Warren Buffett’s Berkshire Hathaway Inc. said Friday (May 6) that its first-quarter profit tumbled 58% from a year ago due to insurance losses from major disasters in Japan, New Zealand and Australia.
The sharp drop is in line with preliminary results outlined by Buffett at the Omaha, Neb.-based company’s annual shareholders’ meeting, the Associated Press reported.
Berkshire, parent company of Forest River Inc., the nation’s second largest RV manufacturer, reported net income of $1.5 billion, or $917 per Class A share, for the three months ended March 31. That’s down from net income of $3.6 billion, or $2,272 per Class A share, a year ago.
Revenue rose to $33.7 billion, up from $32 billion last year.
The biggest drag on Berkshire’s quarter was $1.7 billion in insurance losses related to the March 11 earthquake and tsunami in Japan, the Feb. 22 New Zealand earthquake, as well as cyclones and floods in Australia, among other disasters.
“We had probably the second-worst quarter for the insurance industry in terms of disasters around the globe,” Buffett told shareholders.
Given the magnitude of the catastrophe insurance losses in the first quarter, as well as the potential for additional losses from hurricanes in the U.S. between June and December, Berkshire said it is unlikely that its combined insurance operations will achieve an underwriting profit this year.
Reinsurance companies, like Berkshire’s General Re and National Indemnity, sell backup insurance to primary insurers so the industry can cover big losses.
The $1.7 billion in losses is an estimate of Berkshire’s insurance and reinsurance claims that will be settled and paid over time, though that figure could change, the company said.
Berkshire reported an $821 million underwriting loss for the quarter because of the catastrophes. That compares with a $226 million underwriting gain in last year’s first quarter.
Still, the company’s insurance businesses overall, which include auto and home insurer Geico, contributed $131 million to Berkshire’s net income in the first quarter, because of investment gains. That’s considerably less than a year ago when they added $1.2 billion to net income.
Berkshire owns roughly 80 subsidiaries, including clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company’s net income. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
The company’s results were buoyed by a strong performance from Burlington Northern Santa Fe railroad, which the company acquired a year ago.
The railroad segment contributed $607 million to net income, up from $282 million a year earlier, although the prior-year results did not covered the entire quarter.
Revenues for the segment increased 17% to $4.53 billion, reflecting higher average revenue per railcar. Higher fuel prices contributed to the increase in the form of larger fuel surcharges, the company said.
Berkshire’s manufacturing, service and retailing segment generated income of $558 million, up from $477 million a year earlier.
Most of the improvement in that sector came from manufacturing businesses like building products maker Acme Building Brands and Benjamin Moore, apparel companies like Fruit of the Loom, and leisure product makers like Forest River and Iscar Metalworking Cos.
Berkshire noted that many of its manufacturers were hit by higher commodity costs for certain raw materials, including cotton, steel and petrochemicals, in addition to higher energy costs.
As a result, the companies have hiked prices in recent months for certain products — something that’ll likely be necessary if costs remain elevated or go higher, the company said.
Berkshire’s utilities and energy division, which includes MidAmerican Energy, added $301 million to Berkshire’s net income in the quarter, up from $223 million last year.
Elsewhere on its balance sheet, Berkshire recorded a paper loss of $82 million on its derivative contracts and investments. Last year, Berkshire posted a $1.4 billion gain.
The true value of the derivatives won’t be clear for at least several years, because they don’t mature until at least a decade from now on average. But Berkshire is required to estimate their value every time the company reports earnings. Buffett has told investors he believes the contracts will ultimately be profitable because the premiums are being invested.
Berkshire executives say the company’s operating earnings are a better measure of how the company is performing in any given period because those figures exclude its derivatives and investment gains or losses.
The company’s operating earnings fell to $1.6 billion for the quarter, down from $2.2 billion a year ago.
Berkshire Hathaway Inc. stock fell about 2% or more than $2,660 per share in trading today (March 31) on Wall Street following Wednesday’s suprise announcement that David Sokol was resigning.
Sokol, long considered by outsiders to be the most likely candidate to replace Warren Buffett, resigned after purchasing shares of a company he suggested Buffett buy, the Wall Street Journal reported.
Berkshire owns roughly 80 subsidiaries, including No. 2 RV manufacturer Forest River Inc.
Its insurance and utility businesses typically account for more than half of the company’s net income. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co. Berkshire has more than 260,000 employees worldwide but only 21 at its headquarters in Omaha, Neb.
A top executive of Berkshire Hathaway Inc., who was believed to have had the inside track to one day succeed billionaire Warren Buffett as CEO, has suddenly resigned.
Buffett said today (March 30) that David Sokol’s resignation letter, delivered by his assistant late Monday, came as a “total surprise,” the Associated Press reported.
Buffett said Sokol, who had been serving as chairman of Berkshire’s MidAmerican Energy, NetJets and Johns Manville units, indicated that he wants to spend more time on philanthropy.
Berkshire Hathaway is the parent company of Forest River Inc., the nation’s second largest RV manufacturer. It reported 2010 sales of nearly $2 billion.
“As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family’s resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests,” Sokol wrote. Buffett said twice before, most recently about two years ago, Sokol had spoken to him of resigning for similar reasons but Buffett and other board members convinced him to stay with the company. He has accepted Sokol’s resignation this time.
