RV Weekly

What happened to the RVIA seals on some recreation vehicles being shipped to dealers? Did the seals fall off while being transported to the dealers’ lots? Did the manufacturer run out on the assembly line? Is RVIA redesigning the seals and waiting for the initial print order from the manufacturer? Or is something more sinister involved?  Where is Chief Inspector Jacques Clouseau when we really need him? Rumor has it that some RV manufacturers have discovered a loophole around building RVs that meet the RV Industry Association’s stringent safety and quality standards. These units are easily identified by the lack of an RVIA seal near the RV’s main entrance door. What’s unusual is that some of the manufacturers with seals missing on their units are actively involved with RVIA and even display units at the National RV Show in Louisville. The issue came about when dealers started noticing seals missing on some units parked on their lots. There is a provision in the RVIA bylaws in which members are required to display “the applicable Membership Identification Seal on all vehicles to which the standards are applicable…” Therein lies the loophole. It’s been pointed out to me that RVIA doesn’t require a seal on travel trailers over 340 square feet. As a result, several manufactures are building RVs without having to submit to or be challenged for complying with RVIA standards. 

I haven’t received a response from RVIA regarding the existence of this loophole. But, if it is true, it doesn’t make sense. RVIA loses money by failing to enforce their seal requirements. It’s also a public confidence/public relations problem. Overlooking the ability of some manufacturers to build a unit that doesn’t necessarily meet industry standards would actually give some members preferential treatment over others who play by the rules. Ignoring seal requirements doesn’t sound like something RVIA would knowingly do. I understand that some companies building emergency shelter units post-Katrina successfully argued that they shouldn’t have to purchase seals for units that were never designed to be recreation vehicles, i.e.: they contain no septic holding tanks. Not requiring seals in those instances would make sense for the industry. After all, we wouldn’t want any RV built to substandard specs to be officially recognized by the industry. To do so would give consumers the wrong impression of what a recreation vehicle really is. But, in other instances, a missing seal signals trouble for any RV dealer who opts to carry the unit on his lot. Why? Liability. Imagine if a dealer sells an RV that does not bear the official seal of the RV industry – an insignia that tells consumers the unit was manufactured in accordance with strict construction standards adopted by industry experts. Now imagine if the person buying the “unsealed” unit is seriously injured or killed while using or towing the RV. I’d suspect the legal vultures would descend upon the dealership to find out why they were selling RVs that were knowingly constructed in a way that did not comply with the strict requirements established — and enforced — by the RV industry. As one reader pointed out, “If a dealer sells 90 percent of his units with seals on them and 10 percent of his units don’t have seals, is he not selling something he knowingly admits does not meet minimum acceptable standards and, therefore, does not qualify for the RVIA seal?” 

A dealer who is sued over a safety issue involving a sealed unit may stand a better chance of deflecting more liability to the manufacturer who can defend itself by pointing to the industry requirements. But, a dealer selling an unsealed unit may be left hanging from a lamp post by a manufacturer who simply shrugs its shoulders and tells the court, “he knew what he was buying and selling.” The bottom line is how much is a deal really worth? If a dealer is willing to put his company’s reputation and his personal financial security at risk to sell a trailer for $300 or $500 less than models that meet RVIA standards, perhaps he gets what he deserves.  But my guess is that most dealers don’t even realize that some RVs are being built without the industry’s official seals – especially if he carries other products from the same manufacturer that bear the seal. It might be a good investment of time on a slow morning to have the sales staff sipping coffee while walking the lot to verify that every RV on that lot bears the seal of the RV Industry Association. If they find one missing, it would be worth a phone call to the manufacturer to discover why they are building units that aren’t up to industry standards and then to learn what that unit in particular is lacking that prevents it from being officially endorsed by the industry. At least then the dealer can make an informed decision as to whether he wants to assume that risk. 

I’d also be interested in knowing which manufacturers are shipping units without seals – as would my other dealer readers, I suspect. Some manufacturers might even be interested in knowing which of their competitors are building substandard products, although I suspect a few may already know.  What we need is a really good seal sleuth.  

