What Is the Fate of American LaFrance?

Wailing fire truck sirens can actually lead to a calming effect because you know the fire department is on the way. Until recently, it was most likely that firefighters were arriving in trucks built by American LaFrance.

Tracing its roots as far back as 1832, the LaFrance Fire Engine company quickly developed a reputation for building quality -- and dare I say, pretty -- fire trucks. It later joined with the American Fire Engine Company to create American LaFrance.

Despite the storied history, American LaFrance is seeking bankruptcy protection because of a computer meltdown. Following its sale from Freightliner to investment firm Patriarch Partners, American LaFrance switched to a new computer system from IBM (NYSE: IBM  ) that was incompatible with its existing data, which led to mismanaged orders, misplaced inventories, and inaccessible customer histories. Although it's a sad chapter in its history, reorganization is under way and, if approved, should result in a healthier company.

While the new computers appear to have been the hitch, fire truck sales in general have been far from blazing. Witness Spartan Motors (Nasdaq: SPAR  ) . Some 14% of its $568 million in annual revenues comes from fire truck sales. In its quarter ended in September, Spartan reported segment sales down 8% from the year before. Similarly, Oshkosh Truck (NYSE: OSK  ) , which reported earnings this morning, said today that it is "facing significant headwinds" in its fire and emergency segment.

Computers and costs led to American LaFrance's downfall. If the company emerges from bankruptcy, a more cost-effective process for producing fire trucks would probably go a long way toward increasing sales.


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