Someone needs to get a real job
News that a major stockholder was advocating the sale of Fleetwood Enterprises came as quite a shock to company executives gathered in Las Vegas Monday for the company’s annual dealer event. When someone who owns 11.8 percent of a company’s stock advocates the sale of that company on the same day corporate executives are traveling to meet with the very people who generate bundles of money for the firm, you’ve got to question the timing of such a suggestion.
Monday, New York City investment company SLS Management released a letter to the Fleetwood Board of Directors. Signed by Scott L. Swid, managing partner of the group, it advocated the sale of Fleetwood not just to the highest bidder, but to a specific company — Champion Enterprises. For those unfamiliar with the mobile home and modular housing industries, Champion is a key player in an industry losing money almost as fast as FEMA.
Here’s a quick financial snapshot for Champion Enterprises:
- 2006 = $1.36 billion in sales netted $43.1 million in profit (3.2 percent to the bottom line).
- 2005 = $1.27 billion in sales netted $45.5 million in profit (3.6 percent to the bottom line).
- 2004 = $1.01 billion in sales netted $17 million in profit (1.7 percent to the bottom line).
- 2003 = $1.14 billion in sales netted a $40 million loss (the last profitable year being 1999)
Fleetwood, by comparison, reported these results:
- 2006 = $2.01 billion in sales netted a $90 million loss
- 2005 = $2.43 billion in sales netted a $28.4 million loss
- 2004 = $2.37 billion in sales netted a $161.5 million loss
- 2003 = $2.36 billion in sales netted a $22.3 million loss
In other words, over the past four years, Fleetwood has logged $9.17 billion in sales compared to Champion’s $4.78 billion. But, Champion returned a profit of $65.6 million (1.4 percent of sales) while Fleetwood posted a $302.2 million loss. Okay, so Fleetwood has struggled a bit. But is Champion the model company SLS Management really wants the RV industry to emulate?
SLS Management produces nothing but financial statements and, apparently, letters to boards of directors for companies that don’t earn this freeloading firm enough money fast enough. Besides having contributed $4,600 to Hillary Clinton’s campaign so far this year, Swid’s job is similar to that of the Gordon Gekko character in the movie Wall Street. He also served on the finance and budget committee of the left-leaning Council on Foreign Relations, a group of “experts” who offer advice to government leaders (people elected to real jobs) on critical issues like the ”scant progress made for Afgahn women,” or who advocate that U.S. drug companies be denied patents for new life-saving medicines until they renounce those patent rights in poor countries.
According to an article that appeared in the Financial Times June 6, 2001, “SLS Investors is run by Scott Swid, whose father, Stephen Swid, was a pioneer in the leveraged buyout market. Hmmmm.
But Mr. Swid isn’t the key focus, SLS Management is. Perusing the Securities and Exchange Commission website, I had a chance to review SLS’s last few quarterly reports. Besides owning stock in Fleetwood, SLS also owns shares in Alcoa, Burger King, Citigroup, Comcast, Dell, E-Trade Financial, Ford, Gap, Herbalife, Kraft Foods, Macy’s, Motorola, Sandisk, Sears, Suntrust Bank, UAL, Wendy’s and a dozen others. So naturally, this company’s expertise clearly lies in the production and sale of recreation vehicles. (You can view SLS Management’s annual reports by clicking here.)
Digging deeper into the financial data, I discovered that SLS, despite losing money with Fleetwood, has consistently increased its shares of Fleetwood stock.
- June 30, 2004 = 494,199 shares
- Dec. 31, 2004 = 687,000 shares
- Dec. 31, 2005 = 3,774,501 shares
- Dec. 31, 2006 = 7,777,208 shares
- June, 30, 2007 = 7,588,590 shares
In fact, according to its June 2007 filing, SLS Management owns more shares of Fleetwood than it does any other company in its portfolio; Ford being second with 6.7 million shares and Lawson Software at 4.4 million shares.
But, during the same time, the company also acquired a number of shares in Champion.
- Dec. 31, 2006 = 518,872 total shares
- March 31, 2007 = 1,250,300 shares
- June 30, 2007 = 1,681,700 shares
So, in less than a year, SLS Management/Scott L. Swid have discovered Champion Enterprises, fallen in love with the company and tripled its investments in it. So enamored with Champion’s ability to generate $65.6 million in profit on $4.78 billion in revenue, SLS believes the Fleetwood board of directors should roll over and sell its $9.17 billion company to Champion.
