Northwood Manufacturing Inc. recently hosted its annual Northwood RV Owners Association (NROA) rally at the company’s home base in LaGrange, Ore., attracting 50 rigs and around 150 people.
According to a press release, “Northwood has always been a customer-intimate company – concerned for and involved with the retail customers who have put their trust in Northwood products and their reputation for lasting quality.” Northwood said that the company leadership remains accessible to the public at large, and to dealer partners and a loyal customer base.
The rally, which is organized each year by the NROA, included in-plant tours, allowing owner to see how the product is made. Northwood said it even assigns a team of technicians to visit the campground where the rally was held and help owners with product concerns.
Northwood also arranges for seminars from supplier resources, like Carefree, Suburban, and ALKO, to help the owners maintain and maximize what they currently own and how they might upgrade their current unit with the latest conveniences after market. One of this year’s seminars was “How to reseal your RV,” which demonstrated the how’s-and-why’s of sealant renewal.
Fun activities included a golf tournament, four-wheel riding, wine tasting and a potluck. There were also opportunities to learn how to quilt and how to western dance. An industrious group of ladies completed and presented two quilts: one each for owners Ron and Sherry Nash.
The rally culminated with a Northwood-hosted barbecue luncheon with Northwood staff and executives mingling with the owners. As a final token of thanks, the executives conducted a raffle in which every attending RV was assured of winning an RV-related prize.
All entrants were resubmitted for a grand prize, which was a 110/12-volt refrigerator or freezer. The prize give-a-way was conducted by Northwood executives, including CEO Jim Jones, Director of Purchasing and Marketing Lance Rinker, Director of Manufacturing Keith Williams, Director of Sales Donald Cochran and COO Ward King.
Cochran noted, “Northwood Manufacturing values this organization of fine people and the opportunity they present to keep communications open with the Northwood RV owner. These rallies offer a great insight into what is important to the customer.”
Northwood Manufacturing Inc. is a towable manufacturer in the Pacific Northwest and Western Canada, producing lines under the brand names of Nash, Arctic Fox, Arctic Fox truck Campers and Desert Fox yoy haulers. Northwood has also launched several new brands, including: Fox Creek, a basic camping trailer; Snow River, a step-up travel trailer and fifth-wheel line; Fox Mountain, a mid-profile fifth-wheel line; and Wolf Creek, a value-oriented truck camper.
Editor’s Note: Robert W. Baird & Co. issued a client newsletter following this week’s release of the first quarter results of Thor Industries Inc. Excerpts from the Baird newsletter follow.
Revenue tops forecast. Preliminary sales topped our forecast ($849 v $835), including upside in RVs and specialty vehicles. Backlog fell against an unusually strong comparison, but appears consistent with our outlook. Margin remains the key. As discounting abates and a February price increase kicks in, we expect profitability to improve. Our checks with industry contacts indicate the pace of the retail recovery has slowed (gas prices), but we see decent value in Thor near $30.
Solid results. Thor reported preliminary sales for the April quarter. Sales of $849 million (+25%) exceeded our $835 million estimate. RV sales increased 32% to $739 million, above our $730 million estimate. We estimate that Heartland RV added $117 million to revenue, implying organic RV growth near 11%. Industry RV shipments improved 10% in the first two months of the quarter, with towables up 9% and motorhomes up 18% in February and March. Specialty vehicle sales dropped 10% to $109 million as stimulus spending shrinks, but topped our $104 million estimate.
Margin improving? Management cited commodities and other cost pressure in its release, suggesting that margin pressure has not completely vanished. Still, we believe promotional activity has abated. Meanwhile, a February price increase – which also applied to the backlog – should result in better margin after a disappointing first half.
Backlog OK. The total backlog fell 5% YOY to $633 million and is at the lower end of our expected range. The RV backlog decreased to $427 million–down sequentially and below elevated levels last year–but remains healthy as pace of wholesale delivery improves. The specialty vehicle backlog fell sequentially and YOY to $206 million.
Outlook. We maintain a bullish consumer outlook as credit eases, but our checks indicate the pace of the recovery has been slower than anticipated – a concern we attribute to higher gas prices. Still, near $30, we like Thor for value investors as our cyclical thesis unfolds and discounting abates.
This summary of a Baird research report is not intended as investment advice. To participate in Baird surveys and receive research reports, contact Craig R. Kennison, CFA, at firstname.lastname@example.org.
AARP The Magazine, the world’s most highly circulated publication with 47 million readers, featured an RVing couple in the May/June 2010 issue in an article titled “Retired and Loving It!”
