Monday, September 29, 2008
PILGRIM RV IS NOW HISTORY
RV Business
Monday, September 29, 2008
Six years after Pilgrim International Inc. started producing towables and less than one year after introducing a recreational vehicle made from a new composite material, David Hoefer Sr., one of the founders, told the Elkhart Truth, “It’s over.”
The Middlebury, Ind.-based manufacturer ceased operations in August, laying off nearly 180 employees, and on Sept. 22 filed Chapter 7 bankruptcy.
A few miles away in the city of Elkhart, longtime dealer Hart City RV Super Center announced it is closing as well. The service center will close Tuesday (Sept. 30) and most of the RV inventory will be repossessed Wednesday. The entire business is expected to lock the doors at the end of October.
"It's the absolute worse situation we've been in," Hart City owner Richard Aker said of the current state of the RV industry. "Absolutely nothing dealers can do to eliminate or correct it. Totally out of our control."
Over and over the decline the RV industry has been blamed on rising fuel prices, falling consumer confidence and tightening credit.
Both the manufacturer and the dealership point to these factors as the primary reasons their businesses failed although both enterprises were saddled with particular burdens that also contributed to their closures. Their loss is a sign that in this market, where RV shipments have fallen almost 25% from a year ago, missteps and misfortunes cannot be forgiven.
Pilgrim
The research and development had been completed and production was set to begin on a line of RVs made from composite materials that, Pilgrim officials said, would have changed the industry.
The company did more than move the sinks around and change the floorplans in the new units, said Kenny Mahaffa, production employee with 30 years experience building RVs. It had created a new unit and developed a new way to produce it.
"We were going to go outside of the box," Mahaffa said.
Then, according to Hoefer, the bank pulled the plugged.
The Truth reported that at the time it stopped production, Pilgrim had $9.3 million in orders, $4.3 million in receivables and $1.2 million in cash. It also had made some mistakes, Hoefer conceded, and the bank lost confidence.
"I think the banks are running scared," he said. "We were in a dynamic position to move forward and the dealers were backing our products."
Many banks are reining in their resources as the mortgage mess has undermined the financial markets and, most recently, has taken down Washington Mutual in the largest bank failure in the history of the U.S.
Indeed, RVBusiness magazine reported that KeyBank, based in Cleveland with branches in the local area, announced on Sept. 25 that it would stop making retail loans at RV dealerships and would be exiting the commercial loan market for RVs and boats.
The handful of company executives and production workers who were cleaning the Pilgrim factory on U.S. 20 Friday morning all agreed the downturn in the RV industry was going to get worse.
They expect more manufacturers, suppliers and dealers to go out of business before the economy improves and consumers start buying again.
Doug Lantz, vice president of product development at Pilgrim, noted that local RV workers have close to $14 million in training grants available while the auto industry has gotten approval for $25 billion in loans and Wall Street firms are getting billions in bailout dollars.
Lantz questioned why something is not being done to help the RV industry.
"We can create jobs right here by putting money into business here," he said.
Pilgrim was embracing composite materials in an effort to eliminate the need for wood products to build a unit. In turn, composite materials would stop problems with mold and formaldehyde.
It had been using the new material for floors for almost two years and it was ready to start using the composite to make all six sides of its towables, Hoefer said.
Although Pilgrim is gone, he expects other RV makers to begin using the composite products since the resulting units are lighter and can be pulled easily by family vehicles like minivans or sport utility vehicles.
When the industry emerges from this economic downturn, Hoefer foresees manufacturers employing different production techniques and shifting focus as consumer demand for quality trumps price.
Hoefer's passion for all things RV remains strong and he said he has a lot of options for future endeavors.
Still, as a self-described dreamer, he will always remember Pilgrim and its fate just as it was on the verge, he believes, of setting the pace for the entire industry.
"It was turning," he said.
