Nowhere was the pulse of the industry more evident on Tuesday (Sept. 18), the first full day of Elkhart County’s Annual RV Open House Week, than Forest River Inc.’s teeming Dynamax facility on the north side of Elkhart, Ind., where lunch was being served to thousands of dealer personnel as members of the company’s senior management greeted the U.S. and Canadian retailers.
“So far, it’s noon of the first day and it’s packed in here,” quipped Forest River President & CEO Pete Liegl, drinking coffee amid the clatter inside the expansive Dynamax plant in which motorhomes are displayed on elevated lifts. “We’ve got a lot of people coming in and, so far, the enthusiasm’s good and the ordering’s good.”
And why shouldn’t there be plenty of enthusiasm around Forest River’s Open House display and northern Indiana’s RV-building hub of Elkhart in general, considering that business is “extremely good right now” and has been all year for RVs and the other markets in which Forest River has a hand, including marine, commercial bus, cargo trailer and manufactured housing?
Pointing out that last week’s Hershey Show in Pennsylvania was a “barn burner” of an event at which Elkhart-based Forest River did “phenomenally well” in selling “virtually hundreds of units,” Liegl anticipates that Forest River, a Berkshire Hathaway subsidiary, will exceed $3 billion in annual gross revenues for the first time in calendar 2012.
Even the first rain to fall in five years on the Open House didn’t seem to dampen spirits around Forest River’s County Road 6 complex where more than 500 towable and motorized recreational vehicles are on display.
“This industry’s doing extremely well – extremely well, and marine’s come back strong, especially in the pontoon area which we’re in,” he added. “Cargo trailers are doing good. Buses are doing extremely well, very profitable with big back orders. RVs are doing good, motorized and towable. You know, there is no problem here. Last year was one of our best years ever, and this year is turning out to be even better. “
Liegl’s comments are particularly interesting, considering this is an election year in which the uncertainties of a presidential campaign are often said to cast doubt and indecision among consumers.
“I know we’re doing OK,” said Liegl, noting that Forest River only saw a serious recessionary impact in part of 2009. “A lot of other people in the area are doing well. I don’t think it’s as bad as people make it out to be, but it’s not as good as it could be, either.”
Meanwhile, Don Gunden, a divisional general manager and another outspoken member of Forest River’s management team, also sees good things in the products he handles such as the Rockwood, Flagstaff, Palomino, Sabre and Columbus towable brands.
“Business has been good,” said Gunden. “I mean, I look at my numbers and consistently, month over month, we’re better than we were a year ago and better than two years ago. So, its been consistently better in the towable brands I handle, which top out in price at about $55,000 retail for a Columbus (fifth-wheel).”
And Gunden is also anticipating another solid growth year in 2013, although he’s clearly keeping an eye on the nation’s political landscape.
“Yes, my outlook is tempered because we have elections that could have consequences,” he told RVBUSINESS.com. “You know, the only (negative political) thing that I see, honestly as the industry progresses and grows today is that we’re leaving a segment behind. The population that everybody professes to be trying to bolster is the segment that keeps getting hurt — the first-time buyer. Lower income people are being hammered worse than anybody else. And if we don’t change things politically, they’ll just get worse. We’re not doing anything to enhance their life because we’re taking opportunity away from them.”
Forest River Inc. President Pete Liegl indicates that his company, based on current registrations, is expecting to reach or exceed last year’s dealer count during what has become known as Elkhart County’s 4th Annual RV Open House.
Forest River conceived the whole Open House concept in 2009 as a morale-booster for U.S. and Canadian dealers during the depths of the global recession.
In fact, things are looking pretty good right now for Forest River’s own agenda for the Open House, which is slated for the week of Sept. 17-21. And, generally, when things are looking good for Forest River, they’re looking good in terms of traffic count for the rest of the manufacturers who set up shop that week at their home facilities or in temporary exhibits on Elkhart’s north side to socialize with out-of-town dealers and show them new model year units.
“It’s looking very good, better than last year for the same time period,” Liegl tells RVBUSINESS.com. “When all is said and done, it (attendance) should be about the same as we had last year. I think last year, we pushed 3,000 people through there. And, again, it’s a little misleading because that total might have included competitors and some suppliers.”
Best estimates for the total number of visitors expected in Elkhart and the area towns of Goshen, Bristol, Wakarusa and Nappanee for the Open House, are for about 4,000. But it’s always a rough estimate since the Open House never has had an organized registration or cohesive governing organization.
The biggest days for Open House Week are Sept. 18-19, and Forest River will be following a similar game plan as it did last year, meaning that the world’s No. 2 RV builder — a division of Berkshire Hathaway Inc. — will be serving dealers dinner and libations at its Dynamax facility on County Road 6.
