Quote:Interestingly, Spartan has lost money like mad on the emergency side of their business. Then all of a sudden they have a $100 million line of credit and buy their biggest purchaser of chassis.
My guess is once Smeal ran out of cash, Spartan had no choice but to buy them to keep selling a large enough quantity of chassis to be sustainable. How Smeal got to where they are would be an interesting story to learn.
Supposedly the REV Group folks were first in line to buy, I'd go so far as to bet that Spartan had to outbid them to keep selling a lot of chassis. The press release for the sale states that of Smeal's 2016 revenue of $100 million, $30 million of it was Spartan chassis. That's probably in the range of 150 chassis alone. Anyone think that Spartan is building any more than 250 chassis a year, 300 tops for emergency service use?
I'll be curious to see if Spartan somehow starts to turn a profit on their emergency products side.
Smeal wasn't out of cash although it's impossible to say as they were privately held. One thing they were out of was capacity. They invested a lot in the last few years in both facility upgrades as well as streamlining processes. Not to mention the purchase of UST and LTC. They also have made a big marketing push and added some dealers which has in turn brought a significant uptick in orders. The problem is that in a place like Snyder, NE there is a finite amount of skilled labor. I know they are involved with a technical college about an hour away from Snyder because they realize they have more or less saturated the labor pool there and are hoping to bring in some fresh blood. Smeal was profitable before they made these purchases but obviously making this sort of long term investment is going to impact your bottom line in the short term.
Spartan has done a lot of internal reorganization to try and make the emergency response division profitable again. As has been said here Smeal was their biggest outside customer and after what happened with Rosenbauer I don't think they could afford to lose them. The buzz around the industry was that REV wasn't done after they bought KME. I still don't think they are. Given Smeal's dependance on Spartan for chassis' that would have been an interesting deal to say the least. Smeal & Spartan are a natural fit though. As they stand today they both need each other to survive. The connection with the Spartan aerial plant and LTC only makes it more of a no brainer.
I think your estimate of Smeal buying about 150 Spartan chassis' a year is about right. I'll have to try and find out the total number that Spartan is doing, but I think you are in the neighborhood.
I'm curious to see who REV buys next. Most in the business agree there are still a few too many players and a look at REV's ambulance group would tell you that they like to buy stuff.
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