April 2011

MCI CEO stresses fundamentals

by Alex Roman, Managing Editor

Having recently attended the ABA and UMA shows in January, what were some things you heard that concern operators both about the industry and your company?

The first thing I learned is that there are some wonderful people in this industry. Most said that their businesses have stabilized and have actually begun to grow again. I do not think many have gotten back to the levels they were at in 2007 and before, but it has stabilized and is starting to grow again, which is a good sign.

Most of what I have heard on the concerning side are the challenges operators have to raise prices. Many of them commented that the prices they are charging now are similar to the prices they charged 10 years ago, so that is clearly a key challenge for operators.

In terms of feedback on MCI, everyone was very complimentary about our products. Operators appreciated our J coach as being the best selling coach in the industry and the D as being the workhorse in the industry. Almost everyone I spoke to commented about our aftermarket support. I heard time and again that we offer the best aftermarket support in the industry — service, parts and support. Many operators really appreciate the new direction for MCI.

The last thing I heard was that operators were really interested in what KPS will mean for the company. From my perspective, having KPS as MCI's owners is really the best thing that could have happened because they focus on buying leading industrial companies and really transforming them into great companies. They have already done that with New Flyer and I am confident that the same will happen at MCI.

Much has been made of MCI's previous debt, labor relations, vendor relationships, etc. What is MCI's current financial position and what does the company plan on doing to rectify some of the mistakes of the past?

MCI's debt structure was the catalyst for most of the problems in the past. The company had way too much debt. Before MCI filed bankruptcy, it had over $800 million in debt and, even when it emerged from bankruptcy, it had over $200 million in debt. [Debt like that] can cripple a company, because most of the company's cash was going to pay principle and interest.

Beginning with rectifying the mistakes of the past, the company is extremely healthy financially right now. We have absolutely no bank debt, so all the cash generated by the company can be reinvested to improve MCI. At the end of December, we closed on a new line of credit that gives the company over $80 million of borrowing potential, and we don't plan on using that line of credit because we don't have to. We are actually cash positive and profitable, so it is there as a safety net. MCI has the ultimate backstop because KPS has $2 billion in uncommitted funds. If we find the right kind of opportunities, we can clearly tap into that fund. So, in terms of our financial position and rectifying mistakes of the past, being healthy financially goes a long way.

I also think that we are going to have a very sound operating philosophy. We are going to focus on fundamentals...quality, reliability and aftermarket support. We are going to run our business with honesty and integrity, and we are going to be responsive to the needs of our customers.

Does MCI have plans to introduce new models or revamp current ones?

We definitely plan on innovating with new products. We have the funding and I think that leaders in industries are required to innovate, so we certainly plan on doing that. At this point, we haven't finalized our plans. We are still working on the specifics and being very thoughtful about it. We are learning about our customer's needs and trying to determine the best way to deliver those needs in new models. You get one shot to do it, and you want to do it right, so we are going to be very deliberate about it.

What is your outlook on motorcoach sales?

The fourth quarter seems to indicate that sales have stabilized, although that is a very short period to establish a trend. Our approach is that we are going to make this company great and do the things we need to, assuming that volumes stay where they are. If they rebound and grow again, that is like icing on the cake. We are going to take control of our own destiny and make this a great company at current volume levels, because we cannot control what happens in the market.

 

 


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