Can America’s credit unions provide part of the lending answer for recreational vehicle and marine manufacturers?
On the premise that the nation’s more than 8,100 federal credit unions represent “enormous potential” as a source of financing, this question was broached Wednesday (Mar. 11) during the all-day seminars hosted at the Century Center in downtown South Bend, Ind., by the Recreation Vehicle Industry Association (RVIA).
American Recreation Coalition (ARC) Executive Director Derrick Crandall offered attendees an overview of RVIA’s pilot program with the Credit Union National Association (CUNA) to develop consumer and, possibly, dealer floorplan lending through credit unions.
Crandall and RVIA President Richard Coon were joined on the panel by Rick Rice, president and CEO of South Bend-based Teachers Credit Union – a northern Indiana-based cooperative with $1.6 billion in assets – and industry veteran and lenders’ consultant Paul Novotny, who has been working recently with both the RV and marine industries. They contended there are opportunities in the credit union arena that might help replace some of the financial clout lost recently by the exits of some key retail and wholesale lenders.
The crux of the session was a report on the “Recreation Industry/Credit Union Liaison Program,” as it has come to be called. “RVIA through ARC, along with RVDA and the National Marine Manufacturers Association (NMMA), got ahold of the national credit union association and we’re working through them to work out a strategy where credit unions become more available with credit – both wholesale and retail – on behalf of dealers of recreational vehicles as well as for marine, snowmobiles and those kinds of things,” Coon said. “We have an actual pilot program under way with that national organization to get several dealers across the country – I believe we’re working with six dealers at them moment – and putting them together with their local credit union. Once we get those six results, then we plan on looking for the refinements that need to be made between the two industries and try to go forward with that.”
“The beginnings of these discussions were in the fall of 2008 when we began to explore the various relationships that already existed and the opportunities for growing those relationships,” said Crandall. “It culminated in our first CEO-level meeting with Dan Mica, the president of CUNA and the CEO’s of RVIA, RVDA and NMMA. Our findings were, to me at least, quite surprising. We found that there was a substantial existing relationship between credit unions and the RV and boating industries.”
Crandall said that they’ve initially found that credit unions, in certain respects, were easier to work with than other lenders and, contrary to the preconceptions of some, membership requirements don’t seem to represent a substantial barrier. In fact, he added, while 90% are already lending for boats and RVs at the consumer level, many of them also do member business loans that, in some cases, qualify as floorplan loans to member businesses.
Inasmuch as most credit unions were less affected by the credit crunch than traditional banks, the recreation-related industries have put together a CUNA/Recreation Industry Liaison Committee to explore how to take constructive steps forward to share information and explore future opportunities.
“What we have done is we put together a listing of some qualifying dealers who have lost traditional floorplanning through GE and Textron and others and are looking for new sources of commercial loans,” said Crandall, elaborating on Coon’s “We married them up with some larger credit unions that are operating in their geographic areas. And we are now bringing them together for initial conversations. So, we’re looking at a way to actually be match makers, to begin conversations and use these as a test bed for what may develop.”
He added that one of the things that recreation industry manufacturers, including motorcycle and snowmobile makers, can do to nurture this relationship is to promote credit unions among potential buyers in the future with an eye toward some sort of pre-approval format.
Meanwhile, there’s a move afoot to alter current regulations that limit credit union member lending to 12.25% of total assets. “CUNA at the national level is seeking to increase the allowed level of commercial lending by credit unions,” said Crandall. “It’s not as simple as it sounds because there are opponents to that initiative, especially from some banks. But RVIA has already signed on as a partner in the coalition to expand and free up credit union commercial lending.”
There are plenty of efforts being made at the national and state level to improve RV sales, representatives of various companies in the business were told Wednesday (March 11) at the Century Center in South Bend, Ind.
But, according to a report in the South Bend Tribune, there is still plenty of work to be done.
Rob Snow, the main speaker at a seminar hosted by the Recreation Vehicle Industry Association (RVIA), told the audience about the problems of the Term Asset-Backed Loan Facility (TALF) and TARP (Troubled Assets Relief Program) and how the programs have not really loosened up credit so much.
But there are things the industry needs to do to help itself in its interaction with congressional leaders and banks, he said in an interview after his talk.
“You need to educate them on the RV product,” said Snow, a founding member of Carillon Capital Partners in Washington, where his company serves the financial services industry. “You need to teach them that this is a strong place to invest the money and that you can make a reasonable return by doing it.
“It’s trying to bring (RV) financing into a mainstream credit product which it has not been historically,” he said.
According to the Tribune, Snow said he does not see the credit crunch loosening up anytime soon. And he even suggested RV companies might want to band together and create their own financing machine.
“I don’t see credit freeing up for 12 to 18 months because there is such an issue with asset values,” Snow said. “And when you look beyond the RV industry and there are other asset classes such as commercial mortgages that are just starting the downturn.
“And to the extent that you have instability and continued asset write-downs and banks with capital challenges, they are not likely to come back to the market. So you really need that stability and some of the assets to flush through the system to make it work.”
The industry is going to change a lot, he said.
“There are going to be survivors and folks that don’t survive both in the manufacturing and dealer level,” Snow said.
But if the industry was a patient, its condition would not be “critical,” he said.
“I don’t know that it’s critical because the demographics are still strong,” he said. “There are still people out there who want RVs, people who are committed to the lifestyle.
“So it’s (the market for RVs) not going to go away, but it’s going to re-size.”
Kip Ellis, vice president of sales and marketing for Atwood Mobile Products in Elkhart who attended Snow’s session agrees that the industry has taken steps.
“But it really kind of falls to these banks,” he said. “It’s kind of a PR thing at the moment. Kind of with the broader economy, these banks are kind of holding tight on their capital as these guys have mentioned.
“Until we see some movement in that area, until the banks step up and we actually get new lenders to this industry, it’s going to be a struggle.”
He is both optimistic and realistic about its future.
“Obviously, it’s going to be an industry that survives,” he said. “The demand from the retail side continues to outpace the wholesale.”
And the attendance at RV shows so far this year has been encouraging, he said.
“It’s just a matter of getting people credit and fulfilling some of that demand,” Ellis said.
The general consensus is that credit will soften in the second half of the year, Ellis said.
But the first part of the year is generally the strongest part of the year for RV manufacturers in terms of shipments and preparation for the selling season, he said.
“It seems like it could be too late for that,” he said.