by Larry Plachno
On November 10, 2015, New Flyer Industries announced an agreement to acquire Motor Coach Industries. A little more than a month later, these two leading private coach and public transit brands completed their merger on December 18.
Many in the industry saw this marriage favorably not only for the complimentary assets of the participants but for new stability in the industry.
The product lines of MCI and New Flyer have been complimentary rather than competitive. They have always shared a great deal in common. The most obvious of these similarities was that both companies had been founded in Winnipeg and had their primary manufacturing facilities at that location.
Another similarity: Both MCI and New Flyer were not only leaders in their chosen areas of the bus industry – MCI, intercity coaches, New Flyer, transit buses, – but both had been under the umbrella of KPS Capital Partners in the past.
MCI was founded in 1933 as Fort Garry Motor Body and Paint Works. The company was renamed Motor Coach Industries in 1941. Under the leadership of founder Harry Zoltok, MCI produced vehicles with such reliability and durability that Greyhound invested in 1948 and acquired full ownership in 1958. While MCI did build transit buses on a few occasions, it concentrated on intercity coaches. MCI remained a part of the Greyhound holdings until 1993 when it briefly went independent and then affiliated with Dina of Mexico. Since 1996 the company was controlled by a number of investment companies, the latest being KPS Capital Partners. Moving back under bus management with New Flyer has been seen as a positive.
New Flyer’s history goes back to 1930 when John Coval founded the Western Auto and Truck Body Works in Winnipeg. The Western Flyer name was introduced in 1941 and intercity coaches were built until 1968 when the company decided to concentrate on transit buses.
Like MCI, New Flyer has dealt with multiple owners over its long history. In 1961 the company was sold to the Manitoba Government and renamed Flyer Industries Limited. It returned to private ownership in 1986 under Jan den Oudsten and was renamed New Flyer Industries Limited. Den Oudsten was related to the bus builder of the same name in the Netherlands that was merged into United Bus and now the VDL company. By the 1990s, New Flyer had replaced Flxible as the dominant transit bus builder in the United States and Canada.
New Flyer’s acquisition by the KPS Special Situations Fund came in March of 2002. After improving operations, KPS sold to Harvest Partners in February of 2004 and the company went public on the Toronto Stock Exchange in 2005. In recent years, New Flyer has expanded through joint ventures, acquisitions and solid product innovations.
A joint venture with Alexander Dennis in May of 2012 added a low-floor medium-duty transit bus to the product line. A collaboration project in June of 2012 with Mitsubishi Heavy Industries, the Manitoba Government, Manitoba Hydro and Red River College fostered the creation of a fully electric battery-powered bus.
June of 2013 saw New Flyer acquire North American Bus Industries (NABI) and its factory in Anniston, Alabama that is now producing New Flyer buses. The New Flyer product line today includes their heavy-duty Xcelsior transit model available in both conventional and articulated lengths as well as several different types of power including conventional diesel, hybrid, CNG, battery electric and trolley bus. They also offer the smaller MiDi bus based on their joint venture with Alexander Dennis.
Now comes MCI.
The MCI + New Flyer Combination
What are we looking at with a combined MCI plus New Flyer? Shortly after the acquisition Paul Soubry, the president and CEO of New Flyer and CEO of MCI, sent a letter to customers talking about the combined companies. He made some good points and I can add others.
Both MCI and New Flyer are leaders in their respective fields. Combined, they are a force to be reckoned with. Together they field a staff of nearly 5,000 and support customers with more than 42,000 transit buses and 28,000 motorcoaches on the road most every day in Canada and the United States. Combined, they bring in more than $2 billion (U.S.) annually as the leader in North America. I know of no other manufacturer in North America that produces this number of high-quality buses annually.
From the standpoint of direction and management, this is clearly a step in the right direction for MCI. After having been cut loose from Greyhound, MCI spent more than 20 years under the control of Dina and then investment firms without substantial knowledge of the bus industry. With New Flyer, MCI now has a true bus partner, a longer-term perspective on building a lasting company and the capital to invest in this long-term approach.
In short, the future looks bright for MCI. This first year with New Flyer has seen several improvements in facilities, favorable management changes, improved staff direction and good early news on what customers will want in the future. All of these seem to be pointing the company forward.
Since the two companies joined, plenty of work has gone into bringing them closer together. Paul Soubry, the president and CEO of New Flyer initially took the additional title of president and CEO of MCI. He recently handed off the president’s title at MCI to Ian Smart, executive vice president of New Flyer Aftermarket, and made other senior management moves. Among them, Brian Dewsnup, formerly vice president of MCI aftermarket, now becomes president of a new business unit that combines MCI and New Flyer’s parts, training and publications operations into a single business unit.
Soubry has gotten significant attention for his fast and intelligent moves with this merger. The Financial Post, one of Canada’s leading business publications, named Paul Soubry as Canada’s #1 CEO of the year in 2016. In addition to the company’s combination and performance as the largest transit bus and coach manufacturer in North America, Soubry was credited for making strategic acquisitions that strengthened existing businesses and competitive advantage at both divisions.