Hart City
Customers continue to visit Hart City RV Super Center but with the economy teetering on the edge of a recession, many of those customers remain insecure about their future. So while they look, they ultimately keep their wallets in their pockets.
The Truth reported that sales dropped in October 2007 and have stayed low, weighed down by high fuel prices and, Richard Aker, owner of the dealership, said, the availability of money.
"We are paying for the fact that banks don't want to make loans anymore so people aren't able to buy units," he said.
Economic forces hurt the business but Aker has had the added pressure of trying to rebuild the dealership and its reputation as the RV market has been declining.
In 2004, he sold the business to FreedomRoads LLC, a national RV dealership with operations in more than 20 states, but the situation soured with Aker leaving the company about a year after the sale and the dealership eventually closing in October 2006.
Aker reopened Hart City in 2007 and, until the fall of that year, was recording a good year in sales of diesel motorhomes.
Initially he was adamant about pursuing legal action against FreedomRoads and its companion company, Camping World. While he said he is still considering a court remedy, he has softened his position, saying he cannot put all the blame on FreedomRoads.
Shortly after the national company took over Hart City, Indiana state law changed and all out-of-state residents had to be charged a sales tax on RV purchases. That, said Aker, took a 40% bite out of the business.
Although the General Assembly rewrote the law in 2006, residents from a handful of states still must be charged Indiana sales tax. Aker, viewing the law as unfair, paid more than $2,000 twice to cover the state sales tax for two buyers from California.
Aker said he can control customer service but he cannot lower fuel prices or ease credit, so his dealership has become a victim of the economic conditions.
Since he returned to RV sales, Aker has noticed retirees, considered the mainstay of the RV market, are not buying because the financial crisis on Wall Street is mauling their investments. Meanwhile, younger families who had just been coming into the RV market are now staying away because they no longer feel financially secure.
Those are problems, Aker said, RV manufacturers and dealers cannot resolve.
"I really don't know what the industry could do to fix the situation," he said. "It's just a tough time. I sure hate it. I don't know what we could do different to prevent the situation."
Monday, September 29, 2008
Six years after Pilgrim International Inc. started producing towables and less than one year after introducing a recreational vehicle made from a new composite material, David Hoefer Sr., one of the founders, told the Elkhart Truth, “It’s over.”
The Middlebury, Ind.-based manufacturer ceased operations in August, laying off nearly 180 employees, and on Sept. 22 filed Chapter 7 bankruptcy.
A few miles away in the city of Elkhart, longtime dealer Hart City RV Super Center announced it is closing as well. The service center will close Tuesday (Sept. 30) and most of the RV inventory will be repossessed Wednesday. The entire business is expected to lock the doors at the end of October.
"It's the absolute worse situation we've been in," Hart City owner Richard Aker said of the current state of the RV industry. "Absolutely nothing dealers can do to eliminate or correct it. Totally out of our control."
Over and over the decline the RV industry has been blamed on rising fuel prices, falling consumer confidence and tightening credit.
Both the manufacturer and the dealership point to these factors as the primary reasons their businesses failed although both enterprises were saddled with particular burdens that also contributed to their closures. Their loss is a sign that in this market, where RV shipments have fallen almost 25% from a year ago, missteps and misfortunes cannot be forgiven.
Pilgrim
The research and development had been completed and production was set to begin on a line of RVs made from composite materials that, Pilgrim officials said, would have changed the industry.
The company did more than move the sinks around and change the floorplans in the new units, said Kenny Mahaffa, production employee with 30 years experience building RVs. It had created a new unit and developed a new way to produce it.
"We were going to go outside of the box," Mahaffa said.
Then, according to Hoefer, the bank pulled the plugged.
The Truth reported that at the time it stopped production, Pilgrim had $9.3 million in orders, $4.3 million in receivables and $1.2 million in cash. It also had made some mistakes, Hoefer conceded, and the bank lost confidence.
