The May 11th announcement by the IBS Corporation that they were filing bankruptcy actually took no one by surprise. What did take a lot of their builders and employees by surprise was the company’s insistence that things were going to be OK, just wait until next Monday and production will begin again followed by no production and yet another promise of production beginning the following week.
Now the rumors are flying that on September 9th at least a couple of the closed IBS factories will be officially owned by Champion Home Builders, one of the largest HUD and modular home companies in the US. The most important of all the closed IBS plants is the Liverpool, PA factory that at the time of bankruptcy was supporting a lot of big modular home builders throughout the Eastern US.
No official word from the Bankruptcy Court yet but maybe this time the rumors have some truth to them.
This news has brought with it a lot of speculation about just what Champion brings to the table. Let’s take a look at some of the scenarios that could present itself.
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Champion could reopen the former Excel factory and begin producing the same products that Excel provided its builder base. If that were to happen, it would mean a cultural shift within Champion from a cookie cutter type modular home builder with limited options to a wide open “anything goes” custom modular factory. Smart money wouldn’t bet on that.
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Does Champion want all the IBS factories including Keiser Homes in Maine which was a rental? Champion has a strong presence in the MidWest and while reopening the two All American plants may sound like a good idea, it may be too late as all their former builders have joined with other good regional factories that produce everything the All American plants did. Smart money might bet on the Iowa plant but maybe not so much on Champion reopening the Indiana factory.
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Mod-U-Kraf. This is a great facility and it needs to be reopened as a ‘State of the Art’ factory. However does Champion really want or need this factory. New modular factories have opened in the South and they are quickly proving themselves up to the task of building good custom modular homes. Champion is well served with HUD in this market and if they reopen MUK, their best source of modular business will be their established street dealer network who may be unwilling to spend the time required selling customizable modular over selling from a plan book like their HUD line. Smart money says this will become a Hudular plant if it is acquired by Champion.
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Keiser Homes. This factory was a rental for IBS and after the bankruptcy court brings down the gavel, Champion may have to bid against other modular factories to get this plant as it is unclear whether the Court can force a landlord to continue a lease with another tenant. Smart money says this is a no bet situation.
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Eastern modular home builders. Some of the former IBS management and engineers were hired by New Era, a Champion modular home company in NW PA with the sole intention of moving them back to the Liverpool plant when Champion acquires it on September 9th. Production at competing modular factories spiked during the second quarter as the Excel builders scrambled to find factories to build their houses. Curiously though, some of these builders are anxiously awaiting the reopening of the Liverpool plant thinking it will be like the good old days.
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An interesting thing is currently happening in the East. New housing starts are up a little but after talking to several factories and vendors it appears that the building bubble caused by the IBS bankruptcy has run its course and for a lot of factories things are settling back down to OK levels again. Former Excel builders have become accustomed to their new factories and in many cases the builders have been pleasantly surprised by what these new factories can do for them.
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Builders leaving modular construction. One thing that has surprised everyone are the number of small modular home builders that have either switched back to site building or have gone out of business because of deposits paid to an IBS factory and now their customers are suing them for that money. With no plan by any factory to actively recruit ‘new to modular’ builders and these small builders jumping ship, the modular industry may be in good shape for a while but the long term market for modular construction may shift from single family residential to commercial.
And finally, if the Liverpool plant reopens and produces homes exactly like Excel did, with full customization and the discounts enjoyed by the former builders, won’t the result be the same as Excel’s? Low prices, heavy discounts and the ‘build anything for anybody’ mentality are not in the Champion playbook. Will Champion try it for a year or two and then make a decision? Probably. But you have to ask yourself if Champion, one of the huge players in the HUD and Hudular market, who doesn’t sell like this anywhere else in the US will bend the rules for this one factory? Smart money says to wait two years and see what happens.
September 9th, the date rumored to be when the bankruptcy court bangs down the gavel, should be interesting.
