November 20, 2009 by RVBusiness · Comments Off on MSNBC.com Tracks Elkhart’s Economic Rebound
The wheels are slowly turning again for the RV industry in Elkhart County, Ind., the mainstay of this region’s economy.
Sales are beginning to pick up again. RV makers are cautiously hiring back some of the workers they furloughed during the downturn, according to a recent sto What To Say When U Make Up Back With Your Ex Girlfriend ry by MSNBC.com as part of its yearlong “Elkhart Project.”
Jayco Inc. in Middlebury, Inc., which was producing about 150 vehicles a day in 2006 with a work force of 2,000, cut production and employment by about half during the downturn. The company recently hired back about 200 workers to keep up with a bump in demand.
“On the one hand it feels really good (to be hiring again),” said Jayco President Derald Bontrager. “But we also recognize that both nationally and globally, economies still have a long way to go to fully recover.”
And that’s the crux of the issue. It’s clear that some regions are seeing some of their industries revive. Our latest Adversity Index shows nearly one in four metro areas beginning to recover, including the Elkhart-Goshen area. But the recovery is faint, uneven, faces many threats and is starting from a point so low that it could take years to get up to cruising speed.
Although RV makers are hiring back workers and shortening planned holiday furloughs, the industry is still operating at its lowest level in some 25 years.
Some 70% of the nation’s recreational vehicles are produced in Elkhart County, but the industry hit a major bump when gas prices surged in 2007. Then production all but ground to a halt as the recession took hold and and credit froze up last year.
But as RV makers tentatively begin to ramp up production again, other businesses in Elkhart also are seeing the economy’s wheels begin to turn again.
Car dealers have seen a pickup in traffic to once-empty showrooms, partly due to the government’s “Cash for Clunkers” program, which lifted sales nationwide over the summer. Harold Zeigler, who owns 10 dealerships in the region including a Ford/Lincoln Mercury outlet in Elkhart, said the program was so successful that some of his dealerships ran out of inventory.
Another factor boosting car sales: Loans are getting approved more easily than they were at the height of the financial crisis a year ago.
“At the worst of it they were pretty tight, but I don’t see that as being an issue,” Ziegler said. “There seems to be plenty of money for car sales for a good customers with decent credit.”
Similarly the real estate market is also getting a lift from government-provided tax credits for home buyers and cheap credit for borrowers. Congress extended tax credits that were set to expire Nov. 30, and 30-year mortgage rates are at a near-record low of 4.83%, accroding to mortgage giant Freddie Mac.
In Elkhart, prices seem to have stabilized, according to Barb Swartley, a real estate agent with Century 21.
“We had a nice little surge in the late spring and in the late summer, and I look for this tax credit to make a difference,” she said. “I think that could spur some people to make a move that may have been on the fence.”
Sales are still far below levels seen before the recession began, as they are nationwide. And the commercial real estate market remains mired in a deep slump, according to John Letherman, a commercial real estate broker and president of the Elkhart County Council.
“We’ve got excess capacity, and along with excess capacity and vacancy come some fairly difficult times for our industry,” he said. “The few buyers that are there are basically bottom feeders. We’ve had some sales at $10 and $12 a square foot of buildings that that should have sold for $20 to $30.”
Though some businesses are slowly adding workers, unemployment remains stubbornly high —still stuck at 15% as of September, the latest data available. Nationally the rate is much lower but still rising — to 10.2% in October, up from 9.8% in September.
“Businesses around here are not hiring unless they feel they’re on a pr
The merits of the Car Allowance Rebate System, commonly known as CARS or “cash for clunkers,” may be debated for years, but the program did spark auto sales last summer, indicates a report by Ball State University, Muncie, Ind.
An analysis of auto sales during CARS estimates that of the 690,000 autos sold under the program, all but 3,000 to 5,000 would not have been exchanged without rebates, said Michael Hicks, director of Ball State’s Center for Business and Economic Research (CBER), the research division of the Miller College of Business.