The article focused on several couples at varying income levels who are enjoying their post-career lives despite the current economic mess, the Recreation Vehicle Industry Association (RVIA) reported in its current issue of RVIA Today Express. One of those couples is Jerry Shea and Mary Sullivan of Cambria, Calif. After the bottom fell out of the California real estate market, the two sold their realty business and made plans to hit the road in their motorhome, criss-crossing the country to reconnect with friends and visit far-flung children.
Meanwhile, the editors of Popular Mechanics, another influential magazine, have requested that RVIA members regularly send all their product releases to the attention of associate editor Greg Anderson at GEAnderson@hearst.com. This includes product announcements, innovations and any new and interesting gadgets that might intrigue the magazine’s techno-savvy audience.
While the cost of fuel has put a damper on the travel plans of many Americans, one father-son engineering duo with a passion for RV travel is combating the problem by conceptualizing an electric-hybrid passenger vehicle with the ability to improve fuel economy and increase the acceleration of the motorhome towing it, according to a release from the University of Alabama published by physorg.com.
Steve Shepard Jr., associate professor of mechanical engineering at The University of Alabama, and his father, Steve Shepard Sr., a former faculty member and researcher at Mississippi State University, developed the idea for a hybrid dinghy pusher after the cost of fuel curtailed both families’ traveling plans.
In this concept, the dinghy consists of a hybrid SUV towed by the RV. When driven as a standard automobile, the SUV operates as a fully-functional hybrid vehicle. When towed behind a RV, the SUV switches into the hybrid dinghy pusher mode, where only the electrical portion of the hybrid-SUV is utilized. The hybrid dinghy pusher, known as an HDP, works by going into generator mode and storing energy when going downhill, and energy previously stored in the batteries is used to help push the motorhome up hill. The previously stored electrical energy in the hybrid dinghy pusher can also be used to help accelerate the motorhome more quickly from a stop or while just driving down the road.
A conventional hybrid SUV is adapted to utilize its electric system to recycle energy when being towed. The HDP’s on board motors provide propulsion during acceleration and act as electric generators during braking. The assistance provided to the motorhome by the HDP is not meant to replace the propulsion provided by the motorhome engine; it simply supplements it to improve acceleration and reduces wear on the RV engine. Unlike typical towed dinghies, motorhomes towing an HDP would experience a decrease in fuel consumption and an increase in acceleration performance.
According to the Shepards, hybrid motorhomes are just now coming onto the market, and they are expensive. Besides being a cheaper alternative to a hybrid motorhome, the greatest advantage of this new concept is that the HDP not only assists the motorhome in transit, but it also provides the motorhome owners with a hybrid vehicle to drive after arriving at their destination. Other advantages of implementing such a system are improved fuel mileage, reduced rate of wear on brake components and improved mobility for users of RVs and the dinghy.
Working with the University of Alabama’s Office for Technology Transfer, the Shepards are in the process of securing a development partner to bring this cutting-edge technology to the market. UA originally filed a U.S. provisional patent application, which has since been converted to a full utility patent application.
The Recreation Vehicle Industry Association’s (RVIA) Standards Department has issued the following clarification of the association’s position on the use of California Air Resource Board (CARB) certified wood in response to recent questions about whether the association plans to alter its enforcement position, according to RVIA Today Express.
The increased production of RVs over the past 60 days has spurred a concern among some RVIA members that there could be a shortage of CARB-certified luan in the near future, impacting some manufacturers’ production.
It appears that the temporary shortage of CARB-certified luan is a supply-chain issue rather than an RVIA enforcement issue. RVIA has no influence over the actions of CARB, which requires that, as of July 1, 2010, every RV sold in the state of California must contain CARB-certified wood. Any manufacturer or dealer who sells an RV containing non-certified wood in the state of California after this date would be subject to monetary penalties as established by CARB.
RVIA’s requirements use the same effective date for the other 49 states, but it will apply to RVs built on or after July 1, 2010, not to those RVs sold on or after that date. While RVIA has petitioned CARB for relief on the July 1, 2010, date of sale, there has been no response from CARB, leaving the association to assume that July 1, 2010, remains the effective date for mandatory inclusion of CARB compliant wood (non-certified, but meets the CARB emission levels) in RV products sold at retail in California.
RVIA will continue to allow wood products that meet CARB emission levels but are not CARB certified until July 1, 2010, after which, CARB certified wood products will be required. If an RVIA member does not comply, a deviation will continue to be cited. For this type of deviation under the RVIA Standards program, a member would have to be cited a total of four times (the initial deviation and three repeats) before enforcement action will be taken.
