Spartan Business Model Change

Spartan versus Freightliner. A somewhat meaningless debate for me as we ride on a Freightliner chassis. And, frankly, I don’t buy into the line that one chassis is significantly superior to another chassis. Looking at the number of recalls from Spartan and Freightliner, I would say both of them are overachieving in delivering some quality issues to their customers.

What is up with that latest press release from Spartan?

Spartan Motors Announces Business Transformation to Focus on its Delivery and Specialty Vehicle Segments, Divests Emergency Response Business Unit
February 3, 2020 at 9:00 AM EST

CHARLOTTE, Mich., Feb. 3, 2020 /PRNewswire/ — Spartan Motors, Inc. (NASDAQ: SPAR) (the “Company”), the North American leader in specialty vehicle manufacturing and assembly for the commercial and retail vehicle industries (including last mile delivery, specialty service and vocation-specific upfit segments), as well as for the recreational vehicle markets, today announced the sale of its Emergency Response (ER) segment to REV Group, Inc. (NYSE: REVG). REV Group (REVG) paid approximately $55 million in cash at closing, which is subject to a net working capital adjustment, and assumed certain liabilities of the ER segment. The transaction has been unanimously approved by the Company’s Board of Directors.

In plain English, Spartan sold off their Fire Truck (Emergency Response) business to the REV Group. Why? A little more corporate doublespeak:

“The divestiture marks an important step in our business transformation. E-commerce, electrification and autonomous technologies are driving dramatic change in the industry and this action positions us to continue to provide leading solutions for our customers. I appreciate the dedication of our ER associates over the past 45 years and I wish them success.” — Daryl Adams, CEO

And another thing that is a bit odd about this change in business model?

As part of the sale, Spartan Motors has to change its corporate name and, at this time, the company formerly known as Spartan is now nameless, or TBD. The company that acquired the Emergency Response business from the company formerly known as Spartan, also acquired the rights to the Spartan name. REV will license the Spartan Motors name back to the company formerly known as Spartan, as well as the Spartan diamond logo. This so that the company formerly known as Spartan can continue to use the Spartan name for those RV manufacturers that want to put a Spartan logo on their motorcoaches.

It is possible that you may not have heard of the REV Group. They are a speciality vehicle company and they provide the following products to the RV industry: American Coach, Monaco, Holiday Rambler, Fleetwood, Renegade amongst others. They also deliver buses, ambulances, yard trucks, road sweepers, and fire trucks.

I must admit that $55 million doesn’t seem like a lot of money for that part of the Spartan business. That unit was producing about $250 million of revenue for Spartan. And I don’t understand why the name had to go as part of the deal. That seems very odd to me.

Reading through their latest investor update did not provide me with much insight. The Emergency Response unit was the second largest unit in their business.

The Speciality Chassis and Vehicles (SCV) unit, which includes the Spartan Luxury Motor Coach (LMC) K1 through K4 chassis, took a bit of a hit in 2019.

As I posted yesterday, the entire Class A category was down by 24 percent year over year. It is not surprising that their chassis business segment was impacted.

Should be interesting to see what is going on with the company formerly known as Spartan. I’ll check back once they get a new name.

Quite the industry to follow.