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RV Business Shows Signs Of Rebound

Recreational-vehicle industry was torpedoed by $5-a-gallon fuel prices and a tanking national economy, but it appears to be climbing back toward profitability.

FOREST CITY, Iowa (AP) -- Two years ago, the recreational-vehicle industry was torpedoed by $5-a-gallon fuel prices and a tanking national economy.

Now, the industry appears to be climbing back toward profitability, according to Cedar Valley dealers and Forest City-based Winnebago Industries Inc.

Sales have risen at Cedar Falls-based Ace Fogdall Inc., which sells towable RVs, said Sara Miller, the dealership's manager.

"RV sales are up quite significantly over the last couple of years," she said.

Fuel prices near the $3 level haven't had much effect, Miller said, but she added that other factors played a role in the slump a couple of years back.

"It really was a factor at the start of the financial crisis and also when we had the flooding and tornadoes, so it's hard to determine what the singular impact of what fuel prices were," she said.

Things also are looking up at Paine's RV Sales and Service in Waterloo and Evansdale, said Jeff Paine, vice president.

"Everything is optimistic; people are looking," he said. "We're getting a lot of interest shown, a lot of entry-level and mid-lines in towables."

Tighter credit remains a potential hurdle, Paine noted.

"Financing is not quite back to where it used to be," he said. "They've got to have more equity in their unit to purchase it."

Jasper's RV in Hazleton is still looking for an upturn in sales, said Dan Jasper, owner.

"I guess we've about the same since the downturn," Jasper said. "The last three years have been exactly the same, within one or two units every year, so sales have been flat."

The recession and its ancillary effects likely have been the chief culprits, he said.

"It's the economic conditions, people holding onto their money, paying down debt," he said. There are numbers that would indicate the industry still has some rough times to endure, not the least of which is a national unemployment rate persistently near 10 percent.

Winnebago, in a sense, was in the center of the 2008 downturn, as might be expected of the largest manufacturer of motor homes in the U.S.

Winnebago laid off nearly half of its 4,000 employees and shuttered one of its operations in Charles City.

"We pretty much hit rock bottom in 2009," company spokeswoman Sheila Davis said. "At our highest point, we had about 4,200 employees, and we were down to about 1,600."

Winnebago stock fell as low as $3.23 March 6, 2009. In the year and a half since, however, the price has climbed at a fairly steady clip, reach $17.30 April 29, 2010. The price has faded somewhat, since then but has hung in the $10 level on a consistent basis since the summer.

In mid-October, the company reported a fourth-quarter profit that exceeded analyst expectations and fueled a 9 percent surge in company shares.

Winnebago reported a profit of $4.9 million, or 17 cents a share, in the quarter ended Aug. 28. A year earlier, it lost $50.2 million, or $1.73 a share. Analysts had been projecting EPS of just 5 cents a share.

Sales were up 107.1 percent, to $123.1 million.

"Increased motor home delivery volume continues to be a driving force behind our improved results, however, we remain cautious until we see continued retail growth," CEO Bob Olson said in a news release.

Winnebago said dealer inventory jumped 20.7 percent and demand has remained at a "consistent level" since its fiscal second quarter.

Only a few days later, Winnebago said it was looking into a possible acquisition of Indiana-based SunnyBrook Manufacturing Inc., which builds towable RVs, travel trailers and fifth-wheel trailers.

The potential purchase is part of a plan that Winnebago had announced about a year ago in which the company said it would look for ways to diversify its business.

Winnebago said it expects a deal to be completed by year's end.

"So, we've seen some improvements in that time," Davis said. "It's an improved market. There not only were fewer sales in the marketplace in 2009, but there was also too much inventory on dealers lots. As dealers worked through that excess inventory and the age of the inventory came down, we were able to see an increased order bank to get that in line with the retail environment."

The company is back to about 2,000 workers, Davis said.

Mac Bryan, vice president of administration at the Alexandria, Va.-based Recreation Vehicle Industry Association, said there won't be any double-dip recession in the RV business.

"I don't think there's any question the industry's in recovery," Bryan said. "The year-over-year shipment increases through August were up over 70 percent. That's pretty hard to match if you ask around."
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