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NEWSMAKER

NEWSMAKER’05’05Forest River President Pete Liegl

Shakes Up Competitors and Associates with Sale to

Berkshire Hathaway

Forest River President Pete LieglShakes Up Competitors and

Associates with Sale toBerkshire Hathaway

RVBUSINESS.com DECEMBER 2005, VOLUME 56, NUMBER 9,RVBUSINESS.com DECEMBER 2005, VOLUME 56, NUMBER 9,

’05

Louisville

DECEMBER 2005 � RVBUSINESS 37

by Sherman Goldenbergby Sherman Goldenberg

RIDING HIGH:Forest River

President PeteLiegl, left, with

Curt Smith, gen-eral manager,

Work and PlayDivision

RIDING HIGH:Forest River

President PeteLiegl, left, with

Curt Smith, gen-eral manager,

Work and PlayDivision

Maverick Forest River President Garners Headline With Purchase by Berkshire Hathaway

Pete LeiglPete Leigl

newsmakerAlot of things happened in this

dynamic industry during 2005, acrazy year in which companies were

swept by economic forces — especially gasprices — that were well beyond their control.

But given all of the things that transpired,none seemed to have triggered a greaterwave of shock and awe than the Julyannouncement of the sale of Elkhart, Ind.-based Forest River Inc. to BerkshireHathaway Inc., an almost mythicalOmaha-based holding company with sub-sidiaries engaged in diverse business activi-ties, including property and casualty insur-ance.

As fate would have it, the acquisitionpaired Berkshire Hathaway’s WarrenBuffett, one of the world’s most successfulinvestors, and Forest River’s Peter J. Liegl,sole owner of Forest River and himself a big-ger-than-life character in the recreationalvehicle business.

Part of the public’s interest in the acquisi-tion, understandably, had to do with theundisclosed price of the sale, which includedall of the estimated 71 facilities in severalstates in which $1.6 billion, 5,800-employeeForest River produces commercial buses,pontoon and fishing boats, cargo trailers,mobile offices, manufactured housing, parktrailers and a full line of towable and motor-ized recreational vehicles. Speculationaround the industry was that Liegl hadbanked more than $800 million from thesale of 9-year-old Forest River, the nation’sNo. 2 U.S. towable builder, with about 19%of U.S. towable RV market share.

In so doing, Liegl, our RV BusinessNewsmaker of the Year for 2005, has againreminded us all of what a lucrative high stakesgame this industry can be — and, more thanlikely, always will be — for those who playtheir cards right. And the reverse is also truefor those on the other end of an ill-fated busi-ness proposition. For Liegl, who like Buffett isoften considered the quintessential entrepre-neur, hasn’t alway been on top, as he willquickly tell you. Indeed, he says he was firedfrom his job years earlier at one of the majorRV manufacturers, then again in late 1994by the board of directors of publicly held CobraIndustries Inc., an RV builder for which hewas serving as president at the time.

The difference between most entrepreneursand the rest of society, of course, is theiruncanny ability to bounce back from near-death business experiences and flourish.That’s a skill that Liegl, as you can see in thefollowing Q&A interview, has perfected.

RVBUSINESS � DECEMBER 200538

RVB: We assume that your departure from Cobra, a well known compa-ny that you had nurtured with two partners from the mid-1980s, was apivotal moment in your life.Liegl: I can tell you that it was a surprise to me. They had a board meet-ing over the phone and took a vote on whether I ought to be terminatedor kept. Obviously, that was preconceived out of New York. I picked upmy stuff and went home.

What did you do then?I bought a condo up at Lake Michigan and spent the summer up there. Ihad a couple of boats — an off-shore racing boat and a Sea Ray that waspretty good sized. I kept that up in St. Joe and basically enjoyed life —played a little golf and went boating and kicked back. At that time, I wasdoing quite well in the stock market.

