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The RV: Going the way of the dinosaur?

The economic crisis threatens an industry and an American lifestyle. 'This is the worst it's ever been.'

March 29, 2009|Tim Jones

FOREST CITY, IOWA — In the realm of conspicuous consumption, few things are larger than the RV, the multi-ton vehicular brontosaurus that has taken generations of families on the great American highway adventure.

But in the worst economic crisis since the Depression, the RV is facing perhaps its gravest challenge as sales have plummeted, manufacturers have filed for bankruptcy or gone out of business, and lofty expectations of a grander profile for recreational vehicles have been drastically cut.

Even the most pessimistic economy watchers will acknowledge that someday people will begin buying cars again, only because they have to. That assumption, though, does not apply to RVs, which are not essential purchases, can easily cost a quarter of a million dollars and are relentless binge drinkers of fuel.

"This is the worst it's ever been," said Robert Olson, chairman and chief executive of Forest City-based Winnebago Industries Inc., the market leader and the brand synonymous with RVs. "But you always have to look at a silver lining. . . . I think the industry will come back.

"It's a culture. It's a lifestyle. It's a maker of memories," Olson added.

Or as John K. Hanson, the 1950s-era founder of Winnebago, said a long time ago, "You can't take sex, booze and weekends away from the American people." The immediate question is whether RVs are to be forever linked to that less economically sensitive weekend goal.

Better days for the RV clearly are a memory. Production peaked in 2006 at 390,500 vehicles. Last year it slumped to 237,000, according to the Recreation Vehicle Industry Assn., creating a glut on dealership lots and a raft of clearance sales.

Manufacturing employment in the industry has been cut by 50%, clobbering the economy in the Indiana counties of Elkhart and LaGrange, where 60% of all RVs are built. Production projections for this year are only 130,000 vehicles, about the sales level of 1980.

Two of the bigger and more established manufacturers -- Monaco Coach Corp. of Coburn, Ore., and Fleetwood Enterprises Inc. of Riverside -- this month filed for Chapter 11 bankruptcy protection, and smaller producers have folded.

In the northern Iowa town of Forest City, where Winnebago Industries produced its first RV half a century ago, half of the company's workforce has been laid off, and an assembly plant in nearby Charles City has been shuttered.

"It used to be that people dreamed of owning that big RV," said Don Heath, who began selling RVs in the 1950s in Cedar Falls, Iowa. "I think now more people will be content with the weekend trip to the lake, in a tent. . . . I think we're going to see the clock turned back."

A nation without RVs -- whose history stretches to the 1930s, when they were called "house cars" -- is difficult to imagine, especially with about 8 million on the road now. Over the years the RV industry has proved resilient, weathering fuel price and economic shocks in the 1970s, '80s and '90s. The industry always came back, in part because of people like Wayne Szara, a 65-year-old retired college instructor from Palos Hills, Ill., who fits the profile of the typical buyer: people in their 50s and 60s, empty nesters, and affluent and creditworthy enough to obtain home-sized loans.

Szara drives a 39-foot-long Mandalay. It's the third RV he has owned, and he is fond of driving it to Tennessee and Florida to visit relatives. It gets close to 10 miles per gallon, if he keeps the speed under 65, Szara said.

"People who own them don't worry about gas prices, except when they get to $4 a gallon," Szara said.

But fuel prices did reach that level last summer, and RV sales have not rebounded despite declining gasoline costs.

The biggest problem facing the industry is dried-up credit, only one of the economic components that make the current downturn in sales so daunting. Earlier slumps did not involve a combination of tight credit, swooning home values, high unemployment, plummeting investment portfolios, volatility in energy prices and the lowest consumer confidence levels in three decades. Winnebago Industries' Olson, who describes himself as optimistic, said it may take 12 to 18 months for the industry to pull out of the crisis.

Ron Lichtsinn, who runs a Winnebago dealership in Forest City with 60 vehicles on its lot, is also hopeful.

"I don't believe the industry is permanently impaired," he said. The most expensive vehicle on his lot costs about $335,000.

Part of the future will be defined by a 24-foot model that will get 16 to 18 mpg. "There will always be a market out there for this lifestyle," Lichtsinn predicted.

But the thriving of that lifestyle probably won't return until credit restrictions loosen and, as Olson said, people regain their confidence and revert to the old ways of doing things -- the old ways that have supported this industry for decades.

Times are tough now, he said, but he does not expect consumer behavior to change.

"One thing about the American consumer is they have short memories," Olson said.


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