Buffett did said that he learned earlier this month that Sokol bought nearly 100,000 shares of Lubrizol stock before recommending that Berkshire buy the chemical company. Buffett said he doesn’t believe those stock purchases were illegal, and didn’t ask Sokol to resign.
Buffett has regularly praised Sokol’s work, and many investors have speculated that Sokol was on the short list to succeed Buffett at the Omaha, Neb.-based company.
Due to Sokol’s departure, Buffett said Greg Abel, current president and CEO of MidAmerican Holding Co., will become its chairman; Todd Raba, president and CEO of Johns Manville, will become its chairman; and Jordan Hansell, President of NetJets, will become that unit’s chairman and CEO.
Buffett declined to comment beyond his statement. Sokol did not immediately respond to a message left Wednesday.
Warren Buffett, chairman of Berkshire Hathaway Inc., had brief but warm words for the company’s Forest River Inc. holdings in his annual letter to shareholders issued recently.
On page 13 of the 26-page document, Buffett had this to say:
Forest River, our RV and boat manufacturer, had record sales of nearly $2 billion and record earnings as well. Forest River has 82 plants, and I have yet to visit one (or the home office, for that matter). There’s no need; Pete Liegl, the company’s CEO, runs a terrific operation. Come view his products at the annual meeting. Better yet, buy one.
Forest River is categorized in Berkshire Hathaway’s “Manufacturing, Service and Retailing Operations” segemnt, which reported 2010 sales of $66.6 billion and net earnings of $2.46 billion.
Other record-setters in 2010 were TTI, CTB and H.H. Brown.
For a look at the entire Buffett letter to shareholders click here.
Editor’s Note: The following article was provided by Heather Mariscal of Priority One Financial Services Inc., a subsidiary of Forest River Inc.
Credit scores are not what they used to be. Just a few years ago, many considered a good credit score 680 and above, but today that same 680 score would be an automatic decline from most recreational lenders. You owe it to your customer, as well as to your dealership, to obtain the most complete credit information available before submitting the loan to your lender partners. This means your F&I department needs to have available all three major credit bureaus’ reports.
As every good F&I manager knows, in order to present a credit application to a lender in the best possible light, you must thoroughly review the customer’s credit report first and not just submit the application based on score alone. It’s critical to understand and determine the strengths of the loan request as well as the challenges. While it’s only necessary to use one credit bureau, it is to your advantage to have access to reports from the top three credit bureaus, Equifax, Experian and TransUnion, because scores and credit information can differ greatly among the three.
Credit scores differ for a variety of reasons:
- Lenders might not report to all three bureaus.
- Public records including collections, judgments, liens and bankruptcies might not be reported.
- Closed accounts might not be reported closed.
- The last reported date of a trade line might not be identical.
Because of these differences it is beneficial to receive reports from the top three bureaus to compare credit reports, and see what the lenders are going to see. To help secure approvals, review all three credit bureaus’ reports to ensure you don’t miss any key information the lenders may be basing their loan decision on. Since it is not unusual to see a wide range of credit scores on the same customer, your F&I department should work with all available information, not a piece of the picture portrayed by a single bureau. Keep in mind lenders typically do not pull all three bureaus, as a rule, which could ultimately influence the credit decision negatively.
F&I managers that use only one bureau’s information and don’t receive all of the customer’s credit information, gathered from all three bureaus, could receive a less than desirable approval from lenders who use risk based pricing. With risk-based pricing, lenders estimate the probability that the borrower will default on the loan which means that different borrowers can receive different rates and terms on the same amount to finance. Additional factors that can alter the terms of the approval include: the number of trade lines, debt to income ratios, length of time in bureau and overall revolving usage. All of which could be different from one bureau to another. For example, depth-of-credit file on one bureau might be five years, however, another bureau it might be 10 years; therefore, the lender might deem that customer to have more risk because they evaluated five years of history versus ten.
It’s up to your F&I manager to pull all three credit bureaus, thoroughly review, and point out to the lender any credit bureau discrepancies which might help secure a better approval.
More deals will be approved when the F&I manager highlights the strengths your lenders look for to overcome any weaknesses that might exist in the deal. F&I managers must avoid mistakenly qualifying a deal as better or worse than it actually is. It’s better to have all of the information, than to be surprised with something that could mean losing the deal, or harming your credibility. To ensure this can be accomplished, review credit information from all 3 major credit bureaus. By doing so, the F&I manager will have all of the information necessary to do the best work for your customer.
Priority One has been serving the marine and RV industry since 1987. Acquired in 2007 by Forest River Inc., a Berkshire Hathaway Inc. company, Priority One serves as the F&I managed services provider for hundreds of dealers nationwide. For more information, visit www.P1FS.com.
Monday’s (Jan. 31) surprise news that Berkshire Hathaway Inc.’s Forest River Inc. had acquired Super C motorhome builder Dynamax Corp. seems to have been well received by both buyers and sellers. In fact, spokesmen for both Elkhart, Ind.-based companies tell RVBUSINESS.com that the two firms’ cultures and products should complement each other.
“We’re excited about what the relationship with Forest River can do for Dynamax, the doors that it can open,” said Dewayne Creighton, president of 14-year-old Dynamax, the principal owner and chairman of which was Elkhart businessman Richard Strefling.
