After months of searching for fresh capital to kick start production, Moreno Valley, Calif.-based MVP RV has located a private equity firm and is in the due diligence process leading up to inking a final agreement.
Partners Brad Williams, Roger Humeston and Pablo Carmona jointly told RVBUSINESS.COM today (Sept. 11) they are hopeful the pact can be signed soon and production of the company’s travel trailers and fifth-wheels resumed within a month thereafter.
The owners, formerly with Thor California Inc., have $3 million in confirmed dealer orders ready to fill once production resumes. MVP RV halted production in early June when it ran out of money.
The U.S.-based private equity firm’s capital would not only be used to finance new construction but also to pay suppliers and make good on outstanding warranty claims, they said.
Williams would not disclose the name of the equity firm, the amount of its proposed investment or any other terms.
Their statement came on the heels of a related announcement on Thursday in which they said they formed a separate company – MVP-EV – to build electric vehicles for CT&T United, the American subsidiary of CT&T Korea Ltd. Those vehicles, from motorcycles and golf carts to small cars and buses, will be built in one of the buildings on the MVP compound in Moreno Valley.
CT&T is making its first push into the American market and eventually plans to employ as many as 2,600 people in the country, operating several factories along with research and management teams to market several models of battery-operated vehicles.
MVP-EV holds the West Coast franchise to build the vehicles, thereby having the potential of employing hundreds of workers in Southern California.
CT&T is not the source of the private equity capital in question, Williams said. “They’re (CT&T) not interested in RVs at all,” he said.
The RV and electric vehicle companies are separate but could well use some of the same suppliers, a prospect that became more likely as RV suppliers have come forward since Thursday’s announcement and offered their services, Humeston noted.
MVP RV has less than 100 suppliers, but the electric vehicle business will have some 400 separate suppliers, based on CT&T estimates.
Williams, MVP RV president and CEO, said he went public with the RV company’s progress in finding private equity in part to allay concerns by some suppliers that, amid Thursday’s announcement, the RV firm may have closed.
On the contrary, MVP RV has a variety of vehicles in various stages of production on all its lines and continues to garner dealer interest in its products, Williams said.
Chief among them are the Coast, an aerodynamic, lightweight trailer, and the Envy, a fully-loaded a toy hauler. Both products were designed to fill the void left when Weekend Warrior exited the business, Williams said.
In July 2008, MVP RV Acquisition Corp., an affiliation of top executives at Thor California Inc., agreed to purchase Thor California Inc., a subsidiary of Thor Industries Inc.
As MVP RV, the company continued to manufacture the Wave, Summit and Jazz travel trailers and fifth-wheels along with Tahoe and Vortex toy hauler lines, previously produced by Thor California.
They’ve also developed new products such as the Beacon, a microlight trailer, and the Sonoma, an inexpensive, entry-level travel trailer.
The company was actively selling through nearly 100 dealerships in 11 Western states and three Canadian provinces. Williams estimated at the start of the summer that 65% of MVP RV’s products built in the first year have already sold
The company survived the credit crunch that began a year ago and was aggressive in developing new products, such as the Coast and Envy, but when orders began arriving in the spring, the company was out of cash and had to stop production. But it did not fold, Williams stressed.
“We right-sized and cut and slashed expenses every way you could imagine,” Williams said earlier this summer. “We’ve positioned ourselves so that when we do come up running, our break-even is very low. We’re lean and mean and in position to take advantage.
“We were struggling with profitability through most of last year until this spring. We started to show a profit, which indicated all the changes we had made took hold. Then we got into this cash flow tug of war situation.
“The beauty here is, no bank holding us hostage. We have no long-term debt. Our intent is to get a cash injection and get squared away with our suppliers.
“The time is right for this; we think the worst is behind us. This is the best time to invest in an RV company,” Williams said.
A company that will turn out electric vehicles from a Moreno Valley, Calif., factory could ultimately employ as many as 2,000 people if the firm’s products prove as popular as its executives hope.
