Sometimes things are so bad, it seems they can only get better. That’s how it was two years ago for RV makers, the Fort Wayne, Ind., Journal Gazette reported.
At the depth of the recession, most consumers were too worried about losing jobs and homes to consider spending thousands of dollars on a recreational vehicle. So Northeast Indiana felt the shockwaves of the RV industry’s collapse as well-paying manufacturing jobs evaporated.
This is the story of one company – Fleetwood RV Inc. – that rose from the ashes to create a leaner organization with updated product designs and an improved way of filling orders.
The business is smaller than its bankrupt predecessor, Fleetwood Enterprises Inc. But CEO John Draheim said the reorganized Fleetwood is more stable.
“We’re still dealing with a flat retail market,” he told The Journal Gazette, “but we’ve restructured our company to be profitable at the current (sales) volume level.”
A fresh start
In June 2009, New York-based American Industrial Partners Capital Fund IV LP paid $53 million for Fleetwood Enterprises’ brand, the Decatur operations and some equipment in the company’s California plant.
The company consolidated in Decatur, where Fleetwood has eight buildings: two for motorhome production, one paint shop, three for fiberglass production and two for service and parts.
When Fleetwood Enterprises filed for bankruptcy in March 2009, it simultaneously closed its travel trailer business and began steps to close its motorhome plant in Riverside, Calif. The company still operated one motorhome production plant in Decatur and had 12 manufactured housing plants in 10 states.
Fleetwood Enterprises’ total employment, which was once 2,000, dwindled leading up to the bankruptcy filing. A company spokeswoman didn’t have a definitive number for how low it dropped.
With the sale, Fleetwood Enterprises ceased to exist. As spokeswoman Heather Everett explained, Fleetwood RV is a 16-month-old company with a 60-year-old brand legacy.
The new owners consulted Draheim on how to structure the company before closing the deal.
Draheim has worked in the RV industry since 1997. Before joining Fleetwood, he worked for Monaco Coach Corp., National RV Holdings Inc. and Thor California Inc.
The workforce now has grown to 1,200, but the corporate staff still includes only four positions: chief executive officer, chief financial officer, vice president of operations and vice president of engineering.
Corporate staff members own a stake in the company. The remaining employees are in business units, which are responsible for their own profits and losses.
A new structure
Although the name switch might seem like a minor technicality, the ownership change carried major implications. Fleetwood RV had no debt and no employees when it was formed; 450 were quickly hired for service, parts and warranties.
Former employees who hired on with the new, consolidated operation accepted 10% pay cuts and started over earning vacation time and other benefits. The owners estimated that hourly employees would make as much as they did before the wage reductions, however, because work would be steady rather than punctuated by the layoffs that happened frequently at the former company because of insufficient customer demand.
The company also started from zero when it came to selling its products.
Fleetwood RV had to sign up independent dealers because it doesn’t own any and couldn’t use agreements negotiated by the previous company. Many dealers left the industry in 2009. The smaller group that remains is stronger financially, Draheim said.
With a sales network in place, the company had to recreate a supply network for parts needed to build motorhomes and campers. The previous one, Draheim said, was “fractured” by the recession.
Various suppliers couldn’t keep their companies going when orders dried up. Fleetwood RV had to find reliable suppliers who make the necessary RV components.
A slim operation
Fleetwood RV has a “lean” culture, which means the company actively eliminates waste and inefficiency while stressing continuous improvement, Draheim said.
“We’re able to produce more than we could a year ago,” he said. “If it weren’t for lean, we wouldn’t be where we are today. We wouldn’t be a profitable company.”
Just how profitable, he won’t say. Fleetwood RV also doesn’t release sales figures, but the amount is “substantially higher than a year ago,” the CEO said. And the company still has zero debt, he said.
Statistical Surveys Inc. (SSI) data from October found that Fleetwood RV ranked third in the industry in overall retail sales.
Because of lean business practices, the company is now taking ideas to market in just a few months, Draheim said.
Fleetwood has changed the production process and flow at least six times in the past 16 months, Draheim said. Changes have freed up floor space, leaving the manufacturer enough room to more than double capacity on a single shift, he said.
Making those changes has been a joint effort.
Draheim has read about lean practices, visited other lean plants and completed lean training. The vice president of operations has lean experience. And the equity firm lends expertise in financial and engineering matters, Draheim said.
The most significant change has been in how the plant builds RVs. Previously, workers manufactured in batches, making 10 identical motorhomes before switching to make 10 of a different model.
The process led the company to build more of some models than needed. Fleetwood Enterprises used to pressure dealers to take models they didn’t really want as a result. But Fleetwood RV, the new company, can switch models with each individual RV it builds, Draheim said.
Fleetwood RV builds more than 50 different floor models.
One major challenge is designing those models to fit consumers’ wants and needs.
The company keeps up with the changing marketplace by doing year-round grassroots research. Fleetwood staff goes to more than 200 RV retail shows to conduct focus groups, gathering feedback. The manufacturer recently surveyed more than 2,000 owners and one-third of its dealer network.
The company also seeks input from the more than 4,000 members of its RV owners club.
Customer feedback prompted Fleetwood to launch a product that combines aspects of a Class A design with a Class C. Class As have a front that looks like a bus, carry more water and have more towing capacity. Class Cs have a front that looks like a van, sleep more people but have less water capacity.
