RV Industry Shrinkage Dulls Oregon Jobs Outlook

May 21, 2009 by · Leave a Comment 

The Oregon Office of Economic Analysis predicts employment will decline an average of 5.3% this year and drop 0.7% in 2010, according to The Register-Guard, Eugene.

It isn’t until the first quarter of 2011 that Oregon’s economy will see job growth of more than 2%, according to the forecast.

State forecasters predict that the struggling transportation equipment industry, which includes manufacturers of trucks, boats, railcars and RVs, will take the biggest hit to employment this year. The state predicts job losses of 28% this year, then 5% next year before growth of 3.4% returns in 2011.

Lane County had built itself into a center for RV production, but its two dominant manufacturers of luxury motorhomes, Country Coach LLC of Junction City and Monaco Coach Corp. of Coburg, sought bankruptcy protection earlier this year. Country Coach is operating with just 94 employees, down from a peak of about 1,800 workers in 2006, and Monaco terminated all of its 2,000 employees when it filed for Chapter 11 bankruptcy protection in early March.

(Monaco was due back in a Delaware bankruptcy court today for the auction of its recreational vehicle division. Navistar International Inc. has offered $52 million for the business but company officials continue to decline to talk about why it has bid for the division and what its plans are. The court is scheduled to authorize the sale on Friday and complete the transaction on June 2.)

Other RV manufacturers nationwide are struggling. All manufacturers combined are forecast to ship 7,000 to 8,000 Class A motorhomes this year, said Frank Magdlen, an RV analyst with the Robins Group in Portland. Not long ago, Monaco alone shipped that many coaches in a year, he said.

“That’s how precipitous the drop was,” Magdlen said. He predicts that Lane County’s RV manufacturers will bottom out this year and begin a slow road to recovery in 2010 and 2011.

The industry’s return is predicated on consumer demand, he said. Consumers have to feel secure enough about their job prospects and finances to make the investment. Plus, financing has to be available.

RV financing should be stronger toward the second half of this year and back to more normal activity in 2010, Magdlen predicted.

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Electric Motors: What It Means for the RV Arena

May 14, 2009 by · Leave a Comment 

 As Indiana Gov. Mitch Daniels joined executives from  Electric Motors Corp.  and Gulf Stream Coach Inc. at  the podium today (May 14) to announce what amounts to sensational news for beleaguered Elkhart County  – the possible creation of thousands of new jobs from a new hybrid electric engine initiative – some in the crowd wondered what all this means for the future of the RV industry.

Is Gulf Stream, in an understandable need to diversify, preparing to exit the RV sector altogether? Is the sun setting on the recreational vehicle business just as it appears that a rebound for RV manufacturers and suppliers is on the horizon?

The answer, in a word, is “no,” according to those in attendance at this morning’s press conference in a vacant Wakarusa, Ind., RV dealership – just down the street from an expansive closed Monaco Coach Corp. plant that some suspect may be about to reopen under Monaco’s new Navistar owners.

Indeed, those involved see nothing but good news for everyone involved with the new initiative, including several partner companies currently seeking funding through the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program, which should appreciably expedite job creation in Elkhart County.

However, they caution, the direct industry impact — other than diversification and insulation from the next economic downturn — won’t be as immediate as the jobs it might create. Officials expect to add as many as 1,100 to 1,500 jobs throughout the area’s whole supply chain by 2011-12. Long haul estimates range from 3,900 to 6,000 new hires.

“With all of the affiliated industry in the supply chain, we see that by 2012, if everything goes according to plan, (the addition of) up to 6,000 jobs (in the area),” says Mark Smith, vice president and chief information officer for Gulf Stream and project manager for the electric hybridization vehicle project for the Nappanee-based manufacturer.

Smith and others see the move toward electrification as a boon to the RV business in general over the next few years.

“Electrification in the recreational vehicle business would make a big difference because you’re increasing fuel efficiency and there will be emissions legislation coming down over the next decade that will encumber the industry if they don’t make changes,” says EMC President Brad Rinehart. “And this entire effort will definitely help out the industry in existing business and create new markets of opportunity within the RV business.”

