Renaissance blames delay on lawsuits

Despite two years of strenuous legal wrangling, continuing cash-flow problems and some doubt about the marketability of their airplanes, officials at Renaissance Aircraft insist that their promise to create 200 new jobs and to begin production soon are more than flights of fancy.

And those who worked to bring the company here -- even offering up a few million dollars in state and local start-up funding -- say they still have faith in the company that intends to put several lawsuits behind it, find $2 million from investors and begin building 250 to 300 planes a year within the next few years.

"It's been a long, hard fight," said company president John Dearden. "We've got cash-flow problems, admittedly, and obviously, we're not as far along as we'd like to be."

In early 2001, Georgia-based Renaissance Aircraft inked a deal to relocate to Cape Girardeau amidst promises of eventually manufacturing hundreds of planes a year and creating at least 200 new jobs after the first two years.

Always looking to promote economic development and create jobs, Cape Girardeau sold $2.1 million in bonds to build Renaissance a 60,000-square-foot building as well as pay for infrastructure improvements at Cape Girardeau Regional Airport.

And the Missouri Department of Economic Development approved a grant of nearly $480,000 to assist the city with constructing a major water line to the Nash Road area near the airport, which sits south of Cape Girardeau.

Still tinkering

It's been two years since those promises were made. The company today has nine employees -- which includes Dearden and his wife -- and is still tinkering with its first Luscombe 8F, the 1930s-style two-seat recreational plane that the company wants to make. There are actually two Luscombe 8F's at the facility, but one is a Luscombe that was made by the original manufacturer in the 1930s.

"I think we were all hoping it would be up and running by now," said former Mayor Al Spradling III, who was on the Cape Girardeau City Council when the deal was signed with the city. "There have been some setbacks, we were all aware of that. I think it's been slower than we would have hoped."

Dearden blames two years of lawsuits that depleted the company's funds and forced the company to cut back from a high of 20 employees to nine. The lawsuits claimed Renaissance no longer had the rights to make the plane and that it had wrongly taken $8 million in equipment when it relocated.

But now the litigation is over except for minor details, and Renaissance has won every lawsuit. In fact, an arbitrator awarded $2.5 million from the Don Luscombe Aviation History Foundation in Arizona, which claimed Renaissance had wrongfully taken machinery along with tooling jigs and dies needed to make the Luscombe 8F.

The arbitrator agreed that the lawsuits had cost Renaissance valuable time and money and hindered its reputation with investors.

But the foundation's president, Ron Price, said he hopes Renaissance isn't banking on getting any money from his organization, which manufacturers parts for owners of original Luscombes.

"You can't get blood out of a turnip," Price said. "We were formed out of donations. We have never had $2 million, and we won't have $2 million. You can get as many awards as you want, but if the other party can't pay it, they can't pay it."

Price said what Renaissance will likely get is the Federal Aviation Administration certificate for the Luscombe 8F, which will give Renaissance exclusive rights to make the plane, and all accompanying drawings and engineering designs. While that won't infuse any money into the company, Price said it should make the company more attractive to investors.

"Before, they just had an agreement with us to make this plane," he said. "Once they get this, they'll own the rights to it. That's worth something. If you had to hire an engineer to do all this work, it would cost you a million or more."

Curt Jeschke, Renaissance's chief financial officer, said that the company has known for some time that it would probably not get much money from the foundation.

"But we needed the type certificate," he said. "We're going to get that. There's also a lot of other data we're going to be getting. It's kind of like the cook book for making the Luscombe. We had access to it before under the agreement, but now it will be ours."

Jeschke said that Renaissance will also have the right to produce Luscombe parts for existing Luscombes, something they originally didn't have under the agreement with the foundation. That will make the company more profitable than it would have been, he said.

"There's a lot going on," Jeschke said. "We're taking steps in the right direction."

$2 million more

Now the company is turning its attention to gathering $2 million more from investors. Dearden has been traveling to air shows and other events -- recently he was in California -- to seek financial backing. He said he currently has 17 or 18 investors, including some locally, but he wouldn't name them.

The company plans to have 20 orders by the end of the year, and Dearden expects that figure to rise each year.

In other words, any talk of bankruptcy or going out of business is extremely premature, he said.

"Our assets far exceed our liabilities and it's getting better," he said last week. "We're at the point of getting a fair amount of cash and other assets as well as moving sales. The cash flow problem is being fixed, even as we speak."

That's good news, considering that some of Renaissance's bills are about to come due. The city expects lease payments on the airport hangar and property to begin in April, which the city will use to pay off the bonds used to build Renaissance's building and other infrastructure.

