Spartan Motors, Inc. - Announcement

The following is news regarding Spartan Motors, Inc. . If you
have any questions regarding this release, please contact Jeff lambert or
Ben Buursma at 616.233.0500 or bbuursma@lambert-edwards.com
<mailto:bbuursma@lambert-edwards.com> . Thank you for your interest in
Spartan Motors.
 

Spartan Motors Announces Consolidation of Fire Apparatus Subsidiaries
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Luverne Fire Apparatus and Quality Manufacturing combining into new company:
Crimson Fire


 

CHARLOTTE, Michigan, November 18, 2002 - Aimed at accelerating its growth
and increasing market share in the fire apparatus industry, Spartan Motors,
Inc. today announced a plan to consolidate its Luverne Fire
Apparatus and Quality Manufacturing subsidiaries into a new company that
will do business as Crimson Fire.  Efforts to consolidate the two
subsidiaries will begin immediately, with Crimson Fire beginning operations
on January 6, 2003.

 

The Charlotte, Mich.-based manufacturer of fire truck chassis,
emergency-rescue vehicles and motorhome chassis said that combining the two
custom fire truck manufacturers will allow it to expand its dealer base,
broaden its product mix, share best practices and leverage its engineering
expertise, while creating opportunity for accelerated growth.  Luverne and
Quality both build fire trucks for the middle to premium market, but
distribute their products in different regions of the country and have
complementary geographical strengths.  By combining the two operations,
Crimson Fire will offer a broader product mix and have the ability to expand
distribution nationally beyond the current regional efforts.  Crimson Fire
will offer a combined product offering from both subsidiaries, including
heavy-duty pumpers, tankers, aerials, rescue vehicles and highly customized
fire trucks built exactly to customer specifications.

 

"Spartan's fire truck units were selling to similar customers who wanted
mid-range to premium- priced features, many times offering overlapping
features or competing with one another for the same business," said John
Sztykiel, chief executive officer of Spartan Motors.  "By bringing these two
units together, we can offer customers a full breadth of product features at
any price point from one source.  This brings several benefits to our
customers, who will now have a full range of product features when selecting
the apparatus they need.  It will also mean a more comprehensive sales force
and dealer network to serve fire departments in every region of the country.

 

"While Luverne and Quality have shown improvement over the past few years,
they still only have three percent market share in a fire truck market that
is wide open for growth.  We believe the increased focus of one company,
including some key staff changes and reconfiguring the distribution network,
will immediately put Crimson Fire in a position to win market share,
principally from the few high volume players that make up more than 50
percent of the market."  


 

Both companies, along with ambulance manufacturer Road Rescue Inc., are part
of the Spartan Motors' Emergency Vehicle Team (EVTeam) segment, which
represents approximately 27 percent of Spartan's overall business or $68
million in annual sales.  Spartan said the consolidation and aggressive
growth plans for the EVTeam companies are forecasted to drive a 20 percent
increase in sales and 60 percent increase in earnings for the EVTeam in the
next two years.

 

"When we acquired the EVTeam companies, our priority was always to operate
them as individual profit centers.  They do not get preferential treatment
when they buy Spartan chassis, and this will not change with Crimson Fire,"
said Sztykiel.  "Of course, we also see their use of the Spartan chassis as
a competitive advantage that Crimson Fire can use to move from a regional
apparatus company to among the leaders in the industry."

 

Crimson Fire will operate from Luverne and Quality's current facilities in
Brandon, S.D. and Talladega, Ala., respectively.  Jeff Lautt, who has served
as president of Luverne for nearly four years, will assume the role of
president of Crimson Fire.  Brian Bennett, president of Quality
Manufacturing, is retiring from the company effective today.

 

Spartan Motors said the decision to consolidate Luverne and Quality follows
an extensive internal operational review as well as an independent market
research study on the fire truck industry.  Key findings of the research
include:

 

·        Luverne and Quality have succeeded primarily due to their
exceptional products, despite being lesser known in the industry and having
limited geographic penetration.

·        The fire truck industry is highly fragmented and, as a result,
there is great opportunity to capture market share.

·        Customers care most about product quality and performance, followed
by the reputation and services of manufacturers and dealers.  Luverne and
Quality have strong reputations with their existing customers and proven
products, but lack broader awareness in the industry due to their separate
and limited dealer networks.