And as technology develops, Rinehart explained, heavier-duty vehicles will be involved beyond the light-duty trucks into which Gulf Stream plans to begin installing parallel hybrid electric engines by 2010. “The first program we have is a light duty truck,” he noted. “Our plans are to produce about 40,000 vehicles over the next 48 months here in Elkhart County in partnership with Gulf Stream. We have several other projects that I’m not at liberty to talk about with other partners at this point, but our plans are to become a facilitator, an integrator of electrification products into the RV industry and into the light, medium-duty and heavy truck business.”

Of course, 40,000 vehicles is a stunning number for an area that has seen so much idle manufacturing capacity of late. “But,” adds, Rinehart, (EMC CEO) “Wil Cashen is a pretty stunning guy. He’s been able to bring together a collective group of people, some world class engineering companies and the resources needed to make something like this a reality.”

So don’t look to today’s announcement as a signal that Gulf Stream is looking to get out of the RV business by serving as a lead partner in what amounts to an unprecedented partnership in these parts. On the contrary, Gulf Stream is looking to get farther into the towable and motorized RV arena, according to Smith and Gulf Stream Motorized Division President Brian Shea.

“Absolutely,” said Smith. “Our vision, actually, is to bring back the RV industry in a way that may have taken many more years of this economic recovery.”

“What it means is job growth here again,” added Shea. “We’re (Gulf Stream) getting into a new technology, which we’re excited about. You know, we’ve always felt like we’ve been on the cutting edge in recreational vehicles. Now, this puts us on the cutting edge in technology as applied to vehicles.”




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Reuters: Thor and Winnebago Get High Marks

May 14, 2009 by · Leave a Comment 

U.S. motorhome manufacturers have seen demand for their vehicles evaporate as a result of the current economic downturn and related credit crunch. No one is quite sure what the market for their products will look like once consumers start spending again, according to an analysis for Reuters by James B. Kelleher.

So why is Wall Street so upbeat about the sector?

RV manufacturers expect to ship just 14,100 motorhomes this year — the industry’s worst showing in the 38 years data has been collected. That is down 50% from the 28,300 motorhomes the industry shipped last year and down 80% from the 71,800 vehicles it shipped in 2004.

To put that in perspective, the U.S. auto industry — the poster child for a business in distress — expects total vehicle sales in 2009 to be down 30% from last year and down less than 50% from their peak at the start of this decade.

Yet while automaker shares remain radioactive, analysts remain remarkably sanguine about Winnebago Industries Inc. (WGO.N) and Thor Industries Inc. (THO.N), the two biggest players in the RV business.

They argue that the market for motorhomes will come back and that the two companies will enjoy much bigger market share — and all the advantages that come with it.

Investors seem to agree. After collapsing along with the broader market after the fall of Lehman Brothers last September, shares of both companies have staged big rallies over the past two months, more than doubling in value and handily outperforming the S&P 500.

But to justify the rosy outlook, investors and analysts seem to be fast-forwarding to some presumed rebound in demand that will take place once the current downturn passes, rather than focusing on the industry’s immediate challenges.

“Dealers report a troublesome environment, with light traffic, weak demand, tight credit and uncertain supply — but few things last forever,” said Craig Kennison, an analyst at Robert W. Baird.

“Consumer confidence has bounced and retail comps are easy — suggesting the potential for a mild recovery.”

How ugly is the current environment? Half a dozen leading motorhome manufacturers and suppliers, including Fleetwood Enterprises Inc (FLTWQ.OB) and Monaco Coach Corp (MCOAQ.PK), have been forced into bankruptcy over the past year.

The handful of companies still standing face a bleak future, in which they are likely to rack up losses for quarters to come because of low capacity utilization in their factories and aggressive discounting in showrooms.

“I think you’re going to see huge discounts,” Bob Olson, Winnebago president and CEO, warned during the company’s last earnings call.

“If you’re in the motorhome buying market right now, you’re probably going to see some deals that you’ll never see again.”

These factors “make it impossible for Winnebago to be profitable” in the short term, said Morningstar analyst David Whiston. Yet Whiston, too, is optimistic.

“The short-term story for Winnebago is bleak,” he said. “Long term, Winnebago’s prospects look excellent. The company’s lack of debt will allow it to outlast almost all competitors. And once dealers begin ordering units again, orders will flow to those manufacturers that appear the most likely to stay in business.”

