RV Manufacturers Turning A Profitable Corner, Slowly
LOUISVILLE, Kentucky (AP) — American families are ready to hitch up their trailers and tow the RV industry out of its worst stretch in nearly two decades.
The industry was driven into the ditch last year by the Great Recession. Sales plunged, plants closed and thousands of jobs were cut as orders for recreational vehicles dropped to their worse level since 1991.
Now, RV makers such as Winnebago are starting to turn profits and have begun to hire. And dealers are ordering more RVs for their showrooms. This year, shipments of RVs ranging from entry-level pop-ups to spacious motor homes are expected to hit their highest level since 2007, when the economic downturn began.
The upswing is a sign that somewhat looser credit, stable fuel prices and improved consumer confidence are inspiring Americans to buy more RVs.
"Things are starting to look up," says Tim O'Brien, president of an RV dealership in Lapeer, Michigan, where sales are up 55 percent from a year ago. "People are ready to get out from underneath the frugality of the last couple of years and go out and have some fun and recreation," he says.
Typical RV buyers are people between 35 and 54 with disposable income. They're starting to buy again, say industry leaders and dealers who convened at a trade show in Louisville this week. But a growing share of RV sales come from families choosing less expensive towable RVs, including folding camping trailers, or pop-ups. Those towables are smaller and cost a fraction of the price of amenity-filled motor homes favored by older travelers.
Before the recession hit, towables accounted for eight out of every 10 new RV shipments. Now they make up about nine out of 10 RVs shipped to dealers.
Towables, attached to pickups or hitched to the back of another vehicle, cost between $4,000 and $100,000, according to the Recreation Vehicle Industry Association. Stand-alone motor homes can start at about $41,000 for van-like RVs, according to the industry group, while spacious, bus-like vehicles can run as much as $400,000 for top-of-the-line models. And that's before the cost of gas. Big RVs can get as little as 8 mpg (3.4 kilometers per liter).
Bob Olson, CEO of RV manufacturer Winnebago Industries Inc., says a trend of families buying cheaper towables is encouraging. "They have to start somewhere. And one thing about this lifestyle, you get hooked on it and you want to upgrade."
Winnebago recently signaled its intention to move back into the towables by signing a letter of intent to buy SunnyBrook RV, which makes those type of RVs. Winnebago last built travel trailers in 1983.
The industry is looking for a recovery across all RV models.
It expects shipments from manufacturers to dealers to hit 236,700 in 2010, up 43 percent from last year's nearly 20-year low of 165,700. Through October, shipments have risen nearly 53 percent from the same period in 2009, according to RVIA. In 2011, shipments are forecast to reach 246,000.
Higher shipments mean dealers expect retail sales to rise.
Profits are returning to the industry. Winnebago, which closed two plants during the recession, posted net income of $4.9 million in the fourth quarter ending Aug. 28, compared with a loss of $50.2 million a year earlier. That marked its second straight profitable quarter. Revenue more than doubled to $449.5 million for its full fiscal year.
The results follow the company's biggest loss of $78.8 million in fiscal 2009. Its profit peaked at $70.6 million in fiscal 2004.
Jobs are also starting to come back. About 250,000 RV workers were laid off at the height of the downturn, according to RVIA. But Jayco, which makes towables and motor homes, has hired about 500 more workers this year. Dutchmen, a division of Thor Industries Inc. and a maker of towables, has nearly doubled its work force from about 400 during the worst of the recession to about 770 now. Winnebago shed about half its work force, roughly 1,670 workers, but has since added back about 400 employees.
But speed bumps remain. Many consumers remain wary of big-ticket purchases and many RV owners have delayed trading in older models for bigger ones. Credit isn't as nearly free flowing as in pre-recessionary times.
Still, a recovery seems to be taking hold.
Winnebago's Olson, who became CEO just before the RV industry tanked in 2008, says "It's kind of nice to sit here and see that things are improving."