"I think the banks are running scared," he said. "We were in a dynamic position to move forward and the dealers were backing our products."
Many banks are reining in their resources as the mortgage mess has undermined the financial markets and, most recently, has taken down Washington Mutual in the largest bank failure in the history of the U.S.
Indeed, RVBusiness magazine reported that KeyBank, based in Cleveland with branches in the local area, announced on Sept. 25 that it would stop making retail loans at RV dealerships and would be exiting the commercial loan market for RVs and boats.
The handful of company executives and production workers who were cleaning the Pilgrim factory on U.S. 20 Friday morning all agreed the downturn in the RV industry was going to get worse.
They expect more manufacturers, suppliers and dealers to go out of business before the economy improves and consumers start buying again.
Doug Lantz, vice president of product development at Pilgrim, noted that local RV workers have close to $14 million in training grants available while the auto industry has gotten approval for $25 billion in loans and Wall Street firms are getting billions in bailout dollars.
Lantz questioned why something is not being done to help the RV industry.
"We can create jobs right here by putting money into business here," he said.
Pilgrim was embracing composite materials in an effort to eliminate the need for wood products to build a unit. In turn, composite materials would stop problems with mold and formaldehyde.
It had been using the new material for floors for almost two years and it was ready to start using the composite to make all six sides of its towables, Hoefer said.
Although Pilgrim is gone, he expects other RV makers to begin using the composite products since the resulting units are lighter and can be pulled easily by family vehicles like minivans or sport utility vehicles.
When the industry emerges from this economic downturn, Hoefer foresees manufacturers employing different production techniques and shifting focus as consumer demand for quality trumps price.
Hoefer's passion for all things RV remains strong and he said he has a lot of options for future endeavors.
Still, as a self-described dreamer, he will always remember Pilgrim and its fate just as it was on the verge, he believes, of setting the pace for the entire industry.
"It was turning," he said.
Hart City
Customers continue to visit Hart City RV Super Center but with the economy teetering on the edge of a recession, many of those customers remain insecure about their future. So while they look, they ultimately keep their wallets in their pockets.
The Truth reported that sales dropped in October 2007 and have stayed low, weighed down by high fuel prices and, Richard Aker, owner of the dealership, said, the availability of money.
"We are paying for the fact that banks don't want to make loans anymore so people aren't able to buy units," he said.
Economic forces hurt the business but Aker has had the added pressure of trying to rebuild the dealership and its reputation as the RV market has been declining.
In 2004, he sold the business to FreedomRoads LLC, a national RV dealership with operations in more than 20 states, but the situation soured with Aker leaving the company about a year after the sale and the dealership eventually closing in October 2006.
Aker reopened Hart City in 2007 and, until the fall of that year, was recording a good year in sales of diesel motorhomes.
Initially he was adamant about pursuing legal action against FreedomRoads and its companion company, Camping World. While he said he is still considering a court remedy, he has softened his position, saying he cannot put all the blame on FreedomRoads.
Shortly after the national company took over Hart City, Indiana state law changed and all out-of-state residents had to be charged a sales tax on RV purchases. That, said Aker, took a 40% bite out of the business.
Although the General Assembly rewrote the law in 2006, residents from a handful of states still must be charged Indiana sales tax. Aker, viewing the law as unfair, paid more than $2,000 twice to cover the state sales tax for two buyers from California.
Aker said he can control customer service but he cannot lower fuel prices or ease credit, so his dealership has become a victim of the economic conditions.
Since he returned to RV sales, Aker has noticed retirees, considered the mainstay of the RV market, are not buying because the financial crisis on Wall Street is mauling their investments. Meanwhile, younger families who had just been coming into the RV market are now staying away because they no longer feel financially secure.
Those are problems, Aker said, RV manufacturers and dealers cannot resolve.
"I really don't know what the industry could do to fix the situation," he said. "It's just a tough time. I sure hate it. I don't know what we could do different to prevent the situation."
