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Insiders See More Contraction Before Rebound

December 9, 2008 by   - () Leave a Comment

Veterans of the recreational vehicle industry are quick to explain downturns are just part of the business and do not indicate any major or long-term problem with the product, executive management or the consumer appeal of the lifestyle.
Indeed, every downturn is followed by an upswing, and at last week’s 46th Annual National RV Trade Show, RV manufacturers, dealers and suppliers were confident that the industry will rebound. However, according to a report in The Elkhart (Ind.) Truth, when the so-called better days will return and what the industry will look like are questions open for speculation.
“It is Heartland’s view that over the long term, we will be a smaller industry, not necessarily in terms of units, but in terms of fewer dealers, fewer manufacturers,” said Brian Brady, president and CEO of Heartland RV LLC in Elkhart. “I think the long-awaited industry consolidation is probably upon us. … That could be painful, but at the end of the day on the other side it’s probably more healthy.”
Certainly, as the home of the RV industry where nearly 65% of all motorhomes and towables are built, Elkhart County feels the agony of a downturn more than any other place in the United States. And with some economists predicting this recession becoming as deep as the one that gripped the country in the early 1980s, the closing of RV production lines and loss of jobs, which has already pushed the county’s unemployment rate to more than 10%, could continue.
According to The Truth, even Recreation Vehicle Industry Association president (RVIA) Richard Coon sounded a cautionary note when he said he hopes the 2009 Louisville RV show brings talk the industry is “coming out” of the slump rather than talk about how the industry has recovered.
“We think if the new administration does their thing it should be OK,” Coon said of president-elect Barack Obama and his team. “We should be coming out of it.”
However, after more than 35 years riding the RV industry rollercoaster, Tim Bunday is withholding any sweeping overviews of the current situation.
Worse Than ’80s Downturn? Maybe
“This really isn’t as bad as the downturn we had in the 1980s,” the sales engineer from Mercury Plastics in Florida, said, then quickly added, “but it sure feels like it. Seems like it’s hitting us harder because so many people are losing their jobs and they have no place to go.”
Elvie Frey Sr., president and CEO of SunnyBrook RV Inc. in Middlebury, Ind., noted that in the past when the RV manufacturers and suppliers have cut jobs, Elkhart County had more of a diverse economy and businesses in other industries, such as pharmaceutical giants Bayer Corp. and Whitehall, could provide employment, he said. Now several of those larger companies have closed their plants and moved their operations so local residents have fewer places to apply for work.
“I think one of the things that will happen out of this economic downturn is we’ll again look at other options,” Frey said. “I think it will help the whole local economy the more we become diverse and look at doing things beyond what we’re accustomed to.”
Industry to Remain Based in Elkhart County
Neither he nor Heartland’s Brady believes the RV industry will leave Elkhart County. During recent years, some manufacturers, namely Jayco and Dutchmen Manufacturing, had opened facilities in the West, primarily to lower shipping costs to dealers in that part of the country. That migration appears to have stopped.
According to The Truth, the heavy concentration of suppliers makes northern Indiana the most efficient place to build recreational vehicles. Although the RV industry has the flu and most of Elkhart County is sick, Brady does not believe having so much of the industry in one place is unhealthy.
“You have an infrastructure that’s here, you have a trained work force here; that really gives this industry great operating efficiency,” he said. “Whether I think it’s healthy or not, the fact of the matter is, that is what it is. And I suspect when we look at future production numbers that RVIA supplies, we’re probably going to see a migration of more unit production out of Elkhart County.”
Still, California is a big market and demand is high for recreational vehicles, said Norm Jacobson, marketing manager for Lance Camper Manufacturing Corp. in the Golden State. With West Coast RV dealers trying to feed that appetite but not wanting to pay the $2,500 freight cost added to each travel trailer shipped from Indiana to California, Lance has expanded production into making the towable units.
The 40-year-old manufacturer of truck campers introduced its new line of travel trailers at the Louisville RV show.
Downturns bring contraction in the RV industry that, RVIA’s Coon said, is not necessarily unhealthy since it helps right size an over-flooded market. As families seek out activities they can do together, the popularity of RVing is growing around the world as well as among diverse ethnic groups inside the United States. This bodes well for the industry overall and makes Coon confident an upswing will follow this downturn.
“The products are secondary,” Coon said. “It’s the lifestyle that is what we’re really selling and the products get you there.”

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