Money Man Looking to Right Dorsey Trailers
Chriss Street gained notoriety as a soothsayer of Orange County’s bankruptcy. More recently, he’s been building an empire of trailers for cargo trucks.
In June, Street acquired the assets of the Elba, Ala.-based Dorsey Trailers Inc., a maker of truck trailers that filed for chapter 11 protection in November. The purchase was done on behalf of Fruehauf Trailer Corp. Retirement Plan, a pension fund overseen by Street for workers at Wabash National Corp.’s Fruehauf, also a maker of truck trailers.
“We are determined to put the company back into operation,” said Street, who now is president and chief executive of Dorsey.
This isn’t Street’s first foray into trailers. He is chief executive of what he called two profitable trailer manufacturers: Fruehauf de Mexico and Indiana-based American Trailer Industries.
Street, a partner in Corona del Mar-based money manager Street Asset Management LLC, said he helped resurrect Fruehauf de Mexico in 1996 when Fruehauf Trailer filed for bankruptcy protection.
Fruehauf de Mexico has a plant in Mexico City and makes about 300 trailers a month. The company has annual revenue of more than $60 million and yearly profits of around $3 million, he said.
Fruehauf de Mexico became profitable by bringing down production costs, a strategy Street said he hopes to repeat with Dorsey.
“We have the undisputed world expertise in building trailers,” Street boasted.
The Fruehauf Pension Plan, part of the Fruehauf Retirement Plan, paid $4.6 million for Dorsey, which before bankruptcy had yearly sales of about $150 million. Assets, including inventory, come in at more than $13 million. Street called the deal a no-brainer because the pension fund paid 30 cents for each dollar of assets.
Fruehauf Pension bought Dorsey in June. The pension plan is expected to invest an additional $1 million to bring Dorsey’s manufacturing up to speed, Street said. The investment is less than 6% of Fruehauf’s pension fund.
Still, the investment places a lot of faith in Street’s ability to turn Dorsey around,and in the troubled trailer industry. Dorsey and other trailer makers have hit hard times because of overcapacity and woes in the trucking industry, including high fuel prices.
Last year, Dorsey made about 7,000 trailers and was working at full production. But because of its high cost of debt and other operating expenses, the firm filed for bankruptcy. At the time, Dorsey counted a debt burden of $43 million.
“They had a record production last year,” Street said. “One night they were at full production and the next day they shut the doors,” he said. “They ran out of payroll and filed for bankruptcy.”
According to Street, Dorsey focuses more on high-end products and is a well-known name in the trailer industry. The company makes a range of customized trailers, including dry-freight, refrigerated, flatbed, package-carrier and dump trailers. More than 60% of Dorsey’s sales are to dealers and large customers such as Coca-Cola Bottling Co., J.B. Hunt Transport Services Inc., Penske Truck Leasing and United Parcel Service Inc.
But buying bankrupt Dorsey wasn’t all that easy, according to Street.
The pension plan bought the company in an open auction and found itself in a bidding fight with a leveraged buyout firm from New York, according to Street.
“We won it on our last bid,” Street said.
“The game is to have a poker face, and not to sweat from the outside but sweat from the inside,” he said.
By buying Dorsey out of bankruptcy, Street said he has an advantage that the previous management didn’t have: Dorsey now has no debt on its balance sheet.
The new owners plan to turn Dorsey around by “applying our management skills and operating without debt and leverage,” he said.
“We did the due diligence and found that it was permitted and acceptable by (regulatory) standards and decided to make an attempt to buy it,” said Donald Sheetz, who is the chairman of the administrative committee for the Fruehauf pension plan. Sheetz also is a partner in Street Asset Management.
Street said he expects Dorsey to be back at full production this month and that the company could have revenue of $14 million this year, $50 million next year and back to the company’s pre-bankruptcy level of $150 million by 2003.
The company is expected to incur a minor loss this year but would be cash-flow positive, he said
“We will be able to operate the plant at a break-even of 50 trailers a month vs. 700 for the old company,” Street said. n
