Hundreds of Navistar employees today (Aug. 5) welcomed President Barack Obama to its Wakarusa, Ind., manufacturing facility to celebrate the award of a $39 million federal grant to develop and build all-electric delivery vehicles and bring jobs to the Elkhart County, Ind., communities.
Through this U.S. Department of Energy grant, Navistar intends to build 400 all-electric vehicles in 2010 and expects that within a couple of years to be producing several thousand vehicles annually, according to a press release. Navistar anticipates hiring additional workers immediately as it ramps up production of the all-electric delivery vehicle. As volumes increase and the market grows, the company estimates opportunities for several hundred more people in the Elkhart area. The grant application calls for the creation of up to 700 jobs, which includes Navistar employees and suppliers.
“The all-electric delivery vehicle is a concrete example of what business and government can do when we work together,” said Dan Ustian, Navistar chairman, president and CEO. “The future is now with this electric vehicle. In fact, we already have interested customers, including some of the most respected names in the industry.”
Navistar is in the process of finalizing a joint venture with Modec Ltd. of the United Kingdom to produce and sell electric Class 2c-3 commercial vehicles in North, Central and South America. This zero emission all-electric delivery vehicle would primarily be used by drivers for local deliveries where stop and go driving would otherwise consume a large amount of fuel.
Navistar has three manufacturing facilities in the area: the Monaco RV facility in Wakarusa, Ind., another facility recently purchased from Monaco in Elkhart , Ind., and the Workhorse Custom Chassis facility in Union City, Ind.
“Navistar is keenly aware of our fiscal and social responsibilities as we stand here today in a facility that Navistar bought from a bankrupt entity,” said Ustian. “Navistar believes in its people and products, and that is why the company is investing in the Elkhart area. We have already added jobs since we bought some of the assets of Monaco out of bankruptcy.”
Earlier this year, Navistar purchased certain assets of the recreational vehicle (RV) manufacturing business of Monaco Coach Corporation, one of the nation’s leading recreational vehicle manufacturers.
Navistar’s commitment to innovation is embedded in its DNA. The company’s foundations were laid in 1831 when Cyrus McCormick invented the mechanical reaper, creating a new industry, modern agriculture, which allowed farmers to expand America westward. The company’s reputation for bringing new technologies to market has deep historical roots. The development of an all-electric commercial vehicle would be the latest in clean technologies for the truck and engine market that Navistar has been first to market with.
Hybrid School Bus and Truck and Military Vehicles on Display
Also on display for the president was the company’s hybrid electric plug-in school bus, its hybrid International DuraStar, the Mine Resistant Ambush Protected vehicle and the International( Husky Tactical Support Vehicle. Navistar was also the first to enter line production of commercial diesel hybrid trucks and school buses. In addition to hybrid-electric trucks and buses, the conventional line-up of International brand commercial trucks is among the most aerodynamic, fuel efficient in the industry.
Advancing Clean Diesel Technologies
For decades, Navistar has demonstrated a commitment to clean diesel technologies that benefit the environment and its customers. In 1989, Navistar was the first original equipment manufacturer to release the smokeless diesel engine and, in 2001, Navistar was the first engine manufacturer to gain certification from the U.S. Environmental Protection Agency (EPA) for meeting particulate and hydrocarbon emissions standards – six years ahead of schedule.
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.”
The Wall Street investment firm Robert W. Baird & Co. sees a silver lining in this week’s quarterly report from Thor Industries Inc.
Thor reported a 41% drop in sales for the third quarter, but topped expectations on share gains and rental orders. “Backlog fell, but improved sequentially hinting at a stronger summer than we had modeled,” the investment firm reported to its clients. “Bankrupt competitors may resurface, but Thor has cut costs and accumulated cash to emerge stronger in the next cycle. We raised our price target to $21 and are looking for an opportunity to get involved.”
Thor reported preliminary sales for the quarter of $415 million, down 41% but it topped Baird’s estimate of $274 million. RV sales fell 48% to $311 million, but “exceeded our pessimistic estimate.” Bus sales fell 3% to $104 million. RV fundamentals remain weak, but improved as the quarter unfolded. It was not as bad as feared, Baird concluded.