“It’s probably not going to deviate much at all,” Liegl added. “All we are going to do is have a little gate control because we had a couple of entrances where people came in and were in the display before getting their name tags and registering. And so we want to have a little better control to know exactly who’s coming and who didn’t come. I guess, basically, we are going to duplicate last year, maybe make a few minor changes here and there, but insignificant. And we’re going to have the same number of units displayed, probably in the neighborhood of 500, and serve food and sell as many units as we can.”
Editor’s Note: The following is an excerpt from an Elkhart Truth article offering a response by local RV officials to the Recreation Vehicle Industry Association’s (RVIA) move toward changing the date of its annual Louisville Show. The time frame proposed is for late September/early October beginning in 2014, which would conflict with the Elkhart Open House that has gained momentum since its inception. Pete Liegl, the president and CEO of Forest River Inc. which founded the event, was especially vocal as seen in the excerpt below. To read the entire story click here.
Pete Liegl, president and CEO of Forest River, kick-started the idea of an open house and as other manufacturers have piled on, it has grown into a major showcase. Some dealers have acknowledged they get what they need at the open houses so they are skipping Louisville.
When the national event is held depends on the dealers, Liegl said. Whether the retailers want December, June or some other time, that is when the trade show should be held.
However, a change in the Louisville dates does not necessarily mean an end to the open houses. Liegl again noted if the dealers want the Elkhart County event to continue, it will. That is good news for the local economy since the product shows pump money into area hotels, restaurants and other businesses. For the 2011 event, Forest River alone spent an estimated $1 million on hotel rooms, food and liquor for its dealers.
Emphasizing the open house is for the RV retailers, Liegl said he would resist any effort by the RVIA to ban the event altogether.
“They can go to hell,” he said. “If I want to have a product show, I’ll have a product show. The RVIA is not going to tell me what I can and can’t do.”
No one really knows how many North American RV retailers to expect at Elkhart County’s 4th Annual RV Open House Week, set to take place Sept. 19-23 in and around the northern Indiana city of Elkhart, because that’s the way things work with the open house — a rather relaxed event with no real boss or steering committee or formal sponsor.
Launched in the depths of the recession at Elkhart-based Forest River Inc., it was initially conceived as — and still is very much today — a means for dealers and manufacturers to sit down and enjoy a beer – or root beer – and visit in a casual, low-pressure atmosphere.
And while estimates for this year run as high as 4,000 dealer personnel, Forest River President and CEO Pete Liegl isn’t really predicting how many dealers will be in town for the 2011 open house. But he is expecting this year’s attendance to exceed the 3,000-plus retail attendees who converged on Elkhart last September.
“I think we probably will have more people attending this year than last year because word gets around,” Liegl told RVBUSINESS.com. “And, by the same token, there are other manufacturers besides Forest River having their open houses also, which brings more people in. And if a dealer is here for somebody else, they are going to swing by some of the other manufacturers.”
Here’s a few more remarks from Liegl from a recent interview slated for publication in the September/October issue of RVBusiness — an issue that’s scheduled to include rather detailed locations for open house participants and for which last-minute entries may be accepted as late as tomorrow (Aug. 16) morning by contacting RVB Editor Bruce Hampson at email@example.com.
RVB: So, Pete, you see the open house concept continuing to gain traction?
Liegl: I believe it will, at least in the short term. The timing is far better than the timing at Louisville. Louisville is too late for a dealer to take on a new product, in my estimation.
RVB: While some industry people think Louisville’s too late, others claim the open house is too early.
Liegl: Could be, I guess. The open house might be a little early, but I don’t think so. It lets the dealer see and plan if he is thinking of adding a new line. It gives him adequate time to figure out what he wants, what he needs, how it fits in with his other products, how the programs work for various companies that he might be taking a line on from. And the show season’s right around the corner.
RVB: All in all, then, where do you see this event going in the future?
Liegl: I do not know. I guess I plan on really paying attention to it this year. There has been a lot of talk about if we have these open houses, how does that affect the Louisville Show? I’m buying just as much space, if not more space, at Louisville than I did last year. I’m totally open to anything there. Whatever best fits the dealers’ needs, that’s what we ought to do. And if it’s Louisville that fits the dealers’ needs or these product shows, that’s where we ought to go. The dealer is who we ought to be servicing here.
RVB: Inasmuch as the open house remains a very loose slung event with no real steering committee or formal organization behind it, do you see a time when the manufacturers locally — or nationally — start working more together to plan and coordinate it?
Liegl: There has been some mutual agreement between Forest River and a competitor saying, ‘Hey, why not work together?’ Quite specifically, we were very open regarding the dates when we were having it and not BSing anybody. If a dealer wants to see other peoples’ product when he is in here seeing ours, that’s his business. If he thinks he ought to, then he should. A dealer ought to stock and sell the product he can make the most money on — period. If we are not competitive with our product and our pricing, we ought to pay the price.
RVB: So, you’re open to wherever it might go in the future?
Liegl: Certainly. And if it fizzles in the future, then it fizzles. If Louisville fizzles, then it fizzles. It’s all about what’s best for the dealer.
