Trouble for Winnebago in 2010???

RVThere · 01-04-2010, 08:02 AM

As reported in the WSJ, Winnebago may run out of cash in 2010:

For some, the American dream is throwing away the house keys and driving into the sunset. Even a few investors have recently piled in.
Shares of motor-home maker Winnebago more than doubled in 2009, getting an extra boost two weeks ago when it announced a jump in its order backlog. After sales peaked in 2004, the company has gradually reduced its inventory to $51 million and can focus on new orders.
But Winnebago is running on fumes, with just $29 million in cash. The company had a loss of $79 million in the year ended in August 2009. And while the company has an order backlog of 1,521 units for delivery in the next six months, it says it needs to sell 6,800 annually to turn a profit.

Unfortunately, the Recreation Vehicle Industry Association expects only 14,400 motor homes to sell in 2010. That partly reflects a structural decline in motor-home sales, which account for just 7% of total recreational-vehicle sales compared with 36% in 1986. Even if Winnebago could keep its roughly 20% share of the motor-home market, it would be a few thousand units short of breaking even.
Resurgent competition could make the battle more difficult. Fleetwood RV and Monaco RV were among the top four motor-home makers in 2008, according to Statistical Surveys Inc. Winnebago had a reprieve last year when both filed for bankruptcy protection, but they have recently resumed production under new ownership.
Granted, dealers have cleared out much of their motor-home inventory and will gradually need to replenish. But, barring a miraculous revival in motor-home sales, Winnebago is running out of road.
— John Jannarone (WSJ writer)

Jim Stewart · 01-04-2010, 08:19 AM

OUCH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

DriVer · 01-04-2010, 03:21 PM

I don't have any fear for Winnebago Industries. I expect that Winnebago will be a leader as the industry recovers.

Doug Sage · 01-04-2010, 03:21 PM

That article sounds pretty pessimistic. I hope it doesn't turn out like that. Winnebago is a good company that turns out a quality product. We would all be worse off if they went under. I hope it doesn't happen!

RustyJC · 01-04-2010, 03:41 PM

Quote:

Originally Posted by DriVer

I don't have any fear for Winnebago Industries.

Not to be overly pessimistic, but if the following from the article is accurate, the handwriting is on the wall. Their cash reserves are pocket change, and their backlog is far below their breakeven point - they have to book and build another 5,279 units just to break even in 2010.

Quote:

Originally Posted by WSJ

But Winnebago is running on fumes, with just $29 million in cash. The company had a loss of $79 million in the year ended in August 2009. And while the company has an order backlog of 1,521 units for delivery in the next six months, it says it needs to sell 6,800 annually to turn a profit.

Rusty

DriVer · 01-04-2010, 04:04 PM

According to the Globe Gazette ....

FOREST CITY, January 1, 2010 — An increased backlog of sales orders meant many employees skipped the traditional extra holiday time off at Winnebago Industries Inc.

While most had their normally-scheduled holidays of Christmas Eve, Christmas Day, New Year’s Eve and New Year’s Day, some were set to work New Year’s Eve, company spokeswoman Sheila Davis said. MORE ....

the above "Copyrighted" text is used by permission Source: RVD@aily Report (unlike Post #1)

I remain unwilling to even contribute a spoonful of dirt that others would heap on the premature death of Winnebago Industries. Go Winnie!

- ■ -

Wayne M · 01-04-2010, 06:04 PM

I have helped support them.

Yeah! Go Winnie!

Gary - K7GLD · 01-04-2010, 06:23 PM

There are so MANY economic factors in clear evidence as to where the USA and world economy will likely be for the foreseeable future, that any reasonably intelligent CEO can't miss them and plan accordingly:

Unemployment
Fuel costs
Increasing costs of materials
Rising costs of energy for production
Rising taxes
Clearly reduced demands for luxury items
Reduced numbers and quality of available CG's and resorts
Etc
Etc....

IF these RV industry CEO's aren't smart enough by now, in the face of all the evidence, to adjust their facilities, workforce and product lines accordingly, well....