In the May issue of RV Trade Digest, my editorial discussed how I considered Lazydays RV SuperCenter to be a well-rounded dealership. I made the statement after reviewing the dealership’s year-end financial report and discovering they had developed a good variety of revenue streams which I felt would help the dealership maintain its viability regardless of the economy.

I still consider Lazydays to be one of the best run dealerships in America, but several readers have taken me to task over my conclusions regarding the dealership’s profitability.

One reader, a motorcycle dealer in Nebraska said he was “blown away” by Lazydays’ profit numbers. He believes any dealership that boasts of bringing in $757 million in sales in 2006, but only drops $1.8 million to the bottom line is “unsustainable.” By his math, Lazydays retained just 0.24 percent of their annual income.

He said, “In the motorcycle dealership world, we have learned that anything below a 3 percent net profit will most likely have a negative cash flow.  A little inventory growth and a little shrinkage plus some income taxes will typically eat up at least 3 percent.  I don’t think our business is that different from RV dealers, apart from the larger sales amounts. 

“Even if they could get by on 1.5 percent instead of 3 percent, these guys are in trouble!  They earned 0.24 percent.  This means for every $100 a customer spends, they are only able to keep 25 cents!  I don’t care how good you are, that is cutting things way too close,” he added. “If anything happens – prime rate increase, a minor shift in the value of used units, a sales tax audit, discovery of employee theft, anything at all – that 25 cents is gone.”

The motorcycle dealer noted that his company sold $11.5 million of product last year, and retained $700,000. Another motorcycle dealer in his area sold $30 million in product and retained nearly $3 million in net profit.

“We have the same departments, job functions and titles, the seasonality and the fact that we are selling expensive toys that people don’t really need to people who tend to be passionate about their hobby,” he said. “If Lazydays’ profits are exceptional, I am glad I chose motorcycles.”

On Monday, Lazydays announced its first quarter financial statement. In it, they reported sales of $246 million and kept $1.1 million for a net profit percentage of 0.0045 percent, or 25 cents profit for every $100 in sales. In hindsight, that does appear low.

However, I suspect that Lazydays hires a horde of accountants and tax lawyers that help them determine ways to maximize their deductions in order to reduce their tax liability. Isn’t that what any good business owner would do?
In looking at their most recent financial statement, a few things jump out.  First, their receivables went from $3.7 million in 2006 to a credit balance of $9.7 million. Second, their inventory level went from $15.8 million to $8.4 million. Third, payables shot up from $4.42 million to $9.53 million. Finally, the dealership’s floorplan payments dropped from $27 million to $13.5 million.

Yet, when all the dust settled, The company still made a profit of nearly $3 million and had $4.3 million in cash on hand at the end of the quarter. To me, this still sounds like a well-managed dealership firmly in control of where it wants to go.

Am I missing something?

Despite three record-breaking years in a row for the RV industry, Type A motorhomes have seen some tough sledding in a market buffeted by rising gas prices, lower interest rates and declining home values. But all that may change soon, if 2008 model introductions are any indication. In 2004, the industry sold 71,800 motorhomes which represented 19.4 percent of all RV deliveries. Type As accounted for 46,300 of those units or 12.51 percent of all RVs delivered to dealers. In 2005, a total of 61,400 motorhomes were delivered representing 15.97 percent of the total market. Type As represented 9.86 percent of all units delivered in 2005. Last year, 55,900 motorhomes were delivered to dealers, which equal 14.32 percent of the total market. Type A deliveries represented only 8.37 percent of all units delivered to dealers.  

While total deliveries may have set records year after year, dealers selling Type A motorhomes lost sleep and a significant percentage of their annual profitability. Many dealers abandoned the motorhome market – something they may regret this fall. This year Type A deliveries are the bright spot for the industry.  Through March, deliveries were up 3.4 percent for the year while nearly all other market segments were reporting near double-digit declines or worse. In fact, 14,600 motorhomes were delivered during the first quarter, which represents 15.6 percent of all deliveries. A total of 9,000 Type A motorhomes were delivered so far this year, representing 9.62 percent of the entire industry — and nearly tying 2004 delivery levels. What’s behind the change? There are two reasons, both dealing with chassis. First of all, Workhorse introduced its highly flexible Universal Fuel Option (UFO) chassis at last year’s Louisville show and manufacturers are just starting to get product onto dealer lots.  This chassis gives buyers the option of selecting either a rear diesel engine or a rear gas engine. Either way, the rides are extremely quiet and the units remarkably easy to handle. Best of all, the completely flat floors offered by the UFO chassis opened up whole new avenues for RV designers to create innovative floorplans without taking into consideration the traditional humps and bumps that have greatly limited their design efforts. 