For now, the venture with South Korean-based CT&T United will hire about 120 workers. The battery-powered vehicles, which are not legal for freeways and can’t go as fast as the speed limits on most major surface streets, will roll off the assembly line by the first part of next year.
CT&T signed a deal Thursday (Sept. 10) to make the electric cars with Moreno Valley-based recreational vehicle company MVP RV. One of two factories MVP owns near March Air Reserve Base will be converted to make electric vehicles by a new company called MVP-EV, according to the Riverside Press-Enterprise.
MVP will continue to manufacture recreational vehicles in the second factory, said Pablo Carmona, vice president of manufacturing for MVP-EV.
The first electric cars are expected to roll out of the new factory in January following several months of refurbishing, Carmona said. It will be the Korean carmaker’s only manufacturing center on the West Coast, as well as its regional sales and service hub.
If the demand is strong enough, the plant could turn out 10,000 vehicles a year by 2011, he said.
Carmona, who started out at this factory on the assembly line in 1996 when it made RVs for Thor of California and worked his way to a management position, said MVP officials expect to start looking for workers in about a month. Some could be people who formerly built RVs at one of several Inland companies that have closed, such as Fleetwood Enterprises Inc., National RV Holdings Inc. and Weekend Warrior Inc., he said.
“People that used to make RVs would be comfortable making these cars,” Carmona said.
CT&T has been making electric vehicles in South Korea and China since it was founded in 2002. The company announced plans to open operations in the United States about two months ago.
Two models, the c-Zone, which resembles a golf cart with a fifth seat in the rear, and the e-Zone, which is reminiscent of the French-built Smart Car, were on display for the signing ceremony at the Riverside Convention Center. It was part of an event called the Riverside County Day of Transformation, which brought leaders together to discuss ways to generate jobs and revitalize the economy.
One of those strategies involves jobs based on renewable energy concepts, and in that regard MVP-EV fits. While it currently costs as much as $60 to fill the tank of a sport utility vehicle, maintenance costs for these models run between $5 and $10 a month.
The vehicles are priced between $7,000 and $17,000, and CT&T has more models on the drawing board, including a battery-powered bus, said Brad Williams, CEO of MVP-EV.
But the top speed for the models displayed Thursday is only about 35 mph. People with errands in their neighborhoods and senior citizens are among the likely marketing targets, and the company calls the cars “neighborhood electrical vehicles.”
The cost and the size of the models are drawbacks for consumers, said Mike Caudill, who writes for NADAGuides.com, a publication of the National Automobile Dealers Association.
“I don’t think the demand is going to be as high as this company hopes it will be,” he said of MVP-EV.
“People don’t have that discretionary income to buy a vehicle to take down to the grocery store,” Caudill said
Caudill also is president of Driven Communications in Temecula which represents an electric motorcycle manufacturer and a Singapore firm that is developing a system to convert standard cars into electric ones. He said price will ultimately determine the popularity of a car that may not exceed speeds of 35 mph.
David Stewart, dean of A. Gary Anderson Graduate School of Management at the University of California’s Riverside campus, said there’s risk with every startup, but MVP-EV will be marketed all over the West and has minimal competition.
“It won’t replace the internal combustion automobile, but for someone who is retired or for a stay-at-home spouse it could be a good alternative,” Stewart said. “Also, we’re at a stage where we’re receptive to alternative-energy cars.”
The cars could also be popular with government agencies, including police departments and code enforcement personnel, Williams said.
Tom Freeman, spokesman for the Riverside County Economic Development Agency, said a delegation from CT&T, including its founder, Young Gi Lee, visited Gov. Arnold Schwarzenegger in March seeking sites for its factory. State, county and city officials helped the company zero in on Moreno Valley.
“This is one of those leads that happened in quick-time,” Freeman said. “In economic development, that doesn’t happen very often.”
Riverside County’s unemployment rate of 14.7% in July is one of the highest of any urbanized counties in the state, and areas such as Moreno Valley and Perris, hit hard by foreclosures, have struggled more than most. That is why the news pleased officials from Moreno Valley. Bonnie Flickinger, mayor pro-tem, vowed to purchase the first vehicle that comes off the MVP-EV line.