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Elkhart’s RV Rebound May Indicate Recession’s Exit

Posted By RVBusiness On September 8, 2009 @ 12:24 pm In Breaking News | 2 Comments

George Graber was unemployed for three months this year after the shutdown of an RV plant in Elkhart County, Ind. Now, he’s building $15,000 travel trailers at startup Heritage One RV Inc.

His job-hunting luck reflects a rebound in RV demand that may signal the end of the worst U.S. recession since World War II. In the last four domestic cycles, Winnebago Industries Inc. and other RV makers foreshadowed the economy’s decline and heralded its recovery, government and trade-group data show, according to Bloomberg.com.

“The RV industry is always the first in and the first out, and there’s already been a noticeable beginning of it coming out of the current recession,” said Dave Hoefer, 66, an adviser to Earthbound Recreational Vehicles, which was founded this year on the site of another bankrupt maker in Middlebury, Ind.

Elkhart County builds more than half the RVs sold in the U.S., making it the center of a $14 billion domestic market. Evidence of a turnaround is showing up in new companies like Heritage One sprouting from the remains of failed manufacturers, and in no-vacancy signs at a motel favored by RV-hauling truckers.

Analysts watch RV sales because motorhomes and travel trailers are discretionary purchases that consumers defer in an economic slump. Industrywide deliveries may rise in 2010 to end a three-year decline, said Richard Curtin, director of consumer surveys at the University of Michigan.

Sales in July, the latest available, ran at the strongest annual rate since October, according to the Recreation Vehicle Industry Association (RVIA). By year’s end, those shipments should show their first monthly gain since October 2007, predating the onset of the recession in December of that year, said Curtin, who analyzes data for the Reston, Va.-based trade group.

Rise and Fall
Wholesale deliveries to dealers averaged 355,000 over a six-year period that ended in 2007, then tumbled to 237,000 last year as the recession took hold, according to RVIA data.

Showroom visits and consumer-loan approvals now are rising for the first time in more than a year, said Steve Smith, a Heritage One partner who recently drove 5,000 miles through the Midwest and South as part of a company sales call.

“Customers’ interest is obviously rising, which is making the dealers feel better,” Smith, 47, said from the 30,000-square-foot building in Nappanee, Indiana, where Graber and about a dozen other workers were assembling so-called “stick and tin” trailers of metal sheets over wooden frames.

Three Obama Visits

Elkhart County needs that kind of news. Located along the Michigan border and home to about 200,000 people, the county has a jobless rate of about 17%, the worst in Indiana. President Barack Obama has visited the area three times to talk about economic hardship.

Ron Muhlenkamp, whose Muhlenkamp & Co. in Wexford, Pa., has invested in RV makers coming out of past recessions, said he isn’t yet buying the stocks in this cycle.

“We think the consumer might be slower to return this time,” he said. U.S. joblessness reached a 26-year high of 9.7% in August, the Labor Department said on Sept. 4. The so-called underemployment rate, which includes part-timers who would prefer full-time work and job seekers who have stopped looking, rose to a record 16.8%.

Before coming to Heritage One, Smith worked at Travel Supreme Inc., a maker of $160,000 trailers that shut its plants in January after another company bought out the operations. Nearby sit two vacant buildings owned by motorhome maker Monaco Coach Corp., which went bankrupt in March.

Betting on Recovery

Earthbound, the company advised by Hoefer, is on the site of Pilgrim International Inc., which went out of business in September 2008. Earthbound has been working on $42,000 lightweight trailers since January and is betting on a recovery in time for a sales push in early 2010. Heavier trailers cut fuel economy for their tow vehicles.

“We feel the industry has a strong future,” said Bill Hughes, 58, an Earthbound investor who was a Pilgrim vice president of service and parts. In the past year, 15 new RV makers have begun operations, according to the RVIA.

Another sign of recovery is bookings at the Red Roof Inn in Elkhart, said General Manager Beth Ronzone, a 24-year employee. The motel is filled again on some nights with truck drivers who move RVs, a reminder of the industry heyday two years ago when rooms were sold out five or six times a week.

‘Seeing a Pickup’
“We started seeing a pickup in late April,” Ronzone, 57, said Aug. 24. By that evening, most of the parking lot was occupied.

Hiring is starting to pick up, too, said Dorinda Heiden-Guss, president of the Economic Development Corp. of Elkhart County

Keystone RV Co., a Goshen-based unit of Thor Industries Inc., the largest U.S. RV maker, announced last month it will add 200 workers to expand travel-trailer output, Heiden-Guss said. Jayco, in nearby Middlebury, is also recruiting, she said.

Among the investors betting on the industry is Warren Buffett’s Berkshire Hathaway Inc. Berkshire’s Forest River Inc. RV unit paid about $42 million for the RV business of Elkhart- based Coachmen Industries Inc. American Industrial Partners bought the motorhome unit of bankrupt Fleetwood Enterprises Inc. of Riverside, Calif., in June for $53 million.

Winnebago and Jackson Center, Ohio-based Thor are the only large, publicly traded RV makers still in the business and not in court protection.

Shares of Forest City, Iowa-based Winnebago and Thor have almost doubled this year. Since the recession began, Winnebago has tumbled 45% and Thor has fallen 26%, compared with a 31% decline in the Standard & Poor’s 500 Index. Coachmen still operates its bus and manufactured-home business.

Horses, Humans

At Sierra Motor Corp., a 22-year-old maker of interiors for horse trailers, 2008’s record-high fuel prices helped spur expansion into human transport.

The Bristol, Ind.-based company added a line of travel trailers weighing less than 1,750 pounds. They include amenities such as toilets, which aren’t common on models that small, President Michael Greene said.

That move also meant that Sierra Motor, which has about 45 workers, could keep about a dozen employees who would have been laid off as orders for equine vehicles flagged, Greene said. The labor force has exceeded 100 in busier times, he said.

“They are like family, you hate to have to let people go,” said Greene, 52, who was one of the company founders.

For Graber, 45, who had to sell his pickup for a cheaper model and take other belt-tightening steps after losing his purchasing job at Travel Supreme, the Elkhart recovery can’t come fast enough.

“People I know personally, a couple of them will get back every week now,” he said. “Three months ago, everyone was just down and they weren’t even taking applications.”

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2 Comments (Open | Close)

2 Comments To "Elkhart’s RV Rebound May Indicate Recession’s Exit"

#1 Comment By Chevy1 On January 9, 2010 @ 9:31 pm

The increase in trailer sales is by no means a sign of the American economy getting any better.
PEOPLE ARE BUYING THEM TO LIVE IN!!!
Americans are losing their jobs, their homes, savings, retirement and everything they have. Living in an RV meant for occasional weekend vacations is a sad option but at least it’s a roof over their heads.

#2 Comment By bogey joe On October 7, 2010 @ 11:36 pm

I agree, because most of the trailers leaving Elkhart are either the new lightweight trailers that can be towed by a SUV or for the unemployed, a cavalier. Or the really big travel trailers and fifth wheel trailers that will hold a whole family nicely. And thankfully the payments can be spread out over 6-10 yrs so its affordable on a minimum wage job.
Too bad there’s very few places to park them though. Even Wal-Marts are beginning to disallow campers to park overnight, largely from local govt’s that see that there are too many parking in lots instead of RV parks.
I owe all the blame to our greed that we feel we have to live in a house that’s 1700 sq.ft. or double that. And its gotta have a big yard. We shoulda’ been living in concrete domes that aren’t affected by weather, cheap to heat and cool, and under $50 a sq.ft. to build. Now we’re just trapped in our boxes…


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