Wheels of fortune.

Byline: JOE HARWOOD The Register-Guard

JUNCTION CITY - So much for taking it easy.

Two years after resigning as chief executive of luxury motor home maker Country Coach Inc., Bob Lee is back in the driver's seat of the company he founded 29 years ago.

And the road is much bumpier than it was when he left in mid-2000 to travel and to play with big-boy toys that include an airplane, Harley-Davidson motorcycles, and of course, a Country Coach motor home.

Country Coach's parent company, Perris, Calif.-based National R.V. Holdings Inc., is in a slump even as the nationwide recreational vehicle market is thriving.

Shipments of RVs from manufacturers such as Monaco Coach Corp., Winnebago and Thor to dealers are up 23 percent through August, compared with the same period a year ago, according to the Recreational Vehicle Industry Association. Industry analysts are predicting sales of 294,000 motor homes and trailers in 2002, which would be the third-best year since 1983.

But National R.V. hasn't been able to capitalize on the retail buying binge that started 12 months ago. The company has lost $4.7 million on sales of $166.8 million through the first half of the year. And the company is predicting a loss of about $3.4 million for the quarter that ended Sept. 30. That will mark five consecutive losing quarters.

The company in 2001 lost $11.5 million.

"They've fallen behind in product development and their 2003 products have not been well received," said Sidoti & Co. analyst Scott Stember, who follows the company but doesn't own any shares.

Lee, 63, returned to Country Coach from his semi-retirement - which he spent developing an upscale RV resort in California and temporarily serving as chief operating officer of the parent company - about three weeks ago to turn the things around.

Lee sold Country Coach to National R.V. Holdings in 1996, and he and his wife are the largest shareholders, with about a 6 percent stake.

The management shuffle included the return of Wayne Mertes as president of National RV Inc., the holding company's other recreational vehicle manufacturing unit. Mertes, 65, co-founded National RV in 1964. National R.V. is currently divided into two units: the National RV factory in California, and Country Coach in Junction City. The company doesn't break out financial results for each unit, so outsiders can't determine whether one or the other unit was responsible for more of the losses.

Lee, unwilling to throw blame at individuals, said the poor performance of the two manufacturing units stems from overproduction, high overhead costs, losing touch with customers, and not getting new products to market quickly enough.

Talking to customers

The National RV unit's problems stem in particular from not meeting changing tastes, Lee said.

"They built the wrong product and didn't hit the mark right," Lee said. "In this business, if you miss the mark by very far, somebody will own you."

But he sees brighter days ahead, which is good news for the approximately 850 workers Country Coach employs at its sprawling Junction City campus. The complex is one of Lane County's largest private employers.

Country Coach makes five brands of diesel-powered motor homes plus Prevost bus conversions. The products, which range in price from $300,000 for an Allure up to $1.5 million for the most opulent bus conversion, are customized to fit customer tastes and needs.

"The product is good," Lee said. "We just lost touch with our customers and the customers reacted."

When Lee talks about customers, he's referring to the dealers who sell Country Coach RVs as well as the wealthy retirees and others who take final delivery. Lee said he spent four months traveling and living in his RV last year, talking to other enthusiasts about their likes and dislikes. "You've got to get out there and be with the customer and find out what he wants," he said.

Lee said he plans to beef up customer service, sales and marketing efforts in order to recapture lost market share.

Country Coach also lost some dealers in 2000 that weren't replaced. The company now has about a dozen large dealers - such as Guaranty RV, Lazy Days RV and Buddy Gregg Motor Homes - spread across the country.

"We have the big guys, but we need some small guys so people don't have to travel so far to see our products," Lee said, adding that he wants to build a stable of 20 dealers.

Lee said he's already been in touch with some prospective dealers and hopes "to have that problem solved by the end of the year."

Pacing production

Lee also is trying to find the right production pace in order to perfectly match demand.

Overproduction has cost RV makers dearly over the past two years. When sales started slowing in 2000, manufacturers were slow to react and got stuck with surplus inventory. They then had to offer dealers steep discounts in order to move their finished RVs. Such discounting quickly erodes profits.

"As soon as you build too many and put them against the fence, you become unprofitable," Lee said. "Dealers can smell a company with too much product, and word gets around fast."

Lee said he plans to take a conservative approach when it comes to finding the elusive balance between supply and demand. Sensing continued strength at the high end of the market, he said he's already increased production on Country Coach's top three coach models and added 30 workers.

Walking among the manufacturing lines, the renewed optimism among workers is apparent. Several employees expressed relief about Lee's return. "We're so glad he's back," is a common refrain.

Country Coach in January will begin manufacturing a new diesel coach that will sell in the $200,000 price range, considered to be near the entry level for quality diesel motor homes. It's unclear how many jobs the company will add for that work.

"We should have been in the lower-end diesel market a year ago," Lee said. "We didn't miss the mark yet. It's still there."

Other manufacturers have found success with the entry-level diesel coach. Coburg-based Monaco, for example, has done well with its lower-priced Holiday Rambler and Safari diesel RVs.

Expansion concept

Lee also wants eventually to dust off plans for a $10 million expansion the company put off in 2000 when the national RV market started to sour.

Lee and the company own about 30 acres south of the Country Coach plant site. He'd like to build a 120,000-square-foot production building on about 17 acres in the next two years.

The additional space would be used to build a gasoline-powered motor home that would sell in the $100,000 range. That part of the market is red-hot right now.

"As soon as I can justify the numbers, I'll start building the (new) plant and bringing on the gas product," Lee said.

Aside from the strong demand for the more affordable diesel and gas coaches, Lee said the primary reason he wants to build those vehicles is to attract entry-level customers and then keep them as they graduate to higher grades of motor homes.

Those who embrace the RV lifestyle typically start with a lower priced or used coach. Over time, RV owners tend to trade up to more customized and luxurious models. With the starting price of its coaches at $300,000, Country Coach is forgoing a hearty chunk of the entry-level retail market.

"There's no continuity now between our products," Lee said. "We're going to change that."

Lee said he's in no hurry to head off into the sunset again, but did say he's already thinking about a successor.

"I wouldn't know what to do if I didn't have somewhere to go in the morning," he said. "But I also have lots of toys to play with, so I have to get this thing done."

A BUMPY ROAD: NATIONAL RV HOLDINGS INC. FINANCIAL RESULTS

First half of 2002: Loss of $4.7 million on sales of $166.8 million

2001: Loss of $11.5 million on sales of $280 million

2000: Profit of $10 million on sales of $348.9 million

1999: Profit of $33 million on sales of $419.4 million

1998: Profit of $24.1 million on sales of $360.3 million

CAPTION(S):

Bob Lee (right), who founded Country Coach in 1973 and then sold it in 1996, has come back to the company. At left is product specialist Duane Kerr. Country Coach motor homes await shipment to dealers. The Junction City facility produces five models of diesel RV and luxury bus conversions.