“Both products have their strengths and weaknesses, so we created a crossover,” Draheim said.
The resulting RV costs from $80,000 to $100,000. The vehicle sleeps four to eight people, depending on whether they are adults or children. The breakfast dinette converts to bunk bends, and a “hide-a-loft” is a platform that pulls down from the ceiling and holds an air mattress. The idea for the loft came from the sales staff. Fleetwood engineering group made it work.
The model is shorter and gets better fuel economy than other models that sleep the same number, Draheim said.
“That’s one of our highest-volume products over the last year,” he said.
Mac Bryan, vice president of administration for the Recreation Vehicle Industry Association (RVIA), said several RV makers are offering more stripped-down models to appeal to money-conscious shoppers.
RV sales grew 45% industrywide in 2010, “but, obviously, from very low levels,” he said.
The Virginia-based industry group expects sales will increase 6% to 8% this year, a more sustainable level of growth for models that can range from $5,000 to $500,000. Luxury options include gas fireplaces, Jacuzzis and patios that slide out 3 feet above the ground with canopy overhead and a railing around the sides.
“It’s almost like anything your imagination can conceive, they can build,” Bryan said.
The association expects RV sales will grow faster than some other discretionary spending because, as Bryan put it, “Many people are passionate about the lifestyle. We build family memories.”
The recession was devastating for the RV industry.
October 2008 though June 2009 was the 100-year-old industry’s toughest stretch since major oil embargoes in the 1970s, Bryan said. He expects it will take longer for the industry to recover this time because unemployment rates will probably take longer to fall than gas prices.
Getting a loan
Lending is a major factor in the sales equation. Some prospective buyers have had trouble getting approved for loans, Draheim said. But that’s starting to ease, with some lenders once again approving loans for consumers and dealers, he said.
During the recession, some people ended up buying smaller RVs because that’s all they could get loan approval for or that’s all they felt comfortable spending. But that’s changing. In the past six months, they’ve started buying bigger models. Draheim thinks these owners are rewarding themselves for making it through the recession.
When Fleetwood Enterprises was selling 50,000 to 60,000 units a year, most of the sales were in the mid-priced range, he said. Now, with the market at less than 20,000 units a year, most of Fleetwood RV’s sales are split between the top and bottom of the market.
RV demand is picking up, however. Statistics from www.gorving.com verify increased interest. Traffic to the website has increased more than 40% this year, spokeswoman Christine Morrison said. The site is run by the industry trade association.
Some consumers who postponed purchases during the recession are now looking to buy, Draheim said. He thinks the company is well-positioned for when the market recovers.
Until then, if Fleetwood RV sells more vehicles, it has to take market share from a competitor.
Draheim plans to continue innovating and running a lean operation.
In the short term, he said, “We’re just going to keep doing what we do.”
Robert and Barbara Nicolson, retired supermarket employees from Sedona, Ariz., recently traded in their 2006 motorhome for a new Tiffin Allegro Bus that lists for $355,000. Amenities include a dishwasher, washer and dryer, full-size refrigerator and 1 1/2 bathrooms.
“How nice is it? Well, I’m having a hard time convincing my wife that it’s time to go home,” Robert Nicolson told the Los Angeles Times from a Petaluma, Calif., campground.
The couple — he’s 72, she’s 68 — “were very happy with the deal” of unspecified proportions that they negotiated, in which they unloaded their old 40-footer, Robert said. Added Barbara: “We figured, ‘What are we waiting for? We’re both healthy. Let’s enjoy it.’ ”
RV manufacturers and dealers would love to see more people like the Nicolsons.
During the last few years, the recreational vehicle industry suffered along with consumers because of record-high diesel and gasoline prices, the recession and the credit crunch. Now, U.S. retail sales of RVs have risen, although by only 3%, to 92,974, in the first six months of the year compared with year-earlier sales.
Experts and RV dealers attribute the increase to relatively stable fuel prices, the improved economy and the cautious easing of credit, especially for motor homes that sell for $100,000 and less. On top of that, many dealers are offering hefty discounts to get the big buggies moving again.
Joe Altman, president of Altman’s Winnebago, said consumers were still holding back. The number of people calling and visiting the Carson dealership and hits on the dealership’s website have increased 10% to 12% over last year, but sales are only inching up. That’s despite some large markdowns at Altmans, such as a 2010 Winnebago Vista reduced to $82,939 from $103,716 and a 2008 Winnebago Chalet discounted to $74,939 from $107,755.
To get customers to buy, “they have to have a feeling of wealth in the equity of their homes and investments. They have to feel that their income stream is secure. And if they already own an RV for a trade-in, it’s good if it’s worth more than they owe,” he said.
Altman has been pushing for sales at the lower end of the market.
“RVs above $100,000, we’re avoiding those. It’s still tough to get a loan for them,” Altman said, adding that customer service is more important than ever even when people leave the dealership without buying.
“When they do decide to buy, I want them coming back here,” he said.
The RV industry is coming off the worst sales period since 1979-1981. Then, it was a matter of high unemployment, fuel shortages and long lines at filling stations, double-digit interest rates and the implementation of the 55 mph speed limit.