“They (Forest River) seem impressed with the product, with a lot of innovations we’ve done here, and I think we can add to their product line,” he added. “There wouldn’t be any overlap in my mind between what we do and what they’ve already done.”
Alluding to the “relatively brief” negotiations that preceded the sale, Forest River Chairman Pete Liegl says he anticipates few changes at 50-employee Dynamax. Liegl said Creighton would remain at the helm of the company, which markets the Grand Sport GT, DynaQuest and Isata motorhome lines as well as an upscale DynaAire fifth-wheel.
”We need everybody there, basically,” said Liegl, who reported that Dynamax will operate as a stand-alone Forest River division. ”We might do a little consolidation on the accounting and payables and receivables, but I’m sure those same people will be able to be utilized someplace else.”
The sale price was not announced.
”We paid more than we wanted, but not as much as Dick (Strefling) wanted,” Liegl said. ”He’s always treated me fairly, so I’m sure he’s treated me fair here.
”Dynamax makes a beautiful product. It will fit well,” he added. “In fact, no one else is out there to compete with Dynamax.”
Dynamax operates out of a 200,000-square-foot plant on 27 acres on the north side of Elkhart, builds its coaches on big Freightliner Class 8 and smaller M-2 truck chassis, as well as Ford F-550 and E-450 Super Duty platforms. Retail prices range from $150,000 to $500,000.
Strefling is best known for building the Glaval van and bus brands which Forest River previously purchased along with a group of office buildings and manufacturing facilities. Strefling still operates two substantial industry suppliers in northern Indiana — Lexington Corp., which makes seating, and Charleston Corp., a manufacturer of plastic automotive parts.
Liegl said he originally became interested in Dynamax products while on a camping trip in one of Dynamax’ coaches. ”I was fascinated with how beautiful it was and how it functioned, and I guess that’s what’s been going through my head,” he said.
Creighton, meanwhile, acknowledged that the Great Recession has been tough on all motorhome makers, Dynamax included. And that, most agree, was an obvious factor in the sale.
”Yes it was, mainly because of the banking (tight national credit availability),” he said. ”The banks got extremely tough. Financing was something that was affecting us (but) that will not be the case with Forest River involved, and that’s the exciting thing. They bring so much to the table.”
Forest River Inc. spokesmen confirmed this morning (Jan. 31) that the Elkhart, Ind.-based Berkshire Hathaway Inc. subsidiary has acquired Dynamax Corp., a 14-year-old motorhome manufacturer specializing in high-end Super C-style motorhomes and upscale fifth-wheel travel trailers located on the north side of Elkhart.
“Forest River has purchased Dynamax,” a spokesman for Forest River, who preferred anonymity, told RVBUSINESS.com. “Details to follow.”
Dynamax President Dewayne Creighton was unavailable for comment.
“We’re pumped up about it,” said the Forest River source. “We think there’s a lot of sectors inside that Super C category, everything from the RVer to getting a lot bigger and heavier into the command centers – the units that law enforcement, SWAT teams and the governmental units and insurance companies utilize during big storms and disasters.
“They’ve (Dynamax) already built some of those, and we’ve got some staff people who know this market, so we think we can do a lot of business in the command center specialty vehicles. We’re excited about that.”
Priority One Financial Services, the recreational industry’s oldest and largest F&I outsourcing provider, has added Ruben Sierra Jr. as a business manager in its new specialty finance department.
The new department was formed to help dealers move additional units by securing recreational loans for a higher percentage of credit-challenged consumers, according to a news release. Sierra’s 30 years in the automotive industry as a sales, finance and closing manager makes him a perfect fit at Priority One and for this department, the release stated. In addition to his work experience, he is Association of Finance & Insurance Professional certified and has JM&A training, which is one of the largest providers of F&I products in the automotive industry.
“We really lucked out with Ruben,” commented Rina Aponte, operations manager. “He is experienced, knowledgeable, customer service oriented and can even speak Spanish fluently, which will be helpful for certain dealerships we work with.”
A native of Tampa, Fla., Sierra has been married for 43 years to his high school sweetheart, has two children and five grandchildren. When he is not working, he enjoys the Florida lifestyle of boating and fishing.
Priority One has been serving the marine and RV industry since 1987. Acquired in 2007 by Forest River Inc., a Berkshire Hathaway Inc. company, Priority One serves as the F&I managed services provider for hundreds of dealers nationwide. For more information, visit www.P1FS.com.
Winnebago Industries Inc., the biggest U.S. maker of motorhomes, may make its first acquisition in more than 20 years, signaling the recreational vehicle market sees a sustained economic recovery, Bloomberg reported.
Winnebago may acquire SunnyBrook Manufacturing Inc., the privately held maker of towable recreational vehicles, by the end of the year, according to a statement Monday (Oct. 18). Winnebago, which didn’t disclose financial details, said it has signed a letter of intent and is still studying the potential deal.
A takeover by Forest City, Iowa-based Winnebago would mark an entry into the faster-growing towable RV market, Craig Kennison, an analyst at Robert W. Baird, wrote in a research note. The acquisition also reflects confidence among RV makers, which have foreshadowed economic declines and rebounds.
“There won’t be a double dip in the RV industry,” Mac Bryan, vice president of administration at the Recreation Vehicle Industry Association (RVIA), said Monday in a telephone interview. “This is a marketplace that is in recovery.”