So when did you decide to get back in the RV market?I decided when Cobra was auctioning off the (Cobra Rockwood) tentcamper operation out of bankruptcy court... They only had bankruptcyapproval to sell the tent camper operation. And the day of the (asset) auc-

tion, when I went out toDelaware with my attorney,my thing was to buy every-thing. I wanted it all or nonebecause they were going to gettoo high a price for the tentcamper operation by itself. Igot the tent camper operation,and it was 30 days later that Igot the approval for the otherfacilities on the travel trailerand fifth-wheel side out ofbankruptcy court.

So, how did you manage togrow Forest River from noth-ing in early 1996 to a $1.6billion company this year?All we did was have the bestproduct at the best price andhire decent people.

Your initial Forest River management staff included a lot of the peoplewho had worked with you over the years, did it not?That is correct. I had experiences with these people prior to the startingup of Forest River, and, I guess, there was a lot of loyalty and respect foreach other. As we progressed, somebody that was working now for thecompetition would say, `Hey Pete, I want to get back together with you.’And I’d say, `We ought to do that,’ and so we did. Forest River was found-ed on many prior years of relationships.

Is there any more to your formula for success than the best product atthe best price with decent people running the show? I mean, everybodysays that. Yet, you were able to step in with this company and absorb19% of the U.S. towable market. How were you able to do that?The best product at the best price is everything, no matter what the prod-uct is. If you have that, and are carrying your message to the people whoare buying — in this case RVs — success is going to be forthcoming.There’s nothing more. Then, service it. Take care of it. Be a man of yourword. Do what you say you are going to do. We’ve always done that.

In the process, you’ve utilized a very consistent management style, haveyou not?We have somewhat of a theory that to the victor goes the spoils. A per-son running a division — in this case a general manager — should bene-

"Somebody is goingto get those sales.If we do what weare supposed to do– have the bestproduct at the bestprice, work harderthan the other guy –we'll get the sale."

fit from his hard work. And they do. Financially.By the same token, there is a certain pride ofauthorship that each one has. If you hire peoplewho are somewhat competitive and want to do agood job and succeed, you don’t have to worryabout them. They do what they are supposed todo.

RVB: Self-starters?Liegl: Yes, as Warren Buffet says, if you’ve got abaseball team and a guy is batting .400, you don’ttry to teach him how to swing.

Jumping forward in time, why, with everythinggoing so well at Forest River, did you decide to sellat this time to Berkshire Hathaway or anybodyelse?I’m getting to that age — 61 — that anythingcould happen to a person physically — not that Iexpect it. But I’m saying, `How do I get rid of andturn over the reins of Forest River down the road.’I have to do that someday cause I’m not going tolive indefinitely. At the same time, I have to do itin such a way that it is good for everybody. Andthis I believe is good for everybody, becauseBerkshire Hathaway buys business. They buildthem. They keep them. They maintain them.

And If I sold to an investment group, theirapproach would be to build up the company andspin it off, take it public, whatever, for the sake ofcold hard cash. Who built this company? It wasn’tPete Liegl at all. It was the employees who built it.It’s my obligation to make sure that if we do some-thing with the company that the employees aretaken care of.

The financial strength of Berkshire Hathaway ishumongous. It’s not only good for the employees,it’s good for the dealers because they have securitythat the product that they bought will be takencare of. It’s good for the customer, our suppliers,it’s good for everybody. I might have been able toget more money selling it an investment group,but that wasn’t the best thing for everybody goingforward.There has been all kinds of talk about thevagaries of going public, especially for a guy likeyourself who might not enjoy too much bureau-cracy? How has it gone so far, and what is yourview of how this is going to go in the future.I don’t think it’s going to be much different todaythan it’s been in the past. I have had absolutely noproblem living with the new structure, and Mr.Buffet in effect lets a person run his own show. Mydirective from him has been: `Keep doing whatyou’ve been doing.’

What about Sarbanes-Oxley? How painful isthat?Not painful at all. I’m just a subsidiary of BerkshireHathaway.

So the drudgery of that bureaucracy is not onyour shoulders?I have none of that.