Through the first six months of 2008, sales of recreational vehicles of all kinds totaled 135,451. That was a month before diesel prices topped $5 a gallon in some parts of the U.S. and gasoline rose to more than $4 a gallon. In the first half of 2009, sales dropped to 89,839 vehicles, a decline of nearly 34%.
Those numbers tell only part of the story. The two most expensive classes of RVs fell further than all the rest. Sales of the roomiest and most luxurious Class A motorhomes, vehicles that can cost as much as $400,000, declined by more than 45% in 2009. At the next level, motorhomes that cost as much as $140,000, unintuitively labeled Class C, saw a sales drop of 42%.
The RV industry’s ups and downs played out at Fleetwood Enterprises Inc. of Riverside.
One of the oldest names in the business, Fleetwood was declared the industry sales leader in 2007. In 2008, it was shuttering factories and slashing its payroll by 70%. In 2009, Fleetwood filed for Chapter 11 bankruptcy protection, and its assets were sold. Fleetwood’s motorhome division was acquired by a private equity firm, American Industrial Partners.
Many longstanding RV owner groups have disappeared. The California chapter of the Fleetwood Travelcade Club, founded more than 50 years ago, was attracting so few RVers to gatherings that leaders decided to disband last March.
“We used to get 500 RVs at our events. The last one we held, in Yuba City, [Calif.,] in March, had 78 RVs. That was the swansong of our club,” said Kathy Sexton, whose husband, Mike, served as the group’s last president.
Sexton said that some of the old members will try to stay together in a new group they have dubbed California Dreamers. A planned get-together in Hemet is expecting to attract just 10 couples.
“We’re not expecting to have more than 20 rigs at our events,” Mike Sexton said. That’s in spite of the fact that the new club will welcome owners of all makes and models of RV, not just Fleetwoods, as the old group had.
Even now, as sales recover, most of the increase has come in cheaper segments of the RV market. Motorhome sales are strongest among Class B offerings, while the generously appointed Class A varieties are still on the decline compared with 2009, with sales down 8% through June to 5,242 vehicles. That was half the number recorded during the first six months of 2008.
Those who have been buying during this period have been frugal types willing to be patient and fight for a bargain.
Chuck and Alice Jarocki of Clovis, Calif., bought a “popup” folding trailer camper about a year ago on eBay for just $5,500 after a dealership grew weary of trying to sell it for nearly $9,000.
The Jarockis are avid campers who decided it was time for a step up from tents and sleeping bags on the ground. Their trailer has a heater with a regular thermostat, a refrigerator, a three-burner stove, an outdoor shower and a port-a-potty. Best of all, the Jarockis say, it has a queen-size bed.
“That sleeping bag just wasn’t cutting it,” said Alice, 73. Chuck is 80. “You can stay in this trailer for a week and still be comfortable.”
It’s been 16 months since Fleetwood Enterprises Inc., the former Riverside, Calif.-based RV icon that employed thousands, filed for Chapter 11 bankruptcy. On Thursday (July 29), the U.S. Bankruptcy Court approved its plan to dissolve the rest of its assets, giving it permission to hand out whatever is left over in cash to the people it owes, the Riverside Press-Enterprise reported.
“This does bring us to a bittersweet point in this company’s history,” said Craig Millet, Fleetwood’s attorney, to U.S. Bankruptcy Court Judge Meredith A. Jury.
Since the company filed for bankruptcy in March 2009, Fleetwood sold its name and RV division to a New York-based equity firm that moved operations to Decatur, Ind., and its housing division to Phoenix-based Cavco Industries. Plants were closed and sold as was the company’s military housing operations.
“The legacy does go on except with different owners,” Millet said.
The company moved east from Orange County in 1963 to settle into a Riverside headquarters.
As of March 2009, the company employed 609 workers in Southern California.
At its height, though, the company employed about 21,000 people nationwide, with a few thousand workers at the company’s Riverside headquarters and several Southern California plants.
A liquidating trustee will be left to wrap up what’s left of Fleetwood and the company still faces legal challenges.
Whatever is raised from a now-dissolved Fleetwood could start to be distributed to those who are owed money as soon as 15 days after the court’s order is entered.
It’s not known how much money Fleetwood will ultimately pay out to its creditors.
Administrative claims — essentially the costs to run the company after it filed for bankruptcy — as well as priority claims, tax or otherwise, are valued at several million dollars and set to be paid in full.
One of Fleetwood’s lenders, ISIS, is set to receive all of the $17.8 million it has claimed and about $1.7 million in funds from Bank of America will be paid back, according to the plan.
The company’s common shareholders won’t receive anything.
Gerry Billingsley said she was “devastated” when she was laid off from Fleetwood’s legal department in December 2008 after working there for more than 17 years.
Her husband, Mike, a Fleetwood employee for 25 years, was laid off in January.
She got her full severance and vacation benefits. He didn’t.
Owed more than $10,000, she said, Billingsley sat in the second row of the courtroom in Riverside among 30 other presumably former Fleetwood workers.
“I want it all,” she said of the severance owed her husband.
A settlement in a class-action suit on behalf of workers laid off in March and former employees claiming unpaid severance, vacation, benefits, etc., could bring up to $10,950 each depending on their claims, Millett said.
From there, what’s owed to whom and how much they’ll actually get is largely unknown.
Unsecured creditors have filed about $115 million to $195 million worth of general unsecured claims, but only $10 million to $28.7 million will likely be paid out, based on estimations.