The acquisition would be Winnebago’s first in more than 20 years, Sheila Davis, a spokeswoman, said in a telephone interview. Davis said the company, which announced in November 2009 that it was studying “potential diversification strategies,” may consider additional acquisitions.
Winnebago leads the motorhome industry with a 19% market share, according to Robert W. Baird’s Kennison, who is based in Milwaukee. SunnyBrook sold 1,700 towable RVs last year, making it the 13th largest manufacturer in that market, Kennison wrote in a research note.
‘Like the Concept’
“We like the concept,” he wrote. “Winnebago has the most recognizable brand in RVs, but has yet to leverage it in the faster-growing towable market. SunnyBrook would represent a small but strategic step in that direction.”
Kennison estimates Middlebury, Indiana-based SunnyBrook’s annual revenue at $30 million to $40 million.
Wholesale deliveries by U.S. RV manufacturers surged 71% to 177,300 units through the first eight months of 2010, according to the RVIA. Shipments in all of 2009 were 165,700, the lowest since 1991, according to RVIA data, as consumers deferred discretionary purchases during the economic slump.
Shipments may rise to 239,900 in 2010, a gain of 45% from 2009, according to Richard Curtin, an RV industry analyst and director of consumer surveys at the University of Michigan. Industry shipments may increase 8% to 259,600 in 2011, according to Curtin, who analyzes data for the RVIA, the industry’s Reston, Virginia-based trade group.
The RV industry includes more than 80 manufacturers, RVIA’s Bryan said.
“This is the time in the business cycle where consolidation tends to occur,” Bryan said. “While we’re still seeing some problems continuing related to consumer confidence and the availability of credit, we’re finding that primary demand is very strong. Consumers want to be in RVs and in the outdoors.”
Among the investors reaping gains from the industry is Warren Buffett’s Berkshire Hathaway Inc. Berkshire’s Forest River Inc. RV unit helped the holding company’s manufacturing, service and retailing businesses more than double earnings to $1.15 billion in the six months through June 30, according to a regulatory filing.
Winnebago and Jackson Center, Ohio-based Thor Industries Inc. are the largest, publicly traded RV makers.
Shares of Winnebago have lost 20% this year after more than doubling in 2009. Thor has declined 1.6% this year.
Prime Time Manufacturing has expanded its product offering with the introduction of the all-new Tracer Micro series travel trailer targeted toward minivan and small crossover tow vehicles. Industry insiders got their first look at the new Tracer Micro during the just completed Forest River Inc. dealer open house in Elkhart, Ind., according to a news release.
“The thinking behind the new Micro is simple,” according to Jeff Rank, president for the Wakarusa, Ind.-based manufacturer. “Prime Time wanted a travel trailer that can easily be towed by a minivan with 3,500 pounds of towing capacity. Unfortunately, most of the units in this weight range really compromise livability and function. With Micro we’ve combined great looks, the right features, and many of today’s lightweight composite materials to create a perfect balance between weight, price, features and eye appeal.”
Three floorplans, all with slideouts, are being offered in the Tracer Micro series with shipping weights starting at 2,550 pounds fully loaded. Standard interior equipment includes cherry cabinets and cherry hardwood cabinet doors, automotive styled leather wrapped dinettes, microwave, air conditioner and CD player. On the outside, a full-sized awning, stabilizer jacks, spare tire, stereo speakers, television hook-up and aluminum wheels are included as standard equipment.
The MSRPs for the new Tracer Micro series start at $14,900.
Prime Time Manufacturing is a division of Forest River Inc, a Berkshire Hathaway Inc. company. Prime Time offers towable recreational vehicles under the brand names of LaCrosse, Tracer, and Crusader.
For information regarding the Tracer Micro, consult www.primetimerv.com or call (574) 862-3001.
As Forest River Inc. marks its best sales year since being founded in 1995 by Peter J. Liegl, the multi-divisional company anticipates hosting 2,800 people at its third annual dealer meeting, Sept. 29-30, at its corporate headquarters in Elkhart, Ind.
”I guess we are going to have a 40% increase this year in attendance,” Liegl told RVBUSINESS.com. ”The response has been phenomenally good.”
The show will feature Forest River, Coachmen, Palomino and Prime Time recreation vehicles along with buses, cargo trailers, manufactured homes, commercial vehicles, ice houses, pontoon boats and bathroom units manufactured by other divisions.
In an exclusive interview with RVBUSINESS.com, Liegl estimates that Forest River’s sales for 2010 will be in the range of $2.5 billion, up 74.2% compared to last year.
”We’ve never had a better year in our whole history,” Liegl said. ”We’re happy with that. But by the same token, we picked up a lot of pieces of the pie (market share) where other people went out of business.”
Soon to join Forest River’s lineup is the reincarnation of the Shasta brand in a new division under the direction of industry veteran Brad Whitehead that will build stick-and-tin travel trailers, minimotorhomes and laminated trailers and fifth-wheels. Shasta’s new lineup will make their debut Nov. 30-Dec. 2 at the 48th National RV Trade Show in Louisville, Ky.
”We won’t have anything from Shasta at our dealer showing, but there’s a need for a Shasta-type product and we’ll have it at Louisville,” Liegl said.
Although the recent proliferation of northern Indiana dealer meetings has raised some concerns within the industry regarding the ultimate impact on the Recreation Vehicle Industry Association’s (RVIA) Louisville Show, Liegl said that Forest River’s dealer show is meant to compliment the Louisville Show, rather than replace it.
