Coburg-based Monaco closing 3 Indiana RV plants, cuts 1,400 jobs

Coburg-based Monaco closing 3 Indiana RV plants, cuts 1,400 jobs »Play Video
Monaco is moving some production from Indiana back to Oregon, where the company is headquartered.

WAKARUSA, Ind. (AP) -- Monaco Coach Corp. of Coburg, Ore., blamed the slumping national economy and the shrinking market for recreational vehicles in announcing the closing of three factories in northern Indiana's Elkhart County, eliminating 1,400 jobs, or about a third of its work force.

Monaco said it expected to close the plants in Wakarusa, Elkhart and Nappanee by Sept. 17.

In a letter to employees, Chairman and CEO Kay Toolson and President John Nepute also said the company will fire some of its administrative staff and cut the salaries of executives.

Monaco currently employs 4,300 workers, mostly in Oregon and Indiana. It will keep open Indiana plants in Warsaw, Milford and Goshen that will employ about 700 workers. It has Oregon plants in Coburg, Burns, Springfield and Harrisburg. Hourly production workers earned $25,000 to $35,000 per year, Wanichek said.

Most production of motorized units now made in the idled Indiana factories will move to Oregon, but work on two models will move to Warsaw. Monaco also will consolidate its production of trailers in Warsaw.

The cuts come as Monaco and other RV makers struggle through an industry slump that has seen shipments of the top-of-the-line Class A motor homes fall by nearly a third to 32,900 in 2007 from 46,300 in 2004, according to the Recreational Vehicle Industry Association.

"As a result of record high fuel prices, declining consumer confidence and challenging consumer credit markets, Class A shipments have continued to weaken in 2008, down an additional 40 percent from 2007," the maker of Monaco, Holiday Rambler, Safari, Beaver, McKenzie and R-Vision motor homes and trailers said in announcing the cuts.

Nepute said the plant closings will cut Monaco's Class A production capacity in half, to 90 units per week.

Toolson and Nepute, in their joint letter to employees, urged them to write congressional representatives and ask them to support legislation to strengthen the economy.

"We believe there is more our government can do to facilitate a recovery in our nation's economy. Our government leaders should be taking steps toward making our country energy self-reliant again through drilling for oil, building refineries and encouraging greater use of alternate energy sources," the letter said.

Company spokesman Craig Wanichek said the industry can act as a harbinger of changes in the economy.

"Downturns in retail sales of Class A motor homes in the past have led into recessions," Wanichek said.

Iowa-based Winnebago Industries Inc. reported last month that its profits for the nine months ended May 31 fell 42 percent to $15.5 million, or 53 cents a share, compared with $26.7 million, or 84 cents a share, for a comparable period a year earlier. Sales fell 18 percent to $519.1 million from $632.5 million.

Monaco in April laid off about 300 workers in Wakarusa, nearby Warsaw and Elkhart and previously laid off 200 others, mostly in Wakarusa. Newmar Corp., after cutting 118 jobs in Nappanee in January, said July 2 it would eliminate an unspecified number of other jobs. Fleetwood Enterprises Inc. last month laid off 301 workers at its plant in Decatur, about 75 miles away.

In Elkhart County, where the unemployment rate grew from 4.6 percent in 2007 to 5.9 percent in May, the RV industry employs about 27,000 people and had $7.8 billion in sales last year, said Dorinda Heiden, president of the Economic Development Corp. of Elkhart County.

"You never know the full impact of an announcement like this," Heiden said.

Monaco lost $8.5 million, or 28 cents per share, on sales of $252.4 million during the first quarter of 2008, compared with profits of $1.5 million, or five cents per share, on sales of $322.2 million a year earlier. During 2007, it earned $12.3 million, or 41 cents per share, or flat revenues of $1.3 billion. It's due to release second quarter results on July 30.

The company said it expects severance costs and other expenses related to the cuts to total $7.5 million during the third quarter. It said the cuts should reduce operating costs by more than $12 million per quarter.

Copyright 2008 The Associated Press.