Fleetwood Negotiates for Bankruptcy Financing

March 17, 2009 by · Leave a Comment 

Fleetwood Enterprises Inc. is negotiating with Bank of America for bankruptcy financing and hopes to present a plan to a bankruptcy court as early as next week, according to court documents.

Reuters reported that company spokeswoman Rivian Bell was not able to specify the amount of debtor-in-possession financing being discussed. Such financing is a loan made to a company to help it fund operations while it restructures under bankruptcy protection.

Fleetwood, which also makes manufactured housing, has asked the court to approve emergency funding to pay workers’ compensation benefits to third-party administrators, according to the company’s filing with the Bankruptcy Court for the Central District of California in Riverside, Calif., on Monday. A hearing was scheduled for today (March 17).

Fleetwood filed for bankruptcy on March 10, hurt by high fuel prices and the U.S. economic recession that had limited sales of its recreational vehicles. The U.S. housing market decline has also slashed demand for its manufactured homes.

It is shuttering its travel trailer division and seeking a buyer for its motorhome and manufactured housing units.

“There has been outreach to strategic and financial buyers and there has been interest,” said Bell, adding that she was unable to clarify further.

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Workers File Class Action Suit Against Monaco

March 16, 2009 by · Leave a Comment 

A second class action lawsuit has been filed by employees of Coburg, Ore.-based Monaco Coach Corp. alleging that they did not receive proper notice following the layoff of 2,600 workers in Oregon and Indiana.

The lawsuit claims that Monaco violated the Worker Adjustment and Retraining Notification (WARN) Act that provides employers must give 60 days notice to workers prior to a plant closing or mass layoff. The lawsuit seeks 60 days wages and benefits in lieu of the notice.

Monaco had stated earlier that additional “unforeseen business circumstances precluded” its ability to give 60 days notice to workers. Among the reasons cited were the economy, record gasoline prices last year, the credit crunch, the declining stock market and rising unemployment.

The legal action is a followup to Friday’s (March 13) filing by former employees of Fleetwood Enterprise Inc. making the same claims.

Fleetwood stated: “We don’t usually comment on pending litigation, but in this case there is a great deal of misinformation which is being disseminated, so we want to be very clear that we provided WARN notices to the affected associates in full compliance with the law, and further that we properly notified the appropriate federal, state and local authorities.”

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Lane County Suppliers Hit by OEM Bankruptcies

March 16, 2009 by · Leave a Comment 

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.”

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Fleetwood Responds to WARN Notice Lawsuit

March 16, 2009 by · Leave a Comment 

Riverside, Calif.-based Fleetwood Enterprises Inc. responded to a class action lawsuit filed today (March 13) claiming the company violated the Worker Adjustment and Retraining Notification Act (WARN) in connection with the March 9 closure of its travel trailer division.

Fleetwood stated: “We don’t usually comment on pending litigation, but in this case there is a great deal of misinformation which is being disseminated, so we want to be very clear that we provided WARN notices to the affected associates in full compliance with the law, and further that we properly notified the appropriate federal, state and local authorities.”

The lawsuit was filed in the U.S. Bankruptcy Court for the Central District of California on behalf of over 700 employees who were laid off as a result of the March 9 announcement. On March 10, Fleetwood filed for Chapter 11 bankruptcy protection in Riverside.

The lawsuit claims that Fleetwood violated the WARN Act which provides that employers must give 60 days notice to employers prior to a plant closing or mass layoff. The lawsuit seeks 60 days wages and benefits in lieu of the notice.

The lead plaintiffs, Sandra Justice and Alicia Rice, were employed at Fleetwood’s plant in Edgerton, Ohio, that constructed travel trailers. Plants were also closed in Pendleton and La Grande, Ore.

Fleetwood stated in its bankruptcy filing that it will continue to make motorhomes and manufactured homes.

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Elden Smith: Bankruptcy May Have Positive End

March 12, 2009 by · Leave a Comment 

he Fleetwood brand name is likely to be around on motorhomes and manufactured homes after Fleetwood Enterprises Inc. emerges from Chapter 11 bankruptcy, presumably under new ownership, according to Elden Smith, chairman and CEO.

“There could actually be two very strong Fleetwoods continuing – one in the manufactured housing industry and one in the recreation vehicle industry, even more independent than what they have been under the overall Fleetwood umbrella,” Smith told RVBusiness.