Changing the program requirements in the face of a temporary shortage caused by supply chain issues does not appear to be in the best interest of RVIA or its members. Accordingly, RVIA will continue to enforce the program requirements as directed by the RVIA board of directors.
The 13th annual 2009 Snowbird RV Show & Sale is coming to the Tradex in Abbotsford, British Columbia, from Sept. 24 to 27 and is bringing the latest in recreation vehicles, accessories, gadgets and travel destinations, according to the Abbotsford Times.
There will be over 180,000 square feet for display space at the Tradex, located beside the Abbotsford International Airport.
This event is offering everyone from avid, full- and long-time RVers to families interested on taking recreational trips throughout British Columbia — or wherever their destination may be — a chance to learn more about the vehicles that will be on display, as well as lifestyle opportunities that come with RVing.
The event will take place both indoors at outdoors, as more than 50 exhibitors will be showcasing some of the new and more innovative RVs that are on the market today, as well as accessories like electric bikes and other gadgets.
Exhibitions will also include information on RV properties and private sales.
For those interested in the environmental aspects that RVing provides these days, there will be exhibitions on “innovative green” products that are being offered at dealerships throughout the Lower Mainland.
This will include the Evergreen Ever-Lite, which www.goevergreenrv.com called “the world’s first eco-friendly composite travel trailer.”
According to this website, the Evergreen Ever-Lite comes well equipped with some of the more modern exterior and interior features in the industry.
John and Harriet Halkyard, co-authors of “99 Days to Panama,” will be on hand along with Mike and Terri Church, co-authors of a series of RV and camping travel books, and a number of other industry experts to offer free daily seminars on some of the popular Southern destinations for those interested in exploring somewhere other than the rugged terrain of British Columbia.
One of the destinations up for discussion will be Arizona.
For more information, check out www.rvshowsbc.ca, e-mail email@example.com or call (604) 870-4678.
A high school graduate who learned everything he knows about motorhomes from “the university of Winnebago” has navigated one of the industry’s leading manufacturers over very bumpy terrain in the past year, according to the Associated Press.
Robert Olson, 58, took a job installing motorhome windows at Winnebago Industries Inc. at age 18 in hopes of saving money for college. He never left, foregoing a college education for on-the-job training that led him to where he is now, 40 years later, sitting in the CEO seat.
Actually, the seat he chose for a recent interview was a tan plush leather sectional sofa in the company’s newly unveiled $300,000 Itasca Ellipse.
The 42-foot home on wheels — the company’s largest motorhome ever – was parked outside Winnebago corporate headquarters in Forest City, Iowa, a small farming community of 4,500 people near the Iowa/Minnesota state line.
Production takes place in a campus of several factory buildings encompassing 2.5 million square feet. Components aren’t just assembled here, but seat covers, dashboards, water tanks and cabinets — more than half of the motorhome parts — are manufactured here.
Olson proudly discusses the Ellipse’s amenities: ceramic floor tile, granite countertops and cherry wood cabinetry. There’s a gas fireplace in the living room beneath a large flat-screen television. A second TV faces the king-sized bed in the back of the RV, which you reach after passing a bathroom, and a washer and dryer enclosed in a hallway closet.
“This is what our customers who like to go camping are asking for,” Olson said with a smile.
Going camping these days, it seems, isn’t what it used to be.
Q: It’s been a torturous couple of years for your industry, a 55% decline in shipments in the past year alone. Tight credit, high fuel prices and job losses hit you and your competitors hard. What has it been like?
A: I think you’re going to be hard-pressed to look at any recession this industry has had where you’ve had 10 manufacturers go out of business. They’ve physically shut their doors, sold their assets and they’re done. You’ve also got four other manufacturers who have filed for bankruptcy protection. Some of those are really big names in this industry.
Q: You’ve had to cut total number of workers by nearly 50% to around 1,700, close factories, make other cuts. Is that what enabled you to get through it?
A: We learned a long time ago that you always carry a war chest of cash in reserve and we did that again. We’re still at a point, even being in this recession for about 24 months, where we have no debt. We think that’s a very important part of our success.
Q: If the economy is beginning to recover, are you able to capture some of the customers who might have bought from former competitors?
A: We think we are. Those 10 manufacturers made up only 4-5% of the market, so there’s not a lot there you’ll gain. Some of those in bankruptcy — Monaco Coach Corp. and Fleetwood Enterprises Inc. — made up nearly a third of the market. One of the things that’s a little disheartening to us is that you can file for bankruptcy and get a clean slate. You get to start over. So, now we’ve got two competitors we thought were about down and out who get to come back, and will probably be stronger than ever.
Right now we’re just about 19% of the market and we’ve picked up some.
