The new chief executive officer of New Flyer Industries Ltd. doesn't pull any punches when he explains the near flameout of North America's largest bus builder that occurred during the previous 18 months.
"Our problems were not so much a result of the market dwindling or any cyclicality of the market," John Marinucci said. "It was a function of the financial uncertainty of the company that existed in 2001."
In his first media interview since taking over New Flyer at the end of April, the former president and chief operating officer of National Steel Car Ltd. in Hamilton said the company's weak financial position scared off customers who would otherwise have been happy to buy New Flyer's product.
However, buoyed by a cash infusion from new owners and Mr. Marinucci's expertise in production, the company is working its way back from the brink.
Mr. Marinucci and other company officials are getting ready to show off its new Euro-design bus, the Invero, at the American Public Transit Association's conference and trade show in Las Vegas later this month.
That's where the Winnipeg company will attempt to take the industry lead in esthetic design changes, just as it was the first to build low floor buses.
Mr. Marinucci, 45, said the company ran into trouble because it could not adequately finance its rapid growth. The privately owned company tripled in size to about $700-million in annual sales between 1995 and 2001.
"So, we essentially had a one-year or 1½-year hiatus from the marketplace and we are still working through that now," he said.
In March, the New York private equity fund KPS Special Situations Fund acquired a majority stake in New Flyer for $44-million and the company simultaneously negotiated a subordinated loan at market rates for another $20-million.
All that cash has been reinvested in the company, allowing it to continue to maintain its status as the largest player in a market where it is notoriously difficult to make a profit.
New Flyer holds 25- to 40-per-cent share of the bus market in North America.
"This is a tough industry, it's very competitive and margins are very low. You have to be very prudent in managing resources," Mr. Marinucci said. "Working capital requirements are very large when you have to invest in inventory and finance receivables before you get paid. It sucks a lot of working capital so that $60-million doesn't take you that far."
Chris Prentice, an urban transit consultant with IBI Group in Toronto, said the bus purchasing process is "punishing" for makers.
"They have to foot the huge bill for all the parts and production and it can sometimes take two years between the time a bid is made on a contract and the buses are delivered. The manufacturer ends up becoming a loan company."
While the company is not about to hire back all 500 people it laid off in March, it is very much a force in the market again, said Paul Smith, vice-president of sales and marketing for New Flyer.
"The difference today is that we are now refinanced and we now have bonding capacity and we can participate in any procurement out there and we have been successful recently in some new orders," Mr. Smith said. "But we have to make sure we get the right orders to fit this business."
Mr. Marinucci said the company is anticipating production growth of about 10 per cent by the end of the year. With profit margins so low, the ultimate success of the company will lie in its production efficiencies, analysts say.
The company has two plants in Minnesota -- in St. Cloud and Crookston -- which employ 800 people. There are about 1,000 who work at the Winnipeg facility.
"They have already taken steps to improve efficiencies at Winnipeg and St. Cloud," Mr. Prentice said.