But a lot can go wrong between now and then. On the company’s last earnings conference call in March,  Olson suggested Winnebago, which has long eschewed the trailer market, was no longer categorically opposed to entering it.

“As far as the travel trailers are concerned,” Olson said, “I think for the last eight or nine months I’ve basically taken ‘no’ out of my vocabulary. So to say that we would never get into travel trailers, I guess I’m not going to say that anymore.”

But there is a good reason that Winnebago has avoided that market. Margins are thin, forcing builders to operate numerous factories around the country to cut down on transportation costs between plant and dealer.

Winnebago’s production facilities are all located in northern Iowa, a central location in the higher-margin motorhome market but a remote one for the localized towables market. Creating the manufacturing footprint to play in that market would be an easy way to mess up Winnebago’s debt-free balance sheet.

Still, Winnebago is desperate to increase production. The company is currently operating at 15% of capacity and delivered just 315 motorhomes last quarter — well below the 1,200 to 1,400 units it needs to break even each quarter.

As a result, the company reported a gross margin of minus 37.1% last quarter — a figure Whiston called “astounding, really jaw-dropping.”

Gregory Badishkanian at Citi Investment Research & Analysis says those margins will continue to be under pressure as long as there is “accelerated price discounting” by dealers trying clear out Monaco and Fleetwood vehicles. But like all analysts, he sees Thor and Winnebago gaining share.

It is not at all clear, however, how big that market will be. The old RV market was driven by consumers who took advantage of low interest rates, easy credit, and rising home values to leverage themselves to the hilt. Those days are gone — perhaps forever.

Analysts seem to have accepted that manufacturers will sell fewer of the big, bus-like RVs that were so popular earlier in this decade and many more of the lower-priced, lower-margin smaller RVs.

If that occurs, Whiston said, “industry profits will be much lower than in the past.”

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Holiday Rambler Motorhome Owners Convene

May 4, 2009 by · 3 Comments 

The owners of about 190 Holiday Rambler diesel pusher motorhomes manufactured by Monaco Coach Corp. — members of the Ramblin’ Pushers chapter of the national Holiday Rambler RV Club — are gathered this week at the Elkhart County Fairgrounds in Goshen, Ind.

“We don’t call it a rally,” said chapter President Dick Reidenbach of Indianapolis. “We call it a maintenance session and we will have almost 100 technical sessions over the course of the week.”

“The mission of our chapter is to help educate members on the operation and repair of Holiday Rambler diesel pushers,” Reidenbach said.

This evening (May 4) roundtable sessions will be conducted among owners of the various Holiday Rambler brands. “One of the greatest sources of information for resolving problems with a motorhome are people who own the same coaches that you do,” Reidenbach said.

All this as Monaco Coach Corp., Coburg, Ore., which filed for chapter 11 bankruptcy in March, awaits finalization of a $52 million deal in bankruptcy court through which most of Monaco’s assets are to be sold to Chicago-area based Navistar International Corp.

Pat Carroll, Monaco Coach Corp. vice president of product development, was in attendance at the Elkhart County rally as was Veurink’s RV Center, Grand Rapid, Mich., the oldest Holiday Rambler dealership in the country.

“Pat Carroll told us that it’s been a long six months, but that there is light at the end of the tunnel and that Monaco is definitely on the uptick,” said Reidenbach, who three weeks ago bought a Holiday Rambler Navigator for cash from Lazydays RV SuperCenter in Seffner, Fla., was pleased with the turnout.

“I felt like Monaco is big enough and that the Navistar thing is down the road far enough so that something good is going to happen,” Reidenbach said.

Although turnout for the gathering is about 10% less than it was last year, Reidenbach said those attending are in good spirits. “Honestly, the mood here is pretty upbeat,” he said.

And he is equally pleased that the club was able to draw nearly 400 people to Elkhart County.

“We are absolutely delighted with the attendance, given the condition of the RV industry,” said the Eli Lilly Co. retiree. “We feel like it’s a big success.”

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Rep. Donnelly Sees RV Recovery on Horizon

May 1, 2009 by · 2 Comments 

U.S. Rep. Joe Donnelly, D-Ind., whose district includes northern Indiana’s RV manufacturing area, expects that Navistar International Corp. will begin building recreational vehicles again in factories closed by Monaco Coach Corp.