RVB: In a rather interesting twist, we hear that Forest River and Thor are going to operate a shuttle between each others’ exhibits on County Road (C.R.) 6.
Liegl: That’s my understanding. That’s fine because dealers are here to see product and enjoy the company of other dealers and the staffs of various manufacturers. And if we’re drinking, we shouldn’t be driving. That’s why the more shuttle buses we have, the better. And if we have an agreement between Thor and ourselves, that’s what we ought to do. We want everyone to be safe.
RVB: How come Forest River moved its open house from the grounds around your headquarters on the west side of Elkhart to your recently purchased Dynamax Corp. facilities on C.R. 6?
Liegl: The main reason is that we’ve always put up a tent, and we’ve been very fortunate to have had good weather for the number of years we’ve had it down here. But I know, statistically speaking, one year we are going to have miserable weather, and that tent, sitting where it is, is going to flood.
Now, we’ve been fortunate enough to squeak by without that happening. But I know darn well it’s going to happen if we keep doing it there. We have some decent facilities at Dynamax, and it’s a new addition to Forest River, so its a logical place to have it. We’ve got room out back that we can use and already have talked to Dick Strefling, who we bought Dynamax from, so we have adequate room. We have up to 50 acres there if we need it.
RVB: In summary, the open house is about dealer rapport. That’s the real magic of the open house, isn’t it? I mean, dealers can come in and spend a whole day looking at equipment, eat some ribs, socialize and get out of town.
Liegl: Certainly. We pay for the meals and hotel rooms here. It’s the dealers’ show. We’re there for the dealer. If the banker wants to come, we are not there for the banker. We’ve got the rest of the time in our whole life to talk to the banker or any supplier. We can’t do several things at once and do them correctly. And our No. 1 priority is the dealer, period. If the dealer just wants to sit and not do anything but socialize and drink beer, that’s what we are going to do.
I want our people talking to dealers and resolving any problems or situations we might have with them, whether it be a service, parts or communication problem. We ought to be talking to the dealer about what he likes or dislikes about our product and then take notes and scrutinize things and make the proper decisions based on their input. That’s what we’re there for. We only have a precious couple of days — same with Louisville.
The 4th annual Open House Week in northern Indiana is a go. At least Forest River Inc.’s plans are set, and that usually sets the pace for the rest of the industry around Elkhart County with regard to this emerging fall dealer event.
Forest River first opened its doors to thousands of recession-rattled dealers in 2008 to better communicate with them and to help move product earlier in the season.
The whole thing caught on like wildfire, as more than 20 other Elkhart and LaGrange County, Ind., RV builders started sponsoring simultaneous dealer events at their respective plants as well as at off-site locations for dealers who came in from all over North America.
Forest River President and CEO Pete Liegl says the September open house concept is growing because it’s ”time appropriate.”
”If we are going to sign up a new dealer, he has time to bring the units in (to his dealership),” Liegl said. ”And also, he has the time to understand the procedures and policies that we have here and become familiar with business between his company and ours instead of waiting until Louisville.”
Forest River’s open house date is similar to last year’s — Sept. 20-22 — but its location is all new: across town at its newly acquired Dynamax Corp. facilities on the northeast side of Elkhart. That’s only blocks away from the RV/MH Hall of Fame, which, if things go according to plan, will reportedly play open house host to all of Thor Industries Inc.’s divisions.
“The Dynamax facility has a huge area for parking and a couple of buildings in back that would be very adequate for the dinner, etc.,” said Liegl, whose Berkshire Hathaway Inc. subsidiary purchased Dynamax in January.
Previously, Forest River’s event had been held on the grounds around its headquarters on the west side of Elkhart.
What’s behind the move? Although the weather has been good since the event was established in 2008, says Liegl, that can’t possibly last forever. ”Statistically speaking, one of these years we are going to have some inclement weather,” he added. ”Having it in a field over here (near the company’s headquarters) with a big tent, we’ve been lucky.”
An estimated 3,000 dealer personnel attended Forest River’s busy event last year, where the company wined and dined retail personnel in a huge tent surrounded by an expansive array of the company’s varied products.
That said, Liegl says Forest River will participate as usual in the Recreation Vehicle Industry Association’s 49th Annual National RV Trade Show in Louisville, Ky.
An appropriation of $200,000 for work related to industrial-zoned land on the north side of Goshen, Ind., drew a long debate at Tuesday’s (Feb. 15) meeting of the Goshen City Council.
The money, to come from the city’s Major Moves Fund, would be used to complete design of water and sewer utilities for the land along Ind. 15, owned by Pete Liegl, the CEO of Forest River, Inc., The Goshen News reported. Liegl owns roughly 500 acres, 160 of which have already been annexed into the city and zoned industrial in preparation for a potential new industrial park.
