Fire Service Today

by C. Peter Jørgensen

E-ONE’s introduction of four new models at FDIC in April was overshadowed just one week later when the company shelved plans to build a $50 million state-of-the-art production plant in Ocala, Fla.

In doing so, E-ONE’s parent company, Federal Signal Corporation of Chicago, rejected a $26.7 million cash, land, construction and utilities package put up by the State of Florida, Marion County and the City of Ocala to retain the company’s 1,200 area jobs.

Since last July, E-ONE President Marc Gustafson waged a tough battle in winning approvals from three government levels. Then, within days of local newspaper headlines announcing that the deal was set, Federal Signal pulled the rug out from under him.

Federal Signal’s press release said the company “is making investments in our distribution/dealer channels and product development activities which support our commitment of returning E-One to the lead position in the North American fire apparatus industry.”

That is a nonsequitur of the highest magnitude.

All of E-ONE management, the employees and the nationwide network of dealers are stunned.

Nothing would have gone further toward building the dealer network to its former level than promise of a 21st-century production facility.

Gustafson has also been struggling to retain his dealers, seeing some jump to represent other manufacturers since E-ONE had not introduced a truly new product model in over five years. From second place behind Pierce, E-One has dropped to third with less than 800 orders last year, well behind Rosenbauer.

The week should have been one of celebration at E-ONE with the great reception the new product line got at the FDIC show. The Quest model is completely new with several highly competitive advantages. 

The Urban Pumper, with its 60-inch high hosebed for LDH, is lower than the average hosebed on apparatus of 50 years ago. It represents a welcome innovation, adding to the ease of reloading supply hose quickly.

But these unique new products won’t be built in a new modern plant, at least for the immediate future.

The state and regional government share did not come easily.  The proposal was sold in public meetings as the centerpiece of a new industrial park near the Ocala airport, thereby gaining support from local elected officials. But detractors called it “corporate welfare.” Still nobody wanted to see 1,200 jobs disappear in Ocala.

The project’s political backers said it would be a shot in the arm to the local economy.

E-ONE President Marc Gustafson shows the Quest pump panel at FDIC.

Amanda Davis, E-ONE’s Marketing Coordinator, behind the wheel in the new Quest custom cab at FDIC.   (Fire Apparatus Photo)

Wrong. Federal Signal instead shot itself in the foot. Some might call it one more misstep in an unending march to nowhere.

E-ONE is the corporation’s largest division and the one with the highest potential, but the dealers, employees and management team that’s held the company together during tough times the last few years gets no respect — and no support for a modern plant.

Gustafson, in a little over two years at the helm, has taken E-ONE a long way toward turning the company back to its former status among high-volume apparatus manufacturers. Personally, he must be crushed with this direction reversal by the Federal board.

E-ONE has been contributing about 40 percent of Federal’s overall revenues, but that doesn’t seem to matter. That percentage will rise dramatically since Federal just sold off its $100 million-plus per year Tool Division because it didn’t fit with the current corporatethink.

Federal’s leadership in Chicago is more concerned about how the next quarterly report will be read on Wall Street than keeping the E-ONE plant competitive and rebuilding the company for the long run.

E-ONE has not met profit goals in the last several years under four different presidents. But Federal should realize no management team can turn such a large company around without the parent corporation’s fully committed support.

While the local community was pleased to hear that jobs won’t be lost in the area, the whole affair wasn’t just a minor news item on the business pages. The E-ONE news made headlines in the daily Ocala Star-Banner for several days in April, generating two staff-written editorials as well.

The first editorial, entitled Delay by E-ONE is bad form, said: “As if there wasn’t enough public distaste and disagreement over the $26 million incentive package being offered to Emergency One, inexplicable foot-dragging by the company’s parent, Federal Signal Corp., in deciding whether the deal is worth staying for has amped up a supercharged atmosphere even more.”

After Federal Signal President Robert Welding issued this statement: “This investment proposal for a new E-ONE site is not currently our foremost priority due to the magnitude and complexity,” the newspaper characterized the decision as follows:

It is  “a bittersweet conclusion to a long and contentious community conversation that, in the end, as in the beginning, was driven by business realities alone.”

