RV Weekly

Do you remember when you first learned about Fleetwood opening up the first RV manufacturing plant in Mexico? I remember when that news first came over the wire, I had mixed feelings. From a business perspective, it seemed to be a pretty smart move but, like many Americans, I hate to see jobs leave the U.S. Like many of you, I wondered if this was the beginning of a slow, steady migration of RV manufacturers to Mexico.

It seems our concerns were unfounded because no other manufacturers followed suit. Fleetwood didn’t whole-heartedly close up shop in the U.S., either.

Interestingly enough, a southbound migration is occurring. I just read a story http://www.msnbc.msn.com/id/25175249/ about how consumers are crossing the border to fill up their gas tanks. The story says that in Tijuana diesel is only $2.20, but just a few miles north in San Diego, diesel is $5.04 a gallon. That is a pretty big difference.

Mexican government subsidies are keeping the price down, which raises the question, “Is it cheaper to manufacture raw goods like steel, aluminum and fiberglass down south?” My guess would be, “Yes, for right now.” Will the trend continue?

I am told from various suppliers that the cost of building materials for RVs and aftermarket products has risen substantially with the rising cost of oil. If labor is less expensive in Mexico, and the cost to build and buy raw materials is less expensive in Mexico, and the fuel price of shipping the RV to the dealer is 50 percent cheaper from Mexico, the questions I ponder are, “Are other RV manufacturers taking a harder look at Fleetwood’s decision and potentially considering a move?” and “How much of a margin does this really build into a unit?”

Many believe some of the economic conditions we see today are effects of how the world is changing to a global economy. Will the factors that make Mexican RVs, hitches, furnaces, sinks and other products so attractive continue to impact our industry or is this merely something short-lived that we must weather?

If there was ever a time when America needed to get away from it all, forget the TV news, leave the newspaper unread, get outdoors and just relax, it is now. I continue to see stories about how the national economy is crushing our industry – housing and oil are the epicenter and forecasts predict that those two will continue to spiral for some time to come. On the other side of the coin, we see stories about how consumers are using their RVs and going camping. If fact, camping has never been more popular.

National RV rentals are booming, campgrounds are full and yet RV sales are sluggish. Since the people who own RVs are using them, the key is convincing people to take the plunge and buy an RV. Once they do, we all know they won’t regret it. So how do we convince them? I see time and again how companies are focusing on directly advertising to the consumer. While we have seen unbelievable success with this in the past, it doesn’t seem to be working so well of late. The fact is you can’t out-advertise the media. The people who decide what “news” is and what the “facts” are have the upper hand when it comes to reaching the consumer.

I think our entire industry should make a concentrated grass roots effort to change the type of coverage we are seeing in the national press. Call it a “Sponsor a Reporter Day.” What would be the impact if every dealership in the nation made an effort to send a local reporter (with his/her spouse) out camping? Send them to a nearby campsite with a refrigerator full of food and a full tank of gas. When they return, give them an itemized list of what it cost to get them there. Groceries and necessities $75, travel distance 90 miles round trip (equating to $48 in gas), camp site fee $36. Let them write about the real cost of camping coupled with the awesome time they had. Heck, getting them away from the doom and gloom of a newsroom would probably do loads for their overall disposition, the type of news stories we see about RVing and ultimately our national economy. Target the news “decision maker” is what I say.

When you consider the price to reach the consumer through advertising, the cost of implementing this would be fairly small. Heck, dealers could do this for weeks on end until the entire local newsroom had gone RVing and it would still equate to less than a couple of consumer-targeted ads. The free coverage would undoubtedly be positive and could be priceless. While national advertising campaigns are great (and who can dispute the impact of GO RVing?), let’s take it to a new level and target a whole different demographic.

A recent story in the Colorado Business Journal talks about a consumer trend of tax evasion by establishing limited liability companies in Montana to facilitate registering RVs, thus avoiding higher local state and city sales tax. The Colorado Department of Revenue is now going after these RVers with felony tax evasion charges and several consumers have already pleaded guilty. Colorado is probably not the only state that takes exception to people not registering their vehicles at their home address. Will this be an ongoing trend or is this something that can be addressed at the point of purchase in the F & I office?

While an RV dealer may have little control over where consumers decide to ultimately register their vehicles, I suspect dealers recommending this practice to customers could get their sales tax license pulled, causing all sorts of problems for the dealership.

My question for this week’s blog is does your F&I manager discuss vehicle registration with your customers and do they offer advice on where to register? Is this out-of-state-registration practice illegal in your city and state? Do you have a company policy regarding this and if so what is it? I know there are tons of lawyers’ ads in RV consumer magazines soliciting LLC business from potential new RV customers. How big of an issue is this for your dealership?

It’s no secret money doesn’t buy what it used to, and who doesn’t feel the pinch at the pump? Although astounding, it appears that the pump is feeling it too. You may be surprised to learn that many small town gas stations’ pumps don’t have the ability to charge you the full price for a gallon of gasoline. According to a recent Associated Press story, 8,500 of the nation’s 170,000 gas stations can’t register more than $3.99 on the mechanical-style dials of their pumps. This is causing some station owners to change the pump so it instead displays the price of 1/2–gallon. Then the cashier doubles the price when consumers go in to settle up.

North Dakota, South Dakota, Minnesota and Washington are among the states examining what legislative changes will need to be made to legally allow the 1/2–gallon pricing. Some states have already told gas stations to display the 1/2–gallon price and charge double until a solution can be found.

For many small gas station owners, the price to upgrade the mechanical dial pumps to a digital counter version is just too expensive — $10,000 to $15,000 each. It seems that despite record prices for gas, the station’s margin is relatively small. An upgrade for the old-style pumps is available but the computer in the pump was never designed to handle prices this high. This causes the pump to wear out rather quickly with the upgrade.

Is gas the beginning of the “double the sticker price” concept? It seems all those years of arithmetic in school will be needed after all as we calculate exactly what it costs to fill our tanks.

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.