Mayor Allan Kauffman, who brought the ordinance to the council, explained in a memo that the idea is to be as prepared as possible when developers are ready to build.
“When the economy turns, and if someone wants to build on that land and bring good-paying jobs to Goshen, we wouldn’t want to have a delay while utilities to the site are designed,” Kauffman said in the memo. “Once designed, they can likely be constructed in the amount of time it would take for the developer to put up a building.”
Kauffman said he had not yet spoken with Liegl, only one of his compatriots, Mike Stump, and that it was his own idea. And although the appropriation would only be for design work, with no construction beginning until a developer began moving forward, some council members felt it was not the right time for the effort.
“The questions that I’m getting are about the $200,000 spent up front now for design when I’m not sure how long it would take (for the land to be developed),” Councilman Don Riegsecker said.
Councilman Jeremy Stutsman asked whether it was possible to speak with Liegl and his group to see if they would be willing to put up some of the funding for the work. Dorinda Heiden-Guss, president of the Economic Development Corp. of Elkhart County (EDC), said that in her time before working for the EDC, she had a face-to-face with Stump and Liegl in which it appeared they were quite unhappy with their prior dealings with the city.
“I think it’s inappropriate to go to him for funding,” Heiden-Guss said. “It might be a more negative PR relationship.”
Stutsman, Councilman Everett Thomas and Councilman Tom Stump each feel the appropriation could wait for more information.
A motion to delete the item failed, and the ordinance was eventually passed on first reading.
Also included in the ordinance were appropriations of $5,219 for the EDC, $10,000 for the North Central Indiana Business Assistance Network, $40,000 for one-third of the costs related to a sewer extension along Wilden Avenue, $100,000 from two tax increment financing district funds for training reimbursement grants, $30,420 for a reimbursement to Wightman Petrie Inc. for the Safe Routes to School — 11th Street sidewalk project, just under $2 million of general obligation bond proceeds that were not encumbered from 2010 and $45,000 for the salary of the city’s brownfield coordinator, which was not included in the 2011 budget accidentally.
The appropriations for NCI and the EDC were also questioned due to the amount of money the city already pays for economic development, but were left intact.
A final vote on second reading is scheduled for the council’s next meeting on March 1.
The mayor of Goshen, Ind., wants to help Forest Forest Inc. CEO Pete Liegl develop an industrial park on the city’s north side, The Goshen News reported.
The Goshen City Council will consider the mayor’s request for appropriation to make it happen at its Tuesday (Feb. 1) meeting.
In an e-mail to be included in the council packet, Kauffman, a Democrat seeking re-election this year to a fifth term in office, gave some advance explanation of the appropriations he is requesting, including a $250,000 from the Major Moves fund for design of utility infrastructure for Liegl’s industrial zoned land on the north end of town.
The largest appropriation request will affect an area owned by Liegl along the west side of Ind. 15 north of Brenneman Memorial Missionary Church. Kauffman wrote in the e-mail that the action would be consistent with the city’s past action of extending water and sewer utilities to the Hoogenboom Nofziger land in Waterford Commons.
“When the economy turns, and if someone wants to build on that land and bring good paying jobs to Goshen, we wouldn’t want to have a delay while utilities to the site are designed,” Kauffman said. “Once designed, they can likely be constructed in the amount of time it would take for the developer to put up a building.”
No construction of utilities would take place until the developer confirmed something would be built.
As Forest River Inc. marks its best sales year since being founded in 1995 by Peter J. Liegl, the multi-divisional company anticipates hosting 2,800 people at its third annual dealer meeting, Sept. 29-30, at its corporate headquarters in Elkhart, Ind.
”I guess we are going to have a 40% increase this year in attendance,” Liegl told RVBUSINESS.com. ”The response has been phenomenally good.”
The show will feature Forest River, Coachmen, Palomino and Prime Time recreation vehicles along with buses, cargo trailers, manufactured homes, commercial vehicles, ice houses, pontoon boats and bathroom units manufactured by other divisions.
In an exclusive interview with RVBUSINESS.com, Liegl estimates that Forest River’s sales for 2010 will be in the range of $2.5 billion, up 74.2% compared to last year.
”We’ve never had a better year in our whole history,” Liegl said. ”We’re happy with that. But by the same token, we picked up a lot of pieces of the pie (market share) where other people went out of business.”
Soon to join Forest River’s lineup is the reincarnation of the Shasta brand in a new division under the direction of industry veteran Brad Whitehead that will build stick-and-tin travel trailers, minimotorhomes and laminated trailers and fifth-wheels. Shasta’s new lineup will make their debut Nov. 30-Dec. 2 at the 48th National RV Trade Show in Louisville, Ky.
”We won’t have anything from Shasta at our dealer showing, but there’s a need for a Shasta-type product and we’ll have it at Louisville,” Liegl said.