”I think we need both,” Liegl said. ”No 1, Louisville is limited to RVs. By the same token, space is extremely costly there. I’ve got my show here in a field next to corporate headquarters. I can display more at no cost.”
Liegl, at the same time, said the Louisville Show by itself isn’t long enough to spend the time necessary with Forest River’s dealers. ”Our show just gives us more time to spend with our dealers communicating,” he said. ”That’s all Louisville is, communicating. But with our own show, we’ve got more time to do that.”
The Berkshire Hathaway Inc. subsidiary’s foray into staging its initial dealer meeting in 2008 with the theme ”Pick Your Partner” was spurred by the desire to ”let dealers know that financially, unquestionably, we were the strongest (RV manufacturer),” Liegl said.
”We wanted to make it known that they should make sure that their ‘partner’ was going to be here through thick and thin,” Liegl added. ”And obviously, it worked very successfully for us.
”In effect we were saying to dealers that they needed to know who they were doing business with because if your manufacturer goes out of business, you’ve got a problem, not only a problem getting your warranty, but a problem selling them and getting them financed.
“Every dealer out there understands that very well today when they look at the manufacturers that went out of business and the problems they had with the product that they had on their lots.”
Liegl said the theme for this year’s gathering will involve a ”thank you” to dealers for making Forest River the success it has become.
in the big picture, Liegl said a host of RV manufacturers holding dealer open houses and shows the same week in September is, in reality, boosting attendance at Forest River’s gathering.
Those other companies hosting dealers include Gulf Stream Coach Inc.; Thor Industries Inc. subsidiaries Keystone RV Co., Thor Motor Coach (recently created from the consolidation of Four Winds International Corp. and Damon Motor Coach), Breckenridge and Dutchmen Manufacturing Inc.; Monaco RV LLC; Livin’ Lite Recreational Vehicles; Dynamax Corp,; EverGreen Recreational Vehicles LLC; Sunnybrook RV; and Carriage Inc. Meanwhile, Jayco Inc.’s annual Master Sales Training Session for dealers’ sales staffs is partly slotted in the same time frame.
”Having the competition have their (dealer shows) at the same time has boosted our numbers,” Liegl said. ”We’re getting commitments (from competitors’) dealers that they are coming to ours too.”
Thousands of recreational vehicle retail personnel will be converging in late September on the RV-building center of Elkhart County, Ind., as more manufacturers turn to local 2011 product displays in the wake of the Great Recession and a prevailing cost-cutting atmosphere throughout the business world.
What’s even more interesting is that they’re doing it in unison – at the end of September in synch with Forest River Inc.’s big Sept. 29-30 dealer gathering, now in its third year. In fact, it appears that Forest River has reinvented the wheel to an extent by bringing in hundreds of RV, cargo and commercial trailer retailers to its home plant in late September for a closed gathering at which dealers are wined and dined and treated to expansive new model product displays.
The Berkshire Hathaway Inc. subsidiary’s second annual 2009 “Pick Your Partner” open house last year drew 600 to 700 dealers — a total of 2,000 people – to the grounds outside the Elkhart-based company’s headquarters where retailers were treated to a display of about 350 units plus live music and staff-delivered beer.
Although Forest River’s management hasn’t said much publicly about its plans yet this year, it’s a safe bet that they’re expecting more of the same at this year’s dealer meeting. “I assume it’s going to be as good as last year,” Forest River President and CEO Pete Liegl told RVBusiness. “We’re getting a good response so far. We just started sending out the invites last week.”
The trend toward Elkhart County dealer open houses took a big step forward earlier this month when four Thor Industries Inc. subsidiaries, Keystone RV Co., Damon Motor Coach, Four Winds International Corp. and Breckenridge, announced plans for a combined dealer open house Sept. 28-30 at the RV/MH Hall of Fame Museum in Elkhart, Ind., for which they’re expecting 500 dealers. As many as 100 2011 models will be on display on the grounds surrounding the Hall of Fame.
Now, the latest to join the fray is Thor’s Goshen-based Dutchmen Manufacturing Inc., which has notified its dealers of its first-ever Sept. 27-30 open house at the former Azure boat manufacturing facility at the corner of C.R. 6 and Marina Drive not far from the Indiana Toll Road and the RV/MH Hall of Fame.
Dutchmen President Don Clark says his company’s open house will take place both inside and outside the facility, and will be highlighted by a Sept. 27 dealer party featuring live entertainment and some eye-catching 2011 product displays.
“We’re going to have some surprises that have yet to be viewed by any dealer,” Clark told RVBusiness. “We’re going to have not just one new brand, but several new brands that we will be selling at our open house. And it will be a good precursor for what the dealers will be seeing at Louisville (RVIA’s annual National RV Trade Show, Nov. 30 to Dec. 2 in Louisville, Ky.). We’re going to have our new sales management staff on hand, and it gives dealers an unharied time to get to know them better.”
Other companies are expected to announce their own “open houses” and “showcases” in the near future. Although details were still being worked out, Carriage Inc. Vice President of Sales Ed Kinney says his Millersburg, Ind., firm will hold a Sept. 28-30 open house in Millersburg. “We’ll have a nice display, show some new things we will show at Louisville, give some plant tours and have a good casual time,” he said.