Andy Griffiths, Fleetwood’s CFO, was one of three company officials in court Thursday who had remained to finish the manufacturer’s bankruptcy plan.
Moreno Valley, Calif.-based MVP RV has agreed to buy two factories once used by Fleetwood Enterprises Inc. for $18.6 million, the Riverside Press-Enterprise reported.
Fleetwood Enterprises filed for bankruptcy in March 2009. Since then, the company sold off its RV and manufactured housing divisions as well as factories it owned across the country. The company expects a final bankruptcy plan outlining what its creditors are owed to be approved before the end of July.
The two plants, located north of downtown Riverside off Market Street at 2350 Fleetwood Drive and 5300 Via Ricardo, sit on 36 acres and have 460,000 square feet of space.
According to a legal filing, the offer of $18.6 million, or about $40.43 a square foot, was Fleetwood’s best offer.
The U.S. Bankruptcy Court approved the sale to go forward earlier this month.
The property had been used as collateral to secure a $27.3 million loan from ISIS, a lender which will receive the proceeds from the sale.
The deal is expected to close before Aug. 1, according to a legal filing.
MVP RV had shut down its Moreno Valley plant in the middle of 2009 where it built travel trailers and reopened it in March after receiving funding from an overseas investor.
An agreement MVP RV had to build electric vehicles for South Korean firm CT&T stalled earlier this year.
Officials at MVP RV said negotiations are ongoing.
Brad Williams, CEO of MVP RV, wouldn’t say why his company is interested in buying the plants or if the purchase would affect MVP’s operations in Moreno Valley.
“We can’t comment on it right now,” Williams said by phone.
American Industrial Partners, a New York equity firm which bought Fleetwood’s RV division for $33.2 million in mid-2009, had rented the Riverside manufacturing facilities through November of that year, said Amy Coleman, a spokeswoman for Fleetwood RV, now based in Decatur, Ind.
The new company, known as Fleetwood RV, moved all of its operations to Indiana except for an office it leases in Corona for the company’s chief financial officer, accounting staff and marketing employees, she said.
Indiana Secretary of Commerce Mitch Roob said he will comply with a request from Indiana House Speaker Patrick Bauer to provide detailed information on companies, including several RV companies, that have received tax breaks and other assistance from the state, WIBC, Indianapolis, reported.
Roob said the Indiana Economic Development Corp. will provide the information by June 25.
Bauer, a Democrat from South Bend, made the request after conflicting numbers emerged concerning jobs promised by companies throughout the state and how many have materialized.
Roob told the radio station that companies are not given incentives until they have met their job commitments. Roob also said incentives are not provided until taxes have been collected.
His remarks to our partners at Network Indiana/WIBC follow a letter from Bauer seeking more details.
Several RV companies have received state assistance to expand or remain in Indiana.
In a related development, a national magazine has recognized Indiana for several economic development initiatives. Area Development Magazine has given the state a 2010 Silver Shovel Award for attracting what publishers describe as “high-value investment projects that will create a significant number of new jobs in their communities,” Inside INdiana Business reported.
The top job-creation effort cited by the magazine was the 2009 purchase of the motorized operations of now defunct Fleetwood Enterprises Inc. by American Industrial Partners/FW Holdings Inc. The $7.4 million investment in Decatur saved 935 jobs.
A $2.4 million expansion by Drew Industries Inc. in Goshen, Ind., creating 225 jobs, was cited as one of 10 top examples of job creation in the state.
Heartland Recreational Vehicles LLC today (June 9) announced plans to aggressively revive the iconic Prowler brand, launching production of the former legendary Fleetwood towable line late this summer in a dedicated production facility.
Heartland acquired the Prowler brand among a portfolio of 15 brands from Fleetwood Enterprises Inc., which filed for bankruptcy protection in March 2009. The decision to launch the Prowler series was based on its popularity and incredibly strong brand recognition in the marketplace, according to a news release.
“We view Prowler as arguably the greatest towable name in the history of the recreational vehicle industry,” said Tim Hoffman, vice president of sales for the Elkhart, Ind.-based builder.
“The response from dealers and consumers alike has been overwhelming once people heard that we had acquired the Prowler brand,” added Heartland Director of Sales Coley Brady.
He said Heartland is planning an invitation-only dealer showing for Prowler this summer. “As testament to Prowler’s strength in the market, for 13 years straight Prowler was the No. 1 selling travel trailer and fifth-wheel brand combined (according to Statistical Surveys, Inc.) — a run that has not been repeated.”
Brady said that Heartland will initially offer a wide range of towable products under the Prowler brand. “We have doubled our Louisville show space in anticipation of displaying a series of new product lines bearing former Fleetwood nameplates, Prowler being one,” Brady said.
In line with Heartland’s other towable offerings, the Prowler products will represent “an exceptional and exciting value at retail,” according to Hoffman.
“Prowler will offer RVers unique, set-apart features at some very key price points,” he said. “We have engaged an interior designer specifically for the Prowler launch to ensure that we are developing products that are totally in line with what today’s buyer desires.”
Hoffman added that “Prowler will feature intelligent differentiation from existing Heartland products that are obviously performing exceptionally well in a very competitive market.”
Heartland currently markets more than 15 brands of fifth-wheels and travel trailers and has captured the No. 3 market share in the fifth-wheel category. Heartland’s towable RVs are sold through an independent network of dealers throughout the United States and Canada. The company has more than 1,100 employees.
