.
Under a new business model agreed to by the bank, the Junction City, Ore. RV maker would sell the coaches directly from its factory, bypassing dealers, according to a document filed by the company’s chief financial officer. Operations would be financed by a strictly supervised $11.5 million revolving loan fund, according to The Register-Guard, Eugene.
The new loan includes the $8.5 million that Country Coach already owes to Wells Fargo, bank spokesman Tom Unger said.
The bank had been seeking to seize and sell Country Coach’s assets after the company defaulted on the original loan.
Because Country Coach is in Chapter 11 bankruptcy, the new plan and the financing must be approved by a judge. A hearing is scheduled at 10 a.m. today (March 23) in U.S. Bankruptcy Court in Eugene. Chapter 11 bankruptcy gives a company protection from creditors while it attempts to re-organize its finances.
CEO Jay Howard announced March 19 that Country Coach had reached a financing deal with Wells Fargo, but in fact the deal was not yet done until later that day. Company lawyers filed a motion after the close of business that includes a 60-page loan agreement.
In asking for a hearing today, so soon after filing a 158-page document with the court, Country Coach lawyer Brandy Sargent urged the judge to recognize what she said is the urgent nature of the request.
“Approval of this motion and the interim order in a form satisfactory to Wells Fargo Bank is, simply, the only way that Country Coach believes it can survive as an enterprise,” she wrote.
The company has no significant operating funds, no ability to borrow under any other terms, and faces the prospect of Wells Fargo pressing its effort to liquidate the company’s assets if the deal is not approved, she said.
Country Coach’s factory and its remaining 500 workers have been idle since early December.
Bank spokesman Unger said because the matter is still pending and negotiations are continuing, Wells Fargo officials would have no comment until and unless the deal wins court approval, he said.
“This thing is pretty complicated,” Unger said.
It’s complicated because the agreement involves not just Country Coach and Wells Fargo, but also Riley Investment Management, a company controlled by Los Angeles investment banker Bryant Riley. Riley is the majority owner of Country Coach but he’s also a creditor: Country Coach owes his firm about $15 million, according to court documents.
Howard said the company plans to start bringing back workers to the Junction City factory as early as today to start working on unfinished coaches that are still on the production line, with production ramping up slowly over the next few weeks. Howard said more than 100 workers would be brought back. One of the workers to be called back said he was told the company planned to run a crew of 62.
Howard said the company has 15 unfinished coaches on the production line, and another 15 chassis ready to be built.
According to a proposed budget filed with the court, Country Coach plans to start selling coaches starting this week at a rate of one to two per week, for a total of 43 coaches by the first week of January.
The budget calls for Country Coach to spend $20.3 million over the 42 weeks, of which $18 million will be for operations and $2.3 million will be for bankruptcy expenses. During that time, the company expects to collect $23.5 million.
In a separate filing, Country Coach Chief Financial Officer Mark Andersen offered some details of the company’s new business plan.
By selling directly from its factory, Country Coach eliminates the need to maintain dealer agreements as well as agreements that require the company to buy back coaches dealers can’t sell, he said.
The company also plans to eliminate obsolete floor plans and streamline its existing model line. Country Coach now offers eight different models, ranging in price from $300,000 to $1.8 million.
In addition, Country Coach plans to consolidate its manufacturing operations from three plants to one, reduce its footprint of leased facilities by 30% and negotiate a temporary 50% reduction in lease costs for the rest of 2009.
Shannon Nill, general manager of Guaranty RV in Junction City, which has been selling Country Coach vehicles since the 1970s, said he was pleased to hear that the RV maker and the bank were able to strike a deal that enables the company to resume operations.
“This news with Country Coach is very good – very good for Oregon, for our community and for Guaranty,” he said.
If the company resumes production, that increases the value of the 30 or so Country Coach RVs that Guaranty has in stock, he said.
However, Nill expressed skepticism about the company’s plan to sell coaches directly from its factory, bypassing dealers.
Factory direct sales by RV makers “generally have not worked out,” he said. “The companies that have tried generally go back to dealerships. But these are different times. If this is what is required for the business to succeed, you can’t rule out that approach.”
One unknown factor is service, he said. Without a network of dealers to provide service, owners of Country Coach RVs presumably would have to come to Junction City for warranty service. And Nill said he’s not sure what Country Coach would do with trade-ins.
“There could be a role for Guaranty to purchase trade-ins and market existing used Country Coaches,” he said.
Luxury motor coach manufacturer Country Coach LLC said that its principle secured debt holders have come to terms and new reorganization financing will be made available.
With the support of Wells Fargo Bank as the company’s primary secured creditor, and Bryant Riley as the leader of Country Coach’s investor group, the company said it is positioned to resume operations. Country Coach shut down its Junction City, Ore., facility last December.
The company reported that it has many confirmed, in-process motor coach orders to fulfill, allowing a slow and steady production facility reopening over the next several weeks.
“Our loyal employees, customers and suppliers deserve our heart-felt appreciation for their steadfastness in our times of trouble,” said CEO and President Jay Howard. “Ultimately, our biggest debt of gratitude is owed to Wells Fargo Bank, who is providing the financing for the rebirth of Country Coach as they recognize the value of financially supporting American manufacturing in the Pacific Northwest.”
Country Coach noted that efforts by Ron Lee of Lee Joint Ventures, and company founder Bob Lee, along with his wife, Terry, also were key in working out a deal.
Next week, Country Coach plans to present details of its forward-going plan to the court. Also next week, the company will release a comprehensive update to their interactive website, located at Country Coach.
“The continuation of Country Coach as a brand and a viable Oregon manufacturer serves all parties involved,” said Howard. “Motor coaches owned by dealers and retail customers will better retain their value, suppliers who have struggled along with our company can move towards recovery with us and new customers will enjoy an improved ownership experience.”
Howard acknowledged the sacrifices made by Country Coach’s stakeholders, as well as the “devastating financial damage” suffered by the members of the RV industry at large during this unprecedented industry downturn.
“We have never seen times like these,” he said. “With wholesales shipments in our market off more than 75%, it is little wonder that Country Coach and our suppliers and employees have suffered along with many of our manufacturing peers. My heartfelt apologies go out to all who have been impacted by our company’s inability to resist these powerful industry forces. We look forward to better times ahead.”
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.”
Upon learning that 325 Country Coach International members were notified that their March owner’s rally was canceled, Lazydays RV Center Inc. has offered to hold a complimentary rally in its place.
In a press release, Lazydays said that the club’s registration fees of $50,000 weren’t being refunded. Country Coach, which has not been in operation since December and recently filed for bankruptcy, stated in a Jan. 28 announcement on its wesbite that it would be holding an East Coast rally in June to replace the March event.
The Lazydays rally will take place April 27-30 at the dealer’s “RallyPark” on the company’s site in Seffner, Fla. The event will also include breakfast, lunch and RV seminars daily as well as a farewell dinner and bingo tournament on the last night.
Additionally, Lazydays said it will provide emergency repairs and offer a special discounted labor rate to members requiring service work while at the rally.
“Soon after discovering this unfortunate situation, the employee partners of Lazydays felt compelled to provide these members an alternative rally experience,” said Pat Overby, Lazydays general sales manager.