REV Group, Inc., will be closing its ElDorado National-California (ENC) business by the end of Fiscal Year (FY) 2024 due to supply chain challenges and a business environment REV Group reports made it difficult for ENC to be competitive and profitable. Winding down business until the end of the fiscal year will allow ENC to complete and deliver orders to existing customers.
In a call following the news, President and CEO of REV Group Mark Skonieczny explained the transition to zero-emission buses and challenges associated with the financial health of ENC’s key suppliers created uncertainty of component availability. He says it was expected to take up to one year before production and regulatory testing could begin with new suppliers on board, which would further delay new orders, deliveries and profitability.
ENC introduced its next generation of electric buses, Axess EVO-BE and Axess EVO-FC, in September 2022. The new electric buses were to be equipped with Proterra battery technology. Proterra filed for bankruptcy in August 2023 and sold its battery business line to Volvo and its transit line to Phoenix Motor.
In the past two years, ENC had received contracts from Foothill Transit Authority, Georgia Institute of Technology, Rochester Genesee Regional Transportation Authority and San Francisco Municipal Transportation Agency. REV Group says all existing warranties, as well as aftermarket services and parts, will be fulfilled.
“Delays in the supply of critical components and the build out of infrastructure to support EV adoption, as well as the financial health of key suppliers, has created a competitive bidding environment for diesel and CNG buses that has made it difficult for ENC to compete profitably versus peers of greater scale,” said Skonieczny. “The decision to wind down operations was not made lightly; however, based on the options available to us, we believe this is the best path forward for our business. I would like to thank our ENC employees, dealers and customers for their commitment to ENC over the years.”
No buyer has been identified but REV Group explained the costs associated with discontinuing ENC would be offset from the eventual sale of assets.
The move to shutter operations of ENC is the latest challenge to transit bus manufacturing following persistent supply chain issues, Proterra’s bankruptcy and the pending exit of Nova Bus from the U.S. market.
Support for ENC employees
While REV Group could not provide an exact number of employees working in the ENC business unit, it did note some of the ENC team have accepted positions at other REV facilities. The company said its talent acquisition team would be at its Riverside, Calif., facility, where ENC vehicles are manufactured, to share job openings across REV Group companies and offer relocation support and discounts through REV Group’s vendor Relocation Today. Additionally, outplacement services would be made available onsite to assist employees in finding other employment after their designated end date and local employers would be invited to ENC to host onsite career fairs.
Part of ‘strategic actions’
The closing of ENC is part of a series of “strategic actions” REV Group is implementing to focus its operating structure and improve profitability in markets where it holds a strong position.
In addition to the closing of ENC, REV Group sold its school bus business, Collins Bus Corporation, to Forest River Bus LLC for $303 million in cash. Forest River Bus is the same company that purchased REV Group’s shuttle bus business in 2020.
REV Group will be reorganized into two reporting segments beginning with its first quarter fiscal 2024 results. The remaining Commercial segment business will be combined with the Fire & Emergency businesses in a new segment named Specialty Vehicles, led by Mike Virnig, the current fire group president. The Recreation segment will be renamed Recreational Vehicles and will continue to be led by its current president, Mike Lanciotti. The company expects to provide updated fiscal 2024 guidance, including the impacts of these strategic actions, with its first quarter fiscal 2024 earnings release.
REV Group expects to generate at least $250 million in net cash proceeds from these strategic actions. The net proceeds will be used to return approximately $180 million of cash to shareholders in the form of a special cash dividend in the amount of $3.00 per share of common stock, payable on Feb. 16, 2024, to shareholders of record on Feb. 9, 2024, with the remainder used to pay down debt under its ABL credit facility.
“Today’s announcement creates a more focused operating structure that provides opportunities for growth, consistent cash generation, and improved margin performance,” said Skonieczny. “The net cash proceeds generated from these actions and strength of our balance sheet allow us to return cash to shareholders in the form of a special cash dividend while retaining ample liquidity and flexibility to continue to pursue our strategic agenda.”