When Gary and Dottie Williams ordered their MVP RV Inc. trailer in April 2009, complete with nameplates attached to the bunk beds for their grandsons, they expected to get it a month later.
They planned a cross-country road trip, but stayed in hotels instead.
When they took a vacation to the lake, they rented a trailer.
In between April 2009 and April 2010, the Moreno Valley company that was building their trailer shut down its factory like several other RV makers had done, according to The Press-Enterprise, Riverside, Calif.
While the company looked for investors and tried diversifying its business by going into the electric vehicle industry, salespeople at Giant RV showed Gary Williams other trailers. He said he couldn’t find anything comparable.
He didn’t need to. Gary and Dottie Williams picked up their finished MVP RV trailer at the Giant RV dealership in Montclair this month.
MVP RV, the Moreno Valley maker of their trailer, didn’t get the funds they needed to build electric vehicles but they found an overseas investor willing to back their RV factory.
“It’s such a great feeling to come back,” said Brad Williams recently in his Moreno Valley office. “We survived.”
Manufacturers and RV dealers are beginning to climb out of the wreckage wrought by the recession much like the industry has done early on during past business cycles when the worst appears at an end.
Would-be campers are hardly stampeding to RV dealers to purchase high-end Class A diesel motorhomes, Class C RVs or even pop-up tent trailers but they are looking, and some are even buying.
“We’re first to get hurt, and the first to recover,” said Tom Powell, CEO of Riverside-based travel trailer maker Pacific Coachworks.
In 1979, preceding the 1980 recession that lasted from January to July, RV shipments fell a staggering 48.9% to 199,200 vehicles sent to dealers.
Wholesale shipments fell another 46.2% in 1980 to 107,200 RVs. By 1981, the number picked up 24.6% to 133,600 units. Despite a recession that stretched from July 1981 into November 1982, shipments increased another 5.2% to 140,600.
With the exception of a dip in shipments in 1985, RV production increased nearly eight straight years until 1989. The recession started July 1990 lasting until March 1991. RV shipments picked up 24.6% by 1992.
With the exception of another dip in 1995, RV production grew again year over year for nearly eight straight years until 2000 when it dropped 6.6%. A recession began in March 2001, ending November. That year RV shipments dropped another 14.4%. But by 2002, it was up 21.1%
The most recent recession started December 2007.
Two popular Inland recreational vehicle makers, Weekend Warrior Inc. and National RV Inc., bowed out early on before the economy started to exhibit true signs of stress.
Fleetwood Enterprises Inc., a longtime RV industry icon based in Riverside since 1963, had managed to navigate recessions before usually emerging a stronger company after other competitors blew a tire. This time though, saddled with too much debt, the company filed for Chapter 11 bankruptcy in March 2009 selling off the motorhome division to an equity group out of New York that moved all of the company’s operations to Indiana.
Before, Southern California dealers could pick up the RVs they ordered in Riverside. Now some say they pay extra for shipping.
Elsewhere, Monaco Coach Corp. filed for bankruptcy in March 2009. Country Coach Holding Inc. was liquidated late last year.
In 2007, RV makers shipped 9.5% fewer vehicles. The number dropped another 32.9% in 2008, and continued to cascade another 30.1% in 2009 until there were just 165,000 shipped to dealers, the lowest level since 1991.
First to recover
The Recreation Vehicle Industry Association (RVIA) is expecting shipments to jump 30% this year to 215,900 vehicles.
“When things go down, the RV industry takes it in the gut,” said Joe Laing, director of marketing for El Monte RV which rents ands sells trailers. But it also seems to be one of the first to recover, he said.
Laing said El Monte RV staff noticed year-over-year sales growth since January.
“We don’t know that it means anything,” he said, hesitant to herald economic recovery based on their business. “We’re pretty optimistic that it looks like we’ve come through the worst of it.”
Frank DeGelas, owner of Mike Thompson’s RV Super Stores including locations in Colton and Cathedral City, said he dumped older inventory at a loss to clear out his dealerships for new models being released by the manufacturers who remained.
Usually the recovery after a recession is strong and fast. This one, though, is taking its time.
He sold 11 Coleman folding camping trailers in three weeks, a sign that family buyers are looking for an affordable alternative, as well as Class B motorhomes and the larger Class A diesel RVs.
“I think I’ve been helped by my competitors failing,” he said. The pie may not be any bigger, he said of the RV selling market, but he gets a bigger slice now, he said.
DeGelas credits manufacturers who spent their downtime during the downturn designing new features.
“I’ve been doing this for a long time, over 30 years, and I have never seen the amount of innovation,” he said of new models from manufacturers like Fleetwood RV Inc., now under new ownership. The Encounter, Fleetwood’s latest model, features a bunk bed that converts into a dinette.
“It’s almost like a ‘Transformer’ motorhome,” he said.
Pacific Coachworks Inc., which survived the lean times after having shut down production in the first half of 2009, developed a trailer with a slide-out outdoor kitchen and in another trailer, a slide-out queen bed.
“When things are going extraordinarily well, there’s not as much impetus to be innovative,” said Tom Powell, CEO of Pacific Coachworks.
The company has 100 employees, about half of the staff compared to its height in 2007.