Fleetwood Tuesday (March 6) filed for voluntary bankruptcy in U.S. Bankruptcy Court for the Central District of California, with assets of $558.3 million and liabilities of $518 million. The company said it had $23 million in cash on hand.

The bankruptcy came on the heels of a Friday announcement to dealers that the Riverside, Calif., company was exiting the travel trailer business in which it once held a third of the U.S. market. That resulted in the loss of 675 jobs in three plants in Oregon and Ohio and two service centers in California and Indiana – 225 workers immediately and the balance when Fleetwood completes existing orders.

Smith said that dealers with buy back provisions in their agreements with Fleetwood that were canceled by the company last week now are unsecured creditors under the bankruptcy proceedings.

Smith said that it is logical that new owners would keep the Fleetwood name, which has been around the RV industry for nearly six decades.

“I would be very surprised if new ownership in whatever form that came didn’t chose to use the Fleetwood name and most, if not all, of the brand names,” Smith told RVBusiness. “There is substantial equity there. There are strong dealer organ0zations behind those brands and that is one of the opportunities that any buyer would want to take advantage of.”

He also said the travel trailer division was closed down rather than scheduled to be sold because of declining market share and the general economy, which would not likely enable travel trailer sales to turn around anytime soon.

“We did not feel (the travel trailer division) was saleable as a business entity,” Smith said. “There are certainly assets that are very saleable – one is the facilities, the other could be the product brand names.”

Of greater value right now in Smith’s view is Fleetwood’s manufactured housing business and its motorhome division with such brand names as Bounder, Southwind, Expedition, Providence and American Coach.

In fact, despite daunting shipment numbers for the industry, Smith is convinced that the motorized sector – of which Fleetwood holds a 16% share – can recover.

The fact that several other motorhome manufacturers recently have vacated the markets contributed to Fleetwood’s decision to keep the motorhome division going into Chapter 11.

“Consolidation improves the opportunities of the survivors,” Smith said. “Because it’s a more difficult portion of the market to enter, it takes a lot more capital. There’s much greater risk to it. It does warrant the investment on the part of a company like ours that has a substantial market share position. The margins are strong on the motorized product, so we continue to believe there is tremendous opportunity for our motorhome unit in that segment.”

Although several towable division managers were let go this week, Smith said that Fleetwood’s day-to-day operations continue under existing motorhome division management.

Smith said that Fleetwood has enough cash on hand to last “a good period of time,” but that it also is negotiating with lenders for debtor-in-possession financing that often occurs during bankruptcy proceedings.

However, it’s too early to tell when publicly-owned Fleetwood might emerge from bankruptcy. “Obviously, our intention and our effort is to bring it to a very speedy conclusion and let these businesses move on without having to carry the debt that they currently do,” Smith said.

Smith, who retired from Fleetwood for 7 1/2 years before returning in March 2005 to attempt to bring the firm back to profitability, also said it’s too early to tell whether he and other key Fleetwood managers will remain.

“My commitment always has been for a five-year period,” Smith said. “It’s been four years. I would certainly like to take this to a successful conclusion and see these two businesses under strong, new, committed ownership. At this point, that is my primary objective.”

He added. “I believe I’ve enjoyed the best and the most challenging (times) in my career.”

Had the national economy not collapsed, the veteran executive maintained that Fleetwood would not be in Chapter 11 bankruptcy today. “We’ve made tremendous progress,” Smith said. “Absent of this credit crisis and general recession worldwide, we were on a very solid track for continued improvement if the markets had just leveled out.”

Smith told RVBusiness that the bankruptcy “can have a very positive outcome.”

“It has the potential for taking a great deal of weight off the back of this company, giving it the opportunity under new ownership with a different capital structure to be much more competitive than we’ve been,” he said.

But Smith said the first thing that has to happen for the RV industry in general to recover is an improvement in consumer confidence. “People have to start feeling better about the future,” he said. “The worry has to go away, and they have to feel comfortable going out and making discretionary purchases without threatening their future lifestyle.

“That realistically, probably will not happen until we see less uncertainty in the banking and lending community.”

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Fleetwood Continues Day-to-Day Operations

March 11, 2009 by · Leave a Comment 

Fleetwood Enterprises Inc., the iconic Riverside, Calif.-based maker of recreational vehicles and manufactured housing that has ferried road-trippers and housed owners for 59 years, is continuing day-to-day operations after filing for Chapter 11 bankruptcy Tuesday (March 10).