At MCI, Smart and Dewsnup have significant reputations in the bus industry.
An Industrial engineer, Smart has been with New Flyer since 2011, joining the company from a 14-year career at StandardAero, holding managerial and executive positions including senior vice president of airlines and fleets with responsibility for the operational and financial performance of its four business units. Smart will be based in Winnipeg.
Dewsnup has been described as “a real bus guy” who was an integral part of the merger implementation team after serving as New Flyer’s vice president, business development; he became MCI’s vice president of aftermarket during the past year. Now, he will revolutionize parts, training and publications, but mostly the customer experience of all three.
A mechanical engineer with an MBA, Dewsnup has been focused on enhancing customer value and following through on many of the improvements already underway in the aftermarket area.
In one of his first moves, Dewsnup named Ron Miller to director of the six MCI Service Centers in the United States and Canada. Miller is well known to many because he started with MCI 12 years ago at the Ohio service operation and eventually became MCI fleet service manager, responsible for heavy-duty collision and repair projects. In April of 2016 he became and service center interim director.
This was a good move because Miller is known and respected throughout the industry by insurance adjusters and customers for his expertise, integrity and dedication. The MCI Service Center locations in Des Plaines, Illinois; Orlando; Los Alamitos, California; Blackwood, New Jersey; Dallas and Montreal.
MCI employs nearly 100 MCI and Setra factory-trained technicians. Customer support is a big focus with MCI since there are generally about 25,000 to 28,000 MCI coaches on the road in any given year.
During this past year, MCI formed a new Design Engineering Field Support Team based out of the Winnipeg plant to support MCI Technical Solutions Managers (TSMs) to troubleshoot field issues and streamline solutions. TSMs, a part of MCI’s aftermarket group, are regionally assigned to coach customers to provide technical expertise and handle a range of field matters. MCI added this team to provide a straight line to product improvements at the factory level to spot production opportunities before future deliveries. Any field issue requiring an in-dept solution or a design change will be channeled to the Design Engineering Field Support Team.
Altogether, MCI has 26 Technical Solution Managers with 15 dedicated exclusively to private sector operators in the United States and Canada.
Last year, New Flyer and MCI also held a joint executive summit that brought the management of the two companies together to plan for the future. The focus has been on the potential between the two companies working together and looking for best practices to share across the combined operation.
Several successful efforts were reviewed including a move to position key engineers at the factory to support field issues. This is considered to be one of the most successful redeployments the company has done. A critical goal is to have the entire management team aligned around product, service and support excellence. Also important is a continuous evaluation of the product portfolio to make sure that the bus lineup, parts and service systems meet the current and future needs of customers.
New Flyer and MCI held their first ever Investor Day in Winnipeg on May 14 to let current and future investors review how the investments in New Flyer and MCI facilities were paying off.
The attendees had an opportunity to review some of the facility renovations, equipment and machinery upgrades at all MCI manufacturing plants and improvements in the combined company’s parts distribution center and service center locations. The goal, say New Flyer and MCI, is to enhance the manufacturing environment including upgrades in lighting, lockers and improvements in the engineering studio. All are intended to make MCI and New Flyer the “Employer of Choice” in the motorcoach industry.
There have been two noteworthy changes since the two companies joined. One is that Daimler no longer has an interest in MCI with total control passing on to New Flyer. However, MCI continues to be the distributer of the Daimler-built Setra coaches in the U.S. and Canada.
Also, the distribution agreement with ABC Companies to distribute New Flyer’s MiDi product was terminated. MCI representatives now work with the New Flyer sales teams to bring the vehicle to market.
There has also been substantial progress in other areas during the first year of the MCI/New Flyer merger. The combined company is now putting more resources into technology. New Flyer’s board approved a $3 million U.S. appropriation to combine IT infrastructure as well as look for efficiencies and improvements in other systems that the companies share.
Both companies are looking ahead and are working on technology to meet the future needs of customers. With New Flyer, the obvious interest is in alternative fuels and electric buses as New Flyer is already an expert in this area. The company has produced more than 6,000 alternative fuel buses including trolley buses, hybrids and fuel cells. Also, New Flyer has sent an articulated battery electric bus to Altoona for testing.
Meanwhile, MCI is surveying customers about what features and type of next-generation coaches they want. Of course, if customers want electric coaches, MCI will have a tremendous advantage thanks to New Flyer’s expertise in this area.
Perhaps the future direction of MCI is best summed up in a customer letter from Paul Soubry:
“As we’re now larger (now a combined annual revenue of approximately $2.3 billion U.S.), we want to think big but act small. At the end of the day, customer responsiveness and common sense must prevail. You expect no less and quite frankly you deserve it. Thank you for your business to date with MCI and I look forward to earning your future business with the rest of the MCI team.”