Although the recent proliferation of northern Indiana dealer meetings has raised some concerns within the industry regarding the ultimate impact on the Recreation Vehicle Industry Association’s (RVIA) Louisville Show, Liegl said that Forest River’s dealer show is meant to compliment the Louisville Show, rather than replace it.
”I think we need both,” Liegl said. ”No 1, Louisville is limited to RVs. By the same token, space is extremely costly there. I’ve got my show here in a field next to corporate headquarters. I can display more at no cost.”
Liegl, at the same time, said the Louisville Show by itself isn’t long enough to spend the time necessary with Forest River’s dealers. ”Our show just gives us more time to spend with our dealers communicating,” he said. ”That’s all Louisville is, communicating. But with our own show, we’ve got more time to do that.”
The Berkshire Hathaway Inc. subsidiary’s foray into staging its initial dealer meeting in 2008 with the theme ”Pick Your Partner” was spurred by the desire to ”let dealers know that financially, unquestionably, we were the strongest (RV manufacturer),” Liegl said.
”We wanted to make it known that they should make sure that their ‘partner’ was going to be here through thick and thin,” Liegl added. ”And obviously, it worked very successfully for us.
”In effect we were saying to dealers that they needed to know who they were doing business with because if your manufacturer goes out of business, you’ve got a problem, not only a problem getting your warranty, but a problem selling them and getting them financed.
“Every dealer out there understands that very well today when they look at the manufacturers that went out of business and the problems they had with the product that they had on their lots.”
Liegl said the theme for this year’s gathering will involve a ”thank you” to dealers for making Forest River the success it has become.
in the big picture, Liegl said a host of RV manufacturers holding dealer open houses and shows the same week in September is, in reality, boosting attendance at Forest River’s gathering.
Those other companies hosting dealers include Gulf Stream Coach Inc.; Thor Industries Inc. subsidiaries Keystone RV Co., Thor Motor Coach (recently created from the consolidation of Four Winds International Corp. and Damon Motor Coach), Breckenridge and Dutchmen Manufacturing Inc.; Monaco RV LLC; Livin’ Lite Recreational Vehicles; Dynamax Corp,; EverGreen Recreational Vehicles LLC; Sunnybrook RV; and Carriage Inc. Meanwhile, Jayco Inc.’s annual Master Sales Training Session for dealers’ sales staffs is partly slotted in the same time frame.
”Having the competition have their (dealer shows) at the same time has boosted our numbers,” Liegl said. ”We’re getting commitments (from competitors’) dealers that they are coming to ours too.”
Warren Buffett was spared from giving a deposition in the lawsuit brought by a former executive who said he was wrongly dismissed by the recreational vehicle unit of the billionaire’s Berkshire Hathaway Inc., Bloomberg reported
As first reported on Wednesday (Aug. 4) by RVBUSINESS.com, U.S. Magistrate Judge Christopher Nuechterlein in South Bend, Ind., made the ruling Aug. 2 and said Berkshire CFO Marc Hamburg may be questioned by lawyers for the plaintiff, Brad Mart.
Mart said he was fired from the Elkhart, Ind.-based Forest River Inc. after bringing allegations of fraud to executives, including to Buffett in six phone conversations. Mart had requested Buffett’s deposition to combat Omaha, Neb.-based Berkshire’s claim that it should be dropped from the lawsuit for lack of jurisdiction.
“Even Mart’s own recount of the conversations reveal that Buffett communicated that he did not get involved in personnel matters and that Mart should seek an audience elsewhere for relief,” the judge wrote.
Buffett, Berkshire’s CEO, isn’t accused of wrongdoing. His deposition was requested to help determine facts of the case. Buffett didn’t respond to an e-mailed request for comment sent to an assistant.
Berkshire, the parent company, doesn’t do business in Indiana and shouldn’t be subject to courts in that state, it said in the June 1 request for dismissal. Mart said Berkshire’s control over Forest River submits the firm to Indiana law and Buffett’s statements could help show that.
Hamburg’s deposition was requested by Mart “to probe the full extent of the parent-subsidiary relationship,” Nuechterlein said. “The court considers it appropriate to grant Mart’s request.”
Berkshire had previously offered a deposition with Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett.
Buffett, 79, bought Forest River in 2005 and left its CEO, Peter Liegl, in charge of the unit. Mart, who helped arrange the $800 million sale to Berkshire, was fired last year after he went to Buffett and accused Liegl of fraud, according to the April complaint. Liegl’s lawyer, Jeanine Gozdecki of Barnes & Thornburg LLP, denied the charges and is seeking a dismissal.
Liegl required Forest River to buy parts at inflated prices from a company he owned and appropriated cash from factory vending machines, Mart said. Liegl also reneged on a promise to make Mart CEO, according to the complaint. Mart alleged in the suit that Liegl threatened his life.
“There is no legitimate basis to the allegations of the threats or the fraud,” Gozdecki said last month. “We will vigorously defend these claims on behalf of the company and on behalf of Pete Liegl.”
