johnnymk

http://online.wsj.com/article/SB1210...googlenews_wsj

Two of the country's largest recreational-vehicle makers, pummeled by high gasoline prices and the slumping housing market, face serious cash crunches and are taking drastic measures to ease the strain.

Coachmen Industries Inc., whose sales have declined 40% over the past three years, is borrowing against the value of life-insurance policies it holds on employees and retirees. So far, the Elkhart, Ind., company has tapped about half the cash value of those policies, according to filings with the Securities and Exchange Commission.

Fleetwood Enterprises Inc., which has posted five straight years of losses, recently sold its Riverside, Calif., headquarters and is seeking buyers for other properties, in an effort to raise $100 million to finance a looming bond redemption. In addition to RVs, about 25% to 30% of Fleetwood's business comes from mobile homes, a market that has been skidding even longer.

The $15 billion RV industry has been among the less-heralded casualties of the mortgage and housing crises, say manufacturers, dealers and others. But the impact has been severe. RV sales peaked in 2006 at about 390,000 vehicles, according to the Recreational Vehicle Industry Association. After a 12% drop in 2007, the trade group expects sales to tumble 14% to about 305,000 vehicles this year, the lowest level since 2001.

Industry watchers say couples in or nearing their 50s are the core market for motor homes and travel trailers. These couples are delaying their purchases of RVs, largely because they would typically have financed them by selling or borrowing against their homes. That has become more difficult as home values have plunged nationwide.

Meanwhile, banks and other lenders, many battered by mortgage-related losses, have grown more reluctant to make RV loans, demanding higher interest rates and better credit scores. Last week, General Electric Co.'s consumer-finance unit, a major lender in the field, said it would cease to make new RV loans because of disappointing returns.

High gasoline prices have also put off would-be buyers of the fuel-guzzling vehicles. "Gas is a real problem for these guys. What's happening with [sport-utility-vehicle] sales happens in spades with an RV company like Fleetwood," said Al Koch, vice chairman and managing director at AlixPartners, a turnaround and business-advisory firm.

The sales slowdown has already claimed two smaller RV manufacturers. In November, National RV Holdings, a Perris, Calif., maker of high-end motor homes, filed for bankruptcy-court protection and is in the process of going out of business. Last month, another high-end manufacturer, Western Recreational Vehicles Inc., of Yakima, Wash., closed its doors.

Even Winnebago Industries Inc., one of the industry's strongest companies, hasn't been immune. While Winnebago has managed to stay profitable by cutting costs and focusing on large RVs, a market where profit margins are fatter and competitors fewer -- it has had four straight years of declining sales.

To get through its cash crunch, Coachmen has borrowed $23.7 million, or nearly half the cash-surrender value of what it describes in its filings as "company-owned life insurance."

Such insurance typically is purchased by a company on the lives of its employees and pays the company when an employee dies. In its filings, Coachmen has said the policies were intended to fund executive retirement benefits. It didn't return phone calls seeking details of the policies or the outlook for its benefits programs.

Coachmen sales fell sharply to $480 million in 2007 from $802 million in 2004. Over that period, it nearly halved its work force to 2,300.

The much-larger Fleetwood Enterprises is in its own rush to raise cash as sales continue to tumble and losses mount. For 2007, it posted a net loss of $89.9 million as sales slipped to $2 billion from $2.4 billion a year earlier. Since last year, the company has shrunk its work force to about 8,500 from 10,000.

Most of the RV industry had banked on baby boomers preparing for their retirement years to fuel a new era of sales growth. That is what Robin Schwartz and her husband were expecting in 2005 when they sold off a gas station and bought Brien's RV, a small RV dealership in Fairless Hills, Pa., about 20 miles north of Philadelphia. Mrs. Schwartz said customer traffic began flagging late last year.

"We are selling more used RVs. Or people will take a lower-end model that doesn't have surround sound, or the cabinets are more basic. It's like stepping down from a Lexus to Hyundai," Mrs. Schwartz said.

Jeffbx

There are TONS of RV's available for sale everywhere you look. They get what, about 8MPG? That's $0.50/mile, just for the gas - that adds up quick! It's painful enough traveling in the 'ol minivan - I can't imagine taking a long trip in one of those things at $4/gal.

Chgoman

It's all a matter of what you're buying and what you'll use it for though. If you have a family of 4 and you're looking at buying 4 airline tickets, hotel, food, etc, having a travel trailer can save a lot of money traveling with the family. It has to be something you want to do, but it can save a ton of money on vacations over the years if it's something your family will enjoy.