It was hard for U.S. Rep. Joe Donnelly to contain his enthusiasm.
Something he and other Hoosiers, including fellow Democrat Sen. Evan Bayh, have been working on for months, became reality, according to the South Bend (Ind.) Tribune.
Beginning July 1, the U.S. Small Business Administration will offer government-guaranteed loans to finance inventory for eligible automobile, recreational vehicle, boat, motorcycle and manufactured housing dealerships. Donnelly, D-Ind., said the move is another piece to the puzzle that could get the cycle of business moving again in places like Elkhart County, part of which is located in Donnelly’s congressional district.
“This is very significant,” Donnelly said in a phone interview after attending Thursday’s announcement in Kokomo, Ind., by Karen Mills, SBA administrator.
“It’s not just RV related, but includes marine and manufactured housing. Those are three types of mainstay products in Elkhart County, and this covers every single one of those areas.
“It gives dealers a chance to finance floorplanning,” he added. “That enables the dealers to buy more products from manufacturers and for (manufacturers) to put more people back to work.”
For the past year and a half, many dealers had been unable to purchase cars and RVs to place on their lots, because the dealers themselves did not have the financing.
Organizations they had been getting loans from either refused to make loans as credit tightened, or simply walked away from the business.
“This ends the cycle,” Donnelly said, noting it allows more than 50% of the dealers to use the program. “We think this is a big step in putting people back to work.”
“The whole country starts buying again,” Donnelly said. “Since we do the manufacturing for all these products, all of that (business) will start to flow back into our community.”
Donnelly said Bayh greatly aided the effort. Donnelly himself had met with both Treasury Secretary Timothy Geithner and President Barack Obama about the problem, urging the SBA solution to guarantee the loans.
“I met with Geithner and explained the whole situation,” Donnelly said. “I had conversations with Obama last fall on the way to Elkhart and with him again last week.
“He has been very desirous to find a vehicle to create this financing.”
In a release, Bayh, who was also in Kokomo for Thursday’s announcement along with Ed Montgomery, director of recovery for auto communities and workers, said the program “will help keep open a business that might otherwise have closed.”
“Dealerships employ tens of thousands of Hoosiers and today’s announcement will both save jobs and create new ones,” Bayh said. “For a state like ours, with a proud manufacturing tradition, this announcement is truly a lifeline.”
Floor plan financing is a line of credit that allows dealers to borrow against their inventory and then repay that debt as they sell their inventory or borrow against the line of credit again to add new inventory.
The Recreation Vehicle Industry Association (RVIA) called the program “a key victory on an important front.”
“RVIA has worked diligently over the past several months to have the SBA include floor plan loans in 7(a) loan guarantee program,” said RVIA President Richard Coon. “We are very pleased with the SBA announcement today and believe that the improved availability of credit for RV dealers through this program will benefit the entire industry.”
The program announced Thursday is considered a pilot program and will run from July 1 through Sept. 30, 2010, at which time the SBA will determine whether to extend the program.
U.S. Rep. Joe Donnelly, D-Ind., whose district includes northern Indiana’s RV manufacturing area, expects that Navistar International Corp. will begin building recreational vehicles again in factories closed by Monaco Coach Corp.
Speaking to the National Association of RV Parks and Campgrounds’ (ARVC) 2009 National Issues Conference April 28-29 at the newly opened National Visitor Center on Capitol Hill in Washington, D.C., Donnelly added that he’s confident that RV sales will pick up when credit markets stabilize and the U.S. economy recover.
“We were encouraged by the fact that Navistar is going to be picking up Monaco Coach,” Donnelly told state campground association leaders. “It’s not all official yet, but it looks like they will be manufacturing again in Elkhart County (Ind.)
Monaco filed Chapter 11 bankruptcy in March, and Navistar, which had partnered with Monaco manufacturing chassis in Elkhart, Ind., has offered $52 million to purchase most of Monaco’s RV manufacturing assets, including factories in Indiana and Oregon. In addition, if the deal is finalized by June 1, Navistar will acquire all brands, intellectual property, inventories and equipment relating to Monaco’s product lines.
Donnelly told the campground association leaders that when the RV industries turns around, there will be more demand than ever for places to take RVs.
“There is going to be demand for these products and they have to go someplace,” the Democrat told the RV park and campground operators. “Where they go in so many places is your businesses. You are the heart and soul of the American dream.”
Donnelly, who serves on the Capital Markets Subcommittee of the House Financial Services Committee, said Congress is doing its best to stabilized the American economy.
“We are getting closer on the credit market,” Donnelly said. “With home mortgages, the `liar loans’ are gone and the crazy adjustable rates that changed every three months, they’re going too. We’re back to basics, but we’re a lot better off for it. We will be a lot more solid because of it.”
Donnelly said he is co-sponsor of legislation that attempts to deal with the speculative run-up of crude oil prices that sent gasoline prices over $4 a gallon last summer.