Powell described new orders as solid, “but it’s not sensational” especially compared to stratospherically successful years in 2005 and 2006.
Powell said he wished more Inland RV manufacturers had survived the recession, that way suppliers would take root in the area too. As companies closed, though, so did suppliers and the cost of doing business for those who remained rose.
His company and others are now building based on orders rather than making RVs with the hope someone will eventually order it.
“I think we all learned to be a little more cautious,” he said.
As the Recreation Vehicle Industry Association (RVIA) prepares to roll out a series of events and related activities commemorating the industry’s 2010 Centennial, RVBusiness magazine and RVBUSINESS.com are setting up a special Centennial issue focusing among other things on the “75 Most Influential People” in the history of the U.S. RV industry.
“Talk about a tough job,” says RVB Publisher Sherman Goldenberg, in commenting on the upcoming selection process. “We sat down recently to start making a list of likely nominees and soon realized just how intimidating this process is going to be. I mean, when you get beyond the most obvious individuals like Winnebago’s John K. Hanson and Holiday Rambler’s Richard Klingler and Fleetwood’s John Crean and start looking at who else might be on that list, you begin to realize just how difficult this process can be.”
To help build a pool of names, RVBusiness is adding an application this morning (March 13) to the RVBUSINESS.com homepage, a click-through feature through which website visitors can nominate anyone they think ought to be on RVB’s list of the industry’s “75 Most Influential People.”
That list will be published in a June issue that includes an array of centennial coverage and will be released in sync with RVIA’s 100th Anniversary Party June 7 at the RV/MH Heritage Foundation Inc.’s Hall of Fame and Museum in Elkhart, Ind., during what has been designated as “RV Centennial Celebration Month.”
RVIA’s invitation-only industry party, one of several Centennial projects spearheaded by RVIA designed to lift the industry’s post-recessionary spirits, will feature a “Salute to RV Workers,” a live band, fireworks, centennial salutes from RVing celebrities and other VIPs and the unveiling of an RV-themed time capsule that will remain on display at the RV/MH Hall of Fame and Museum.
“We know there are many possible candidates who would likely qualify as having been among the ’75 Most Influential’ individuals in the industry’s history, both from the past and including people who are still working in the industry today,” said Goldenberg. “So, we’ve decided to open the doors on this project to the industry at large to make sure we don’t overlook a lot of people who ought to be mentioned on this list.
“In saying that, however, we realize full well that we will inevitably slip up and overlook some people whose contributions were clearly vital to their companies and to the industry at large because the universe of names over a century’s time is simply too large,” he added. “But we’re trying to keep those oversights to a minimum.”
Heartland Recreational Vehicles LLC today (Feb. 3) announced the acquisition of the remaining active trademarks of Fleetwood Enterprises Inc.’s towable brands — commercial nameplates that Heartland describes in a press release as the “some of the most recognized and iconic brands in the industry.”
“This is an exciting transaction for Heartland,” said Heartland CEO Brian Brady. “Fleetwood’s towable brands have long been among the most widely recognized names in the towable RV segment, with loyal customers and an extensive dealer network. By acquiring the trademarks of Fleetwood’s towable products, we will enhance Heartland’s brand portfolio with industry leading names such as Prowler, Pioneer and Wilderness.”
“In the last five years,” he added, “Heartland has become one of the leading manufacturers of towable RVs and is the third-largest manufacturer of fifth-wheel RVs in the U.S. Our phenomenal growth and success has given us the financial strength to pursue the acquisition of Fleetwood’s legendary trademarks. We would like to thank our dealers and customers for their continued support of Heartland and we look forward to enhancing our industry leadership by continuing to create great products that our customers love.”
In addition to producing 15 existing brands of travel trailers and fifth-wheels, 900-employee Heartland expects to begin manufacturing towable RVs under the newly acquired brands during the next 12 months. Under terms of the transaction, Heartland has acquired all active trademarks of the towables RV segment of Fleetwood Enterprises from a bankruptcy proceeding, and Heartland will not assume any liability for warranties or claims relating to existing sold and unsold Fleetwood-manufactured products.
Editor’s Note: This thorough story about the RV and boat industries was written by Reagan Haynes and is taken from Soundings Trade Only Today.
There’s a long-standing belief that the RV market leads the boating industry by about six months. Feedback from those in the RV and marine trades indicates that formula is holding true in this recession, even though the numbers show both industries are tracking similarly.
Still, there are leading indicators on the RV side that are hard to ignore. Fleetwood Enterprises Inc. and Monaco Coach Corp., two of the RV world’s largest manufacturers, filed for and emerged from Chapter 11 restructurings. While some components of the brands were lopped off or modified (or sold off entirely), both remain in business, giving the industry a much welcomed sense of stability.
Meanwhile, the marine industry’s second-largest manufacturer, Genmar, remains embroiled in a difficult bankruptcy process, with no clear sense of what the final outcome will be. That not only is a concern to dealers and industry insiders, but some believe it’s one reason lenders are more hesitant to loan money to marine businesses than their RV counterparts.
The marine and RV industries share some of the same impediments to recovery, including financing and the fact that they sell “luxury” items.
Manufacturers seem to be approaching the recovery differently, too. Some boatbuilders are keen to offer more modest and affordable options to consumers, while many say RV manufacturers are looking for the next big “wow” factor to spur consumers to trade up before they’re quite ready.
