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Just a Speed Bump?

Industry leader Fleetwood Enterprises has seen its RV sales slow and its grip on the manufactured housing market slip. Is it worried? Not in the least.


Cruising along like one of the luxury motor homes it produces, Fleetwood Enterprises Inc. spent most of the last five years rolling up impressive sales gains as the nation's leading producer of recreational vehicles and factory-built houses.

But just as the road ahead seems clear for record sales of the vacation vehicles popular among retirees and the ready-built homes embraced by rural renters, the Riverside-based manufacturer has hit some potholes.

Fleetwood's share of the fast-growing manufactured housing industry has slipped during the last two years as the company has struggled to sort out capacity and retailer headaches. Fleetwood now appears in danger of losing its perch atop the industry.

Meanwhile, the company expects flat sales of its recreational vehicles this year despite the strong economy, low unemployment and a booming stock market--a combination that would typically fuel sales.

Fleetwood has blamed its RV sales slowdown on poor weather during the traditional spring buying season. But some some analysts say Fleetwood vehicles have become too pricey and that the company has been slow to react to industry changes. It was years behind competitors, for example, in introducing popular "slide-out" sections to increase the roominess of its motor homes.

Wall Street has taken a dim view of Fleetwood's travails. Although the company--which posted a profit of $125 million on $2.9 billion in sales for its fiscal year ended April 30--bought back 23% of its outstanding shares in the last year to boost stockholder value, the share price has dropped about 17% since last fall.

"The company itself has struggled, and both of the industries they are in are also struggling right now," said Robert Curran, an analyst at stock brokerage Merrill Lynch.

Fleetwood officials acknowledge that this year's financial picture is nothing to brag about, but they say there's no reason for alarm.

"I've been in the business for 50 years and there's always been growth and changes along with some ups and downs," said John C. Crean, Fleetwood's 72-year-old founder and chief executive. "We're not going to panic if things get a little slow."

Since going public in 1965, Fleetwood has had several opportunities to panic as it endured dramatic downturns. But the company has managed to rebound each time.

After the oil embargo of 1973, for example, RV sales plunged and the company's stock lost more than 90% of its value before recovering. In the early 1980s, rising oil prices and a recession sent Fleetwood shares spiraling down by about 80%. And during the recession of 1991, a sales drop pushed the stock down about 50%.

Fleetwood's current problems are minor "blips" compared with those incidents, said Paul Bingham, Fleetwood's chief financial officer. Though Fleetwood is concerned about its lost market share, several factors bode well for the company's long-term future, he said.

A huge number of baby boomers is entering the age group that has been the recreational vehicle industry's most reliable source of customers. A recent study by the University of Michigan said the pool of consumers aged 45 to 54 should balloon by 10 million, to more than 70 million, early in the next century.

Industry officials reject suggestions that this new generation of potential buyers will have less of an appetite for recreational vehicles than did their predecessors. Features such as computer modem hook-ups, satellite dishes and fully equipped kitchens and bathrooms have been designed into the latest models to boost their appeal.

Though Fleetwood's market share has declined to about 26% of the industry, from about 30% five years ago, the company remains the dominant player in each of three RV categories: bus-like motor homes, towable travel trailers and smaller folding trailers.

Fleetwood expects to regain lost ground with recent improvements, including the slide-out sections that add about 24 square feet to a motor home's interior. The feature is one of the industry's most important advances in years and is a big draw for buyers looking for less-cramped quarters--something Fleetwood realized later than its competitors.

"It was my fault that we were slow with the slide-out," said Crean, who remains closely involved in product development and market strategy despite spending more time working from his Newport Beach home than at the company's Riverside offices.

"It was my decision to hold off on the slide-out because I've seen a lot of things come and go in this industry. But it appears that is here to stay."

Riverside County dealer Bob Miller said Fleetwood faces sharper competition than ever before in the RV market.

"Fleetwood is still No. 1, but the rest of the industry has been catching up the past few years," he said. "Their competitors have been pretty aggressive with price and quality. I think Fleetwood still makes the best motor homes, but they are not always the quickest with new trends, whether it's a slide-out option or new floor plans."

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