Q: Describe your average buyer?
You can’t lose sight of the fact that projections are that until 2030 you’re going to have 350,000 Baby Boomers per month joining our potential customer base.
You also have people living longer. We’ve got customers out there like at last year’s annual rally of Winnebago motorhome owners, a guy was 87 years old and he was dickering on a coach.
Q: Any other factors that might have an impact on sales?
A: What I’m really excited about is that 2004 was one of the biggest years this industry has seen in volume. Our average trade-in cycle is four to six years. So we’re right in the heart of those people wanting to trade their used coaches off for something new.
The whole market is starting to grow. Three years ago we had an African American RV club camped here and the Hispanic demographic is starting to grow.
One thing about it is, you’ve got my generation and even my kids’ generation, their parents took them camping, they took them to the lake and they sat around a campfire. A lot of people now look to gain a simpler life. They’re looking at wanting to share those types of memories with their kids.
Q: Tell me about your background. Where did you grow up?
A: I grew up in Osage. I was born and raised there. I went to school there, graduated from Osage High School. I’m very proud of my Iowa roots. My wife and I raised two children in Forest City, my daughter is 37 and my son is 34. As for my parents, my dad was a mechanic and worked at a Chevrolet garage in Osage when he was younger. He became a gas transport truck driver for a local oil company. My mom was a nurse’s aide and a cook at Osage Community Hospital.
Q: How did your career path an Winnebago Industries lead you to the CEO’s office?
My education was at the university of Winnebago. I’ve taken a lot of extra courses targeted toward the individual field I was in at the time. I’m a certified practitioner in production inventory control, for example. I got my break in the materials side of the business. It allowed me not only to see the material side but to interact with much of the manufacturing side. I then got the opportunity to move into manufacturing. I ran both the fabrications support areas and the assembly side of it, so I’ve seen all sides of the business and now I’m getting an education in sales, engineering and planning.
It’s gone extremely well.
Q: Do you have a motorhome?
A: Not yet. I will say I’m in the process of building a shed right now and it was built around having a motorhome. That is the plan, when I do retire. You can’t be in this industry and tout the beliefs of it and the memory-making part of it and not do it when you’re done. Both my wife and I are looking forward to the day we get to do that.
Recreation Vehicle Industry Association (RVIA) members elected two incumbents and four new members to the board of directors in the association’s annual elections, which concluded on Monday (Aug. 24), according to RVIA Today Express.
Andrew Baer, vice president of sales and marketing at KZRV LP; John Draheim, president of Fleetwood RV Inc., and Tim Tiffin, general manager of Tiffin Motor Homes Inc. were all newly elected to three-year terms as manufacturer representatives. Jeff Hanemaayer, chairman of Roadtrek Motorhomes, was re-elected to a three-year term manufacturer seat.
Jeff Rutherford, president of Carefree of Colorado, was newly elected for a three-year term as an at-large representative. Incumbent Garry Enyart, director of RV business for Cummins Power Generation, was re-elected to three-year term at-large seat.
Supplier Seat Election to End Sept. 5
The special election for the three-year term supplier seat continues through Sept. 5. The candidates running in the special election are John Juliano of Al-Ko Kober Corp. and Kevin Phillips of Thetford Corp. The official representatives of all RVIA eligible companies were sent instructions regarding voting in this special election.
Each of the newly elected board members will begin serving on Oct.1. The RVIA board has the highest level of authority in the association organizational structure. It is responsible for association matters on a broad policy basis.
The American Automobile Association (AAA) projects that 39.1 million travelers will take a trip of 50 miles or more away from home over the Sept. 5-7 Labor Day weekend. The numbers represent a decrease of 13.3% from Labor Day 2008, when travel was the highest this decade, at 45.1 million travelers.
The nonprofit AAA’s forecasting partner, IHS Global Insight, believes much of the decline in travel plans can be attributed to Labor Day falling late on the calendar. Labor Day this year is Sept. 7, when the school year is already two to three weeks into the fall session for most school kids, according to the South Florida Business Journal.
Last year, Labor Day fell on Sept. 1, allowing for a long weekend trip before a new school year started in most regions of the country.
In any case, analysts say upcoming holiday travel will be the third strongest for the Labor Day weekend this decade. The second busiest year was 2003, at 41.6 million travelers.
AAA expects the nationwide average price of gasoline to be approximately $2.60 per gallon – one dollar per gallon less than it was in 2008.
“Our forecast shows Labor Day travel will be up over this summer’s 4th of July holiday and that’s a positive sign,” AAA President and CEO Robert L. Darbelnet said.