Jim Stewart · 01-04-2010, 07:36 PM

The problem faced by many companies in this economy is their fixed verses variable costs. It is possible for most businesses to control their variable costs, controlling your fixed costs separates the men from the boys. Ford was able to do it, GM and Chrysler were not.

In 2008, they cut their expenses to the bone and still lost $79 million. It would seem that it may not be possible for them to cut enough to come close to break even with anticipated sales of approximately 2,800 units.

Possibly look for someone to buy them and take them private. Venture Capitalists will invest, cut the fixed costs and sit on it for several years until the market improves. Then look for it to go public again. I could even see a Chapter 11 to 7 and then the rescue! It was far cheaper for Navistar to buy the assets of Monaco and relieve themselves of any liabilities such as warranty than to buy it outright. I doubt that Winnie has an inside board member like Monaco did to pull off the scam!

Shuffster · 01-04-2010, 08:16 PM

So, why did WGO stock go up today? Is the glass half full or half empty?

EngineerMike · 01-04-2010, 08:30 PM

The real bad news in that story is for the odds of a Country Coach rescue. The judge in that bankruptcy has approved the Chap7 liquidation. Bob Lee is looking at those kind of numbers and thinking about whether there is a market to revive Country Coach if he picks up the rump end of the assets available for purchase. With 14,400 units to sell into, the upper-middle end of luxury is going to be razor thin.

Tom-NC · 01-05-2010, 09:07 AM

After being a loyal customer of Winnebago since 1989 I believe that this strong company that manufacturers great motorhomes will be fine.
Remember one thing other than appliances they make everything themselves and don't have to rely on Vendors who naturally add to the cost of RV's plus have to turn a profit too.
I know for sure that Monaco has a vendor who makes the front and rear caps for their RV's. This costs them money.
As DriVer says they will be just fine and will be a viable company making great motorhomes.
Lastly they have a great bunch of people working for them and they all have stock in the company so they will do whatever it takes to succeed.

Go Winebago you can do it!

Gary - K7GLD · 01-05-2010, 11:35 AM

Quote:

Originally Posted by EngineerMike

The real bad news in that story is for the odds of a Country Coach rescue. The judge in that bankruptcy has approved the Chap7 liquidation. Bob Lee is looking at those kind of numbers and thinking about whether there is a market to revive Country Coach if he picks up the rump end of the assets available for purchase. With 14,400 units to sell into, the upper-middle end of luxury is going to be razor thin.

ABSOLUTELY!

And Winnebago and others have to look at market reality in the same way - it's NOT so much about the integrity of the company, and the quality of the product at this point, tho' that IS required - it IS about making and selling enough units for any given company to continue to eke out a profit. And THAT quite likely requires serious changes in design, manufacturing, focus upon WHICH price class/level of RV *is* still selling well - and then adjusting production accordingly - assuming, as also pointed out earlier, fixed and UNadjustable costs can be either absorbed or shed...

MaverickBBD · 01-05-2010, 11:43 AM

Like John Prine said: Stop wishing for bad luck and knocking on wood. I did my part and will probably contribute to their backlog if my personal financial situation improves again.

dirko · 01-05-2010, 03:03 PM

Hi Ho: I guess WI is not big enough to get a government bailout. I suppose a couple of hundred million is just not enough for them to be important. I don't know exactly what the criterion is, but if every company that needs money is bought by the government we eventually become totally socialistic, so that probably won't happen. The problem is that banks don't want to become involved unless a company is profitable and they are sure to get their money back, so it is a problem even for good, stable responsible companies these days.

Good luck WI! Hope things work out.

Dirk

Jim Stewart · 01-05-2010, 10:46 PM

Quote:

Originally Posted by Shuffster

So, why did WGO stock go up today? Is the glass half full or half empty?

If people believe that a company is ripe for a take-out or acquisition, the stock price often rises. I think Winnie is a great company with good people, but unless their employees start buying a lot of MHs for themselves, it may be a sad year!

