RV Weekly

The numbers for shipments to dealers for the month of November are finally in. It grieves me to report a measly 6,000 RVs were shipped to the nationwide network of dealers in November. That represents a 71.4 percent decline for towable units and a 75.8 percent decline for motorized units when compared with November of 2007. This probably explains the look of desperation I saw in many of the RV manufacturer’s faces in Louisville this year.

Cumulatively, through November, total shipments are down 30.1 percent from 2008. When I compare the two graphs from 2007 and 2008, the trends pace very similar with a couple big hits in March and October. If the annual pacing trend continues, the good news is we should begin to see things on the rise now that January is upon us and the dealer shows begin. The big question is whether dealers are able and willing to stock up at the beginning of the year for their show season.

Some dealers are struggling to obtain flooring and cash flow is at an all-time low. Dealers may not be able to order from manufacturers in early 2009. Dealers who do have the cash flow to order may not have the confidence to part with what is essentially their safety net.

In other recent news, The Conference Board Consumer Confidence Index showed that consumer confidence hit an all-time low in December. On a whim, I checked to see how the RV shipments graph compared to the graph on consumer confidence. Check out the consumer confidence press release and graph here.

I wanted to see if there was any correlation between consumer confidence and RV shipments. To truly compare the two, you would have to stagger back the consumer confidence data a couple months to allow enough time for any uptick in consumer confidence to translate into dealers restocking units with replacement orders.

Interestingly enough, when examining the two graphs, I didn’t really see any obvious correlation. With all the factors that impact these two, it probably was a little optimistic to think there might have been a pattern there. Even so, I still don’t believe that consumer confidence isn’t directly related to how our industry is doing right now. But maybe this does tell us that available consumer financing is the single most important factor hurting us. What do you think? Is that bigger than consumer confidence?

Lynn Franco, director of The Conference Board Consumer Research Center said, “The further erosion of the Consumer Confidence Index™ reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008. The Present Situation Index is now close to levels last seen in the months following the 1990-91 recession, but is not as low as levels reached during the 1981-82 recession. Declines in the Expectations Index appear to be moderating, but this index continues to hover at historical lows. Both sub-indexes bear careful watching over the next several months to see if they are starting to show signs of approaching a bottom. In the meantime, however, the overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half.”

So the questions remain, will we see an uptick in RV sales in 1st quarter of 2009 like we’ve seen in previous years? Once Obama takes office will consumer confidence rise and people begin spending money again? Have we hit the bottom?

You can’t pick up a paper or go to a single news Web site without seeing some kind of story on the government’s attempt to fix our economy. Now that the prime interest rate is near zero and the first $350 billion has been doled out to financial institutions, one might ask what have we now accomplished? Is it better now than before?

Well, the bleeding isn’t over yet. After many hard fought political battles, we have just approved bailing out the auto industry. We’ve agreed to give $17.4 billion to Chrysler and GMC, and they have three months to come up with a viable business plan. Personally, I’ve never heard of it working that way: “We agree to give you huge sums of money and we want you to come back in three months and tell us how you spent it to become better.” I don’t really see that as a workable plan.

The big question is, should we be bailing out the auto industry? People have strong feelings on both sides. If we don’t, it could lead to Armageddon. If we do, it may just be staving off the inevitable and may be a complete waste of money.

Personally, I’m still stinging a little bit over how the banks and various financial institutions have handled their bailout. A news story today on MSN.com revealed that $1.6 billion of that money went directly into bank executive’s pockets. Some of you may recall a story about AGI sending its employees to a spa and golf outing to the tune of $440,000, less than a week after receiving an $85 billion loan from the government. Read about that here. Another story broken by the Associated Press today revealed that most of the companies that benefited from the bailout either cannot account for, or are unwilling to account for where all that money went. Read that story here.

From my perspective covering the RV industry, I can tell you where it didn’t go – it didn’t open up funds to finance flooring for dealers, and it wasn’t made available for RV consumers to purchase new RVs. In fact we’ve seen many of the financial institutions who serve the RV industry, either pull back, or remove themselves from our industry.