Other Labor Day travel observations by AAA and IHS Global Insight:
- A greater share, 84%, of travelers will travel by auto.
- Four percent are expected to travel by air.
- Auto vacations will be taken by 32.9 million.
- Air trips will be taken by 1.5 million – the lowest number this decade.
- Traveling by other modes – which can include trains, cruises, buses, RVs, personal watercraft, motorcycles or trips that use multiple modes of travel – are expected to reach 4.8 million.
- The average amount spent is projected to be $968 and the average distance traveled will be 645 miles roundtrip.
Editor’s Note: This is another in a series of stories by MSNBC.com about Elkhart County, Ind.
The Elkhart County 4-H Fairgrounds turned into a caravansary for more than a thousand wandering RVers this week. Roughly 440 RVs showed up to the fairgrounds for the 24th Newmar International Kountry Klub Rally.
The most RVs, 42, came from Florida. Another 35 were from Michigan. Thirty were from Missouri, while 16 were from Indiana. Two rigs came all the way from Alaska.
But the gathering of RV enthusiasts falls under the shadow of a devastated industry. Since a peak of 390,000 RVs sold in 2006, sales have dived 65 percent. Experts aren’t expecting much of a sales rebound any time soon.
The RVers at the fairgrounds aren’t ignorant to the industry’s woes. Many are well grounded to the troubles plaguing RV manufacturers. Still, that hasn’t stopped them from rallying behind the tattered flags of the RV industry.
Sitting in a lawn chair outside their 2002 Newmar model on Thursday (Aug. 6), Ed and Yvonne McGann discussed RVs with other owners. The couple are usually at an advantage in such conversations. For the past nine years, the Texas natives have been wandering the country, visiting all of the lower 48 states.
“We do not have a principal residence,” said Ed McGann. “We wanted to get away from that traditional lifestyle.”
Ed McGann says he and his wife are able to continue the gypsy lifestyle because of their retirement savings. For most of his working life he’s set aside 10 percent of his gross income. Rather than investing it, he’s saved.
“It’s a very expensive lifestyle,” noted Yvonne McGann. “It’s a privilege to be able to do this.”
It’s a privilege the couple has cherished. Ed McGann says he’s seen many fellow RV-ers settle down because their retirement savings was cut in half in the waning months of the recession. Yvonne says, Aside from their savings, Medicare and Social Security has allowed them to continue RVing.
“There are those of us who are too crazy to figure out we’re broke,” joked Ed McGann.
Several lots down from the McGanns was Tom Canerty. Like the Texas couple, he’s been RVing for years and has been to a number of RV rallies. Canerty is a traveling salesman for Lee’s RVs in Oklahoma. He says he’s noticed several trends at the rallies he visited.
“If there’s any demand, it’s for the higher end models,” he said.
The RVs on display at the Newmar rally range in price from $100,000 to $750,000. Canerty says that those who can afford the more expensive RV have been less affected by the economic downturn and thus will continue to upgrade for the upper tier models.
“We’re also seeing people that would normally buy a new coach every three years are instead upgrading their coaches,” Canerty said. Painting, carpet and upholstery vendors, Canerty says, do very well at such rallies.
But many note that the numbers at such rallies have been down. In 2007 the Family Motor Coach Association International Convention registered 3,822 non-commercial coaches at the event. In 2008 only 2,774 registered for the March convention. This year’s FMCA International Convention, held in Bowling Green, Ohio, two weeks ago, registered only 4,226.
Barney Barnett, International Kountry Klub director, says despite a slide in registration at this year’s Newmar rally, he maintains a positive outlook on the industry.
“I’m cautiously optimistic. It will come back. But don’t get me wrong it won’t get back to the level it was before,” Barnett said. “Looking at it from the sidelines, there’s a long way to go.”
According to the Recreation Vehicle Industry Association (RVIA), a substantial number of Americans maintain an interest in the market. The RVIA estimates nationwide there are as many as 30 million RV enthusiasts, including RV renters.
At Friday night’s closing ceremonies for the Newmar rally, over a thousand such enthusiast packed the largest building on the fairgrounds.
“The industry itself is getting stronger by the day,” said U.S. Rep. Joe Donelly, D-Granger, before the cheering crowd of Newmar RV owners. “We’re working real hard to have a stable fuel price and a low fuel price. I know how important that is.”
Ed McGannon said he prays that fuel prices don’t jump back up. In 2008, when the spike in fuel prices took many RV-ers off the road, Ed and Yvonne McGann were able to continue wondering the country in their RV. He hopes to continue to go to RV rallies and has even toyed with the idea of caravaning through Central America.
