RV Weekly

The one positive thing about a down-turn in our industry is that it forces creativity. Innovate or die. Although sad to see, a shake out may not necessarily be a bad thing for our industry and the companies who weather the storm.

Freshly returning from Winnebago’s dealer days in Las Vegas, I heard a number of ideas and product innovations leading me to believe the company will continue to hold its own in the motorized category with its 2009 Itasca and Winnebago brands. This being recently-appointed Bob Olson’s first dealer days as Winnebago’s Chairman of the Board and CEO, it appears that Bruce Hertzke has left the company on very solid ground. The company has its facilities paid for, has no debt and reportedly has plenty of money in the bank for innovation in coming years.

Winnebago announced that it has decided to “hold the line” on pricing for diesel models on the 2009 lineup. This means dealers will offer the company’s brand new models (with upgraded features) for last year’s model prices — a strong selling point in what will surely be a competitive market this year.

When it comes to product upgrades, some models will feature Winnebago’s all-new global positioning system (GPS) called the GPgo. The unit includes a removable Alpine GPS unit for use outside the RV with an in-unit docking station for the driver while traveling. The touch screen can be viewed and operated by both drivers and passengers heading down the road. The GPgo has been added to the Winnebago Journey, Tour and Vectra models and the Itasca Suncruiser, Latitude and Meridian.

Other Winnebago innovations include a new body–conforming mattress, an expanded offering of the company’s RestEasy theater seating module and the Dream Dinette that has been popular of late with various manufacturers.

Foretravel President Lyle Reed has his own ideas for weathering the storm. In a letter recently posted on the company’s website, he announced a new “Freedom to Drive” program for any new 2009 Nimbus or Phenix units ordered or purchased from May 15 to June 30. The program reimburses consumers for some fuel costs during the warranty period as well as pays for normally scheduled maintenance and service on coaches. To sweeten the offer, the company has lengthened the warranty periods for some of its models.

Offering creative pricing, new gadgets and free gas are only a few of the ways companies are pushing through this year’s challenges. Fleetwood Enterprises recently sold both its corporate headquarters and folding camper division to raise $100 million for an up-coming bond redemption. While those moves may appear to be signs of desperation, in 2007 the company was the market leader for Class A motorhomes and has a number of options available to push through the slower season.

Coachmen Industries is taking an entirely different approach. The company is borrowing against the value of its own employees’ life insurance policies. Reportedly, Coachmen tapped roughly 50 percent of the value of those policies according to filings with the Securities and Exchange Commission.

Those are merely a few of the different ways manufacturers are addressing present economic conditions. I’d love to hear your thought on these and any other ways companies are changing the way they do business to do what it takes in 2008. As Winnebago’s Olson said at the dealer meeting this year, it is important for dealers to align themselves with strong business partners to ensure they are not left holding the bag when a manufacturer goes belly up.

Thanks for participating in this week’s blog.

While GE Money intends to keep intact the flooring programs it currently offers dealers, the company has decided to exit consumer finance of RVs and boats. GE has extensive relationships with both Thor and Monaco Coach who are directly impacted by this move. I am told that Thor will be given a period of time to find a new lending partner and a letter recently sent to dealers from GE said it may continue financing “eligible products” for Monaco Coach. New credit applications were accepted through May 5 with funding continuing until July.

I’ve also been told that loan delinquencies on RVs are up, which has kept interest rates high despite the recent rate cuts by the Fed. When you add in that credit lending has tightened (check a recent MSN story on it here) significantly, selling an RV has gotten a little tougher as of late.

How do you think GE’s departure will impact your business and our industry on a micro and macro level? Will other companies quickly pick up the slack with no real impact, or will there be a gaping hole left by the third largest lending institution exiting the industry?

March is the month when a good portion of RVs come rolling onto dealers’ lots. In fact, March is the biggest month of the year for RV shipments. Dealerships are stuffed to the gills with brand new inventory and advertising efforts kick into high gear to move it off lots.

This March was a little different because the units trickled in to dealers instead of having a mass March product infusion. The recent data from RVIA shows that March new unit RV shipments in every category were down. Motorhomes topped the list with a 35 percent decline from last year and towables were down by almost 10 percent. Check out the numbers here.

Some claim that towable RV sales are directly linked to truck and SUV sales. I think they are related but so many factors play in to it. It is difficult to compare RV new unit shipments to truck new unit shipments because of distribution differences within the two industries but we can look at new unit sales for tow vehicles.

New truck and SUV sales universally dropped by double digits in March. General Motors’ March truck and SUV sales were down 22 percent. Ford reports March truck and SUV sales dropped 16 percent. Toyota Motor Corp. says March was down 14 percent from same month sales in 2007. Nissan was down 20 percent and Honda was 12 percent.

According to the American Bankers Association, consumer’s auto loan payments made to dealerships (indirect auto loans) are being made late at the highest rate on record—3.13 percent. Late auto loan payments to banks (direct auto loans) are at a 2-1/2-year delinquency high of 1.9 percent. In essence more people are having a tougher time making their truck payments. On the bright side, this means that 97 percent of consumers are doing just fine paying their truck loans. Hopefully, they will have extra cash to add a new RV as well.

The drop in new unit RV shipments could mean a variety of different things. It could mean dealers already have plenty of RVs for the busy summer season and their days inventory has increased, so they have no need for new units. It could mean that dealers are anticipating selling fewer units this year and see no reason to incur interest charges on units that they believe will just sit for a lengthy period of time. It could also mean that manufacturers are delivering units a little later in the year and we will see a surge of shipments in April or May.