Who stands to make the most money in this deal? Sounds like an attempt at market manipulation to me; and fiendish trick to play on Fleetwood on the eve of their dealer conference where several new brands and models will be announced. It makes me wonder if Scott L. Swid or SLS Management has an axe to grind with Fleetwood executives who will no doubt be ambushed at their dealer meeting by investors and others who have read Swid’s ridiculous recommendation, which you can view by clicking here.
Someone needs to get a job. As a shareholder in Burger King and Wendy’s I suggest that Mr. Swid start there.
Maybe if the company had ever manufactured something, we could take their recommendation seriously.
September 5th, 2007 at 10:21 am
Fleetwood has long lost the support of dealerships. I say dealerships because the owner or dealer who has Fleetwood running in their blood for so long, pines for the day they come back. The rest of the dealership however, just want it off their lot.
They do not make a good sell able product at a competitive price. They do not pay warranty. Fleetwood does not care for any of their employees. How many salesmen and parts and service people have left or been let go over the past 10 years?
Fleetwood is a mess and will continue to be a mess as long as they keep doing the same thing that got them in the mess.
Bret Folkman
September 3rd, 2007 at 9:14 am
I respectfully disagree with this statement Barry;
“Long forgotten is the customer that wants a quality product or at the very least, value for what they pay…it’s more important to build cheaper products that won’t last long so you have to buy another one in 3 years. Just so it looks good seems good enough for them.”
As long as the RV industry holds this perception of themselves, their customers and their products, then we will continue to do the same things that created this situation in the first place.
The problem is the way we market and sell RV products. History has proven that people will pay for quality when there is “real” quality to be had. People are not stupid, they understand the quality issues surrounding many products in the RV industry and they will fight you on price when that is the only thing you have to hang your manufacturing hat on!
In every other consumer purchase, a person will spend their hard earned money on quality products, whether it is a car, house, kitchen appliances, or tools. I don’t know why the RV industry continues to have a problem with this fact of everyday life.
If dealers continue to sell on price, then they have nobody to blame but themselves for the problems and perceptions that come along with this attitude.
Selling value will never go out of style, if you have the value and reputation that your products deserve. You can’t “hope” that people understand value, it must be demonstrated throughout the pre-sales, sales, and post-sales activities that each dealer and manufacturer put into the making and selling of RVs.
August 31st, 2007 at 11:48 am
Corporate America, and unforunately you can include almost any company that makes a product that rolls on wheels, has completely forgotten what made it great.
Long forgotten is the worker that makes the product that the masses want to buy…they cost too much money, much better to quit production in American and have it made by cheaper foreign labor overseas.
Long forgotten is the customer that wants a quality product or at the very least, value for what they pay…it’s more important to build cheaper products that won’t last long so you have to buy another one in 3 years. Just so it looks good seems good enough for them.
Long forgotten is corporate pride…but then again that comes when you are really proud to have your name or face on your product because it stands for something. I feel that most corporate leaders only look at the name on the front of the building they work at, as the place they’re at until something else better comes along…it’s the old, “If I make a monster hit here, then someone else will come along and offer monster money for me to do it for them.”
Not forgotten, is the stockholders and the top management…and top management’s bonus programs. I would think it’s safe to say in today’s corporate world, that when a decision is being made, that more thought is put into those two ideas, than into what’s good for the product, the worker, the customer or our country.
When Fleetwood closed factories in both the U.S. and Canada, using the excuse of poor sales and then turned right around and opened new ones in Mexico, how could it be any other way? Cutting back production in the face of poor sales is something anyone can understand, in any industry. But, this was nothing more than corporate greed.
August 30th, 2007 at 12:25 pm
If these comments are representative of the people who work in the industry, and obviously talk to others in the industry, then can we assume that the consumer reaction is quite the same - perhaps even worse - and this is also contributing to the downward spiral that Fleetwood has been experiencing for several years? Surely there must be some divisions or models (perhaps American Coach) that don’t rally fit this profile here and might be cash creation opportunities if sold off, per Mark’s comments. If this is truly representative of how many in the industry feel, then there are some tough decisions to be made in Riverside, or wherever their new corporate headquarters winds up being located.