City manager Michael Miller said the bond payment will be about $250,000 a year, meaning Renaissance must pay monthly installments of more than $20,000 a month -- plus an additional $41,000 a year to lease the hangar building. The land lease will require 9 cents a square foot a year for the 2.79 acre tract of land, which is about $11,000 a year.

"We thoroughly expect them to do what they say they can," Miller said. "We have no reason to doubt them."

Having said that, Miller added that the city is protected should Renaissance take a nose dive. He pointed out that the building is extremely valuable and that it would be easy to lease to another business or as hangar space. He said he's already been approached by people who have heard Renaissance has been struggling and are interested in leasing the building.

Miller also noted that it was because of Renaissance that the state gave the grant to get a good water supply to Nash Road.

"That water serves the entire industrial area out there," he said. "We've wanted to do that for years. Renaissance gave us a reason to tell the state that there was a need for it. ... We don't want to see Renaissance fail, and we don't think they will, but if it happens, the city's investment is still sound."

By agreement, the city will get $500 for each plane that Renaissance manufactures, Miller said.

Dearden and Jeschke both said they expect Renaissance to be able to make the payments next April. Miller said that if they don't, the city could serve notice after 10 days and could force the company to vacate the building after 30 days.

Finding buyers

But even if the optimism of Dearden and others proves to be correct, there is some question about whether there will be buyers for 250 to 300 planes a year.

Steve Krog is the president of the Hartford, Wis.-based Luscombe Association, a 1,000-person group of pilots who have an historic interest in the Luscombe, which was originally made from 1939 to 1951. He said there are about 2,000 of the original Luscombes that are maintained and flown today.

"There's a market for Luscombes," said Krog, a former airline pilot. "The magic will be whether or not Renaissance can produce it and come in at a price that is attractive to general or sport aviation pilots. I think they can do it -- I hope they can, anyway -- but until they get into production, it's hard to say."

Renaissance's base price for the Luscombe model it is producing is about $77,000, but once options are added, the price could reach more than $90,000. Krog said he's uncertain about the market for 300 planes a year at that price.

"Given today's economy, that might be a hard objective," Krog said. "Had they done this five years ago, they might have done it. I'm not saying it can't be done, I'm just saying they are going to have to work very hard to make that happen."

Krog also pointed out that people can buy original Luscombes for as little as $18,000, though at that price they usually need a lot of work.

"But there is a market for a new Luscombe," he said. "When you buy an original Luscombe, it's a project. There's something to be said for buying something new, especially if it looks like a Luscombe."

Jeschke reiterated that the goal of 250 to 300 planes a year is for when the company gets up to full steam. He also added that he believes there is a market, considering that thousands of kits to build a Luscombe are sold each year.

"We're not going to make that many in the first year," he said. "But there's demand for that once we get going."

There is another manufacturer of a different type of Luscombe, based out of Altus, Okla. Luscombe Aircraft Corp. is a manufacturer of the 11A Sedan, a four-seater that was made by the original Luscombe company after the Luscombe 8F. The Luscombe 11A was produced from 1948 to 1961.

Renaissance executives stressed that these are entirely different planes. The base price of the Luscombe 11A is much higher at $155,000.

Flying high

Officials across the board expressed confidence in Renaissance.

"There's not any nervousness on my part," said Cape Girardeau airport manager Bruce Loy. "There's no nervousness on the part of Renaissance. The foundation was the problem. If worst comes to worst, I've got a great building I could lease if necessary."

Airport board members also were supportive.

"There's a large market for it," said board member Gerry Keene, who is also a financial planner. "We have discussed it several times at board meetings. It's my opinion that they have an excellent business plan. They have faced a lot of diversity and it's my belief that they have cleared all those hurdles."

Board member Mark Seesing, who was also the airport manager in the early 1990s, said he thinks the city only stands to benefit.

"I think they'll survive," he said. "I think there's enough interest in that type of aircraft for the company to do well."

Mayor Jay Knudtson said things like this take time.

"Sometimes the public is quick to expect results," he said. "Rumors have mired John Dearden since he came to town. And people have to remember that the city knew that the by-product of this was getting a viable building and water to Nash Road. That outweighed any risk involved with Renaissance."

Mitch Robinson, head of the Cape Girardeau Area Industrial Recruitment Association, was a key recruiter trying to entice the business to come to Cape Girardeau.

"You have to realize that litigation has hurt them," he said. "But with that behind them, they can move forward. I think we're all concerned, and they're concerned. They're very aware of their situation. But I've got faith in John, Curt and their staff. I think these guys can make it happen."

smoyers@semissourian.com

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