Combine a flat floor with a full wall slide and consumers apparently have fallen in love with Type A motorhomes all over again. Not to be outdone, Freightliner today introduced its XCL Series Maxum chassis at the Winnebago Dealer Days event in Las Vegas. It’s a modified raised rail chassis that is seven times stronger than typical raised rail units. Its lower center of gravity improves ride and handling, especially with a 60-degree wheel cut. But the real power behind this unit is its storage capability. The Maxum’s inverted design creates a total of 220 cubic feet of storage underneath the coach. That’s a lot of space for golf clubs, folding chairs, suitcases, pull-out slides, charcoal bags and sassy children.  Did I mention that the Maxum is also a diesel chassis which not only allows consumers to save some money at the fuel pumps, it also gives Winnebago a chance to significantly improve its performance in the diesel market where it’s share of sales is half its industry-leading gas market share.  In an industry which often considers changing interior colors and exterior paint schemes to be model year innovations, it’s nice to see that manufacturers and suppliers are working together to make things happen in a way that excites consumers and drives traffic to RV dealerships. While Winnebago Industries is often on the leading edge of product innovation, I’m willing to bet that other manufacturers will quickly follow suit to create units that fully capitalize on the floor plan options and basement storage capacity these innovative chassis offer. This year’s National RV Show may be the site of some breathtaking innovation that has the potential to stop the stall of Type A sales and reinvigorate a buying public hungry to travel in style with all their toys.

I’m convinced it’s easier to separate Siamese twins joined at the head and chest than it is to separate government entities from what they think is their God given right to forcibly collect money from citizens that appoint these yahoos to office in the first place. The latest abuse at the public trough comes in Texas. Not all of Texas mind you, but just two counties whose leaders seem genetically predisposed to ignoring not only public sentiment, but the rule of law as well. 

According to Associated Press reports, lawmakers in Texas have twice passed bills that exempt travel trailers from property taxes assessed by Texas counties. Voters have also twice approved constitutional amendments exempting travel trailers from property taxes. So, wouldn’t you think the issue would be settled? Not in Hidalgo and Cameron counties which are, not surprisingly, little islands of insignificant blue in a massive red state. Lawmakers and elected officials in those two counties feel that travel trailers should be taxed as “property” and its owners forced to support the local school district for an entire year – despite the fact the childless “Winter Texans” live there only four months a year. These part-year residents can’t even vote out the clowns that are nickel and diming them. 

Ironically, campground and RV park owners in those counties already pay property taxes for the sites AND the RVers who buy park models and travel trailers in Texas must pay sales tax on the units. The counties are assessing the RV owners for “improvements” to the property created by parking an RV on a site and maybe adding a deck. Hidalgo County assesses property owners 59 cents for every $100 in property value. One news report suggested the value of RVs in the county totaled $48 million. That means, the county would lose $283,200 in tax revenue if they exempted RVs from the property tax.   

When you add all the taxes, fees, assessments, fines, admission charges, permits, levies and other revenue-generating “contributions” at the county’s disposal, the total Hidalgo County budget is $132.5 million.  But, that’s just the county’s “general fund.” Hidalgo County has 48 other separate “funds.”  My elementary math suggests that eliminating the $283,200 in revenue generated by taxing Winter Texans would amount to a budget reduction of two-tenths of one percent. In response to pleas for tax relief by RV owners, county judge J.D. Salinas wants to meet with RVers to develop a “phase out” approach to eliminating the tax so the county wouldn’t be hit “so hard” with the 0.00214 percent income reduction. 

I suspect it would take a Caterpillar 579 Trailer-Mount Knuckleboom Loader to extract Judge Salinas and his associates from the public trough. Texas RVers are hotter than a jalapeño in August. They’ve drawn a line in the sand telling the counties they will go elsewhere rather than be subject to double taxation. RV owners have formed the Upper Valley Homeowners Association to lobby a third time for tax relief. They are also planning to pool their money for a massive nationwide advertising campaign to tell other RVers they aren’t welcome in those Texas counties. I suspect they’ll find a sympathetic media that will help them get as much publicity as they can. 