Gulf Stream Coach Inc. also is joining in the September rush with an event scheduled for Sept. 27-30 at which the Nappanee firm will show 45 towable and motorized units.
Meanwhile, Jayco Inc.’s own annual Master Sales Training Sessions for dealers’ sales staffs is partly slotted in the same time frame.
Jayco, headquartered in nearby Middlebury, plans to bring in approximately 500 people for intensive sales training at its complex in Middlebury, Ind. The sessions run Sept. 20-23 and Sept. 27-30 and will involve sales training and extensive factory tours, reports Marketing Director Sid Johnson.
Jayco did not sponsor these sessions last year due to the economy, but traditionally holds the event at the end of September every year, Johnson reports. “Dealers pay for transportation. We pay for everything once they get here,” said Johnson, noting that the cost to Jayco is in the neighborhood of $200,000.
The whole emerging sequence of events, in turn, is beginning to prompt questions about just how many hotel rooms there are in the region to house an influx of business people of this magnitude. Elkhart County, in itself, has 2,591. And while it’s got to translate into a positive in terms of facilities use at the Hall of Fame, located along the Indiana Toll Road east of Elkhart, it’s also posing questions among some industry observers about how this emerging trend might ultimately affect the viability of the Louisville Show.
That said, some of the players in this emerging scenario like Clark and Keystone President Bob Martin seem to be keeping their focus on Louisville as well. Martin called Keystone’s September product display “a little preview of Louisville” that would include some – but not all – of the products his company would unveil at the national show in late November.
‘It’s a good opportunity to get in front of your dealers in the fall,” said Martin, whose agenda will include seminars and training, vendor booths and meetings with customer service representatives and retail and wholesale financing sources. ”It a good draw for Keystone with a couple of motorhome lines and Breckenridge (which builds park trailers). All the divisions are working on plans together. There will be a lot to see.”
“This is an absolutely exciting event,” said Tim Howard, president of Breckenridge,“ whose Nappanee-based firm participated several years ago in a Thor-only dealer show in Elkhart County, “because the way we did it before, it was far-flung. The companies who did it in unison did so at their own locations. This will be at one location.”
Howard said the Thor event was not specifically designed to coincide with Forest River’s “Pick Your Partner” event, but it makes sense. “I don’t think it was discussed as that,” he said, “but it is logical, It makes perfect sense for a dealer to have the efficiency of killing two birds with one stone.”
Dan Shea, Gulf Stream towables president, said the September event makes a lot of sense, giving dealers, especially Canadians, a chance to place their orders early.
“It’s a good opportunity for dealers who need product quicker,” said Shea. “There is a lot of reason for dealers to step up and buy product this October, November and December.”
Although late September dealer shows take some of the luster off Louisville for Gulf Stream and others, Shea added, “Louisville will still be a big show for us.”
Warren Buffett was spared from giving a deposition in the lawsuit brought by a former executive who said he was wrongly dismissed by the recreational vehicle unit of the billionaire’s Berkshire Hathaway Inc., Bloomberg reported
As first reported on Wednesday (Aug. 4) by RVBUSINESS.com, U.S. Magistrate Judge Christopher Nuechterlein in South Bend, Ind., made the ruling Aug. 2 and said Berkshire CFO Marc Hamburg may be questioned by lawyers for the plaintiff, Brad Mart.
Mart said he was fired from the Elkhart, Ind.-based Forest River Inc. after bringing allegations of fraud to executives, including to Buffett in six phone conversations. Mart had requested Buffett’s deposition to combat Omaha, Neb.-based Berkshire’s claim that it should be dropped from the lawsuit for lack of jurisdiction.
“Even Mart’s own recount of the conversations reveal that Buffett communicated that he did not get involved in personnel matters and that Mart should seek an audience elsewhere for relief,” the judge wrote.
Buffett, Berkshire’s CEO, isn’t accused of wrongdoing. His deposition was requested to help determine facts of the case. Buffett didn’t respond to an e-mailed request for comment sent to an assistant.
Berkshire, the parent company, doesn’t do business in Indiana and shouldn’t be subject to courts in that state, it said in the June 1 request for dismissal. Mart said Berkshire’s control over Forest River submits the firm to Indiana law and Buffett’s statements could help show that.
Hamburg’s deposition was requested by Mart “to probe the full extent of the parent-subsidiary relationship,” Nuechterlein said. “The court considers it appropriate to grant Mart’s request.”
Berkshire had previously offered a deposition with Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett.
Buffett, 79, bought Forest River in 2005 and left its CEO, Peter Liegl, in charge of the unit. Mart, who helped arrange the $800 million sale to Berkshire, was fired last year after he went to Buffett and accused Liegl of fraud, according to the April complaint. Liegl’s lawyer, Jeanine Gozdecki of Barnes & Thornburg LLP, denied the charges and is seeking a dismissal.
Liegl required Forest River to buy parts at inflated prices from a company he owned and appropriated cash from factory vending machines, Mart said. Liegl also reneged on a promise to make Mart CEO, according to the complaint. Mart alleged in the suit that Liegl threatened his life.
“There is no legitimate basis to the allegations of the threats or the fraud,” Gozdecki said last month. “We will vigorously defend these claims on behalf of the company and on behalf of Pete Liegl.”
Mart’s request to depose Jeff Rowe, Forest River’s director of human resources, was granted by the judge. An application to question Forrest Krutter, Berkshire’s secretary, was denied.