As reported by the Press Enterprise, Riverside, part of its business will be shuttering its travel trailer division, affecting 667 employees nationwide including 12 at the company’s Rialto, Calif., service center. Other closures include plants in Pendleton and La Grande, Ore., impacting 415 workers, along with a facility in Edgerton, Ohio, that employed 175 employees people.

Fleetwood said that all current orders would be complete at the plants before they were closed down.

In addition, the company laid off another 65 Inland workers in corporate positions Monday. More than 600 workers remain in Riverside.

The company, which will now be concentrating on its motorhome and manufactured housing markets, still has 15 factories and 3,000 employees nationwide. That’s a far cry from its heyday in 1998 when 21,000 people in 62 factories built RVs, trailers and homes.

A Fortune 500 company for 28 years, the company boosted Riverside’s business image and made the Inland region a destination for other RV makers.

Now, bruised and battered by failed attempts to expand, ballooning debt and an economy in tatters, Fleetwood’s stock traded for a penny per share on Tuesday. The company hasn’t made an annual profit since April 2000.

Since then there has been a flurry of management changes, while the company winnowed its losses from $284 million to $1 million by 2008 after shuttering factories and cutting costs. By then, though, Fleetwood was faced with the country’s deep financial slump.

Buyers couldn’t get bank loans to purchase an RV and dealers couldn’t get financing to order new models from manufacturers.

Plus declining property values meant many buyers could no longer draw on their home’s value and use the cash to buy an RV.

“What we are seeing in the RV industry at this time I don’t believe any dealer or manufacturer anticipated,” said Mellanie Ingle, spokeswoman for Giant RV – one of the largest RV dealerships in California with locations in Colton, Corona, Montclair, Murrieta, Westminster and Indio. “Giant RV is confident Fleetwood will emerge from the Chapter 11 filing. Fleetwood is the foundation of the RV industry.”

The Press Enterprise reported that the company was delisted from the New York Stock Exchange in January. It dropped from 7 cents per share to a penny per share in over-the-counter trading on Tuesday.

There will be 609 employees in Riverside – 200 in corporate headquarters, 93 in its manufactured housing operation and 316 building motor homes – down from a peak of a few thousand in the late 1990s.

In 1998, the company was one of the largest makers of motorhomes and travel trailers, with about a 26.1% market share in RVs and 21.6% share of the travel trailer market.

In 2007, it accounted for just 7.6% of the RV market and 5.9% of all travel trailers sold, according to the company’s most recent annual report.

Joe Hixson, a spokesman for Fleetwood, said there are no immediate plans for more layoffs.

The company is seeking bank funding to keep operating, but “we have what we believe to be sufficient cash for the immediate term,” Hixson said.

Monaco Coach Corp. filed for bankruptcy this month. Perris-based National RV sought chapter 11 protection in late 2007. Weekend Warrior Trailers of Perris closed in September last year.

Christian Eddleman, an analyst with Argus Research, said that Fleetwood’s move was just one more in an industry in serious contraction. “It’s just a nightmare scenario for the RV industry that’s not getting better,” he said.

Eddleman has advised stockholders to sell since the last quarter of 2007. “It’s likely that the shareholders are wiped out,” he said.

As for buyers for Fleetwood’s RV and manufactured housing divisions, the marketplace for struggling RV-related companies doesn’t include a lot of suitors.

“It would have to be someone with deep pockets,” Eddleman said.

Thor Industries Inc., Fleetwood’s competitor with more cash on hand and less debt, could be a possible candidate, he said. He also pointed to Warren Buffett’s Berkshire Hathaway Inc., which bought Indiana-based RV company Forest River Inc. in July 2005. Forest River bought Coachmen Industries Inc. in January.

According to the Press Enterprise, Hixson would only say Fleetwood is “moving with a sense of urgency with discussions with our buyers,” without naming those interested.

Several employees at Fleetwood’s Riverside factory where motorhomes are painted say they’re not discouraged by Tuesday’s news.

“You’re never prepared for this kind of stuff, but you see it happening on the street all the time,” said Ralph Montes, a 63-year-old maintenance supervisor who has been with Fleetwood for 21 years. “We might have some bumps and bruises, but we’ll come out of this OK.”