The backlog fell to $441 million, down 16% from $526 million last year, including a 9% drop in the RV backlog and 23% drop in the bus backlog. “Importantly, the backlog improved sequentially and implies better Q4 revenue than we had modeled – suggesting Thor will remain profitable in FY2009.,” Baird stated.
Thor improved its towable share to 31.3% year-to-date, up from 30% in 2008, the investment firm noted. “Meanwhile, Fleetwood and Monaco filed for Chapter 11 bankruptcy protection – leaving the door open to survivors like Thor. Together, Fleetwood and Monaco represented 7% of the towable market and 28% of the motorhome market in 2008. Recently, Navistar acquired assets from Monaco but has not indicated whether it plans to build RVs – so the share opportunity remains unclear.”
“We have begun to see faint signs of a bottom in the RV market,” Baird stated in its industry outlook. “Dealers remain reluctant to accumulate inventory, but consumer confidence has improved – hinting at a retail bottom. Meanwhile, Thor has cut costs and accumulated cash to position itself as a lean survivor with share-gain opportunities as the market recovers.”
Baird raised its earnings estimates for Thor based on this week’s report. It projects the company will earn 20 cents per share for the current fiscal year, up from its earlier estimate of a loss of 25 cents per share, and projects the company will earn 85 cents per share in FY 2010, up from 25 cents per share.
Thor reported $296 million in cash and equivalents at the end of the third quarter, a 19% increase over a year ago. This amount, Baird noted, will be sufficient to support acquisitions, internal growth initiatives, share buybacks and higher dividends.
Monaco Coach Corp. got the green light Friday (May 1) to put its major assets up for auction later this month, but only after intensive negotiations that delayed the start of a hearing in U.S. Bankruptcy Court in Delaware.The Press-Enterprise, Eugene, Ore., reported that Robert Orgel, one of Monaco’s attorneys, told Judge Kevin Carey that Monaco was fortunate the hearing was scheduled late in the day because the extra time enabled the parties to resolve all the objections to Monaco’s auction plan.
“I couldn’t have told you that 45 seconds ago,” he said.
Monaco, a Coburg, Ore., RV maker, terminated about 2,000 employees and filed for Chapter 11 bankruptcy protection in early March, seeking to reorganize its finances while getting breathing room from creditors.
Before Friday’s hearing, lawyers for Monaco’s two main secured creditors, Bank of America and Ableco Finance, as well as for unsecured creditors and for the U.S. Trustee, had filed objections to Monaco’s plan to put its major assets up for auction, as well as its request to continue using cash from the main creditors.
Ableco had registered the most vociferous objections in a brief filed Thursday. Its lawyers argued that the proposed $52 million sales price would not come close to covering the $75 million that Monaco owes Ableco and Bank of America. Good faith negotiations to resolve issues had failed, they said, arguing that the company’s operations should be shut down and its assets liquidated.
The Press-Enterprise reported that after talks that apparently went on for most of the day Friday, the objections were resolved.
A subsidiary of Navistar International Corp. has agreed to buy Monaco’s assets for $52 million, but other parties will have a chance to submit bids at hearing scheduled for May 21.
Navistar is a massive Illinois corporation that builds diesel engines, school buses, heavy trucks and military vehicles.
Earlier this month, Monaco signed an asset purchase agreement in which a Navistar subsidiary called Workhorse International Holding Co. would buy Monaco’s major assets for $52 million.
Under such a deal, Navistar would acquire all of Monaco’s RV brand names, its closed factories in Coburg and Indiana, plus equipment and intellectual property. Navistar hasn’t disclosed its plans for the Coburg headquarters, but a Monaco official said in March that the new owner would restart the plant.
Monaco and Navistar have a long-running business relationship. In 2007, the two companies formed a joint venture to build rear-engine diesel chassis in Elkhart, Ind. And Navistar’s president and CEO, Daniel Ustian, has been on Monaco’s board since 2003.