“It appears that this request is more likely to lead to an impermissible fishing expedition than targeted, jurisdictional discovery,” Nuechterlein said of the request to depose Krutter.
Krutter had no comment. Stephen Kennedy, a lawyer for Mart, declined through an assistant to comment.
Berkshire Hathaway Inc. was sued by an ex-manager of its recreational vehicle business who said he was fired after bringing allegations of “millions of dollars” of fraud to executives, including Chairman Warren Buffett, according to Business Week.
Brad Mart said in an April 5 complaint that Buffett “took no action to correct the deficiencies” at the RV maker, including the removal of cash from factory vending machines for deposit in a personal account of Forest River CEO Peter Liegl. A representative for Berkshire said Mart never told Buffett, in three conversations, about unethical behavior, and that a company probe found no illegal activity.
Mart is seeking the Forest River CEO post, which he said he was promised, according to the complaint in federal court in South Bend, Ind. He also asked for damages including reimbursement for his loss on the sale of his home in Illinois when he purchased a new property in anticipation of getting the promotion. He accused Elkhart, Ind.-based Forest River Inc. of breach of contract and said Liegl threatened his life.
“Because Mart followed the Berkshire Hathaway Code of Business Conduct and Ethics and reported known or suspected violations of the code by Liegl and Forest River to Warren Buffett, Mart lost his job,” according to the complaint. Liegl “fared much better, retaining his position as CEO of Forest River and keeping the millions of dollars he bilked.”
Mart was fired early last year after helping to arrange Berkshire’s 2005 deal to buy Forest River for about $800 million according to the complaint. Mart said that he was named general manager of the company’s financing business after it was bought by Berkshire and then told in 2007 he would succeed Liegl as CEO. Mart said he reported violations to Buffett in six separate phone conversations.
“Mr. Mart did not alert Mr. Buffett to any unethical, fraudulent or illegal activities” at Forest River, said Berkshire Secretary Forrest Krutter in an interview. Krutter said Buffett asked him to conduct a review of RV maker related to “business items.” “In the course of the investigation, these allegations came to light,” Krutter said of the fraud claims. “My investigation did not identify any fraudulent, unethical or illegal activities.” Krutter said he’s seen “no evidence or indication” that the allegations of death threats are valid, and that the reasons for Mart’s dismissal aren’t related to his claims.
Berkshire’s code says the company will “uphold the highest level of business ethics” and that retaliation is prohibited against employees who report violations in good faith. Buffett told Congress in 1991 that he had given employees of Salomon Inc. a message after a bond scandal: “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”
Mart said that Liegl required Forest River to buy parts, at inflated prices, from a company he owned and demanded that the RV maker’s staff use his airline-charter service for business travel. Liegl’s conduct also included “appropriating hundreds of thousands of dollars in cash from factory vending machines,” according to the complaint.
Liegl also used “ghost payrolling” so that former employees could receive salary or benefits from Forest River in a “fraud upon Berkshire Hathaway’s shareholders,” according to the complaint. Buffett oversees a collection of more than a 70 companies from Berkshire’s Omaha, Nebraska, headquarters with a staff of about 20 people. Berkshire’s subsidiaries include insurers, shoe manufacturers and power producers. He seeks companies with strong management and entices business-owners to sell their firms by promising not to interfere in day-to-day operations.
‘A Remarkable Entrepreneur’
Mart said he introduced Buffett and Liegl. According to Buffett’s annual letter to Berkshire shareholders published in 2006, Liegl previously sold Forest River to a leveraged- buyout firm and subsequently quit the firm because of a disagreement on strategy. Forest River then went bankrupt and Liegl repurchased it, Buffett said. “Pete is a remarkable entrepreneur,” Buffett said in the letter. “You can be sure I won’t be telling Pete how to manage his operation.”
Forest River has about 5,355 employees, according to Berkshire’s 2009 annual report. The unit sells restroom trailers and pontoon boats in addition to RVs, according to the company’s website.
Angelica Schultis, a lawyer for Mart, declined to comment.
RVBUSINESS.com reported in October 2008 that Mart had been named president of Forest River. “Brad is a very competent manager,” Liegl said. “Making this move, we can maintain doing what we are doing.”
Liegl told RVBusiness that he will, in turn, focus on acquisitions. “The times are right to be aggressive in this area,” Liegl said. “There are some people struggling out there. It hasn’t been the greatest of times for everybody in the RV business, but, by the same token, it hasn’t been the worst for everybody, either.”
The announcement of Mart’s promoton came in a company memo dated Oct. 1, 2008.
RVB: So, Mike, how things are going for the new Coachmen at this point?
Terlep: We are streamlined and simple and far quicker to market. Our focus is on the product, the customer and sales. And just as we frequently look into the review mirror in driving a car, we are keeping abreast of the competitive landscape. The new Coachmen is gaining market share and, yes, we are once again profitable. We’ve been profitable the last nine months and we generated a profit for 2009.
RVB: But Coachmen’s RV business generated big losses while part of the former Coachmen Industries Inc. How do you explain this turnaround?
Terlep: You eliminate all the commotion, the waste, the excess. You streamline the process, eliminate the processes you don’t need and you get to the market on a timely basis with a great product.
RVB: Would you call this a seamless transition or were there bumps along the way?