August 30th, 2007 at 10:01 am
Rarely has a company as large Fleetwood, been mismanaged for such a long period of time. Its fall from #1 to where it stands today is legendary. Time and time again, poor choices were made with regards to bringing the latest floorplans to market quickly, de-contenting and price point. Complacency led to poor quality. In the end, all that will remain are Fleetwoods brands after they are divided and sold to companies like Thor and Forest River.
August 29th, 2007 at 7:14 pm
Maybe the demise of Fleetwood started back when it became popular to knock off good US suppliers with well engineered products for cheaper “made in China” items. Fleetwood did this on a number of times and their final products are a direct reflection. Look at their customer satisfaction numbers drop over the past 5 to 8 years. Quality products reduce warranty issues and increase customer satisfaction. The focus should be on the customer not on building products cheaper. What goes around comes around and almost always you get what you deserve.
August 29th, 2007 at 3:26 pm
Gene;
I wasn’t actually comparing Swid to Buffet per se. I was merely drawing a parallel based upon the fact that one doesn’t necessarily need to know much about manufacturing to purchase a manufacturing entity and be successful (Buffet). If you’re making the purchase for investment purposes then you’re knowledge base can be more about financials then production.
Fleetwood is indeed one of the best known names in the industry, but your assessment about having a quality reputation is perhaps a bit behind the times. Take a look at the numerous RV forums on the internet and you’ll find that’s not the consensus opinion, which perhaps mirrors what you’re likely to find in the campground as well. That’s the primary reason why I think it’s sad what they’ve become, because of what they once were.
August 29th, 2007 at 7:43 am
Hey guys, this whole story exudes the feeling of one of Corporate America’s shell games. Wall Street bankers, allong with some Government agencies, are very good at playing this game. But I agree with Bob and others on the veracity of this move by SLS. I seriously doubt that Swid and SLS can be compared to Warren Buffet and his buy-in to Forrest River.
Fleetwood is one of the best known names in our Industry. They have an established reputation for quality and I say that not just because I own one of their products.
All that said, I suggest that Fleetwood management shake off the bad press and hunker down and move ahead.
Gene
August 28th, 2007 at 3:36 pm
One does wonder why anyone would want a company that shoots itself in both feet buy closing domestic plants, throwing folks out of work & commencing operations in Mexico…we all know how popular Mexico is right now; and, who could argue the quality of their products?…Besides, Fleetwood could have boasted about their stuff being made by Mexicans without leaving town - just hire the illegal aliens…Or, could it be that Champion actually knows how to run a company; and, SLS figures their leadership could turn Fleetwood around?…Only my opinion, not to be confused with reality.
August 28th, 2007 at 3:28 pm
[i]I would guess that Mr. Swid has never been inside an RV and probably has no clue on how to make them or sell them.[/i]
One could say the same thing about Warren Buffet, but that didn’t stop him from buying Forest River. It’s always wise to know what the company you’re buying actually does, but since Buffet is pretty good at investing it seems certain people can skirt that issue and still come out on top. Now, I’m not saying this guy Swid isn’t some kind of leech — for all I know he may very well be — but his motive could also be to make a change for the better.
As you noted by Fleetwoods financials the company has been hemorrhaging money for years. It’s products are no longer regarded very highly, it’s customer service is widely reviled, there’s far too much duplication in their products, the list goes on. To be honest, it’s kind of sad how far they’ve fallen.
Quiet clearly, Fleetwood needs to do something. Perhaps a new owner is the answer. Could Champion possibly do worse?
August 28th, 2007 at 2:40 pm
I would guess that Mr. Swid has never been inside an RV and probably has no clue on how to make them or sell them. If he didn’t like the company why did he keep buying more of their stock? Perhaps to just manipulate it further down the road and play games with another of their investments. Was the announcement poor timing? I doubt it. It sounds like a carefully orchestrated attempt to embarrass the executives of Fleetwood on what should be a great occassion - a meeting with the dealers who will be responsible for delivering the Fleetwood message to consumers interested in buying the companies products. I guess his Dad taught him a few of Wall Street’s inner secrets along the way. Can you park RVs on Wall Street?
August 28th, 2007 at 12:11 pm
Great story. Greeedddyyy Wall Street.