Friday, March 09, 2007



Steve Bibler
RV Business
Friday, March 9, 2007

Riverside, Calif.-based Fleetwood Enterprises Inc. will begin production in May of its stick and tin Pioneer and Mallard travel trailers for sale in the company’s Southwest market in a leased facility in the border town of Mexicali, Mexico.

This is believed to be the first time a U.S.-based RV OEM has moved unit production offshore.

The move has been in the planning stage for two years and is unrelated to a recent announcement that Fleetwood was closing three U.S. travel trailer plants, Elden Smith, chairman and CEO, explained during an analysts’ conference call on Thursday (March 8).

Smith called the Mexicali plant “part of a long-term strategy to produce the best quality and highest value products in the market.”

He said Fleetwood “may start other operations there,” but added that the company has “no other plans to relocate other things down there.”

The one-time costs to begin production in Mexicali will be $2 million, according to Paul Eskritt, executive vice president of the RV Group. The savings in labor costs are significant, he said, along with other overhead costs, “depending upon what state you compare it with.”

Fleetwood pays full-time employees in Southern California about $20 an hour in wages and benefits. Lyle Larkin, Fleetwood's vice president and treasurer, said the company will pay $4 an hour in Mexico.

Mexicali is a city of 850,000 just over the border and is the capital of the Mexican state of Baja California. It is constantly growing due to the number of “maquiladoras” that sprout up there. Fleetwood will be able to import materials and equipment on a duty-free basis for assembly and then re-export the assembled RV back to the U.S.

Fleetwood has hired a dozen engineers from Mexico who have already completed seven weeks of training in La Grande, Ore., where the Pioneer and Mallard brands are built, Smith told RV Business.

“Each of them is a degreed college engineer from a university in Mexicali,” Smith said. “They find it to be quite an interesting management position.”

The engineers in Mexicali are setting up operations in a new, 80,000-square-foot plant 10 minutes from the U.S. border. Hiring of between 130 and 150 production workers also has begun with plans to hire a total of 200 to 300 workers as the company ramps up production.

Jim Kindleberger was hired as general manager to run the Mexicali plant, which will provide product for sale in California, Arizona and Nevada.

Smith stressed during the conference call that the timing of announcing the Mexicali operation and closings of plants in Rialto, Calif., Longview, Texas, and Williamsport, Md., is coincidental.

“Product produced in Mexicali was not being produced in Rialto,” he said. “This was an initiative that has been going on for some time. Our commitment to Mexicali was made months before the decision to close the three plants.”

Capacity utilization has been one of the issues facing Fleetwood management for months and a major reason behind the plant closings, Eskritt said. The company reported a net loss of $17.5 million in its travel trailer segment in the third quarter ending Jan. 28 on sales of $81.8 million. Utilization in its travel trailer plants was estimated at 48% in the quarter.

In the comparable quarter a year ago, the travel trailer segment earned $11.1 million on sales of $169.2 million.

Closing the three travel trailer plants will cost Fleetwood $4.5 million in the current quarter but over the course of the year will save the company $10 million in costs, it was stated.

Operations in the remaining travel trailer plants have been streamlined, the number of floorplans reduced and each plant is building a more limited range of products, Smith said.

Travel trailer backlog at the close of business on March 2 was 2,002 units, down 63% from the year-ago figure of 5,342, Smith said. However, the year-earlier total included 1,830 Emergency Living Units (ELUs) for hurricane disaster relief.

Smith noted that some of the 1,000 workers idled in the three plant closings will be offered jobs this spring in Fleetwood’s motorhome division which is experiencing an upturn. Smith reported a motorized backlog of 1,402 units as of March 2, up 19% from a year ago.

Meanwhile, the toy hauler production was moved from Rialto to Oregon and units will begin rolling off production lines in April, Smith said, calling it “a seamless transition.”

Smith said the plant closings leave Fleetwood with its “best operating, most efficient plants and capable work forces, leaving us with the cream of the crop in terms of plant operations. It also allowed us to strengthen an already strong management team at each location.”

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