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RV maker Country Coach warns it may close
(Register-Guard, The (Eugene, OR) Via Acquire Media NewsEdge) Jan. 2--JUNCTION CITY -- The head of Country Coach has notified employees that the RV factory will shut down for good in two months if it can't obtain new financing.
"Looking forward, due to recent and unexpected circumstances beyond the control of Country Coach, it now appears that Country Coach will be forced to permanently shut down unless it obtains additional financing on or before Feb. 28, 2009," CEO Jay Howard said in a letter to employees, dated Dec. 30 and obtained Wednesday by The Register-Guard.
Even if the company is able to obtain a loan, the company expects "mass layoffs" starting around March 1, Howard said.
Country Coach, like other RV makers, including Monaco Coach in Coburg, has been hammered by brutal market conditions this past year. The privately held company has already laid off hundreds of employees in a series of job cuts in 2008.
Company spokesman Matt Howard said the company currently has about 500 employees. As recently as June 2006, the company said it had 1,700 workers and was planning to hire 200 more to help build two new models of motor coaches.
Matt Howard said he couldn't speculate on the likelihood of the company's ability to obtain loans that would permit it to stay in business.
"We're spending every effort right now trying to resolve that," he said Wednesday. "All our emphasis lies in making sure Country Coach stays open and viable."
The letter was sent to employees as "a worst case scenario" and to fulfill a legal requirement under the federal Worker Adjustment and Retraining Notification Act. The WARN Act requires employers to give employees and communities 60 days notice in advance of plant closings and mass layoffs.
"These are the worst economic times any of us have ever seen in this business," Matt Howard said.
Historically, the company has furloughed workers for two weeks in December, but this year Country Coach extended its shutdown for the entire month of December because of the tough economic times.
The company had planned to reopen next Monday. That won't happen, Matt Howard said.
Junction City Administrator David Clyne said the prospect of a Country Coach closure is "going to be tough news for the city."
"It doesn't come as a surprise to many people," he said. "The economy has been pretty difficult for them."
The effects of a shutdown would be felt not only by Country Coach employees but also by other businesses in town and their employees, he said. The city, too, would lose tax revenue if the company closes, he said, and has already been looking at how it may have to trim operations in anticipation of this kind of announcement.
In 2008, Country Coach paid $139,378 in property taxes to the city and the same amount to the Junction City School District, according to the Lane County Assessor's Office.
"They've been a great employer," Clyne said. "We would be very sorry to see them go. I hope they can find the financing and are able to reorganize and find a business model that works for them in this changed environment."
Lenda Currier, retail sales manager for Camping World, said Country Coach accounts for at least 10 percent of the store's business, including RV owners who shop while having their RVs serviced at the nearby Country Coach plant. Camping World, which opened in Junction City in 2006, supplies RV accessories and camping equipment.
News of the potential closing also had a personal impact for Currier. "My husband's worked there for 20 years. He builds doors for a living," she said. If he loses his job, "Where is he going to go? There aren't (many) jobs in manufacturing ? Monaco has been cutting jobs, too."
What happens at Country Coach, Currier said, "is not affecting just the RV business, it's affecting families."
Leona Houston, the general manager of B & I True Value Hardware, said the Junction City store does business with all the motor home manufacturers. "Country Coach was one of our big customers," she said, buying things like "rolls and rolls of dropcloth type plastic." Problems in the RV industry made themselves felt at the hardware store, as both the RV makers and the companies that supply them began buying less, Houston said.
"They're still buying a little," she said of Country Coach, but far less than they did a few years ago.
A Country Coach worker who provided Howard's letter to The Register-Guard said the company "was a great place to work," but has not done a good job communicating with its employees. "They're not really good about letting workers know what's going on," he said. "They seem to think it doesn't concern us."
He declined to identify himself or his position because he doesn't want to jeopardize his job in case the company is able to obtain financing.
"I'm hoping they do get the money because I'd like to go back working there," he said.