The newspaper’s editors said, “The idea of the city of Ocala, the county and the state joining forces to offer E-One $26 million in cash, land and construction and infrastructure grants was widely criticized in the community as being corporate welfare by the government on one hand and corporate extortion on the other.”

The newspaper added that the success of retaining local jobs had to be tempered by recognizing it represented a “significant setback” to the industrial park project.

And, rubbing salt in the wounds the next day, Welding, speaking to financial analysts during a publicly broadcast phone call, was more candid. He told the people on Wall Street, where Federal Signal is traded on the New York Stock Exchange,  “We felt the project was too expensive and too risky given our other priorities.”

Clearly, Welding has little experience in financing commercial real estate. Today, most huge office buildings and manufacturing centers are owned by real estate investment groups operating as REITs. These Real Estate Investment Trusts are exempt from federal taxes and operate somewhat like mutual funds that hold stocks. Owners do not pay tax until they cash out, meanwhile the trusts pump earnings back into the economy by investing in more commercial real estate.

With a $26.7 million government incentive package and competing REIT corporations looking for investment opportunities, it is unlikely Federal would have had to put any of its own money at risk.

So, what vision drives Federal Signal is hard to fathom. The people who write press releases aren’t the real insiders, and the insiders like Bob Welding are either naïve or holding back on stating the real strategy and objectives.

At the same time Federal Signal was canceling construction plans and withholding support for E-ONE, the apparatus manufacturer’s growing rival — American LaFrance (ALF) — was readying a brand new 460,000-square-foot manufacturing facility outside Charleston, S.C., for earlier-than-planned occupancy in June. 

Like most commercial real estate undertakings these days, a Real Estate Investment Trust made up of investors who haven’t a clue about building custom fire trucks will own the bricks and mortar.

American LaFrance will occupy the building under a long-term lease. ALF, being deftly run by former Wall Street insider Lynn Tilton, chairman of Patriarch Partners, will have a facility specifically built to turn out fire apparatus quickly and profitably.

Bob Welding: the comparison doesn’t make Federal Signal look all that good. Is there something you are not telling us? Why will E-ONE now continue to struggle in a series of cobbled-together buildings dating back to the company’s founding in the 1970s while your competitors Pierce, Ferrara, KME, Spartan Chassis and Seagrave all recently opened modern manufacturing plant additions?

And soon American LaFrance will move into the largest and most modern fire apparatus manufacturing plant in the world — more than 10.5 acres under one roof. And adjacent to this plant ALF will open another 60,000-square-foot office, engineering, research and development building combined with a customer planning and delivery center. 

That’s 520,000 square feet — just about 12 acres for both buildings — on a single site overlooking Interstate 26, gateway to Charleston, S. C., and the South’s most historic city, in the year American LaFrance celebrates its 175th anniversary.

 [Note to Federal Signal Board Members: contact Fire Apparatus magazine directly before July 15 for covert press passes to ALF’s grand opening in August.] 

Give credit to E-ONE’s employees. After a few rough years when delivery times ran high and quality slipped, both are back on the track. Despite the outmoded facilities, E-ONE builds a good product with its 75-foot single axle quint the standard for the industry. And its new models are the best sign of things to come from that company in several years.

E-ONE’s four all-new models on the FDIC floor were conceived and developed during the political debates over state, county and municipal subsidies while day-to-day deliveries continued.

Overall sales levels may have been stagnant in the last three months, but just how much can be expected of a management team struggling to maintain dealers being recruited by competitors offering modern manufacturing plants and faster deliveries?

Building fire apparatus is a straight nuts and bolts business. It’s not rocket science. The bolts have to be inserted the way the customer specifies and then the nuts go on and are tighten up real well.

Custom fire trucks are built one at a time, to individual drawings for each truck. And when completed they have to be reliable.

But because of this Federal Signal decision to cancel the new plant, the contrast with the other top fire apparatus manufacturers couldn’t be more stark.