Mart’s request to depose Jeff Rowe, Forest River’s director of human resources, was granted by the judge. An application to question Forrest Krutter, Berkshire’s secretary, was denied.
“It appears that this request is more likely to lead to an impermissible fishing expedition than targeted, jurisdictional discovery,” Nuechterlein said of the request to depose Krutter.
Krutter had no comment. Stephen Kennedy, a lawyer for Mart, declined through an assistant to comment.
Judge Christopher Nuechterlein has sided with management in a preliminary ruling in the suit against Forest River Inc.
In a decision announced this afternoon (Aug. 4), the judge ruled that plaintiff Brad Mart, former president of Forest River, cannot order billionaire Warren Buffett, CEO of Berskshire Hathaway Inc., Forest River’s parent company, to be disposed in the suit.
Ron Lipinski, attorney with Seyfarth & Shaw LLP, Chicago, representing Forest River and its current CEO, Pete Liegl, told RVBUSINESS.com the judge’s ruling was “consistent with our position” which he argued during an hour-long hearing on July 26.
Mart’s attorney had argued for extensive discovery, but today’s ruling came down on the side of limited discovery.
But Lipinski stopped short of putting too much weight on the decision.
“It’s a preliminary discovery ruling. I don’t know that you can classify it as a victory or a loss. If the case proceeds, it (the request for Buffett’s deposition) may be raised again,” he said.
The judge further ruled that Mart can take some limited discovery and file his briefs. Preliminary discovery is to be completed by Oct. 1.
Mart petitioned for a deposition of Buffett to demonstrate the parent company’s role in his firing, according to a June 17 motion in the court. Omaha, Neb.-based Berkshire, one of the defendants named in Mart’s lawsuit, has said it wasn’t involved in the dismissal. In a July 6 brief, Berkshire asked the court to protect Buffett from questioning, Businessweek first reported.
Mart’s lawyer is Stephen Kennedy, of Kennedy Clark & Williams PC in Dallas, who made the deposition request and argued his client’s position in court. Kennedy spoke first, followed by Cary Lerman, of Munger Tolles & Olson LLP, Los Angeles, attorney for Berkshire Hathaway.
The request to depose Buffett, the world’s third-richest person, escalated a conflict that already included Mart’s allegations of fraud and threats of violence at Forest River, the Elkhart, Ind.-based recreational vehicle maker. Mart’s chance of winning a settlement may improve if the judge orders the deposition.
Buffett isn’t accused of wrongdoing. His deposition could help determine facts of the case, and may lead to his testimony at trial.
Mart requested Buffett’s deposition to combat Berkshire’s claim that the firm should be dropped from the lawsuit for lack of jurisdiction.
Berkshire, the parent company, doesn’t do business in Indiana and shouldn’t be subject to courts in that state, the company said in a June 1 request to dismiss the case. Mart said Berkshire’s control over Forest River submits the firm to Indiana law and Buffett’s statements can help show that.
Buffett, 79, bought Forest River in 2005 and left its founder and CEO, Liegl, in charge of the unit. Mart, who helped arrange the $800 million sale to Berkshire, was fired last year after he went to Buffett and accused Liegl of fraud, according to the April complaint.
Liegl required Forest River to buy parts at inflated prices from a company he owned and appropriated cash from factory vending machines, Mart said. Liegl also reneged on a promise to make Mart CEO, according to the complaint. Mart alleged in the suit that Liegl threatened his life.
“There is no legitimate basis to the allegations of the threats or the fraud,” said Jeanine Gozdecki, lead attorney for Liegl and Forest River. “We will vigorously defend these claims on behalf of the company and on behalf of Pete Liegl.” Gozdecki, of Barnes & Thornburg LLP, is seeking a dismissal.
Liegl said in a sworn statement that he runs Forest River independently of Berkshire and the parent company didn’t play a role in his decision to fire Mart. Liegl, who is also a defendant in the case, didn’t mention the allegations of fraud in a statement in support of his motion for a dismissal.
Mart has also asked to depose Berkshire CFO Mark Hamburg and Secretary Forrest Krutter. The company offered Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett, according to court filings. Mart rejected that offer. Berkshire’s Krutter declined to comment.
Berkshire Hathaway Inc. was sued by an ex-manager of its recreational vehicle business who said he was fired after bringing allegations of “millions of dollars” of fraud to executives, including Chairman Warren Buffett, according to Business Week.
Brad Mart said in an April 5 complaint that Buffett “took no action to correct the deficiencies” at the RV maker, including the removal of cash from factory vending machines for deposit in a personal account of Forest River CEO Peter Liegl. A representative for Berkshire said Mart never told Buffett, in three conversations, about unethical behavior, and that a company probe found no illegal activity.
Mart is seeking the Forest River CEO post, which he said he was promised, according to the complaint in federal court in South Bend, Ind. He also asked for damages including reimbursement for his loss on the sale of his home in Illinois when he purchased a new property in anticipation of getting the promotion. He accused Elkhart, Ind.-based Forest River Inc. of breach of contract and said Liegl threatened his life.
