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Hertzke: Winnebago Rolls on Despite Slowdown

Sales of recreational vehicles may be off again this year from a record high in 2004, but crowds were big and spirits were high at the annual gathering of owners of motorized recreational vehicles made by Forest City, Iowa-based Winnebago Industries Inc. under the brand names Winnebago and Itasca.
“They just want to have a good time,” said Bruce Hertzke, Winnebago chairman and CEO.
The Des Moines Register reported that the Winnebago-Itasca Travelers (WIT) Club Grand National Rally is a marketing tool and a way of building customer loyalty, according to Hertzke. This year’s July 15-20 rally was No. 38.
Hertzke said Winnebago executives had worried that high fuel prices would hurt rally attendance. The number of motorhomes, however, was up about 20 from a year ago to 1,450, and about equal to average attendance during the past five years, Hertzke said.
That loyalty has helped Winnebago to weather a slowdown in sales being felt across the motorhome industry during the past three years.
Hertzke said Winnebago has performed well, even though the market has cooled. Analysts and other industry watchers agreed.
Winnebago is “kind of toughing it through a pretty tough industry, but they’ve done a decent job,” said Kathryn Thompson, an analyst with Avondale Partners in Nashville, Tenn.
Of six publicly traded RV companies, only two, Winnebago and Ohio-based Thor Industries, have consistently turned profits in the market slowdown, she said.
Analysts credit lean operations, smart new products, a powerful industry brand name and sound management.
“The company has no debt and a pile of cash, nearly $157 million,” said Craig Kennison, an analyst with Robert W. Baird & Co. in Milwaukee.
Among Winnebago’s bright spots: New diesel-powered, Class C motor homes, the Winnebago View and the Itasca Navion, that get 17 to 19 miles per gallon, compared with eight to nine for many comparable vehicles, Hertzke said.
Introduced two years ago, the View and Navion appeal to fuel-conscious buyers and have the cachet of being powered by a Mercedes-Benz diesel engine.
“There’s no question that the Mercedes brand and the perception of Mercedes quality helped to sell the unit,” Kennison said.
Winnebago has 93 models of motorhomes, Hertzke said, adding that 10 years ago it had 45 or 50.
Hertzke said the RV industry is healthy, even though sales are down from the banner year of 2004. Sales are still strong compared with low points such as the early 1990s, he said.
Winnebago’s fiscal 2007, which ends in August, could still end up being among Winnebago’s top four or five years for revenues, Hertzke said.
Winnebago is the market share leader in combined sales of the Class A and Class C motorhomes, according to Michigan-based Statistical Surveys Inc. Its market share is 18.8%, said Tom Walworth, Statistical Surveys president. California-based Fleetwood Enterprises is second at 15.9% and Thor is third at 14.5%, he said.
Sales average around 10,000 vehicles a year, Hertzke said.
Baird’s Kennison is forecasting a 7% increase in Winnebago sales for fiscal 2008, depending on interest rates, consumer confidence, housing market trends and Winnebago growth in diesel market share.
The company’s total work force is now about 3,350 people, most in assembly plants in Forest City and Charles City. The company also has a factory in Hampton.
The employment high point was in 2004: 4,000 full-time workers, and another 200 temporary summer employees, Hertzke said.
The cuts have been made through attrition, a Winnebago spokesperson said. The company has had only one layoff in recent years, effecting about 170 employees in August 2005.
All have now been called back to work or offered a chance to return, she said.

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