Monaco Coach Corporation

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Monaco Coach Corporation

91320 Industrial Way
Coburg, Oregon 97408
U.S.A.
Telephone: (541) 686-8011
Toll Free: (800) 634-0855
Fax: (541) 302-3800
Web site: http://www.monaco-online.com

Public Company
Incorporated: 1968 as Caribou Manufacturing Company
Employees: 3,050
Sales: $595 million (1998)
Stock Exchanges: New York
Ticker Symbol: MNC
NAIC: 336213 Motor Home Manufacturing

Monaco Coach Corporation is one of the leading manufacturers of premium motor coaches and towable recreational vehicles. The company’s motor coaches are a bit more expensive than its competitors, ranging from $60,000 to $750,000, while the firm’s towable recreational vehicles are typically priced between $15,000 to $70,000. What makes the higher-priced Monaco coaches so attractive to prospective customers, according to the company, is their impeccable performance and unparalleled accommodations. The company’s products include the high-end Royale Coach model, priced between $550,000 and $750,000, as well as the Signature Series, Executive, Navigator, Dynasty, Imperial Windsor, Endeavor-Diesel, Endeavor-Gasoline, and the Vacationer, all from 30 to 45 feet long and with engines of up to 500 horsepower. The company’s towable recreational vehicles are some of the most luxurious ever designed, including such brand name products as televisions from Sony and Quasar, microwave ovens from General Electric, stoves from KitchenAid, and fully automated DSS (satellite) systems. With its headquarters located in the quiet town of Coburg, Oregon, the company sells its product line though an extensive network of independent dealerships across the United States.

Early History

Monaco Coach Corporation grew out of Caribou Manufacturing Company. In 1968, Ray Mehaffey and his wife and children, along with some other friends, decided to change their lifestyle and move from Orange County, California, to Junction City, Oregon. The plan was to relocate to a more sedate and quiet part of the country and start their own business. Mehaffey and his friends focused on manufacturing campers for the growing outdoor recreation market, and opened for business in December 1968. The firm was dubbed Caribou Manufacturing Company, and the strategy was to initiate manufacturing after the start of the new year. Mehaffey and his management team planned the manufacturing schedule to include one camper a day to begin with, and then increase the amount to five campers per day once the company had achieved its full production capacity. The first campers produced by the company cost approximately $2,100, depending upon which of the 11 sizes a customer chose and which individualized floor plan was ordered.

When the company open its doors in 1968, little did the three friends realize that their operation would expand rapidly. Initially, the production facility at Caribou Manufacturing Company was quite small, and the firm had contracted only one exclusive dealer. Yet by the summer of 1971, the company required larger manufacturing space, and so the entire firm was moved to 325 East First Street where it remained for over 25 years. In fact, the owners had much to be proud of—Caribou Manufacturing Company had designed and produced approximately 1,000 high-quality campers, with many of them including individualized floor plans. Most impressive was the company’s rapidly growing sales distribution network, which included almost 30 dealers over a large five state region in the Pacific Northwest.

Although flush with the feeling of success, the three owners were taking nothing for granted. All of them were well aware of the highly competitive nature of their industry, and it was of paramount importance to them to introduce new and improved products. Searching for a new design, the owners of Caribou decided to design and manufacture a mini-motor home called the Monaco. Having established a reputation for including deluxe features and accommodations in all of its previously built campers, the Monaco was also designed for comfort and luxury. The mini-motor home soon became the best selling mini-motor home across the United States, and sales for the company began to increase steadily. From its introduction in October 1971 through February 1972, Caribou Manufacturing Company sold hundreds of the Monaco mini-motor homes. One of the added benefits for the firm was the expansion of its dealer network from 30 to over 40 participants in less than a six-month period.

Unfortunately, the energy crisis during the early and mid-1970s brought the company’s growth and development to a sudden halt. As OPEC tightened its grip on the price of oil, the increase in costs for gasoline across the United States jolted consumers into a heightened state of awareness about the country’s dependence on foreign oil and started a movement toward fuel conservation. Almost overnight consumers were more inclined to purchase automobiles that gave them more miles to the gallon than ever before. The trend away from big motor-homes and campers was a part of this movement as well, and sales at the company began to plummet. In response, Caribou Manufacturing Company produced a mini-model pickup camper in 1974, but the energy crisis had its effect on the firm, and the owners were just managing to keep sales high enough to remain in business.

Change and Transition

Although many other recreational vehicle manufacturers were unable to survive the effects of the energy crisis, Caribou Manufacturing Company had produced a desirable product, and was managed well enough, to survive. Yet the owners seemed overwhelmed by the challenges facing them, and decided to sell their holdings in the company for $15 million to Brian Obie, the mayor of Eugene, Oregon. A well-known and highly successful businessman in the area, Obie was the president of his own company, Obie Communications, which functioned as a holding company for a radio station in Eugene called KUGN, and Obie Outdoor Advertising. Ray Mehaffey, still wanting to participate in the firm he had founded, became one of the vice-presidents.

Under Obie’s leadership, Caribou Manufacturing Company focused exclusively on the production of motor homes while giving up the entire product line of campers. As Obie provided some investment capital for the company to expand, in May 1976 production increased from seven to eight motor homes per day. In addition, Obie’s contacts within the advertising industry and his ability to market the company’s products through his own advertising company were invaluable. Soon sales were on the increase, with more and more orders arriving each day. By February 1977, the company’s daily production of motor homes had increased to 16 units, over 200 people were employed by the firm, and its current facilities required almost double the space to continue the expansion program. At the same time, Obie decided that the company needed a new name to reflect its new image and developing product line, so he changed the company’s name to Monaco Motor Home, Inc.

