Economy puts RV sales in the slow lane

FOREST CITY, Iowa - The assembly line here at Winnebago Industries usually moves at just eight inches an hour. But as demand for these big vehicles has dropped recently, the pace of the line has slowed even more. Workers are churning out fewer motor homes, and some of them have been laid off.

Watch the news and you can see why consumers are holding back. Stock market gyrations, a major investment bank teetering and the Fed trying to come to the rescue by slashing interest rates.

Along the way, the American psyche has taken a hit.  Confidence in the economy is plunging, and prospective buyers are clutching tightly to their cash and credit.

For Al and Darlene Picconatto from Waite Park, Minn., the pain of the credit crunch became personal when their home mortgage payments spiked.

“I went from my one job to two jobs to three jobs, so I was working at three different jobs … just to make the payments,” said Al Picconatto. “When you add $650 on a mortgage payment something else has got to slide someplace.”

The new home mortgage payments were crushing their budget.  With both a house – and a house on wheels – something had to go.

“It was the camper, motor home or the house,” said Darlene Picconatto. “You have to choose the house.”

Their motor home – manufactured by Newmar – was repossessed.  For a large family that had spent so much time camping together, it left a huge void.

“Going out camping is a big thing in our life,” said Al Picconatto. “The Fourth of July weekend -  we go back for a trail ride in North Dakota. Riding in the badlands of North Dakota is fantastic.  And you go on a horse over trails this wide. ... And you look down over cliffs and you see buffalo.”

For recreational vehicle makers, the Piccanatto’s story — and others like it — don’t help their sales pitch. Joe Barbagallo, owner of the Cedar Ridge R.V. Center in Branchville, N.J., has seen demand shrink. He says the current downturn is probably the worst he’s seen. Those who do buy are going for smaller R.V.’s and avoiding the bigger models.

“We've had to make adjustments in our inventory, “he said. “We're selling a lot more trailers, which people will put in campgrounds and leave them there (for the season).  And they can drive back and forth in their four- or six-cylinder car.”

For some buyers, the great fear is taking on payments they cannot afford.  Scores of owners have had to turn in their keys. For many who bought RVs, the road ends at Midwest Recreational Clearinghouse in Cannon Falls, Minn. It’s a temporary resting place for repossessed RVs that are then resold at online auction to become somebody else’s preowned pride and joy.

The company’s auction Web site is called CrankyApe.com – an unusual name for a unique business. It acts as a broker for banks trying to sell repossessed vehicles.  Co-owner Brian Livingston says that as the economy has slid, the pace of repossessions has picked up. His sales are up by some 50 percent in the past six months.

“Six months ago we probably did five to six units a day,” he said. “We're up to 10 to 12, and sometimes we've gone up to 15 units a day lately.  And we've expanded locations just to have the real estate to park them.”

For Winnebago, it hasn’t been an easy ride. With the economy slumping, big-ticket items are the first to go — especially when that ticket can be as much as $300,000.

Winnebago is headquartered Forest City, Iowa, home to the largest of their three manufacturing facilities. But because of current market conditions, they’ve had to scale back production by some 20 percent.  Some 300 employees -- 9 percent of the Winnebago work force --  have been laid off or shed through attrition. 

Bruce Hertzke started on the assembly line 37 years ago; today, he’s the company’s CEO.  In his 10 years running the company, he’s never had an unprofitable year – but in the last quarter, earnings were down 67 percent.

“I think the market's going to be tough for the next six to nine months yet,” he said.

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