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RV Retailers Navigating 'Ugly Times'

The Associated Press

This week's Recreation Vehicle Industry Association trade show in Louisville, Ky., comes amidst a major sales slump.

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By BRUCE SCHREINER and DAN STRUMPF

The Associated Press

Published: December 6, 2008

LOUISVILLE, Ky. - Under the gloom of plunging motor-home sales and with travel trailers stacking up on lots, recreational vehicle makers and dealers tried to lift their spirits by joining in song at their national trade show this week.

"You gotta have heart," they sang at the kickoff breakfast, trying to stay positive in an industry that's hit a big speed bump. The swooning economy and a credit crisis that makes it tougher to finance a six-figure purchase are keeping potential RV buyers off the road.

"These are ugly times," said Richard Coon, president of the Virginia-based Recreation Vehicle Industry Association. "I've seen lots of downtrodden faces, and for good reason."

RV companies showcased their newest models at the industry event Tuesday through Thursday, including hybrids and slimmed-down motor homes touted as more energy friendly. Now the trick is to persuade skittish customers to spend again.

Through October, shipments from RV companies to dealers for the year fell 27 percent from the comparable period in 2007, according to RVIA. The downturn is expected to stretch into 2009, when shipments are forecast at 186,800 units, about 25 percent lower than this year's projected total of 248,000, according to the association, citing statistics from Richard Curtin, director of consumer surveys at the University of Michigan.

"This industry is in the middle of a three-year downturn, and you can really probably even date it farther back than that," said Kathryn Thompson, who follows RV companies for Avondale Partners.

At the height of the industry's upturn this decade, shipments totaled 390,500 units in 2006. But those are now fond memories for manufacturers and dealers feeling the economic pinch.

Larry Troutt, an RV dealer in the Houston suburb of Waller, said his sales are down about 20 percent from last year. Customers are still checking out his stock and he's still making deals, but a larger percentage of his inventory has been stuck on his lot.

"Right now, my sales manager has my approval to sell anything that's close to a year old for what we paid for it," said Troutt, who has a couple hundred units on his lot.

Expensive, "discretionary" items like RVs are often the most vulnerable to the downturn because they are easy to put off.

Towable RVs, affixed onto pickups or hitched to the back of another vehicle, run between $4,000 and $100,000, according to the RVIA.

Standalone motor homes can start at around $41,000 for van-like "Type B" RVs, according to the industry trade group, while spacious, bus-like "Type A" vehicles run as much as $400,000 for top-of-the-line models.

At the trade show, RV manufacturers Winnebago Industries Inc. and Fleetwood Enterprises Inc. unveiled diesel-electric hybrid concepts expected to improve fuel efficiency by more than 40 percent.

Dutchmen Manufacturing Inc., a unit of Thor Industries Inc., showed off its EcoLogic, an 18-foot towable trailer whose walls, floor and roof are made of thermal plastic rather than wood, making it lighter.

But the optimism around new model rollouts comes amid a dour climate for the industry.

In the past 12 months, 45 of about 2,850 RV dealerships around the country have closed, according to the Recreation Vehicle Dealers Association.

RV makers, meanwhile, have reported dismal financial results and are closing factories. Last week, Fleetwood, based in Riverside, Calif., posted a $57 million quarterly loss and said it would close eight plants and lay off 760 workers. Coburg, Ore.-based Monaco Coach Inc. said it will slash white-collar salaries between 20 percent and 40 percent.

Eskritt predicted the industry will weather the downturn because the "RV lifestyle is not going away."

"People will always enjoy the great outdoors," he said. "Owning a motor home, travel trailer or fifth wheel has become a part of the American dream."

LAZYDAY'S WOES

Tampa's Lazydays RV Center cut 75 jobs this year amid a sharp downturn in the market, partly triggered by a credit crunch that stifled sources for loans that customers needed to buy RVs. Billed as the world's largest single-site RV dealer, Lazydays also missed a November interest payment on a $138.7 million loan, according to documents filed with the Securities and Exchange Commission. The company lost $6.3 million in the quarter that ended Sept. 30, compared with a $2.1 million loss during the same quarter of 2007. Officials at the company say sales have stabilized recently, rather than degraded, and employment stands at 504 workers.

Richard Mullins

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