Speaking to the National Association of RV Parks and Campgrounds’ (ARVC) 2009 National Issues Conference April 28-29 at the newly opened National Visitor Center on Capitol Hill in Washington, D.C., Donnelly added that he’s confident that RV sales will pick up when credit markets stabilize and the U.S. economy recover.

“We were encouraged by the fact that Navistar is going to be picking up Monaco Coach,” Donnelly told state campground association leaders. “It’s not all official yet, but it looks like they will be manufacturing again in Elkhart County (Ind.)

Monaco filed Chapter 11 bankruptcy in March, and Navistar, which had partnered with Monaco manufacturing chassis in Elkhart, Ind., has offered $52 million to purchase most of Monaco’s RV manufacturing assets, including factories in Indiana and Oregon. In addition, if the deal is finalized by June 1, Navistar will acquire all brands, intellectual property, inventories and equipment relating to Monaco’s product lines.

Donnelly told the campground association leaders that when the RV industries turns around, there will be more demand than ever for places to take RVs.

“There is going to be demand for these products and they have to go someplace,” the Democrat told the RV park and campground operators. “Where they go in so many places is your businesses. You are the heart and soul of the American dream.”

Donnelly, who serves on the Capital Markets Subcommittee of the House Financial Services Committee, said Congress is doing its best to stabilized the American economy.

“We are getting closer on the credit market,” Donnelly said. “With home mortgages, the `liar loans’ are gone and the crazy adjustable rates that changed every three months, they’re going too. We’re back to basics, but we’re a lot better off for it. We will be a lot more solid because of it.”

Donnelly said he is co-sponsor of legislation that attempts to deal with the speculative run-up of crude oil prices that sent gasoline prices over $4 a gallon last summer.

“I’m no clairvoyant, but much of what happened to prices was done on speculation,” he said. “We sat there day after day watching demand continue to go down as prices continued to go up.

“And what we saw was that (investment banker) Morgan Stanley was one of the world’s largest owners of petroleum. What was clearly going on was price manipulation.”

Donnelly said that legislation pending the House Agriculture Committee would require that buyers of petroleum futures contracts have the facilities to store the oil they buy.

“(That means) if someone has a million-gallon contract, they have to be able to store a million gallons,” Donnelly said. “That’s how it was until 1999. That’s what we are trying to get back to now. That would make it a fair market and an appropriate market.”

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‘Stalking Horse’ Buyer for Monaco Alone in Race

April 27, 2009 by · Leave a Comment 

Even though Monaco Coach Corp. has struck a deal to sell its major assets to a subsidiary of Navistar International for $52 million, the Coburg, Ore.-based RV maker is racing to close the deal before it runs out of money and creditors run out of patience, according to The Register-Guard, Eugene, Ore.

At a hearing Friday (April 24) in U.S. Bankruptcy Court in Delaware, an attorney for Monaco said the company had signed an asset purchase agreement with Workhorse International Holding Co., a Navistar subsidiary. The company’s main secured lenders – Bank of America and Ableco – have agreed to provide it with at least one more week of operating cash while Monaco officials try to “get them comfortable” with what they would be paid in the sale, said Robert Orgel, one of Monaco’s bankruptcy attorneys.

“How much they are to be paid is the key issue,” Orgel said. “The amount it takes to satisfy them may well be harder to achieve the longer it takes us to close a sale because we are incurring expenses every day and the ability to sell assets is limited.”

When it filed for Chapter 11 bankruptcy on March 5, Monaco owed Bank of America $38 million and Ableco $37 million. In a Chapter 11 case, a financially stressed company is given protection from creditors while it reorganizes its finances.

Orgel asked Judge Kevin Carey for an expedited schedule so the company could be put up for auction and the deal could be consummated by June 1. If the sale doesn’t close by then, creditors could move to liquidate Monaco.

But an attorney for the committee for unsecured creditors, Donald Detweiler, told the judge that the sale appears to benefit only the two lenders. Liquidation of Monaco’s assets or some other alternative may provide a better return to unsecured creditors, he said.

“There may be a better way to see value than what’s being proposed here,” he said.

Carey said he expects any reorganization plan to provide some value for unsecured creditors.

“The court can’t create value when value isn’t there, but I want a fair shot at unsecured creditors getting there,” he said.