The employee said he got a letter the week before Christmas saying the company would not be paying workers for the holidays of Christmas or New Year's Day, nor would workers get one week of pay during the holiday furlough as they have in the past. Historically, workers accrue 10 hours of pay every quarter during the year to be paid during the December shutdown, he said.
For now, he said, he's getting by on unemployment benefits.
"Everybody's looking for a job," he said. "Nowadays, they're few and far between."
In his letter to employees, Jay Howard outlined the problems confronting the company:
In August, the company sought financing, but the funding it received in October was less than initially requested, he wrote. He doesn't specify the numbers, and Matt Howard said he did not have authority to discuss the financing.
But in September, the company issued a news release saying it had obtained a $6 million capital infusion from investors, and SEC filings showed that it sold $10.9 million in subordinated secured promissory notes to 11 investors earlier in the year.
Jay Howard said RV sales were hurt by the high gas prices last summer, and then by a nationwide credit crunch. Then in November, GE Capital, the primary lender for Country Coach dealers, announced that it would not finance RV purchases at least through the end of 2008, he said.
"GE's surprising decision to stop funding Country Coach's dealers effectively stopped the demand for motor homes," Howard wrote.
As a result, several Country Coach dealers closed, which "triggered massive repurchase obligations for Country Coach while decreasing the demand for motor homes even further," he wrote.
If the company cannot obtain financing, the plant will not reopen and will close permanently sometime between Feb. 28 and March 14, he wrote. Even if financing is obtained, Country Coach anticipates "mass layoffs" starting on or about March 1.
"While Country Coach would have preferred to provide earlier notice of the mass layoffs and potential shutdown, to do so would have undermined its efforts to obtain financing to preserve its business," Howard wrote.
Country Coach, originally known as Country Camper, was founded in 1973 by Bob Lee, a former aerospace worker who was one of the original partners in Monaco Coach Corp. Over time, the company developed a market niche of building higher end, bus-like RVs that today range in price from $300,000 to more than $1 million.
Lee sold the company in 1996 to National R.V. Holdings Inc., a publicly traded RV maker in Perris, Calif., that paid $9 million for the company and assumed $10.1 million in debt.
After National R.V. got into financial trouble, Lee was among the partners, led by Los Angeles investment banker Bryant Riley, who bought Country Coach back from National R.V. in February 2007 for $38.75 million in cash and the assumption of $13 million in debt. The new ownership took the company private.
Signs of trouble at Country Coach began to emerge late last year. In December 2007, the company imposed the first in a series of job cuts, laying off about 200 workers. More layoffs came in March. And in April, the company imposed a 5 percent pay cut on all employees, and Jay Howard said he was trimming his own pay by 25 percent.
In December, the company elected not to attend the biggest RV trade show of the year in Louisville, Ky., even though it had developed what observers said was the biggest innovation the industry had seen in years: an RV with a retractable deck.
As with the shutdown of the Hynix computer chip plant in Eugene, the County Coach shutdown illustrates that the regional economy operates in a national and global context, said Dave Hauser, executive director of the Eugene Area Chamber of Commerce.
"As we work our way, as a nation, through this recession, we're going to take our fair share of lumps," he said. "If the financing doesn't come through and we were to lose Country Coach, that would be another blow to our regional economy."
The Recreational Vehicle Industry Association said shipments through September 2008 were down 24.6 percent from 2007 and predicted that 2009 shipments will be 25 percent lower than 2008. In the past 12 months, 45 of about 2,850 RV dealerships around the country have closed, according to the Recreation Vehicle Dealers Association.
Reporter Sherri Buri McDonald and business editor Ilene Aleshire contributed to this report.
To see more of The Register-Guard, Eugene, Ore., or to subscribe to the newspaper, go to http://www.registerguard.com.
Copyright (c) 2009, The Register-Guard, Eugene, Ore.
Distributed by McClatchy-Tribune Information Services.
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