The “clunkers” program, which cost nearly $3 billion in taxpayer funds, gave incentives of up to $4,500 to people who traded in old, inefficient vehicles for gas-thrifty new ones. CARS was designed to stimulate the nation’s sluggish economy while also reducing carbon emissions.
“It is no secret that American automobile sales have languished miserably in this recession,” Hicks said in a news release. “CARS created an immediate boost to the industry that is so important to Indiana as well as much of the manufacturing-centered Midwest.”
Hicks believes his analysis should put to rest any thoughts that CARS was unsuccessful in spawning new vehicle sales. A recent report by Edmunds.com, an automobile consultancy, estimated that only 170,000 vehicles sold in July and August were attributable to CARS.
“The Edmunds.com study didn’t properly account for the economic conditions and contribution of the ‘cash for clunkers’ program, so it seriously understated the impact,” he said. “While some owners would have exchanged their cars for new vehicles – with or without the program, or simply made the purchase decision a couple months early – our model suggests very few buyers who participated in the program would have otherwise bought a new car last summer.”
Hicks’ model for the analysis includes variables such as unemployment rates, interest rates and gasoline prices.
“All of these factors had an impact but, the ‘clunkers’ program was statistically very significant and explained most of the spike in new car sales in July and August,” he said.
Still, there are significant negative aspects of CARS, Hicks added. The program has allowed consumers to get rebates on cars that were not built by America’s struggling Big Three automakers – Ford, GM and Chrysler.
“This might generate an unintended effect of lowering market share for the American firms the program was apparently designed to benefit,” said Hicks. “I also have doubts about the benefits of destroying the nation’s stock of less expensive, used cars that low-income buyers can afford while providing general fund support to individuals to buy new autos.”
The report may be found at http://cms.bsu.edu/en/Academics/CentersandInstitutes/BBR/~/media/DF360CADE9424CA0AB9B8CDA68AAA952.ashx.
Businesses reduced inventories at the wholesale level for a record 11th consecutive month in July, although sales rose by the largest amount in more than a year, sparking hope for better days ahead, the Associated Press reported today (Sept. 11).
The report mirrors recent developments in the RV industry, whose forecaster Richard Curtin also is reporting a gradual upturn following a two-year decline.
Economists expect that some modest restocking triggered by the higher sales helped boost the economy out of recession in the current quarter. Some analysts said the economy could rebound to growth approaching 4%, after it fell at a 1% rate in the April-June period.
The Commerce Department reported today that wholesale inventories declined 1.4% in July, more than the 1% drop economists expected. That decline followed a 2.1% fall in June, worse than the 1.7% drop originally reported.
Sales at the wholesale level rose 0.5% in July, the fourth consecutive increase and the biggest gain since a 2% jump in June 2008.
Jennifer Lee, an economist at BMO Capital Markets, said the rebound in sales was encouraging and should help convince businesses to restock their shelves and back lots. That swing in inventories should play a major factor in boosting the economy out of a recession in the current quarter.
The overall economy, as measured by the gross domestic product, will grow at a 3.8% annual rate in the current July-September period, Lee forecast. The economy posted declines of 5.4% and 6.4% in the fourth and first quarters respectively, the worst performance in a half-century.
“For the second half of this year, things are looking better than they were a few months ago with activity being helped by stimulus efforts such as the Cash for Clunkers program,” Lee said.
Economists are worried, however, that the economy will slip back to weaker growth beginning next year as the impact of various stimulus programs dims and the unemployment rate keeps rising, depressing consumer incomes and their willingness to spend.
Still, more positive news came Friday when consumer confidence, as measured by the University of Michigan-Reuters survey, rose more than expected to a reading of 70.2 in early September, compared with 65.7 in August.
“With hope comes more spending and with more spending comes more production,” Lee said.
Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest.