Terlep: I’d love to say it was seamless. The Forest River organization has a lot of great people in it and we had a lot of help from a lot of great people. So, I think the integration was about as seamless as you could have orchestrated with the merger as large as it was. We had a few bumps in some areas. But in the eyes of the (RV) owners, the dealers, the suppliers and employees, I think it went remarkably well. I believe anybody you talk to would reinforce that.
RVB: Tell us about your management team.
Terlep: The management team is made up of a diverse, dynamic, talented and motivated group of individuals that have one thing in mind: winning. There is tremendous chemistry in our team and we enjoy working together. We are having fun and we are putting W’s in the win-loss columns. Our management team is empowered and very focused.
RVB: How much carry-over exists in your team from “Old Coachmen” to “New Coachmen?”
Terlep: Quite a bit, especially in the plants. In the management team and sales team there is a blend of those that had been with Coachmen and some new blood. I believe that through the transition and integration of Coachmen into Forest River we rebuilt a team of “all stars,” the best of the best. There are six divisions within the new Coachmen, each headed by a general manager with a dedicated plant, sales team, and each operates under its own profit and loss. There are no vice presidents in our divisions. No layers, only doers. Dave Miller heads Class A’s, Mike Bear the Class C’s, Don Medd the fifth-wheels, Bob Dumm the laminated travel trailers, John Babcock the conventional travel trailers and Gar Warlick the folding camping trailers. Sandy Marschke oversees our support plants. They report to me and I report to Mr. Liegl (CEO Pete Liegl).
RVB: We’re told that there are fewer product lines today bearing the Coachmen brand name. Why is that?
Terlep: We streamlined and rationalized our product offerings. Any product line that could not stand on its own was eliminated. Any product that was not generating the results at retail that our dealers and we need and expect was eliminated. We have limited the number of floorplans within each product line with the view of improved product turns at the dealer level. It is difficult to generate three to four turns a year if you have 40 floorplans to choose from.
We placed a moratorium on the number of floorplans each division can generate. If they want to bring another floorplan to market, they need to eliminate a weaker floorplan. This reduces lead times on products, improves turns, improves quality by increasing repetition in our plants and keeps the best product in the market.
Every product line underwent vast improvements to elevate its competitive position in the market and we introduced six new product lines targeting what we believed to be the largest market segments and growth opportunities of the market: the Catalina travel trailer, Freedom Express travel trailer, Apex travel trailer, Brookstone fifth-wheel, North Ridge fifth-wheel and Encounter Class A.
The carry-over product lines that have been vastly redesigned include the Chaparral fifth-wheel, the Freelander, Leprechaun, Concord and Prism Class C’s, the Mirada, Cross Country and Pathfinder Class A’s and, of course, our Viking and Clipper camping trailers. We are experiencing market share gains in all of our products and fully expect and intend on building upon these gains throughout 2010.
RVB: How did dealers respond at your first Louisville Show?
Terlep: Excellent. We wrote business and signed a lot of new dealers.
RVB: What changes has your dealer body undergone in the past year?
Terlep: Our dealer body remains the lifeline of our company and our success. We can only be as successful as our dealers are, so we want to make them as successful as we can selling our products. The make-up of our dealer body, just like all distribution bases, has changed through the recent recession due to attrition. We continue to value many long tenured relationships with dealers that have been with Coachmen for as many as 40-plus years and we have added a number of new dealers to the Coachmen dealer body that have brought new energy and volume to our company.”
RVB: If you could capsulize it into a few words, what is your philosophy at the new Coachmen?
Terlep: The philosophy of Coachmen is really quite simple – perform! Generate results! Win!! As for business principles, they remain the same as those on which Coachmen was founded: Our word is our bond. Practice the golden rule. And business goes where it is invited and stays where it is well cared for. Coachmen is managed as a stand-alone division of Forest River. There is no effort to cross-promote or align or not align with Forest River dealers. We believe the best product at the best dealership will win in the marketplace. This is what keeps Forest River so strong.
RVB: Although the Coachmen RV business is still part of a publicly held company, you’re much lower on the food chain as a unit off a larger company, Berkshire Hathaway Inc. Does that change in any way your accountability to shareholders.
Terlep: The accountability of Coachmen to perform is just as prevalent now as it was under old Coachmen. There was never an absence of accountability. However, under the current structure we are able to focus our energies on running the business, and we have far fewer distractions that accompanied being higher up on the food chain, as you put it.
There are many stakeholders in the game and they all have expectations of us. We need to meet the expectations of all stakeholders starting with Berkshire Hathaway and Forest River Inc. all the way through to the end consumer. In any event, the goal is to quiet the critics and generate results. Under Forest River Inc. and the leadership of Mr. Liegl, I believe that we are doing just that.
The business model of Forest River has permitted us to simplify and focus our energies on the key fundamentals of the business.
Let me be clear on one point: old Coachmen was a great company and grew to be an industry leader over a very long 46-year history, much longer than the average life of a company and certainly much longer than the average life of a publicly held company. It was time for a change and the change was a good change for Coachmen — the brand, the dealers and the consumer — and I believe that the addition of Coachmen to Forest River has provided the value that Mr. Liegl saw in the opportunity. Coachmen is a great brand that has been in a sense, reborn. But let’s not forget that the equity and value in the Coachmen name lies both in its history and in its future.