When RV owners met with tax assessors in March to voice their objections, the government agents smugly told them the appropriate time to protest the assessment is in June, when Winter Texans are back swatting mosquitoes in their home states. By maintaining their hard-line approach to collecting $283,200 from RVers, the county stands to lose significantly more if the RVers launch a boycott. A study by the University of Texas - Pan American found that 150,000 retirees pump more than $400 million into the local economy with shopping, dining out and other spending. At an 8.25 percent sales tax rate, the state and county collect $33 million from retirees.  Hidalgo County’s share alone is $10 million – 35 times above the amount collected by shaking down RVers for property taxes.  

Common sense would suggest that county officials would benefit more by figuring out a way to attract additional childless big spenders who don’t commit crimes to the area. But don’t hold your breath. 

The power to tax is the power to destroy. Yet, in this instance, perhaps the county will end up destroying the golden eggs deposited by golden geezers who are being forced to flock toward a more hospitable environment.

I’ll admit I’m stumped. As I reviewed the shipment report released Friday by the RV Industry Association, I was left wondering what happened to the travel trailer segment.

The March shipment data revealed that nearly every market segment was down by double digits:

• Travel trailers, down 18.7 percent
• Fifth wheels, down 14.1 percent
• Although folding campers were even in March, for the year they were down 17 percent
• Even truck camper sales were down 22.2 percent last month

In asking around, some have speculated that dealer inventory was simply too high earlier this year and that they have put off reordering new product until the 2008 models are introduced.  Some companies, like Fleetwood, are already introducing their 2008 lines. But, if that’s the case, what are dealers selling until the 2008 models arrive on their lots?

In talking to dealers, they tell me that although January and part of February was slow, nearly everyone said that March was one of the best months they’ve had in a while.  If so, why would shipments be down double digits in most categories?

Could it be that manufacturers got caught off guard by a sudden spring surge and they weren’t able to gear up production quickly to generate replacement units? So, although demand for units may have been high, shipments to dealers were down because units couldn’t be built fast enough.

Fuel prices have traditionally impacted motorhomes as people erroneously think that it will cost them an arm and a leg to travel a few hours to enjoy a weekend away in their motorhomes.  Dealers are usually able to set consumers straight when they take time to come onto the lot, and it looks like they are succeeding.  Type A motorhomes were down only 2.7 percent in March, but up 3.4 percent for the year. 

A quick glance at the campgrounds surrounding the Texas Motor Speedway a few weeks ago showed just how popular RVing remains, at least with the NASCAR crowd. You could almost walk roof-to-roof for miles on all the motorhomes crammed into the parks. 

The shipment decline still can’t be an adjustment due to Katrina units, can it? By March 2006 most of the FEMA trailers had been already been sold to the government.  I know RVIA went to great lengths to separate the Katrina units from routine sales to prevent data from being skewed. Could it be that this downward trend in travel trailer shipments is directly due to the fact the government is selling thousands of used FEMA “RVs” to unsuspecting buyers? 

Type C motorhomes were down 13.6 percent in March and for the year — and that’s also confusing. If gas prices were the issue, why were the more fuel efficient Type Cs getting hammered while demand for the larger units was increasing? Perhaps consumers were adopting the attitude of a gentleman responding to last week’s blog when he said in response to the “hostage-to-Big-Oil” game that’s being foisted on everyone, “Screw ‘em!! Fill the tank up anyway and go support your nearest campground owner and have a lovely weekend! Ya’ll honk as you go by.”

Demand for Type B motorhomes, which are very fuel efficient, is up considerably this year.  Even though it amounts to only a 300 unit increase over last year, a 42.9 percent increase is hard to ignore. But, when it comes to expense of ownership/operation, what’s the difference between traveling in a Type B motorhome and hauling a travel trailer?  

So, as hard as it will be for me to just shut up and listen for a while, I’m truly interested in any theories as to why travel trailers are dropping while motorhomes appear to be on the rise.