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Jayco: Rebound’s Strength was a Big Surprise

June 25, 2010 by · Leave a Comment 

Wilbur Bontrager

Wilbur Bontrager

A lot of the talk at Jayco Inc’s “Annual Jayco Dealer Homecoming” on Monday and Tuesday (June 21-22) of this week had to do with the recession and the extent to which the industry was emerging from an epic downturn that shook the American economy and RV arena to its foundations.

While no one seemed to take issue with Jayco President Derald Bontrager’s Monday night assessment that the “worst of the recession is behind us,” no one seemed altogether comfortable making predictions for the future, given all of the unknown variables that still exist in the American economy.

Yet, it’s fair to say that the mood of the 150 dealers on hand at the Renaissance Shaumburg Hotel & Convention Center was decidedly positive.

“They are very positive, and this is more specific to Jayco with our product lineup and the things they’ve seen,” Jayco Chairman Wilbur Bontrager told RVBUSINESS.com. “But overall, their optimism seems to be quite good — with a degree of uncertainty for the fall. But as we’ve come through the last year and a half of economic uncertainty, a little bit of that still lingers.

”Adding to the unknowns right now are the effects of the BP oil spill in the Gulf, something Bontrager believes is currently impacting more than the campground sector in that region.

“We’ve got several dealers down in the Gulf,” he said, “and they already are seeing the effects of that spill. Economically, people in that region are now uncertain about their future, given that those Gulf economies so rely on fisheries and related things. They (retailers) are seeing the impact of that, economically, that people are uncertain about jobs and are afraid of losing their homes just because they are uncertain about what the future holds for them.

“We are seeing some impact in that region on the sale of RV’s, obviously,” he added. “But, fortunately, in the overall scope of things, that’s a relatively small piece of our overall RV economy.”

Derald Bontrager likes most of the comparisons he can draw between now and a year ago when the industry was just beginning to climb out of the recession.

“We know for a fact that, compared to a year ago, dealer inventories are in much better shape,” said Bontrager. “Aging is down. Our inventories are fresher. Dealers are going to be wiser moving forward in terms of their inventory management. That’s a positive thing for the industry.

“They’ll be less enamored by the ‘deal of the day’ and be smarter about what they stock, and they’ll look forward into the future a little better,” he continued. “The finance companies are going to require that, anyway, with the new way of doing business. Finance companies are going to have a lot more say in dealer inventories and, certainly, the curtailments. Those are good things.

“The dealers here, particularly our Jayco dealers, are very optimistic, but are going to be very cautious with their inventories moving into the fall and winter because I think we all believe the economy is still on some fairly fragile footing.”

Looking at the cup half full, however, few would have believed a year ago that the industry would be posting a 93.4% shipment increase through April.

“A year ago,” he said, “I would have never guessed where we are at today as an industry. It caught most of us in the industry off guard — the level to which we’ve rebounded. Certainly, it’s not the levels we were at in ’06 and ’07. We’ve seen a spike here over the last 12 months and it’s going to start leveling off. It’s going to more of a steady, gradual climb over the next three to five years. I really believe that. We are positioned very well to take advantage of that.”

Employment at Middlebury, Ind.-based Jayco reflects that turnaround, having gone from 2,500 three years ago to 1,100 in the winter of 2009 and now about half way back up to 1,700.

So, can the industry expect to return to the same type of activity levels that it experienced in 2006, Bontrager was asked?

“I believe the industry has the potential to return to those numbers and exceed them,” said Bontrager. “Several years ago, some predicted that we would reach the half-million-unit mark, I believe we have the potential to reach that, but it’s going to be a slow climb. We might not see that for seven, eight, 10 years. It’s won’t be in the next three, four, five years. I believe the market potential is there. There are still a lot of factors that favor our industry and the lifestyle that our industry can provide.”

The recession has also prompted a revised view of product on the part of the American consumer, observed Bontrager, who sees a move to smaller, lighter weight and more easily towable travel trailers and fifth-wheels. “In the early ’80s,” he said, “the industry produced light weight products. At that time, it was sort of a fad and it went away. This time, I think it’s a trend and it’s here to stay.