“I’m no clairvoyant, but much of what happened to prices was done on speculation,” he said. “We sat there day after day watching demand continue to go down as prices continued to go up.
“And what we saw was that (investment banker) Morgan Stanley was one of the world’s largest owners of petroleum. What was clearly going on was price manipulation.”
Donnelly said that legislation pending the House Agriculture Committee would require that buyers of petroleum futures contracts have the facilities to store the oil they buy.
“(That means) if someone has a million-gallon contract, they have to be able to store a million gallons,” Donnelly said. “That’s how it was until 1999. That’s what we are trying to get back to now. That would make it a fair market and an appropriate market.”
(Editor’s Note: Joe Donnelly represents Indiana’s 2nd Congressional district. The following is a Letter to the Editor he wrote to the South Bend Tribune. The letter was published on Sunday, April 26).
I am writing in response to Brent Bardo’s letter to the Voice of the People on March 16. I appreciate Bardo’s interest and support of the manufactured housing industry. I share his belief that this is a vitally important industry to our district and I share his concern that more needs to be done to help during this economic crisis.
During my tenure as representative of the 2nd Congressional District, I have had the privilege to represent the recreational vehicle and manufactured housing capital of the world. As our nation has fallen upon tough economic times, the RV and manufactured housing industries have been hit especially hard.
Manufactured homes house almost 20 million Americans, which translates to many jobs for hardworking Hoosiers back home.
An issue that plagues most businesses – particularly small businesses – is the lack of available credit in the system. Both RV and manufactured housing manufacturers have suffered from the lack of credit to purchase inventory for their floorplans. This has had a ripple effect on manufacturers and suppliers. At the same time, the lack of consumer financing has hindered the ability of families to purchase these products.
One of the ways that I have tried to alleviate some of the pain in both industries is by ensuring that RV and manufactured housing loans are eligible for Term Asset-Backed Lending Facility – TALF – loans. This is a new program designed to revitalize secondary loan markets and intended to jump-start primary lending markets. Originally, this program only included student, credit card, small business and auto loans as eligible forms of collateral. After working with several of my colleagues and the Federal Reserve, the scope of the program was changed to include RVs as part of the definition of an automobile and opened this form of financing up to all floorplan loans. Manufactured housing and RV manufacturer floorplan loans will be able to be securitized and purchased with TALF funds, which will hopefully loosen up credit.
Another way that I have advocated for the manufactured housing industry is the area of consumer lending. Typically, loans that are offered to families hoping to purchase a manufactured home on leased land have been significantly higher than other home loans. One way to obtain a lower loan rate is to purchase loan insurance. The Federal Housing Administration Title I loan program guarantees loans for manufactured homes that are placed on leased land, which enables lenders to provide a more affordable loan to consumers. Unfortunately, these loan guarantee limits have not been raised since 1992 and not kept pace with rising housing costs. That is why I introduced legislation to raise home-only loan limits from the current $48,600 to $69,678, enabling more families to purchase a home that fits their needs. I was pleased that this was signed into law last July.
It has been my privilege as a member of Congress to work on ways to help these important industries to thrive and get them back on track to regain their competitive edge.
Rep. Joe Donnelly, D-Ind., addressed RV industry leaders on the various efforts at the federal level to help stimulate the RV market during a March 11 conference prior to the day-long session of Recreation Vehicle Industry Association (RVIA) member seminars at the Century Center in South Bend, Ind.
According to a press release, Donnelly focused most of his comments on efforts to improve the credit squeeze facing RV consumers and dealers, recognizing that without adequate floorplan financing dealers cannot purchase new products from manufacturers.
RVIA said that Donnelly was the champion in Congress – along with Rep. Pete DeFazio, D-Ore., and Rep. Mark Souder, R-Ind. – for including RV consumer and floorplan loans in the Term Asset-Backed Securities Loan Facility (TALF) – a program to encourage lending by providing federal support for the origination and sale of new loans. Currently funded at $200 billion, the program could expand to as much as $1 trillion to address the shortage of money available for lending.
“TALF is expected to be very lucrative and profitable for lenders and investors with the Treasury Department backing up loans in a big way,” said Donnelly. “As the program rolls out this month, our hope is that it will open up credit markets and attract more dollars to the RV industry.”
He also reported on efforts to expand TALF eligibility beyond AAA-rated securities. In its present form, only asset-backed securities (ABS) carrying an AAA-rating by two rating agencies are eligible.
“We are talking to and educating the Federal Reserve Board about the problem that the AAA-rating presents for the RV industry,” Donnelly said. “Our focus in these conversations is to have RV floorplan loans covered even if they don’t meet the AAA threshold.”
In addition to his conversations with the Federal Reserve Board, Donnelly also offered to arrange a meeting or call between the Federal Reserve Board and RVIA so the association could press the industry’s case on this issue.