The July inventory drop left the inventory to sales ratio at 1.23, meaning it would take 1.23 months to exhaust stockpiles. That was slightly lower than the 1.25 ratio in June, but still above the 1.13 inventory to sales ratio of a year ago.
The rise in sales at the wholesale level come amid continued weakness at many retail establishments, which reported lackluster back-to-school sales in August. However, automakers saw a spurt in activity from the government’s clunkers program.
Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. all reported increased sales in August as consumer snapped up their fuel-efficient models. But rivals Chrysler Group LLC and General Motors Co., which have just emerged from bankruptcy protection, saw their sales fall for the month.
The 11th straight drop in wholesale inventories is the longest stretch on records that date to 1992, surpassing the old mark of nine straight decreases from June 2001 to February 2002, a period that covered the last recession.
Camping World has launched a “Cash for Campers” incentive, giving up to $7,500 cash allowance for motorized RVs when current RV owners purchase a new vehicle.
It is designed to mirror the the government program “Cash for Clunkers” currently supported by the automotive industry and Department of Transportation.
Camping World’s self-funded recycle and save initiative is focused on improving the quality of vehicles currently in circulation as well as stimulating the economy in heavy-hit manufacturing states such as Iowa and Indiana, according to a news release from the Lincolnshire, Ill.-based retailer. The “Cash for Campers“ program incentivizes RV consumers to transition into new and more fuel-efficient motorized RVs when they trade in an older, less fuel-efficient model.
Camping World has aligned itself with the three top selling motorhome manufacturers who are leading the charge toward improving environmental issues with efforts in such areas as chassis selection, fuel savings through design and long-term durability. These changes are evident in their current motorhome line-up such as the Winnebago View and Navion, Damon Avanti and Four Winds Serrano.
Marcus Lemonis, Camping World chairman & CEO, said, “As the market leader, Camping World currently retails over 18% of all new motorhomes sold in the U.S. We believe that an accelerated transition of the current installed base ultimately accomplishes several important goals: to remove less fuel efficient models from the roads, increase the demand for new and more efficient motorhomes which will ideally result in assisting the RV manufacturers in putting people back to work.”
Camping World also plans to permanently retire less fuel-efficient models ages 1984 and older through a salvage process. Lemonis further detailed, “If a consumer owns a less fuel-efficient and less technologically advanced motorhome and is interested in trading it in through the”Cash for Campers“ program, their unit is eligible for a cash allowance toward select new models at Camping World.”
The company expects to launch similar programs in the near future on recycling towable models as well as select RV accessories with more details to be released as plans get underway.
More details about the program can be found at CampingWorld.com/cashforcampers.
Congress will gas up the hugely popular “Cash for Clunkers” car-swap program with an additional $2 billion, the Senate’s top Democrat vowed Tuesday (Aug. 4), according to the New York Daily News.
“We’ll pass ‘Cash for Clunkers,'” said Senate Majority Leader Harry Reid, D-Nev., assuring reporters he had the votes to win approval following a White House meeting with President Obama.
Reid said the Senate would act before it goes on vacation Friday.
Car buyers have already zipped through most of the $1 billion initially set aside for the initiative.
The White House says the program would run dry of cash by the weekend unless the Senate authorizes the additional billions – a move already OK’d by the House.
The funding infusion should last through September, the White House predicted.
Republicans and some Democrats object to “Cash for Clunkers,” which has sparked more than 250,000 trade-ins, claiming it’s a bailout for the auto industry.
“Here we are incentivizing the purchase of cars, (and) we’re taking money from our grandkids by adding to the national debt,” Sen. Tom Coburn, R-Okla., huffed. “Why not incentivize demand for boats? Or how about RVs?”
Coburn said the federal government is “clueless” about managing the program, insisting the need to inject more cash proves his point.
Supportive lawmakers say Cash for Clunkers has been a smash hit among consumers – and good for the economy.
“Dealers are packed and sales are booming,” said Sen. Debbie Stabenow, D-Mich.