One thing is certain, he says. “We would absolutely never consider moving back into a house.”
Focus on Community
Newmar had originally scheduled its annual International Kountry Klub Rally for Perry, Ga. However, with the harsh economic atmosphere in Elkhart County, Kountry Klub officials decided they would hold the rally close to home.
“Newmar is located in Elkhart County and we wanted to do something to help support local business and drive traffic to the county,” said Barney Barnett, Newmar’s International Kountry Klub director.
The change in venue wasn’t the only thing the Klub did to support the local community. It held a food drive throughout the six-day rally to raise money and food for the Nappanee Christain Development Center. A total of $1,068.25 was raised and a truckload of food was sent to the center.
One of the favorite places for Supreme Court Justice Clarence Thomas and wife Ginni to grab some sleep is in a Wal-Mart parking lot, Mrs. Thomas told National Public Radio on Wednesday (Aug. 5).
Here is a link to the radio interview:
In fact, the Washington power couple spends each summer touring the United States in their 40-foot Prevost motorhome, she said. The justice and his wife have cruised through 27 states since buying their used recreation vehicle in 1999.
“We have found it’s a wonderful life,” Ginni Thomas told National Public Radio from upstate New York on Wednesday.
“We have been in dozens of Wal-Mart parking lots throughout the country,” she added. “It’s one of our favorite things to do if we’re not having to plug in and we’ve got enough electricity.”
She said that their joy in traveling has only been slightly tempered by the overwhelming to-do they occasionally get when other campers identify the high court justice.
“Clarence gets recognized every once in a while and that sort of puts a damper on things because when we’re out, we kind of like to be incognito, if you know what I mean,” she said, noting they stopped traveling to one campsite because 20 or 30 people would greet them each year.
President Obama on Wednesday (Aug. 5) said $2.4 billion in federal grants for next-generation, fuel-efficient vehicles will create or retain thousands of jobs in Indiana and lay a foundation for the economy of the future.
In a cavernous Monaco Coach recreational vehicle assembly plant now owned by Navistar International Corp., the president told a crowd of 250 enthusiastic workers that $39 million of the grants would go to build 400 of the vehicles at their company, according to the Northwest Indiana Times.
“We have to harness the innovative and creative spirit that’s waiting to be awakened all across America,” Obama said.
Other Indiana companies winning the competitive grants are Allison Transmission, in Indianapolis; Delphi, in Kokomo; and Magna, in Muncie. In addition, Purdue University, the University of Notre Dame, Ivy Tech Community College and Indiana University will receive grants to develop electric vehicles.
Indiana will receive more of the $2.4 billion than any state but one, Michigan, Obama said.
More than 1,000 people worked at the sprawling Monaco Coach complex before all production was shut down last year. Monaco Coach was bought out of bankruptcy by Navistar International in June.
Unemployment started to soar in Elkhart County early last year as its recreational vehicle industry crumbled in the face of the national recession and high gasoline prices. It hit a high of 18.8% in March.
Navistar CEO Daniel Ustian spoke before Obama, noting his company is more than 150 years old and once had its new technology protected by a lawyer named Abraham Lincoln. The company is now a leader in the production of green diesel trucks and plans to be a leader in production of electric vehicles, Ustian said.
“We have a common goal with the president,” Ustian said. “We want to grow our company and grow jobs and grow our economy.”
The president also appeared to have the goal of answering his critics and breathing new life into some of his initiatives.
“There are those in Washington who focus on the ups and downs of politics,” Obama said. “I’m focused on the ups and downs of the American people.”
In addition to the announcement that the many of the grants for electric vehicles would flow to Wakarusa and other Indiana communities, the president launched into a defense of his stimulus program, education initiatives and most particularly, his drive to reform American health care.
“We will push health reform to the end of this year because the American people need it,” Obama said.
At the end of his talk, the president worked the edges of the seats, shaking hands and exchanging words with workers like Robert Stevens, 34.
“Anything new is good,” Stevens said afterward. “Especially if it’s a new, fuel-efficient vehicle.”
Makers of recreational vehicles and mobile and manufactured homes fared well on Wall Street on Wednesday (Aug. 5), led by RV maker Thor Industries Inc. and by Drew Industries Inc., a maker of parts primarily used in travel trailers and fifth-wheel RVs, according to Investor’s Business Daily.
Thor climbed for 13 consecutive sessions through Wednesday, gaining 30% in July and 14% in August.
On Tuesday, the Ohio-based company said second-quarter earnings fell 92% to 4 cents, a full 60% below consensus views. Revenue dropped to $415.5 million, 41% below year-ago levels.