Both industries have had to deal with credit crunches that have stunted their rebounds, and most forecast a long, drawn-out recovery. Suppliers and vendors to both marine and RV manufacturers have faltered precariously. Weakness in consumer confidence is keeping sales difficult to come by.
Those customers who are buying are tending toward smaller boats and RVs. They’re the “bottom-feeders,” as one insider says – looking for, and often finding, a steal. But if the RV industry is a leading economic indicator, there are some reasons to be hopeful.
Credit seems to be easing slightly, as RV dealers find both wholesale and retail financing options through local lenders who are looking to replace lost car dealership clientele. Shipments are increasing, meaning at best that improved sales are ahead and, at worst, that dealers are clearing and replacing their aged inventory with new models.
And whether the numbers support it or not, the prevailing perception is that the RV industry is doing better overall – a definite boost at a time when everything hinges on consumer confidence.
Both the RV and marine industries have lost dealers and manufacturers. The RV industry has counted 170 dealerships that have gone out of business since 2007, out of a total of 3,000, according to Phil Ingrassia of the national Recreation Vehicle Dealers Association (RVDA). It’s a small percentage, but it’s much higher than the typical 15 to 20 closings the RVDA tracks in a typical year.
The Recreation Vehicle Industry Association (RVIA) estimates that about 50% of its work force has been laid off, according to spokesman Kevin Broom. The RV industry has about 80 manufacturers – down from about 100 – whereas the marine industry has about 1,500 boatbuilders, according to Scott Stropkai, an RV industry analyst with Statistical Surveys Inc. (SSI) in Michigan.
Some think the marine industry must contract more to shrink capacity to demand, but experts say it won’t become as small as the RV industry. “This is an industry with lots of small niches, more so than the RV industry,” so it needs more manufacturers and dealers, says Thom Dammrich, president of the National Marine Manufacturers Association (NMMA).
The NMMA estimates that around 20% of boat dealers have failed – some 1,500 of approximately 6,000. The marine industry is losing dealers more quickly than the RV industry because so many are undercapitalized and overstocked, says Phil Keeter, president of the Marine Retailers Association of America (MRAA). RV dealers tend to have one or two brands, while it’s common for boat dealers to carry five or more, making the RV dealer more stable.
“The (boat) dealer shouldn’t buy so much stuff; he shouldn’t try to be everything to everyone,” says Keeter. “He ought to be more focused.”
Just as unemployment numbers tend to be a lagging economic indicator, the RV industry seems to be a leading indicator, says Mac Bryan, vice president of the RVIA. Though sales dipped similarly through 2008 and the first two quarters of 2009, according to SSI data, the perception is that the RV side is rebounding ahead of the boating industry.
“We’re definitely seeing the RV side recover quicker than we’re seeing the boat side recover, although there are still some similarities where maybe larger motorhomes and larger boats are softer, and smaller boats and smaller trailer sales are improving,” says Chris Hoover of Ron Hoover RV and Marine Center, which has five locations in south Texas.
The RV industry definitely leads into recessions but not necessarily out, according to Mark Bretz, of Bretz RV and Marine in Missoula, Mont. This time Bretz saw the same early decline on the marine side. “I think that these industries were probably aware something was going on that wasn’t good for close to a year before a lot of other industries felt that,” Bretz says.
A shorter boating season makes the industries tough to compare in terms of who is first in or out of a recession, says Earl Stoltzfus, who has owned Stoltzfus RV and Marine in West Chester, Pa., for 42 years.
In 2006, the RV industry shipped 390,000 units. The 2009 projection was at 146,000, but a 27% increase is forecast for 2010 over “admittedly weak numbers,” Bryan says.
Bretz isn’t comforted by the new projection. “I just think that manufacturers are out of sync with retail,” he says. When dealers saw their business plummet, they quit buying. Now inventory is so low that they are buying to restock.
“But on the sell-through rate, it’s still not very good,” says Bretz.
Like many, Stoltzfus thinks the RV industry is healthier because major manufacturers have already worked through Chapter 11 restructurings. Though the largest boatbuilder, Brunswick Corp., responded quickly to the downturn by downsizing, the future of No. 2 Genmar has been up in the air since its Chapter 11 filing last June, leaving dealers, suppliers and consumers fearful of the future, he says.
Stoltzfus worries that Genmar is repeating the pattern of an RV manufacturer that hurt its dealers and customers in the Chapter 11 filing process. Though the assets were sold to a solid builder with a good reputation, they were sold on a net-net basis with no liabilities. That means approved warranties will not be paid and dealers are not able to sue for damages, he says.
“You don’t do that and get away with it,” Stoltzfus says. “They are currently trying to mend their ways, but it’s going to take a long time. They’re going to get a much smaller portion of the industry. The portion that is taking care of consumers and dealers during this time, they are the ones that will get more market share.”
The major RV bankruptcies came early in 2009 and were resolved during the summer, giving more weight to the idea that the RV industry leads marine. Bretz predicts that RV manufacturers will have a tougher recovery because, in the past, RV builders who filed for Chapter 11 typically didn’t emerge from bankruptcy, yielding their market share to survivors. This time, the same number of major builders is competing for a smaller market.