Interpreting the data can be done any number of ways. It would be interesting to see how dealers from different parts of the country perceive the data. It would also be interesting to read dealers’ perceptions on how tow vehicle sales will impact this year’s RV sales. Do decreased truck and SUV sales foreshadow tough times for the travel trailers and fifth wheels?

Nearly 10 years ago, the Committee of Excellence conducted a study to see how happy RV consumers were with their overall RV recreational experience of buying, owning and using an RV. What the study revealed was astonishing — nearly 25 percent of RV consumers would never purchase again and would tell their friends that buying and owning an RV was a bad experience.

Over the years additional studies have been conducted to make sure the report was not an anomaly, and the results were very similar. To address the issue, five areas were identified that consumers complain the most about. Task forces were assembled to figure out the best ways to address the five major complaints of consumers. The reality is all five areas center around a single problem – RVs breaking down and not getting fixed quickly.

How upset would you be if you bought a car and within the first week of owning it, something broke on it? When you returned the vehicle to have the problem fixed, they told you it could be anywhere from a several weeks to three months to fix the problem. Would you buy from that dealership again? Would you buy that brand again? Heck, if you didn’t really need the vehicle, would you even bother owning one? The contributing factors to this problem are so diverse that it has taken several years and countless hours donated by a host of really bright volunteers just to figure out a plan to fix why RVs break so often and why they can’t be fixed in a timely manner.

All of these problems center around one thing — money. The push in the industry has been to bring down the cost of RVs so they are affordable to a larger number of consumers. More consumers able to buy RVs equates to increased sales. Everybody makes more money. The problem is that the infrastructure to support the increased sales was never developed and lowering the per-unit cost came at the expense of quality. The pool of consumers is so great that 25 percent attrition was acceptable. It is a classic case of volume over margin.

This race to the bottom line has affected the entire RV distribution chain from supplier, to manufacturer, to dealer. Competition to lower price has impacted everyone in the industry, forcing them to cut costs and consequently, quality, just to stay in business. There are a number of manufacturers and dealers whose primary business niche centers around producing and selling the lowest-priced RVs. They have mastered this business model and have no incentive to change because they are making money. If 25 percent of their customers are unhappy, that’s acceptable, because unhappy customers’ checks cash just as easily as happy customers’ checks do once a contract has been signed.

The only way this will change is if there is a public relations fall out and the money disappears. This is on the horizon because consumer demographics are changing. Generation Y tolerated the headaches of RVs breaking, but subsequent generations are not as tolerant. When this happens (and it will soon), good businesses will suffer alongside the low-cost, volume RV manufacturers, suppliers and dealers.

This is why the task force’s work is so vital to the industry. As an industry, we must change the way we approach everything when it comes to making and selling RVs. If we have the foresight to implement the task force’s recommendations, we can avoid the looming PR nightmare and continue to grow.

There will be resistance by some in the industry because they have a good thing going with inexpensive, poor-quality products and poor customer service, but we cannot let them define our industry’s future.

They say never to talk about it. It’s one of the two big no-nos, but blogs break all the rules — so what the heck, let’s break the rules for a change. Shoot for the moon, I say. I’m talking about politics. We know that Obama is an active RVer, but I’m told that when Cheney travels by airplane he does so in a very large plane with an RV loaded in its belly. Cheney’s staff refers to this RV as “the Silver Bullet.” I don’t know for sure, but that may very well be an Airstream. Has his traveling in an RV (by plane) had a direct or indirect impact on our industry over the last eight years? Hard to say, but I doubt it. If Obama is elected, will it have a direct or indirect impact on our industry? Again I’m not sure. Hillary? (shrug) I’m told Chelsea Clinton, Hillary’s daughter, pulled into Carnegie Mellon University in a Chateau RV today. Does that mean anything?

At RVIA’s annual meeting, a presentation was done on how each candidate, if elected as president, might impact the RV industry. Would we be better off with a republican or democrat? Would Hillary be nicer to us than Obama?

What about McCain? Is he an outdoorsy sort of guy?

Now I realize that who is put in office may impact a whole host of things that could directly or indirectly impact our industry in different ways. For instance, if a democrat is elected, it will most likely mean an increase in ma and pa’s taxes, not to mention business taxes. On the other side of the coin, if a democrat is elected they say they will do something about the price of oil and promise to end the war. If a republican is elected they promise to do something about immigration reform and will bring economic stability to the U.S. and overall stability to the Iraqi nation. Nearly every issue you can imagine that is important to any segment of our population will be impacted in some way, shape or form. The question is “how?” I sure don’t know.

My experience with government is that it is so slow moving that progress on any front, on any issue, is nearly impossible. Even when a party dominates both the executive and legislative branches of government, there is always the filibuster.

It can be really frustrating when it appears that politicians spend most of their time drawing things out to prevent anything from being accomplished, rather than actually providing solutions to the nation’s problems. A really great example is the mortgage mess that has been going on for more than a year. Congress has had more than 12 months to offer a solution. This issue has impacted the RV industry, and on a greater scale our economy so drastically, it’s truly amazing nothing has been done yet. I suspect the real reason is because nothing can be done with so many people involved. They say the quickest route to getting absolutely nothing accomplished is to form a committee. Our government is one big committee.

My question to bloggers this week is: who will be the best presidential candidate for the RV industry, and why do you think that? I hate to say this, but as with all blogs, remember to be nice with each other as we discuss this, or I may delete your comments.