Despite the miss, the stock climbed 6% Tuesday and another 6% Wednesday in huge trade.
The trigger appears to have been a rising backlog of undelivered orders.
Thor’s total backlog rose 45% to $588 million by July 31, its highest level in two years.
Thor’s RV segment backlog was $298 million, up from $146 million a year ago.
The increase suggests RV dealers have worked through the bulk of an inventory reduction imposed by their lenders, primarily Bank of America and GE Capital, says analyst Bret Jordan with Avondale Partners.
That could mean increasing orders for manufacturers, Jordan says, but it doesn’t show an increase in consumer demand.
Drew, which reported July 31, saw second-quarter earnings drop 71%. That was 300% above analysts’ consensus views.
But the company says most of the surprise came from low-end, towable products, rather than its higher priced fifth-wheel RV lines.
“The RV category is not dead,” Jordan said, “but the consumer has sort of traded down.”
He keeps coming back to northern Indiana, as if magnetically drawn to some ore of truth there.
For the fourth time in 15 months, President Obama will arrive in this blue-collar manufacturing area –this time the town of Wakarusa — to sample the mood of the heartland and bring a message of change. He returns today (Aug. 5) to a community that has been as hard hit as any in this recession, according to the Los Angeles Times.
“Each time he comes here, I keep thinking things must get better,” said Rosalie Collins, 43, an unemployed recreational vehicle worker, as she waited in line at a local unemployment office.
Elkhart encapsulates a key part of the country’s industrial downturn. Unlike the great Midwestern auto towns that are locked with a single industry, the region occupies a slice of industrial America that encompasses a range of manufacturers from musical instruments to high-tech engines.
It is a place that Obama has also found attractive. Elkhart, locals say, is in a traditionally conservative region that has shown a willingness to tilt Democratic. The county backed Sen. John McCain in the last presidential election, but the state went to Obama.
The visit fits a pattern of high-level White House trips to states that are historic presidential battlegrounds. Obama is looking to hold the state in 2012 – and so Indiana is receiving a disproportionate share of his travel time.
Salvation won’t come soon enough for the nearly 16,000 people in a county of less than 200,000 who currently don’t have a job. More than 45% of the businesses in the area are in manufacturing, and one-quarter of those are tied to the RV industry. More than a dozen factories have shut down in the past 12 months.
People here say they have begun to see a slight turn in their world, small improvements and some hiring that hint that the worst may be over. But after so many months of grim news, they are still worried.
“We’ve all been scraping the bottom, and there’s not much left to scrape,” said Loren Begly Sr., 78, a retired truck driver whose six children have all had trouble either finding or keeping full-time work.
Since the late 1800s, when shops building medical products and brass machine fittings crowded along the rail line, the area’s backbone has been its diverse industries.
The region has grown accustomed to economic roller coasters.
It survived after many jobs making musical instruments were moved overseas. It bounced back after gas prices eased and interest in RVs resumed in the 1980s.
It recovered after the Miles Laboratories plant, where Alka-Seltzer and Flintstone vitamins were made, closed its doors in 2001.
“It’s a national icon for economic cyclicality,” said Ken Rosen, chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, Haas School of Business.
The latest cycle is about the worst it has ever been.
No one here could have imagined such hardship was coming when then-Sen. Barack Obama first stopped here in early May of last year in his campaign for the presidency.
When Obama returned that August, he was leading in the polls, and factories across this northern stretch of Indiana were shedding jobs. People were so eager to hear what Obama had to say, they arrived 12 hours early to wait outside of Concord High School.
When Obama came for a third stop in February, he came as a president trying to put a human face on why the country needed to support his $787 billion stimulus package.
Collins had lost her job by then and was scared. Gas prices had soared. Credit had dried up. Unemployment in the city of Elkhart had skyrocketed to 18 percent.
In the months since, the area has poured its resources into searching for the next manufacturer to bring new jobs.
The area has banked on help from the president’s stimulus plan. The county has attracted its share — $38 million approved so far. Of that, the city of Elkhart has had $14 million approved.
Now, there are hints of recovery. Seven area manufacturing companies, ranging from auto-insulation parts and an office-chair maker to RV manufacturers, have announced plans to expand.
On Tuesday, Dometic Corp. said it would put more than 240 people back to work in Elkhart, when it moves a manufacturing here from a factory in Sweden.
Obama is scheduled to speak today at the shuttered Monaco RV plant in Wakarusa.
He will use the trip to announce grants for advanced battery and electric-vehicle production, according to the White House. He’ll also talk about what’s needed to build conditions for sustained growth.