Montes and Andy Villegas, who works with him, said as of noon Tuesday that no employees have been told their jobs are in jeopardy, and they praised Fleetwood’s past employment practices.

“It’s a great company. We’re going to come out of this whole,” said Villegas, 49, who has been with Fleetwood since 1980. “It has good people and good managers. That’s why I’ve been here so long.”

Villegas said he accepts that the company is struggling because people are less likely to buy luxury items during a recession.

But there were weak sales due to the early 1990s recession, and the company survived that, he said.

“The airline companies had their problems, and they came out of it,” he said. “They’re still flying.”

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Fleetwood Says Filing Will Halt Katrina Lawsuits

March 10, 2009 by · Leave a Comment 

Fleetwood Enterprises Inc. said in court papers for its Chapter 11 bankruptcy filing that the action will halt all 289 lawsuits pending related to the Riverside, Calif.-based company’s supply of emergency trailers to victims of hurricanes Katrina and Rita.

According to a Wall Street Journal report, that includes lawsuits filed by Katrina victims that are set to go to trial later this year.

Fleetwood and fellow trailer makers Gulf Stream Coach Inc., Forest River Inc. and Keystone RV Co. are named in lawsuits filed by Gulf Coast residents who, displaced from their homes after the 2005 storm, took shelter in the travel trailers that the federal government purchased from them and from other companies.

As part of the federal government’s response to Katrina, Fleetwood was asked to build 7,500 special travel trailers and 3,000 manufactured homes. Now under bankruptcy protection, the Riverside, Calif., company is seeking to close the travel trailer division and is planning to sell its motorhome and manufactured housing units during its Chapter 11 case.

The lawsuits, which will go to trial in New Orleans beginning in September, accuse the companies of quickly assembling the trailers with formaldehyde-treated materials in an effort to make a quick buck from the disaster. The government may be named as a defendant in the suits, too, for its alleged negligence in the matter.

The government’s disaster relief agency, the Federal Emergency Management Agency (FEMA), was widely criticized for its role in the debacle and was accused of refusing to acknowledge that tests revealed unsafe levels of formaldehyde.

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Fleetwood Enterprises Exits Travel Trailer Sector

March 9, 2009 by · 1 Comment 

Riverside, Calif.-based Fleetwood Enterprises Inc. will be exiting the travel trailer market to “focus on its motorhome and manufactured housing business.”

In a letter to dealers, RV Group President Paul Eskritt explained that the company’s trailer division had incurred significant losses the past several years.

“Fleetwood’s travel trailer division sustained losses of $65.3 million in 2007 and $16.8 million in 2008,” he said. “In recent years, this division has lost market share due to aggressive competition from industry peers. Fleetwood has responded by improving its product lineup, but current market conditions are too severe to permit timely recovery.”

Eskritt went on to say that the move would terminate existing dealer agreements. The rest of the letter stated:

“Because of the decision to withdraw from the travel trailer business, which has resulted in the discontinuance of all travel trailer product lines, the applicable Fleetwood travel trailer manufacturers hereby terminate the travel trailer dealer agreement and/or any other contractual or non-contractual agreements with the dealer relating to the supply of travel trailer products, effective as the date of this letter.

“Law applicable to dealers in some states requires us to inform you that the law in your state may provide you with a right to protest this notice or to take other action.

“To the extent possible, given existing inventory and work in progress, the Fleetwood travel trailer manufacturers will honor and fulfill orders submitted by your dealership for travel trailer products prior to the date of this letter. However, the Fleetwood travel trailer manufacturers will accept no further orders for travel trailers on or after the date of this letter.

“Further information regarding the handling of warranty issues as to travel trailer products will be provided at a later date.

“To the extent that any or all of your previous business arrangements with Fleetwood in connection with travel trailer products ceased or were terminated prior to the date of this letter, this letter will serve only as a general notice to you of Fleetwood’s current status and not as an acknowledgement of any ongoing business relationships.

“Fleetwood intends to concentrate its efforts on its motorhome and manufactured housing business. Our decision to exit the travel trailer business and this letter terminating your travel trailer dealer agreement, does not terminate or otherwise, in any way, affect dealer agreements or other arrangements concerning Fleetwood’s manufactured housing and motor homes business, its products and support of those products.”

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