Ray Obie had a vision for the company that he purchased, and he was just beginning to implement that vision during the late 1970s and early 1980s. With its focus now on the manufacture of a line of motor homes that included sophisticated brand name appliances, luxurious accommodations, and finely tooled craftsmanship, Monaco Motor Homes was on its way to increasing sales and profitability. More and more new models were introduced during this period, while the company’s dealer network expanded across the United States. One of the turning points for the firm occurred in 1984 when Obie decided to purchase the Roadmaster Chassis Division of the Chrysler Corporation. This single acquisition provided Monaco with the personnel and resources to begin designing and manufacturing highly innovative chassis for the motor homes it was now introducing at a rapid pace.

As the company grew, plans for expanding manufacturing facilities were announced in July 1984. Although Monaco would remain at its present location, the total plant size would be increased to 110,000 square feet. Such an increase in production capacity necessitated an increase in the number of employees as well, from 310 in 1984 to 450 by the end of 1985. Monaco motor homes were being sold for between $60,000 and $95,000, with the Crown Royale model sold for between $195,000 and $220,000. There was only one Crown Royale model manufactured each week, and the company soon had a backlog of orders. The company’s Cavalier model was sold for between $49,000 and $60,000, but unlike the Crown Royale, it was manufactured at a rate of one per day. Increasing the company’s manufacturing capacities enabled Monaco to bump production of the Crown Royale to one per day and the Cavalier to between two and four per day. As a result, the completed expansion of the firm’s manufacturing facilities led to a dramatic jump in annual earnings, from $30 million in 1984 to $50 million by the end of 1985.

Company Perspectives:

At Monaco, we strive to match or exceed our owners’ expectations. Before any recreational vehicle is shipped, it must pass rigorous quality assurance checks at each step of the process. Our owners expect this, and their satisfaction is the ultimate measure of success. Our goal of designing and manufacturing a world-class motorhome is only half of the equation. The ultimate key to our continued success is satisfying customers. We devote much of our time listening to our owners at rallies, on caravans, and in our plants and service centers. We’re not afraid to ask them what they think, and they’re certainly not afraid to tell us. We listen and the owners keep coming back.

Along with the successful growth of the company, and its increasing revenues, came the interest from people who wanted to purchase Monaco. In 1987, Ray Obie finally decided to sell the firm to Bill Warrick and a number of his investment associates, including Kay Toolson. Immediately after the conclusion of the acquisition agreement, Warrick became chairman of the board, while Toolson was chosen as president. The company was renamed Monaco Coach Corporation and the management team implemented a comprehensive assessment of the firm’s product line. When the assessment was finished, Toolson decided to rework many of the company’s products. In 1988, the Crown Royale was totally redesigned, with the first rear engine Roadmaster chassis, and introduced during the autumn of that year. In late 1989, the company introduced the 1990 model of the Crown Royale Signature series, with a completely redesigned semi-monocoque chassis. Similarly, the 1991 Dynasty was introduced in the autumn of 1990. In 1991, Monaco Coach Company purchased both the Diplomat and the Executive product lines and necessary tooling for their manufacture. Thus the product line that was to make the company successful and famous during the decade of the 1990s had been put together by new management. With such an attractive product line, the company was soon besieged with orders, and decided to expand its operations by opening a manufacturing and sales facility in Elkhart, Indiana. The once small company started by three friends in a quaint little town nestled in the Pacific Northwest had grown into a national corporation that was the undisputed leader of the market for coaches above $100,000.

The 1990s and Beyond

From 1988 to 1992, on the strength of its product line, sales for Monaco Coach company skyrocketed $64 million, an increase of 372 percent during that four-year span. Led by Kay Toolson, along with eight additional company managers and a small number of investors from outside the firm, management bought out Warrick Industries in March 1993 for a little over $25 million. In the autumn of that year, the company announced its initial stock offering and sought to raise approximately $18 million to pay off its outstanding loans and pursue an expansion program. After the buyout and the successful IPO, Toolson became chairman and CEO. Under the sure hand of Toolson, who had extensive experience in the recreational vehicle industry before arriving at Monaco, revenues at the company jumped to $150 million by the end of fiscal 1995.

With Monaco motor homes developing into some of the most successful offerings within the recreational vehicle industry, Toolson decided to acquire the Holiday Rambler Division of Harley-Davidson in order to secure an even larger share of the market. Holiday Rambler manufactured mobile homes in the $65,000 to $125,000 range, with both front gasoline and diesel engines. With a loyal customer base, Holiday Rambler was the RV of choice for most of middle-class America. Moreover, with Holiday Rambler’s manufacturing facility located in Waukarusa, Indiana, just down the road from Elkhart, the combination of the two firms’ product lines was a natural fit.

Under astute management, Monaco Coach Company developed during its 30-year history into one of the best run firms in the nation. By the end of fiscal 1998, sales had increased to $595 million, with hundreds of vehicles sold every year. Although competition was quite intense within the recreational vehicle industry, Monaco Coach Company had both the managerial skills and the resources to continue its uninterrupted story of success.