Unsecured creditors are those that don’t have any legal claim on a company’s land, buildings or equipment. They get paid only after creditors with secured positions, often banks, get paid. If they get paid, unsecured creditors are likely to get something less than the total amount they’re owed. The company has thousands of unsecured creditors.

In a court filing, Monaco attorneys argued that an asset sale to a buyer that would operate the RV maker as a going business would provide the most benefit to everyone concerned. Doing so would “create direct value for creditors, saving 2,000 or more jobs in communities in Oregon and Indiana … and creating ongoing value and revenue for a large number of (Monaco) vendors, dealers and other creditors.”

It’s not clear from the company’s court filings how many people would be employed in Coburg and Indiana if the factory were to resume production.

Navistar, a massive Illinois corporation that builds diesel engines, school buses, heavy trucks and military vehicles, announced a month ago that it had signed a nonbinding letter of intent to buy Monaco’s core assets for up to $50 million. On Wednesday (April 22), Monaco signed an asset purchase agreement with Workhorse, a Navistar subsidiary serving as a “stalking horse” purchaser. In bankruptcy cases, a stalking horse bid sets a threshold price so that other potential bidders can’t low-ball the purchase price.

Judge Carey will conduct another hearing this week on bid procedures and other issues, including whether the secured creditors are willing to extend additional operating credit to Monaco while the sale moves forward. A sales auction would be conducted in mid-May, followed by another hearing May 22 at which Monaco would be seeking court approval for a sale and creditors could seek to block it.

Under the terms of the deal, Navistar would obtain certain manufacturing facilities located in Indiana and Oregon. In addition, Navistar will acquire all brands, intellectual property, inventories and equipment relating to Monaco’s motorized and towable recreational vehicle segments.

The deal would not include Monaco’s resort properties, which the company is attempting to auction separately. Nor would it include its Roadmaster Cargo Trailer business and several industrial properties. 

“We are excited to move forward with the tremendous resources of Navistar supporting our great products,” Monaco CEO Kay Toolson said. “Everyone at the company is ready and committed to again build the highest quality RVs in the industry, offer the best customer support and bring jobs back into the communities in which we operate. We appreciate the patience of our employees, dealers, suppliers and RV owners as we navigated through this challenging environment.”

The company said it appears that no proceeds from the sale would be available for distribution to shareholders.

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Monaco Inks Deal to Sell Assets to Navistar

April 24, 2009 by · Leave a Comment 

Monaco Coach announced today (April 24) that it has signed a definitive agreement to sell substantially all of the company’s RV  manufacturing assets to a unit of Navistarmonaco-logo Inc. for approximately $52 million. The Monaco board of directors  unanimously approved the transaction.

 The closing of the proposed transaction is scheduled to occur no later than June 1, subject to certain closing conditions and completion of the bankruptcy court approval process, including the auction process and the entry of a final non-appealable sale order of the bankruptcy court pursuant to Section 363 of Title 11 authorizing the transfer of the purchased assets to Navistar. Monaco filed for Chapter 11 bankruptcy relief on March 5 in Delaware.

The transaction includes certain manufacturing facilities located in Indiana and Oregon. In addition, Navistar will acquire all brands, intellectual property, inventories and equipment relating to Monaco’s motorized and towable recreational vehicle segments.

Excluded from the transaction are the Motorhome Resorts segment, the Roadmaster Cargo Trailer business and several industrial properties. Monaco continues to work with other interested parties regarding the acquisition of its Motorhome Resorts segment and other assets held for sale.

“We are excited to move forward with the tremendous resources of Navistar, Inc. supporting our great products,” said Kay Toolson, Monaco chairman and CEO. “Everyone at the company is ready and committed to again build the highest quality RVs in the industry, offer the best customer support and bring jobs back into the communities in which we operate. We appreciate the patience of our employees, dealers, suppliers and RV owners as we navigated through this challenging environment.”

Navistar, with nearly $15 billion in annual sales, is a leading global manufacturer of commercial vehicles, military vehicles, diesel engines and related parts and services.

Monaco cautioned that it presently appears there will be no proceeds ultimately available to the company from this transaction and other potential asset sales sufficient, after payments to creditors, to result in any distribution to the shareholders of Monaco.

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Tampa Firm Named to Help Monaco Coach Corp.