DriVer · 01-06-2010, 09:13 AM

Quote:

Originally Posted by Jim Stewart

I think Winnie is a great company with good people, but unless their employees start buying a lot of MHs for themselves, it may be a sad year!

I don't see that happening however every other manufacturer is in the same situation. I'm not ready to write off the motorized portion of the RV industry just yet.

When the market turns, and it is showing signs of life, Winnebago Industries is going to be one of the motor home manufacturers that is going to be able to hit the ground running. WI products are typically the benchmark to where all other motor home buyers and manufacturers compare themselves to.

One of the challenges that was stated by Bob Olsen is that they are having difficulty in getting enough materials to build motorhomes because of the trickle down effect. Many suppliers are just not able to produce the volume of material that is required to sustain robust growth like in 2004 for example. The supply side I expect is going to need time to recover as well.

I believe this is one of the factors that is slowing down Winnebago deliveries and perhaps to a lesser degree not so much lack of being able to sell product. The rub is a lot fewer people buying large ticket recreational items (all types) since many of those would be buyers are in survival mode.

The first thing that people outside of the RV sphere will say is, there goes a "Winnebago" because the name has become synonymous with motorhomes. That's BIG when you can capture the imagination of a customer with a brand name right from the start of the buying process.

This phase will pass because North Americans as a people are unwilling to give up that adventure and discovery spirit. The family bonding benefit of what recreational vehicles can deliver on is not going to change and that need is always going have to be filled. It is just as true now as it was in the past. Call me optimistic!

ARROWVP38 · 01-06-2010, 10:45 AM

I don't see that happening however every other manufacturer is in the same situation. I'm not ready to write off the motorized portion of the RV industry just yet.

When the market turns, and it is showing signs of life, Winnebago Industries is going to be one of the motor home manufacturers that is going to be able to hit the ground running. WI products are typically the benchmark to where all other motor home buyers and manufacturers compare themselves to.

One of the challenges that was stated by Bob Olsen is that they are having difficulty in getting enough materials to build motorhomes because of the trickle down effect. Many suppliers are just not able to produce the volume of material that is required to sustain robust growth like in 2004 for example. The supply side I expect is going to need time to recover as well.

I believe this is one of the factors that is slowing down Winnebago deliveries and perhaps to a lesser degree not so much lack of being able to sell product. The rub is a lot fewer people buying large ticket recreational items (all types) since many of those would be buyers are in survival mode.

The first thing that people outside of the RV sphere will say is, there goes a "Winnebago" because the name has become synonymous with motorhomes. That's BIG when you can capture the imagination of a customer with a brand name right from the start of the buying process.

This phase will pass because North Americans as a people are unwilling to give up that adventure and discovery spirit. The family bonding benefit of what recreational vehicles can deliver on is not going to change and that need is always going have to be filled. It is just as true now as it was in the past. Call me optimistic!

I belive DriVer is correct. Every M/H on the road people say" that looks like a winnie"
Just like when you order in the restuarant " i'll take a Coke" If and when the money starts flowing again in my household you bet I"ll Be at winnies door for my new unit
38T '07 adventure NO I'll GET the 42' w/tag next!!!!!!

lakewoodpaul · 01-06-2010, 07:03 PM

I remember back in the early 70s during the supposed gas crunch, Time magazine put Winnies founder John K Hansons picture on the cover of one of the issues and his famous quote "you cant take sex, booze ,and weekends away from the American people" I suspect if WI made it thru those times, They will make it again. I certainly hope so, we really enjoy WIT. and we love the product. We are on our 7th.

Navy Flier · 01-07-2010, 07:02 PM

I doubt that Winnebago will be going under any time soon. One item missing from the WSJ report is that Winnebago has zero debt. Also, I would like to know if that figure of 6,800 units to break even is current. The most expensive item for any business is personnel. Winnebago laid off 2,100 workers in 08/09 and is now calling them back, slowly but surely. Since they have no debt, own their manufacturing assets and make many of the parts in house I believe they can well control their breakeven point.