Monaco Coach Corp. indefinitely layed off 850 of its 5,900 employees on Thursday (April 3) and its remaining workers will produce 20% fewer units when they return to five-day work weeks beginning April 14, company executives said during a conference call with investment analysts Thursday.
The elimination of 850 jobs and the shutdown of all of Monaco’s plants next week (April 7-11) are part of an effort to reduce the company’s unsold finished goods inventory, the Monaco executives said Thursday.
Prior to Thursday’s announcement, Monaco’s factories in Indiana and Oregon operated on four-day work weeks the past “six or seven weeks,” said Kay Toolson, chairman and CEO.
The latest move was made because Monaco is facing “a wholesale market challenge,” said John Nepute, president. Monaco’s dealers retailed more of the company’s units ngthe first quarter than they ordered from Monaco’s factories because dealers are concerned about consumer confidence being influenced by a soft economy and uncertainties related to the war in Iraq, he said.
Consequently, with fewer employees working five-day weeks, Monaco now plans to produce 133 motorhomes a week and 55 towables per week, Nepute said.
Prior to the layoffs, Monaco was building 177 motorhomes per week and 65 towables per week, he said. The cuts in production will be “across all lines and by equal amounts in terms of percentage,” said Marty Daley, CFO.
If the wholesale market remains weak, then Monaco might take “occasional Fridays off” or shut down its plants for an entire week, as it plans to do next week, according to Toolson.
Toolson said Monaco has no plans to exit the towables business. He said the towables plant expansion project in Elkhart, Ind., will continue and the construction of a motorhome painting facility in Wakarusa, Ind., will continue at a faster pace because construction workers will not need to work around motorhome production next week.
Monaco will introduce a “toy hauler” and new fifth-wheel models this summer.
“We are excited about our towables business. We make money at it and we will continue to grow that business in the future,” Toolson said.
Currently, Monaco’s profit margins on towables exceeds its margins on motorhomes, because of the dealer and retail incentives now offered on the company’s motorhomes, Toolson said.
Monaco’s discounts “are perhaps a little more severe” on its gasoline-engine motorhomes and its low-end diesel coaches, although Daley noted, “There is some reluctance on the part of dealers to stock high-end, too.
“In the last week and a half or so, (retail) sales are still going on out there,” Daley continued. “No one is saying they’re appreciably better or appreciably worse, but there seems to be a lingering concern about the long-term impact of this conflict (in Iraq).”