This leads us to the auto bailout. I think we have seen how well the government does in ensuring that taxpayer’s money is well spent. There are a host of rules the auto industry will now face that the financial institutions didn’t, but the government’s track record isn’t very good. It appears that a number of dealerships will have to close for these two companies to become viable. Those dealerships have contracts that will be violated. This means that large sums of our taxpayer’s money will be paid to them to reconcile and part ways.

The RV industry doesn’t always work this way. We have seen a number of RV manufacturers go out of business and RV dealers completely lost out. They are stuck with inventory that has no warranty and finding replacement parts is questionable. Some dealers even now are owed large sums of money for warranty repairs they did in good faith that they will never be compensated for. Thousands of people have lost their jobs in our industry and we haven’t seen any bailout. This makes it hard to empathize with the auto industry.

So, what do you think? Does the government even have the ability to effectively bring the auto manufacturers into viability? Should we bail on or bail out the auto industry? Does this have any implications to our industry, often compared to the automobile industry? Is this issue impacting your decision, as a dealer, as to which RV manufacturers you are willing to partner with?

Due to the high number of responses I received on my “Selling 2010 Product” blog I thought I would take on another topic the Florida dealer sent me.

This dealer explained to me that manufacturer discounting has become more of a problem with the struggles of the current economy. He says that some manufacturers are discounting their stock inventory as much as 50 percent and despite the discount it is potentially hurting current inventory and used unit value.

The Florida dealer wants to know why manufacturers don’t offer a customer rebate like the auto industry. This would drive the customers to purchase what the dealer has in stock and then the dealer would reorder the product. He suggests that manufacturers give the customer a $5,000 or $10,000 discount and not the dealer so all dealers can compete on the same level.

To get a healthy discussion on this topic started, let’s hear what you think. Do you think by discounting too much, manufactures have created a game of ‘who can buy it the cheapest?’ Do you feel this process has created more of a negotiation when purchasing from the manufacturer? Are dealers holding off purchasing product to wait for a better deal?

*Editor’s Note* I would like to have a healthy, constructive discussion about this topic, so please refrain from commenting simply to “bash” manufacturers.

Last week while I was preparing to fly home from the RVIA National RV Trade Show I received an interesting e-mail from a Florida dealer. This dealer wanted to know why manufacturers are producing 2010 product now.

Based on the communication I had with this dealer, I wanted to get a discussion going about the pros and cons of producing 2010 product now. Some of the questions we discussed were:

•Does producing 2010 product devalue the 2009 product?

•Should dealers only be allowed to purchase 2010 product at the 2009 Louisville show?

•With the current economic situation is this an opportune time to hold off on producing for next year?

•Does anyone really benefit from producing 2010 product now?

I would like to encourage a discussion on this topic and would like to hear from as many interested parties as possible.

Highlights from the 2008 RVIA Show

In walking the show and speaking with both attendees and exhibitors during the past several days a single question reverberated throughout the show – “What are you hearing about attendance?”

According to RVIA, attendance was down 37 percent. There is no doubt that this is a dismal number, but writing off the show as a flop would be mistake. Manufacturers and other exhibitors report that they did indeed write orders at the show. In speaking with dealers, many of them report that despite what many might think, dealers often place their orders long before the show. In speaking with Kelli Harms of Winnebago, she told me that the company doesn’t really attend the show with the intention of it being the crucial sales event of the year for the company. Based on what other dealers tell me this is probably true for many of the manufacturers.

Speaking of Winnebago, I was very impressed with their new 2010 Class A, the Via and its Itasca counterpart the Reyo, built on a Dodge Sprinter chassis with a Mercedes Benz diesel engine. With the 15-plus miles per gallon the Via offers, it officially gets better gas mileage than my 2001 Jeep Cherokee.

Both Winnebago and Fleetwood introduced Class A hybrids at Louisville that are a very exciting advancement for the industry. The hybrids are built on a new Freightliner ecoFRED chassis and offer fuel saving of more than 40 percent. This is an important advancement as our industry begins to focus on providing greener products.

A number of suppliers and aftermarket manufacturers introduced new products that also go along the green theme. This shows that the industry is diligently working to produce the kinds of products that are customers will soon be demanding.

Overall the show was a great opportunity to identify where other members of our RV business community are heading. New business opportunities exist and the general consensus is we are not out of the woods yet, 2009 will be a very challenging year but many companies are positioning themselves to weather the storm.