“Maybe these industries will end up like the airline industry – to be a survivor you have to go through every few years and do a bankruptcy again,” says Bretz. “I think part of it will make businesses, unfortunately, less afraid of debt, because it appears that if you take on a bunch of debt and don’t manage it very well, you get a get-out-of-jail-free card.”
However, the prolonged uncertainty caused by Genmar’s unsettled Chapter 11 is scaring off potential lenders, Hoover says. A banker that RV and Marine Center deals with told Hoover that, from a lending perspective, RV manufacturers are more stable than marine manufacturers. That makes banks hesitant to issue marine dealers floorplan money.
“Two of the three biggest RV manufacturers … both filed and both emerged, [so] it seems like just a hiccup,” Hoover says. “There’s still some question on where the marine manufacturers are.”
The marine industry is operating with only one national wholesale lender – GE – and the RV industry with three – GE, Bank of the West and Bank of America. Still, Stoltzfus says the two industries have suffered equally but that the RV industry has moved further beyond its low point. He believes he is paying more than he should for GE’s wholesale dollars but says he has no shortage of credit.
Bretz says there’s a mixed message being sent. “Legislators are saying they want to grow business, but meanwhile the banking regulators are being incredibly onerous on banks in many cases, and until that changes, I don’t think you’re going to see significant expansion” into RV and marine wholesale finance, Bretz says. “Regulators that had capital ratios that they thought were acceptable two years ago are now saying those ratios need to be twice as high, and the only way you can get there logically is to reduce outstanding loans. Until banks are positioned to where regulators stop getting them to beef up capital liquidity, you’re not going to see significant change.”
However, RV dealers have been resourceful with local lenders, and credit unions and have been helping them understand floorplan finance, says Ingrassia. RV dealers say they have had some relief across the board, since local banks are loaning wholesale credit lines.
One reason credit unions have been more open to providing credit is because they have undergone such a change in the auto market, Bryan says.
Marine and RV associations have joined forces to secure Small Business Administration loans that were to be spread between marine, RV and auto dealers. That program has performed below expectations, Ingrassia says, and though everyone expected the new program to take time, it’s taking longer than anyone thought.
Bryan speculates that the credit crunch on the retail side has caused a slowdown in the turnover of vehicles, perhaps similar to that of the marine industry. “Typically, people trade in RVs every four years, and my guess is that time frame has been lengthened,” says Bryan.
Factories ramping up
RV manufacturers are gearing back up to build more product, but Keeter says that won’t necessarily be reflected in the retail market.
After both industries focused on clearing out aging inventory, combined with a credit shortage, there is little product in the pipeline, Bretz says. “I believe RV manufacturers will have a relatively good 2010 just bringing inventories back to normal,” says Bretz. “That’s one of the problems with both industries – we don’t have good information about retail. There’s much better information about shipments, but in times like these [shipment numbers] tend to either understate or overstate the problem and are not a very accurate indicator of what’s really going on.”
The RV industry is also moving to a system that allows consumers to dictate production.
That is especially true for dealers who sell higher-end motorhomes, since those already were declining in popularity before the recession’s onset, Bryan says. In 2006, that segment accounted for about 15% of the 390,000 units sold. Now it’s less than 10%, says Bryan.
“Because dealer inventory is being watched very closely and because the cost of that inventory has … gone up in several different ways, dealers are reluctant to take on inventory they don’t think they can move very quickly,” says Bryan.
If the RV industry does, in fact, lead marine, that could be a cue for dealers who sell larger vessels to pay close attention to their inventories, because Bryan says no one anticipated such an extreme decline in that RV segment.
Retail credit could also be a factor. Bretz says he has problems securing financing for buyers of the expensive RVs he sells.
Ingrassia says dealer inventories have thinned, as has the competition with the liquidation market. Maybe it’s fortunate that few expect a swift upswing in either market, because many worry that decimated supplier ranks would be hard-pressed to keep up.
Dealers will have smaller inventories moving forward, Bretz predicts, and will understand the importance of turning them more than in the past. And it will take time before the manufacturers have the clout they had a few years ago.
“We’re in the process of opening a new store in Portland [Ore.], and we’re amazed at how many good product lines are available in what would be a pretty major market,” says Bretz.
The RV industry is unveiling new products for the upcoming model year at a pace likely to exceed marine, where some manufacturers are offering scaled-down versions of models, or resurrecting smaller, previously discontinued boats.
“I would say that is a pretty significant opposite,” says Hoover. “(RV manufacturers) are bringing out bigger TVs and fancier things and trying to give people a reason to buy.”
Some marine manufacturers say that after such a long trend of adding technology and gadgets to boats, there might be a consumer trend toward simplicity. But in the RV market, Broom predicts, that predilection will not just disappear.
There will be a trend to provide better value in the future, Bryan says. The marine industry seems to be catching up in terms of offering fewer options or more specific packages. Bryan says the RV industry has already made that shift. And even when people buy less-equipped vehicles, they buy add-ons after the fact, he says.
“That’s been a strongpoint in the industry – the aftermarket sales,” Bryan says. That being said, RVs are increasingly coming fully loaded with home conveniences like televisions and microwave ovens.
And though nobody expects a rapid rebound in either industry, Hoover says the family dynamic of both is giving him leverage in this uncertain economy. People are making choices about their limited disposable income, and in the end, family activities win. That gives him hope for both the marine and RV industries.