“We’ll be putting a lot of energy into alternative materials and lighter weight products, but still giving the consumer all the amenities that they’ve been used to,” said Bontrager, adding that he feels that the day of the larger, luxury towable or motorized product has not passed altogether. It’s just that consumers, who are generally more Internet-savvy than ever before, are focused on value.

“We are really focused on value,” said Bontrager, “and value isn’t always focused on price. You don’t always have to be the low cost producer to have the most value in the marketplace. That’s what we’re really focused on.”

As for the dealers in Schaumburg, there is a consistent theme: Most, like dealer principal Leonard Wagner and sales manager Brian Beno, of Wagner’s RV Center Inc. in Suamico, Wis., are indeed experiencing better times. “We’re doing a lot better than last year,” said Beno. “Sales are up, especially in the towable market.”

That said, consumers today are more “cost conscious,” said Beno, mirroring Bontragers’ views in saying that buyers are currently looking for more value. “The best thing,” he added, “is that they are putting money down. The banks require money down now and they are putting the money down. And the customers are more aware of what they are buying. They are more Internet-savvy so when they come to your lot, they’ve done their homework. They know what the competition has to offer.”

While his dealership is still off from the pace it set three years ago, Jeff Pastore, a former RVDA chairman from Hartville RV Center, Hartville, Ohio, said he is “thrilled” to be ahead right now as much as 25% over last year. “We projected ourselves to be up, but not 25%,” he said. “We projected about 10%. We are thrilled about that.”

“We did the same thing,” noted Ron Shepherd, of Camperland of Oklahoma,Tulsa, Okla. “We projected ourselves up this year about 10%, and we are up 30 to 35% from those projections. It’s still not to the levels that we were three years ago. But in Oklahoma, we didn’t get hit with the recession quite as hard as other parts of the country. So, we never went down quite as low, either. We are recovering much, much quicker.”

In what ways has the recession changed life for these two dealers?“I’m definitely less likely to take a risk,” said Pastore. “Product-wise, we will go a lot deeper in the models we know we can count on. We just don’t quite have the breadth of choices because we are more conservative. I trust the market. I don’t trust credit right now. That’s what’s making it sticky.”

“I would say ‘conservative’ is definitely the answer,” added Shepherd. “From a management standpoint, we don’t spend money we don’t have to spend. And we stock what we know is going to sell, and we don’t take a lot of risk on products. We are going to be very, very slow to move back into the motorhome market. We are going to stick with towables a lot longer. We sell some motorhomes, but not very many.”

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Pace American May Shutter Indiana Factory

June 7, 2010 by · Leave a Comment 

Pace-American-logoCargo trailer manufacturer Pace America may close its manufacturing facility in Middlebury, Ind., potentially costing 150 workers their jobs, according to the Indianapolis Business Journal.

Pace American Inc. notified the state of the possible closing late last week, saying it is in the process of selling its business operations and assets.

“While it is our hope that Pace American’s business operations will continue without interruption throughout the sale process, we believe there is a possibility that this sale may force [the company] to close the facility,” CEO Jim Tennant wrote in a letter to the State Department of Workforce Development.

If the northwestern Indiana plant closes, the decision is likely to be permanent, he wrote. Pace American’s facility employs 118 hourly and 32 salaried workers. The company has other facilities in Texas, Utah, Georgia and Oregon.

The closing would be another blow for Elkhart County, where 14.1% of the work force was unemployed in April, the last month for which state statistics are available. Its unemployment rate is the highest in Indiana and last year reached nearly 20% to lead the nation, drawing the attention of President Barack Obama.

Last week, Industrial Opportunity Partners (IOP), a private equity firm based in Evanston, Ill., surfaced as a “stalking horse” in the sale of assets of Pace American Inc.

A June 15 “Article 9″ auction has been scheduled in Chicago to sell the assets of Pace American, but IOP has submitted a bid in advance of the auction, making it the “stalking horse” in the proposed sale. The value of its bid was not revealed. IOP will become the new owner of Pace American’s assets, unless another firm comes forward and submits a bid of at least $750,000 higher than IOP’s, according to a notice publicizing the sale.

The deadline to submit a bid is 1 p.m. EST Friday (June 11).

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