·        Consolidating the two companies rather than running them
independently or selling them will accelerate profitability and dramatically
improve economic value-added results as measured by the Company's SPAR
(Spartan Profit and Return) program.  Crimson Fire is forecasted to generate
a return on invested capital of 20 percent by 2005.  

 

"We did extensive financial analysis and market research to arrive at this
consolidation plan, and we felt it was important to share the details of the
process we went through," said Sztykiel.  "We are not the type of company
that announces a major initiative, but provides very vague details.  We want
all our stakeholders to understand why we made the decision, what it means
today, and what impact it will have on the future."

 

Additional details of Spartan Motors' evaluation and implementation plan for
the Luverne and Quality consolidation can be found at a dedicated website at
www.spartanmotors.com/crimson.asp <http://www.spartanmotors.com/crimson.asp>
.     

 

Spartan Motors said that the consolidation of operations will result in a
reduction of the combined Luverne and Quality workforce by approximately 10
percent over the next three to four months.  The subsidiaries currently
employ a total of 130 people.  

 

Other components of the integration plan include:

·        Dealer Expansion and Support: Crimson Fire will work with the
existing dealer network that previously served Luverne and Quality to be
sure that excellent dealer support exists for customers throughout the
country.  Crimson Fire will be adding dealers to the network to ensure
comprehensive coverage of each region of the country.  The company also
intends to implement new training programs and regional sales meetings to
grow dealer knowledge and sales.

·        Increased Sales and Marketing:  A broadened geographic focus will
be a priority with both manufacturing facilities staying online and Crimson
Fire's plan to hire additional regional sales staff so that more areas of
the country will have dedicated sales professionals to assist customers and
dealers.  In addition, Crimson Fire intends to better leverage its use of
Spartan chassis and their strong acceptance with fire departments nationwide
to better position its product line against the larger vertically integrated
OEMs.  Spartan has fire truck chassis in every state in the nation,
encompassing thousands of fire districts. 

·        Purchasing Consolidation: Consolidated purchasing opportunities
will strengthen Crimson Fire's partnerships with suppliers, while creating
opportunities to reduce costs and improve terms.

·        Manufacturing/Engineering Resources:  The two combined companies
will share best practices in product engineering and manufacturing and work
jointly on new product development.  Both companies have introduced new
innovations to the market that will now be available across the product
spectrum.

 

"There is great potential for Crimson Fire to be a leader in the fire
apparatus category in the years to come," said Jeff Lautt.  "A combination
of macro-economic factors such as the Bush Administration's $3.5 billion
Homeland Security budget for first responders as well as industry-specific
factors like the increased emphasis on strong dealer service and product
innovation make the timing for this consolidation ideal.

 

"We are confident we can increase market share with a greater focus on
distribution, sales and marketing and smart operational execution.  The
industry -- both dealers and customers -- are looking for a high quality,
professional, cost-competitive manufacturer that is also easy to do business
with.  We expect Crimson Fire to be that solution and look forward to
creating significant earnings growth, sales growth and shareholder value
through this initiative."

 

Spartan Motors acquired both Luverne and Quality in August 1997.  Both
companies have been in the fire apparatus manufacturing business for a
combined 130 years, with Luverne celebrating its 90th anniversary and
Quality celebrating its 40th anniversary this year. 

 

Spartan Motors, Inc. ( www.spartanmotors.com <http://www.spartanmotors.com/>
) is a leading developer and manufacturer of custom chassis for recreational
vehicles, fire trucks, ambulances and other specialty vehicles.  The Company
also owns ambulance manufacturer Road Rescue Inc. and rescue vehicle
manufacturer Crimson Fire, formerly Luverne Fire Apparatus and Quality
Manufacturing.

 

The statements contained in this news release include certain predictions
and projections that may be considered forward-looking statements by the
securities laws.  These statements involve a number of risks and
uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and actual results may differ
materially.

 

# # #

CONTACT:  John Sztykiel, CEO

Spartan Motors, Inc. (517) 543-6400

or

Jeff Lambert, Paula MacKenzie ( jlambert@lambert-edwards.com
<mailto:mail@lambert-edwards.com> )

Lambert, Edwards & Associates, Inc. (616) 233-0500

 
Ben Buursma
LE&A
Grand Rapids, MI
616.233.0500
bbuursma@lambert-edwards.com <mailto:bbuursma@lambert-edwards.com>