Drew Industries Inc., White Plains, N.Y., Thursday (July 30) reported net income of $2.6 million for the second quarter ended June 30, compared to net income for the second quarter of 2008 of $9.2 million.
The net income decline was attributed to a $50 million decrease in net sales to $101 million, 33% below the $151 million reported in the 2008 second quarter. This decline in net sales resulted from a 44% drop in industry-wide wholesale shipments of travel trailers and fifth-wheels and an estimated 43% decrease in industry-wide production of manufactured homes, as compared to the 2008 second quarter.
“We are very pleased with the substantial improvement in our operating results during the second quarter,” said Fred Zinn, Drew president and CEO. “We continued to gain market share in many of our product categories, introduced several new products, and further strengthened our balance sheet. At the same time, our cost control programs have been expanded and are ahead of schedule.”
“Industry-wide shipments of travel trailers and fifth-wheel RVs for the month of June 2009 reached a seasonally adjusted annual rate of about 148,000 units, greater than any other month this year,” said Jason Lippert, president and CEO of Drew’s subsidiaries, Lippert Components and Kinro. “Industry production levels during the last several months have far exceeded our expectations, and we hope this is related to increased retail demand. Although we cannot predict whether this production level will be maintained, the RV industry is currently in a much better position than anyone expected a few months ago.
“Last year at this time many of our customers began to significantly cut back production schedules in response to lower demand from dealers. While there are uncertainties, it appears that many of our customers will continue to produce five days a week for the next couple of months. Beyond that it is difficult to anticipate demand, particularly during the winter months.”
The company also continues to reduce expenses through facility consolidations, staff reductions and synergies between its subsidiaries, Lippert Components and Kinro. Cost reduction measures benefited second quarter 2009 results by over $2 million compared to the same period in 2008, and are expected to benefit full year 2009 results by nearly $10 million.
New Products Introduced
“We continued to gain market share and introduce new products in the second quarter,” said Lippert. “New products included the debut of the Tow-N-Stow convertible storage unit, and the introduction of the innovative QuickBite coupler. We are currently considering several other new products, and we will take every prudent step to ensure that we increase our opportunity for growth, while maintaining outstanding customer service and product quality.”
Net loss for the current six-month period was $34.1 million. Excluding the first quarter 2009 goodwill impairment charge of $29.4 million, net of taxes, and $3 million, net of taxes, of extra expenses in the first quarter of 2009 related to plant consolidations, staff reductions, increased bad debts and obsolete inventory and tooling due to the unprecedented conditions in the RV and manufactured housing industries, the net loss for the current six-month period was $1.7 million.
Due to the seasonality of the RV and manufactured housing industries, the company’s results in the first and fourth quarters are typically the weakest, while second and third quarter results are traditionally stronger.
“The economy, while somewhat better than during the 2008-2009 winter, remains weak,” said Zinn. “In addition, many RV and manufactured housing dealers and consumers continue to have difficulty obtaining credit, which could make it tough for some dealers during the traditional seasonal slowdowns starting later this year. Therefore, our industries are likely to face additional challenges in the latter part of 2009 and the beginning of 2010. Further, our raw material costs continue to be volatile, declining modestly during the 2009 second quarter, but recently rising by 5-15%, depending upon the type of raw material.”
More than 90% of the company’s RV segment net sales are components for travel trailer and fifth-wheel RVs, with the balance comprised of components for motorhomes, and specialty trailers. The RV segment represented 78% of consolidated net sales in the second quarter of 2009.
Drew’s RV segment reported operating profit of $6.3 million, on net sales of $79 million in the 2009 second quarter, compared to operating profit of $13.0 million on net sales of $111 million in the comparable period in 2008. Excluding sales price changes and acquisitions, the “organic” decline in RV Segment net sales was $43 million, or 39%, due to the sharp decline in industry shipments.
For the first six months of 2009, the RV segment reported net sales of $131 million, a decrease of 44% from the same period in 2008. RV Segment operating profit was $1.7 million for the first six months of 2009, including $2.9 million of extra expenses in the first quarter of 2009 related to plant consolidations, staff reductions, increased bad debts and obsolete inventory and tooling. Excluding these extra expenses, the company’s RV segment had an operating profit of $4.6 million in the first six months of 2009.
“Through acquisitions, new product introductions and our position as an increasingly important supplier to leading RV manufacturers, we increased our product content for travel trailers and fifth-wheel RVs to $2,071 per unit for the last 12 months, compared to $1,891 per unit in the prior 12 month period,” said Lippert. “Our success over the years has been a direct result of our ability to gain market share, introduce new products and improve operational efficiency, as well as our financial strength. We are striving for continued success in each of these areas.”