The wheels are starting to come off the motor home manufacturing industry, as Fleetwood Enterprises Inc. illustrated again Wednesday.
Fleetwood said it expects to post a loss for its fiscal first quarter ended July 30, because of sharply lower sales of recreational vehicles--especially motor homes--to dealers, and efforts by Riverside-based Fleetwood to cope by cutting its work force and taking other restructuring steps.
For the Record
Los Angeles Times Friday August 4, 2000 Home Edition Business Part C Page 3 Financial Desk 1 inches; 32 words Type of Material: Correction
Recreational Vehicles--A story about the motor home industry in Thursday's Business Section incorrectly stated that Winnebago Industries Inc. is also a producer of manufactured houses. Winnebago is no longer in that business.
The problems: Rising interest rates, higher gasoline prices and excess stockpiles on dealers' lots are braking the industry's growth. They're also threatening to send the highly cyclical RV industry into another of its long-term slumps, following a banner year in 1999.
RV sales "at both the wholesale and retail levels over the past six weeks have been below our expectations," Fleetwood President Nelson Potter said in a statement. "Motor home sales in particular did not reach the level we anticipated six weeks ago."
The problem is mostly with the dealers, who typically borrow heavily to finance their purchases from RV manufacturers, said Fleetwood's chief financial officer, Paul Bingham. Though consumer sales are down slightly, dealers--already too flush with unsold models--have sharply cut back buying more vehicles because of the recent hike in interest rates, he said.
"So they're cutting back on the level of inventories they're carrying, and that backs up to the factory floor rather quickly," Bingham said.
Fleetwood is only the latest RV maker to announce a downturn. National RV Holdings Inc., based in Perris, Calif., last month said its second-quarter profit plunged 86% from a year earlier on a 29% drop in sales, and it laid off 350 workers, or 16% of its employees, because of lower production.
Even Winnebago Industries Inc., which still enjoyed higher RV sales through the first half of 2000, warned recently that "unfavorable market conditions . . . may make the next quarter or two more challenging for us."
And Wall Street is showing the companies no patience. Fleetwood's stock price so far this year has plunged 39%, Winnebago is down 35%, National RV has skidded 55%, Coachmen Industries Inc. is off 30% and Thor Industries Inc.'s shares have lost 20%.
"With slowing sales and the uncertain state of the economy, coupled with the interest-rate environment, you're seeing dealers scale back," said Jeffrey Graff, an analyst at the investment firm A.G. Edwards in St. Louis.
