Thursday, January 08, 2009
SMALL-BUSINESS PRINCIPLES HELP RV MANUFACTURER HANDLE CHALLENGES
Recreational vehicles are considered major purchases, and most of the companies that make them have thousands of employees scattered across several states.
That makes Eclipse Recreation Vehicles Inc. an exception. The Riverside manufacturer of travel trailers and "toy-haulers" embraces the principles of small businesses, which is helping the company survive a dangerously weak market for the industry.
Eclipse is owned by Joanne and Dallen Trealoff, a local couple with deep roots in what until a few years ago was considered one of Inland Southern California's major industries.
Dallen Trealoff was there for much of that success. He has been working in the industry for more than 30 years, starting with Fleetwood Enterprises Inc. in the early 1970s. Along the way he was a top marketing person for Skyline Corp. and Forest River Inc.
The Trealoffs founded Eclipse in 2003 and moved to Riverside a few years later. The complex on Kansas Avenue has 160,000 feet of production and office space, and the company will probably swell to about 100 when the peak production season starts in a few weeks.
Sales were as high as $56 million in the third full year of operation but fell to $28 million in 2008.
Owners Dallen and Joanne Trealoff founded Eclipse Recreation Vehicles in 2003. "We run a tight ship," Joanne Trealoff said.
Eclipse follows the classic rules for small businesses. The Trealoffs keep close tabs on the market, they keep their inventory where the market dictates it should be, and they don't purchase more materials than necessary. And, the company is debt-free.
"We run a tight ship, and we look at everything all the time," Joanne Trealoff said.
Q: Why did you decide to go into business for yourself after years of working for others?
Dallen: I had thought about it for years. Everybody does. But you know the term 'golden handcuffs'? You get comfortable staying at your job. But in hindsight, it's been absolutely incredible.
Joanne: It was the right timing. At that point in time, a lot of people didn't want to make a change. We were the ones who were supposed to fail.
Q: How did you use the contacts you picked up in the industry?
Dallen: There were some dealers I had been doing business with since 1976. We use input from thousands of conversations. There are no mystical ways. It's about listening, and coming up with a big decision.
Q: How do you make a relatively high-end item like an RV attractive to customers?
Dallen: Instead of looking at the price, we look at what's the value. Our whole goal is to give the customer what he's looking for at the price he's looking for.
Q: What is the key to keeping your operations running well?
Joanne: One of the great things about this has been coming up with great personnel. At first, the staff was all confined to a single double-wide, and even when production was up we were very streamlined. Less is better. Sometimes you have to keep a lot of balls in the air, but we're all integrated, we all work together.
Dallen: We all want to do a great job. I want better things for our employees, better benefits. It's our job as owners to make sure it's all in place.
Q: How are you surviving the weak economy?
Dallen: This will be an interesting year. The funny thing is that we tend to get stuck on unemployment. If it's at about 8 percent in California, that means that 92 percent of the people are working. The nice thing is, we can adjust. It won't be a horrible year by any means.
Joanne: You have to hand it to our sales staff. There are manufacturers with hundreds of repurchases out there, but our sales team, and Dallen, actually flew to Utah to help a dealer sell some of his inventory. No one ever does that.
Reach Jack Katzanek at 951-368-9553 or at jkatzanek@PE.com
Product: Trailers and toy-haulers
Owners: Dallen and Joanne Trealoff
Employees: Almost 100 at peak season
Sales in 2008: $28 million
WARREN BUFFET THINKS THE RV INDUSTRY IS COMING BACK
According to Edmonds Auto Observer, Warren Buffett's Berkshire Hathaway Inc. recently reported to government regulators that it had purchased $40 million in recreational vehicle maker, Coachmen Industries Inc., based in Middlebury, Ind.
Berkshire Hathaway's strategy clearly is buying low in businesses that are at rock bottom. Sales of recreational vehicles by U.S. makers, including big names like Winnebago Industries Inc., Fleetwood Enterprises Inc. and Thor Industries Inc., are expected to fall to a 12-year low as 2008 draws to a closer and likely will tumble even further in 2009.
University of Michigan researcher Richard Curtin, who directs consumer surveys, told Bloomberg News earlier this month that RV sales likely will be 248,000 vehicles in 2008, down from 266,000. That would be the lowest since 1996 and a 30% drop from last year, according to the Recreation Vehicle Industry Association (RVIA). Curtin forecasts 2009 sales will drop to 186,800 units, the lowest level since 1991.
The RV industry has been clobbered by tight credit, fluctuating gas prices that hit $4 a gallon last summer, rising unemployment, a tumbling stock market that is eroding the consumer's sense of wealth and a generally deteriorating economy.
As a result of slumping sales, RV makers are struggling:
Jackson Center, Ohio-based Thor, the world's largest maker of recreational vehicles, reported income dropped 87% in the most recent quarter.
Fleetwood of Riverside, Calif., and the third largest U.S. RV maker, said its losses in the most recent quarter widened to $56.7 million. It was Fleetwood's ninth loss in the past 10 quarters. The company has closed eight plants, eliminated 13% of its work force – or 760 jobs – and is cutting costs.
Motorhome maker Winnebago, Forest City, Iowa, reported a higher-than-expected loss of $9.6 million in the quarter, with sales plunging 68% in the period. It was its second consecutive quarterly loss.
Buying into the RV industry isn't Buffett's only venture into the auto-related business. Earlier this year, Berkshire Hathaway announced it had purchased a stake in China's BYD, a battery maker recently turned automaker.
Buffett's MidAmerican Energy Holdings paid $230 million for a 10% stake in BYD to support its "green" technologies, the company said. The deal gives MidAmerican a foothold in the Hong Kong-listed company, which is developing electric-hybrid cars it expects to start selling in China later this year, Europe and Israel by 2010 and North America thereafter. It gives the Chinese company a much-needed boost in funding for further development and credibility.
NEWS ABOUT MONACO AND COUNTRY COACH
Thursday, January 8, 2009
Officials of Monaco Coach Corp. have notified employees that a four-week production shutdown at the Coburg, Ore., factory has been extended another three weeks.
The Register-Guard, Eugene, reported that the plant was shut down for a holiday furlough Dec. 15, with production scheduled to resume Monday (Jan. 5). But employees who called in this week to a company hot line heard a recording that said “due to the continuing challenge in market conditions,” the layoff in Coburg would be extended to Feb. 2.
Monaco is constantly managing production to match up with retail and wholesale demand for its coaches, and demand is down, spokesman Craig Wanichek said. Retail sales were down 40% and wholesale sales were down 50% in 2008, he said.
Employees at the warranty and service center in Harrisburg meanwhile, won’t be called back until March 2. Winter is typically a slow time at the service center, Wanichek said.
Monaco employs about 2,200 people in Oregon, mostly in Coburg and Harrisburg.
Like other RV manufacturers, Monaco has been struggling through a down market. With the U.S. economy in recession, the industry has been hurt by poor consumer confidence and tight credit.
Last year, Monaco closed three Indiana factories, suspended its dividend, cut its production in half and laid off about 2,100 employees in a series of job cuts.
RV maker Country Coach Inc. in Junction City, Ore., has been shut down since early December. Workers there were supposed to return Jan. 5, but were told at the end of December that the plant would be shut down permanently Feb. 28 unless the company could obtain new financing.
Country Coach has about 500 workers.