“Because Mart followed the Berkshire Hathaway Code of Business Conduct and Ethics and reported known or suspected violations of the code by Liegl and Forest River to Warren Buffett, Mart lost his job,” according to the complaint. Liegl “fared much better, retaining his position as CEO of Forest River and keeping the millions of dollars he bilked.”
Mart was fired early last year after helping to arrange Berkshire’s 2005 deal to buy Forest River for about $800 million according to the complaint. Mart said that he was named general manager of the company’s financing business after it was bought by Berkshire and then told in 2007 he would succeed Liegl as CEO. Mart said he reported violations to Buffett in six separate phone conversations.
“Mr. Mart did not alert Mr. Buffett to any unethical, fraudulent or illegal activities” at Forest River, said Berkshire Secretary Forrest Krutter in an interview. Krutter said Buffett asked him to conduct a review of RV maker related to “business items.” “In the course of the investigation, these allegations came to light,” Krutter said of the fraud claims. “My investigation did not identify any fraudulent, unethical or illegal activities.” Krutter said he’s seen “no evidence or indication” that the allegations of death threats are valid, and that the reasons for Mart’s dismissal aren’t related to his claims.
Berkshire’s code says the company will “uphold the highest level of business ethics” and that retaliation is prohibited against employees who report violations in good faith. Buffett told Congress in 1991 that he had given employees of Salomon Inc. a message after a bond scandal: “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”
Mart said that Liegl required Forest River to buy parts, at inflated prices, from a company he owned and demanded that the RV maker’s staff use his airline-charter service for business travel. Liegl’s conduct also included “appropriating hundreds of thousands of dollars in cash from factory vending machines,” according to the complaint.
Liegl also used “ghost payrolling” so that former employees could receive salary or benefits from Forest River in a “fraud upon Berkshire Hathaway’s shareholders,” according to the complaint. Buffett oversees a collection of more than a 70 companies from Berkshire’s Omaha, Nebraska, headquarters with a staff of about 20 people. Berkshire’s subsidiaries include insurers, shoe manufacturers and power producers. He seeks companies with strong management and entices business-owners to sell their firms by promising not to interfere in day-to-day operations.
‘A Remarkable Entrepreneur’
Mart said he introduced Buffett and Liegl. According to Buffett’s annual letter to Berkshire shareholders published in 2006, Liegl previously sold Forest River to a leveraged- buyout firm and subsequently quit the firm because of a disagreement on strategy. Forest River then went bankrupt and Liegl repurchased it, Buffett said. “Pete is a remarkable entrepreneur,” Buffett said in the letter. “You can be sure I won’t be telling Pete how to manage his operation.”
Forest River has about 5,355 employees, according to Berkshire’s 2009 annual report. The unit sells restroom trailers and pontoon boats in addition to RVs, according to the company’s website.
Angelica Schultis, a lawyer for Mart, declined to comment.
RVBUSINESS.com reported in October 2008 that Mart had been named president of Forest River. “Brad is a very competent manager,” Liegl said. “Making this move, we can maintain doing what we are doing.”
Liegl told RVBusiness that he will, in turn, focus on acquisitions. “The times are right to be aggressive in this area,” Liegl said. “There are some people struggling out there. It hasn’t been the greatest of times for everybody in the RV business, but, by the same token, it hasn’t been the worst for everybody, either.”
The announcement of Mart’s promoton came in a company memo dated Oct. 1, 2008.
Publisher’s Note: RVBUSINESS.com touched bases recently on a variety of topics with Forest River Inc. founder and CEO Peter J. “Pete” Liegl. Here’s a verbatim transcript of that on-the-record conversation, which took place in the aftermath of the company’s successful “Pick Your Partners” dealer meeting that drew some 2,000 people from 700 U.S. and Canadian dealerships in late September to the Berkshire Hathaway Inc. subsidiary’s home complex on the west side of Elkhart, Ind. Parts of this interview appear in the upcoming issue of RV Business, the magazine.
RVBUSINESS.com: Pete, your dealer meeting this year was impressive to say the least, as most in this industry are well aware.
Liegl: It was considerably more than last year, obviously. But we’ve got Coachmen in there and a couple of other things we didn’t have last year.
RVBUSINESS.com: What signal or message are you sending these dealers?
Liegl: It’s not different than any other year. We are trying to give the best product at the best price ratio. Obviously, there’s only a couple of financially strong manufacturers in the RV business, and us being one. Dealers have gotten burned severely with a couple of other manufacturers who filed bankruptcy or went out of business and I think they realize that. The opportunity is phenomenal right now for us. We are going to expand the motorized area drastically. We’ve done OK in the towables and we’ve been into motorized quite a few years now, and we’ve got a pretty good handle on the products that we make in motorized and we just need to make more.