April 22, 2009 by · 2 Comments 

Tampa, Fla.-based Focus Managemnt Group was appointed financial adviser to Monaco Coach Corp. under an order entered by a bankruptcy judge, according to the Tampa Bay Business Journal.

Focus Management is performing a broad range of financial reporting, consulting and advisory services, the company said in a release. Focus Management also provided Monaco Coach with advisory services before Monaco Coach filed for Chapter 11 bankruptcy relief on March 5, the release said.

The Focus Management team is led by Robert Riiska, a turnaround manager and restructuring specialist who has extensive leadership experience in Chapter 11 reorganizations, financial restructurings and operational turnarounds, the release said.

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Judge Gives Fleetwood More Time for Sale

April 21, 2009 by · Leave a Comment 

Fleetwood Enterprises Inc. has been granted more time to finalize an agreement with potential buyers.

Company officials said an agreement wasn’t imminent and would not say who the potential buyers were, except that the company continues to have discussions with several parties, according to The Press-Enterprise, Riverside, Calif.

The Riverside-based company, which filed for Chapter 11 bankruptcy protection March 10, sought more time in court documents filed Friday (April 17).

Fleetwood said it needed to delay a final hearing about its temporary financing plan “to finalize an agreement with prospective buyers.” The company added that its ability to find buyers before the final hearing could resolve issues others have had with Fleetwood’s temporary $80 million financing plan with Bank of America.

In addition to being out of town when the original hearing was scheduled to occur, the lawyer representing the case’s committee of creditors mentioned the same reason as Fleetwood’s in his original motion to delay the hearing.

The final hearing to approve Fleetwood’s financing plan has been rescheduled for April 29 at 1:30 p.m.

Monaco Coach Corp., an RV-maker that also filed for Chapter 11 bankruptcy in March, has received one suitor; truck and engine maker Navistar offered $50 million.

Jeff Kurowski, director of industry relations for the National Recreation Vehicle Dealers Associations (RVDA), said dealers hope someone will buy all or some of Fleetwood rather than risk the company being liquidated.

“I would be surprised if someone came in to buy all of it,” he said, since it would require deep pockets and an understanding that both of Fleetwood’s divisions — manufactured housing and RVs — follow the same cycles. When one is down, the other is, too, he said. “Someone would have to have a pretty good stomach for risk.”

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Monaco Asks Judge for OK to Auction Resorts

April 13, 2009 by · Leave a Comment 

A hearing is set for Friday (April 17) on motions filed last week in U.S. Bankruptcy Court in Delaware by Coburg, Ore.-based Monaco Coach Corp. for permission to conduct an auction May 8 of its resorts in Indio and La Quinta, Calif., Las Vegas, Nev., Bay Harbor, Mich., and Naples, Fla.

The La Quinta property is raw land purchased in expectation of developing a resort. The Indio and Las Vegas resorts are fully developed and Monaco owns interests only in some of the remaining lots, according to The Register-Guard, Eugene, Ore.

Monaco has been trying to sell the resorts since last December, according to the company’s motion. The company hired investment banking firm Avondale Partners, which to date has contacted more than 75 prospective buyers. Of those, 30 have signed confidentiality agreements, but none have submitted bids.

Monaco wants to conduct the auction with bids on any combination of its five resorts.

Monaco has been in the resort business since about 2002, when it bought properties in Indio, Las Vegas and Naples from Outdoor Resorts.

Monaco spokesman Craig Wanichek said last year that the company got into the resort business because the owners of its luxury motorhomes want to go on vacation to places that have the amenities they desire, which include tennis courts, swimming pools, golf courses, spas and restaurants.

Monaco filed for Chapter 11 bankruptcy last month and laid off 2,200 local employees. Two weeks ago, the company announced it had found a possible buyer in Navistar International Corp. Navistar signed a non-binding letter of intent to buy some of Monaco’s core RV assets for up to $50 million.

Under a timeline established by U.S. Bankruptcy Judge Kevin Carey, Monaco has until April 16 to file motions to accommodate a sale or establish sale procedures, until May 13 to conduct a public auction and until June 1 to consummate a sale.

Should the deal go through, Navistar would own all of Monaco’s RV brand names, its closed factories in Coburg and Indiana, plus equipment and intellectual property.

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