Small businesses, known for jump-starting economies, aren’t upholding their reputation so well this time around, says The Wall Street Journal.
During past recessions, small firms have been the forerunners in hiring and growth, and the harbingers of recovery. But, this time, they are holding back, seemingly more than large companies — although it’s debatable how much this general statement applies today to recreational vehicle arena.
The reservation appears to stem from a general uncertainty — felt by consumers and owners alike — about whether economic conditions will worsen again before they improve. Some 86% of small business owners say they are concerned about a double-dip recession, according to a survey published by Citigroup last month.
“A lot of small businesses have direct (contact) with consumers,” says Stephen P.A. Brown, director of the Center for Business and Economic Research at the University of Nevada in Las Vegas. “Consumer income just isn’t back yet.”
Consumer confidence likely won’t improve until jobs return, Brown is quoted as saying in the Journal’s “Money Hunt” column, but business won’t hire until consumers spend more, triggering a “vicious cycle” of unemployment and slow sales.
Navistar’s International Corp.’s emergence as the suitor seeking an asset buyout of Monaco Coach Corp.’s RV interests represents an extension of the engine builder’s growing stake in the industry – bolstered during the past several years through acquisition and strategic partnership.
Following an initial report of a pending buyout by a “major public company,” Coburg, Ore.-based Monaco revealed Thursday (March 26) that Navistar had issued a non-binding letter of intent to purchase its RV-related assets and assume certain liabilities for $50 million. Monaco, which filed for Chapter 11 bankruptcy March 5 after a nearly two-year run of “right-sizing” to match faltering demand, reported that the companies are looking to finalize the acquisition in mid-April.
“If we are able to reach agreement, the purchase of certain Monaco assets would fit our strategy of leveraging our assets to expand our diesel business, serve the end customer and would also complement our Workhorse Custom Chassis business,” stated Jack Allen, president of Navistar’s North American Truck Group, a U.S. market leader in large trucks that ranks second in the production of heavy Class A trucks with 13 North American plants.
The tentative deal expands Warrenville, Ill.-based Navistar’s presence in the RV industry while also adding another layer to a diversified, global portfolio that includes production of medium- and heavy-duty trucks, military vehicles, diesel engines and related components for a variety of industries.
Navistar reported net income of $234 million on revenue of $2.97 billion for its fiscal first quarter, ended Jan. 31, including $955 million in military sales – notably a contract with the U.S. government to supply MRAP armored vehicles,
In fact, Navistar currently is a player in the RV sector, perhaps more so than most people realize, looking back over the past few years:
- In mid-2005, GVW Holdings Corp., Highland Park, Ill., sold its Workhorse Custom Chassis LLC and Uptime Parts LLC subsidiaries to International Truck and Engine Corp., an operating unit of Navistar. Workhorse, Union City, Ind., is a major manufacturer of chassis for Class A motorhomes, buses and walk-in trucks. Uptime Parts, located in West Chicago, Ill., and Reno, Nev., supplies replacement and aftermarket parts for the RV, truck and bus markets that Workhorse serves.
- Monaco in January of 2007 formed a joint venture with International to manufacture rear-engine diesel chassis. Monaco and International own 49% and 51%, respectively, of the newly formed company — Custom Chassis Products LLC. Production continues at Monaco’s 210,00-square-foot Roadmaster chassis plant in Elkhart, Ind., which Monaco said was not impacted by its bankruptcy announcement.
- Navistar chairman, president and CEO Daniel C. Ustian has been a Monaco board member since 2003 and has aggressively pursued complementary markets and businesses for Navistar’s truck and engine lines, according to The Wall Street Journal.
- Navistar engines to date have been used in a number of motorhomes, including Damon Motor Coach’s fuel-efficient 31 ½-foot Avanti Class A.