RVBUSINESS.com: Those are ambitious goals, considering that RVIA forecaster Richard Curtin predicts that motorized in 2010 is only going to occupy 7.8% of the market. Why would you expect growth in motorhomes?
Liegl: For several reasons. When you look at two other manufacturers that went bankrupt and might be coming back out, there’s a hell of an opportunity. We are completely convinced that the RV business is here to stay. It might be a little different than we’ve known it in the past. In total there is something like 21 manufacturers who used to manufacture some form of RV who are not with us here in the last 12 months.
But things are good. Things are not bad out there. I think it’s going to continually improve. Obviously, we all know the recession is over. It was over at the end of June. The recovery is going to take a little longer, but dealers are selling. Dealers are getting flooring. Customers are getting financing. The RV industry’s not bad right now.
RVBUSINESS.com: The RV industry generally leads in to – and out of –downturns. At least that’s how the old saying goes. Did it appear to hold true this time around?
Liegl: I believe it is holding true. We are doing more in sales and bottom line in the last three months than we did during a comparable period last year. And last year wasn’t a bad year. That’s also a little misleading because we have Coachmen (Forest River last year purchased the RV segment of Coachmen Industries Inc.) now with us. So, obviously we are not comparing true apples to apples. But even if we did compare apples to apples, which I do, we are doing better than we did last year during the same time period. You could just walk that (Forest River’s dealer) show and not hear anybody and look at them and know that the enthusiasm is running high.
RVBUSINESS.com: So, back to your earlier comment, you agree with (Federal Reserve Chairman Ben) Bernanke that the recession is over?
Liegl: Yeah. I think he predicted that sometime back. We still have high unemployment here, but it is improving. Interest rates are low. Gas isn’t expensive. Things are good.
RVBUSINESS.com: Flooring is still a challenge.
Liegl: Yes, in some cases it is. But again, dealers are required to do what they should have done in the last five years. We as an industry, we as a country, got sloppy. We gave people financing that shouldn’t have had it. We were lax on collecting the curtailments, paying the interest. Well, 20 years ago, we didn’t have that problem. Every dealer knew you were supposed to pay your curtailments and your interest. With this sub-prime attitude, giving financing to people who shouldn’t have it, primarily in housing, is a problem.
The big problem that we’ve experienced – and are now getting over – is that you’ve got to pay your interest to a financing institution. You’ve got to pay your curtailments, and they (a lot of dealers) weren’t used to that. They (finance companies) are holding their feet to their fire, and if they (dealers) don’t (pay curtailments), they aren’t going to get any more (credit). Now, people have accepted and understand that, and they’re more current with that situation than they were six months ago.
RVBUSINESS.com: Looking back at your dealer meeting, is it possible that you brought more dealers to Elkhart for your two-day get together than you’ll see at early December’s Louisville Show.
Liegl: I guess so. I don’ know what they (RVIA) are forecasting. But we were blessed with the number of dealers that did show up. I was very favorably impressed. And the attitudes were phenomenal.
We’ve got a lot (of dealers) who still didn’t come for various reasons that we expect to see in Louisville, and we are going to maintain our presence there. And our display this year will be as big, if not bigger than last year. I think we are going to see a lot of dealers down there, too. It might not be as many, but the Louisville Show comes and goes very quickly, and you don’t get to see as many dealers as you want and you don’t get to spend the time with them that you want. There might be fewer people coming to Louisville this year, I don’t really know. But I personally think there is going to be a product shortage next year. Some people think I’m crazy if you publish that. But I don’t care. I don’t think there’s going to be a product shortage, I know there is going to be a product shortage.
RVBUSINESS.com: Is this prediction based on growing demand in the market or on the industry’s inability to keep up after a tough year?
Liegl: Primarily on the manufacturers’ ability to beef up and give the market what it needs. It’s my understanding — and I had a list not too long ago — that 21 manufacturers have gone out of business. Obviously, even if the market shrinks, which it has and is going to be smaller next year than it was a few years back, there are not as many people (companies) to build the product. So, we plan on getting our share.
RVBUSINESS.com: What kind of pace are you on dollar-wise in 2009?
Liegl: We are going to do probably in the area of $1.8 billion.
RVBUSINESS.com: How many employees are you now?
Liegl: I think 6,200, nationwide.
RVBUSINESS.com: I know it’s a simplistic view, but a lot of people see the towable side of the industry turning into a what might best be described as a two-horse race between Forest River and Thor over the next few years. Your thoughts on that audacious statement?
Liegl: We are the financially strongest one, obviously. And we will be No. 1. There isn’t going to be any horse race. You just have to look at the recent stats. Our numbers are increasing where our other competitor’s out there are decreasing. We are only a few percentage points different right now when you put together Coachmen, Forest River and Palomino. Last month, I think we had 45% of the camping trailer business, retail. The July numbers are out and we aren’t doing as much as I want, but it’s acceptable.