DECEMBER 2005 � RVBUSINESS 39

So, you’re going to stand there and tellus that nothing is changing at ForestRiver, even though every company thatgets purchased says the same thing,and many of them ultimately wind upgetting turned upside down by theirbuyers?I know that’s true in many cases.But If wego back and look at Berkshire Hathaway,I made my agreement with Mr. Buffet.Mr. Buffet is world known. He has animpeccable reputation. And what he toldme is coming true, and I have no reason toever question him. Everybody in theworld knows he’s a man of his word.When you are doing business with a per-son like that, he’s going to do what he saysbecause it’s so important that he maintainthe reputation that he has.

Word on the street, right or wrong, isthat Berkshire Hathaway didn’t do allthat much due diligence when finalizingthe Forest River purchase. Is that cor-rect?Well, what do we call due dilligence.Maybe there wasn’t a lot of due dili-gence as you and I know it. But maybethere was due diligence done, I’m goingto say, at a higher level that Buffett did.How did he get to where he is at if he’smade very many bad mistakes? Youknow he has to know what he is doing.So the due diligence that we mightthink is maybe not what he thinks.Not counting paper clips?Exactly.

How about you? Are you staying in thefray on a day-to-day basis. Is yourapproach to every workaday similar towhat it was before the sale?I’m here before 8 o’clock every day. Iwork half days right now to be honest— just like before. Seven until seven.

There’s talk that, when all is said anddone, your company may emerge fromthis transaction as an industry consol-idator, not unlike Thor Industries Inc.already is.There might be some truth there.We’ve got the capability to be a con-solidating factor because Forest Riverhas the strongest financial statementof anybody in the RV business.

Anybody. That’s not includingBerkshire Hathaway. That’s ForestRiver itself. But I have to give credit toThor, they are No. 2. That’s the truth.In fact, you can take three or four pub-lic RV companies today, add themtogether and they don’t come up toour net worth. We’ve got several com-panies out there that should not bepublic RV companies.Are you still as committed as ever tobuilding your market share in motor-ized product, even in the current envi-ronment?Yes. We can’t change it. Somebody isgoing to get those sales. If we do whatwe are supposed to do — have the bestproduct at the best price, work harderthan the other guy — we’ll get the sale.Otherwise, in terms of product, ourmain thrust on the short term is tofocus on quality, fit and finish and cus-tomer satisfaction. We have just added anew PDI building in Goshen, a newservice center in Elkhart. We want toturn out the best product we humanlycan, and continue doing what we aredoing. In a nutshell, that’s it.

How do you view the current market-place?I think inflation, for example, is farmore rampant than people are acknowl-edging. People are feeling the pinch onfuel. This winter natural gas is predict-ed to be 40 to 50% higher than it waslast year. You are going to experienceshortages in materials. We are going tosee some serious price increases. That’sgoing to affect the consumer. I don’tthink it’s going to last forever. But Ithink we’ve got 18 months of priceincreases that are going to be hurtful.

You’ve made bold statements in thepress recently regarding your plans tocontinue building projects and add asmany as 600 workers in the nearfuture to accommodate continuinggrowth. Can you comment on that?Well, we put up eight plants last sum-mer. They are all done and producing.And I just bought another five build-ings, two in Elkhart, on top of the eightwe built last year. We are definitely mov-ing forward. I don’t care if the market

Reprinted with Permission of RV Business

“Mr. Buffet in effect lets a person run hisown show. My directive from him has been:‘Keep doing what you’ve been doing.’”

shrinks in half. Half is still far more thanI can build. Someone is going to get it.

Is some of this production space allo-cated to building units for the FederalEmergency Management Agency(FEMA) for use in the hurricane-strick-en areas?We have built some. But we’ve beenblessed. We didn’t need any orders, soour ability to build any of them hasbeen limited. We could have moreFEMA orders, but we are scheduledout. We took 7,000 or something likethat, and I dedicated some plants to it.We are building 300 a day, but we had abacklog of orders prior to that.∆