Perspectives

Case Study

Developing a Short-Term Action Plan and Setting the Strategic Direction for a Newly Acquired Recreational Vehicle Business

Industry & Client Situation

A diversified manufacturer of commercial vehicles had recently purchased the bankrupt assets of a leading manufacturer of recreational vehicles (RVs).

The newly acquired company had been severely affected by the abrupt downturn in the RV market that resulted from the economic meltdown of 2008/2009. The impact was particularly acute at the higher end of the Class A motorhome segment (Q1’09 unit shipments down by 80% relative to Q1’08), which had historically been a stronghold for the organization. In early 2009 the company voluntarily filed for Chapter 11 bankruptcy protection. The nature of the transaction allowed the acquirer to void existing contractual obligations, and to rebuild the business on a completely clean slate.

Bridge Strategy Group was engaged by senior management right after the acquisition to:

  • Help stand the newly acquired business back up, including defining what set of dealers to sign new agreements with (and in what terms), projecting demand to support the restart of manufacturing activities, and determining what suppliers to bring back;
  • Identify supply chain cost reduction synergy opportunities between the newly acquired company and the parent company; and
  • Re-architecting the newly acquired business for future sustainable profitable growth.

approach

Dealer selection. We conducted a comprehensive assessment and developed a prioritized list of dealers that: were financially sound, could commit to purchases, provided appropriate market coverage, and represented a robust platform for growth.

Demand forecasting. We developed a forecasting model to project monthly demand (at retail and at wholesale) based on dealers’ ability to turn existing inventories.

Cost reduction synergy opportunities. We identified cost reduction opportunities by analyzing the supply base of both the parent company and the newly acquired company.

Dealer models: We described dealer economics along three different types of business models, which offered different types of growth platforms for our client.

Re-architecting the business. Using our understanding of dealer and product line economics as well as key market dynamics, we proposed new ways of realigning the business for future growth, including enhancing emphasis on a ‘consumer pull’ model, realigning dealer incentives, and restructuring the supply chain to address different market requirements (e.g. reduce complexity for enhanced efficiency at the lower end, while allowing for a flexible consumer pull, made-to-order model at the higher end).

results

The Sales team was appropriately focused on pursuing the highest priority dealers, helping accelerate incoming orders. At the same time, our demand forecasting model estimated wholesale shipments at less than a third of the number of units originally reflected in the financial plan-of-record—realigning expectations had a significant impact on a business that was under very tight cash constrains, by preventing the company from re-hiring more employees than needed or by overbuilding to stock in face of severely market conditions. The supply chain analysis identified millions of dollars worth of cost synergy opportunities, while our articulated go-forward vision provided our client with strategic options to re-architect the business for profitable growth.