It's sad that Monaco may not be in business anymore, but maybe Warren Buffet or
another investor will rescue them. Being a public company is both a blessing
and a curse. It can raise money for the company and make the owners rich.
However, the curses are numerous. You're usually not as nimble because of the
layers of management. Audits and SEC filings are extremely expensive. But, IMO
the biggest curse is that the pressure to perform each quarter is enormous. It
can cause companies to make short-term decisions instead of doing what's best
for the company long-term. Making ill-advised acquisitions or blowing out
inventory at the end of the quarter to make the numbers can be the start of a
slow death.
I think Monaco's decision to sell a national chain a ton of motorhomes at huge
discounts a few months ago was the beginning of the end. While I'm sure they
felt it was something they needed to do to keep their line moving and their
workers working, it angered the existing dealers as they had promised in their
much ballyhooed "Franchise of the Future" that every dealer would pay the same
price. Newmar was approached a couple of years ago by the same chain to give
them special discounts and they refused.
Newmar has been under no pressure to perform each quarter and have the luxury to
think long-term. They've saved their money over the years and stayed debt-free.
They've invested in R&D and got a headstart on everyone with the motorhome
slide-out. They've been very innovative over the years. They only build units
that are sold to either dealers for stock or special orders for customers. If
the orders slow down, they just slow down their production or shut it down
completely until they accumulate a few weeks of orders.
Right now, they are about the only game in town that will do extensive specials.
They are getting full price for their units and passing along any supplier
increases. The next one was announced last week and will take effect March 23.
Very small, but still an increase. Every few weeks they have to repurchase
units that a west or east coast dealer defaults on, but most all of those units
are repurchased below invoice and resold to the existing dealers. They don't
have hundreds of dealers, so their exposure is less than most. I assume that
the money they make on the units their building now helps defray the cost of
some repurchases. Clearly, business is not great for any of the manufacturers,
but there are quite a few treading water or losing money slowly.
Today's Newmar buyer has a choice between ordering a perfect custom coach at
full price or buy a maybe not so perfect coach for them at a large discount.
That has kept the distressed units moving well and the special orders have been
coming in. There's seems to be significant pent-up demand. We just had the
best February in our history. Every department set an all-time February record.
It seems that buyers are realizing that this is the best RV buyer's market EVER
if you're looking for a 2007 or 2008 repo or a pre-owned coach.
In the public sector I think that Winnebago, Thor and Forest River are very
strong. In the private sector, Newmar, Jayco and Tiffin are in good shape, IMO.
I've had in-depth discussions with Newmar and Jayco and they are in good shape.
Of course, I can't prove that because they're private corporations. But, I
trust what they tell me and they've always been straight with me. Some of these
relationships are 20, 30 years old.
The biggest problem out there now is dealer financing, not customer financing.
We're getting virtually everything we sell financed. They might have to put a
little more down and they most definitely have to produce more proof of income,
tax returns, etc. than before, but they do get financing.
Dealer inventory financing is another story. The credit markets are still
pretty much froze up for dealers. There are only 3 national lenders left in the
game due to recent consolidations and others deciding to get out. The 3 left
try to figure out ways of keeping the dealer from accessing their credit line.
It's brutal and it's killing the manufacturers, too. Dealers want to buy
product from them, but can't. Customers want to see the unit before they buy,
but can't. I've had to bring in several lower end trailers COD (can't afford to
do diesels COD!) because of all the red tape. Customers are purchasing
half-million dollar Newmars without seeing them first, because of the discounts,
but it's still a tougher sale.
Supposedly, the TALF/TARP bill will unfreeze the credit lines for dealers, but
it hasn't happened yet. When it does, the deep discount deals will disappear
quickly. That will likely happen in the next few weeks, just as seasonal demand
increases. The manufacturers left standing should benefit quickly.
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