Despite a variety of new products for 2007 and evidence that the Class A motorhome market may have bottomed out, the president of Middlebury, Ind.-based Coachmen RV Co. LLC expects the soft demand will continue in the fourth quarter and likened the competition for market share to “a dogfight.”
Speaking during a conference call to analysts on Tuesday (Oct. 31), Coachmen’s Michael Terlep reported that the company had product backlogs entering the fourth quarter of 744 units, well below the backlog of 4,965 units a year ago. The deterioration in backlogs reflects weaknesses in both towable and motorized markets as well as some 2,500 towables built for hurricane relief in the final quarter last year, he said.
The company continues to suffer “a hangover effect” from defective sidewalls produced for some units a year ago, along with weaknesses in its overall product offerings that caused Coachmen to lose shelf space on dealers’ lots, Terlep said.
“We had the wrong products and too many models,” he said.
As a result, its wholesale performance is lagging the rest of the RV industry. The challenge, Terlep said, is rebuilding Coachmen’s shelf space on dealer lots at a time when dealers are holding down inventory.
Terlep projected fourth-quarter RV revenues “along third-quarter lines” of $90.5 million.
Rick Lavers, CEO of parent Coachmen Industries Inc., Elkhart, Ind., said he was not optimistic that the company, which lost $3.4 million in the third quarter, could return to profitability in the final quarter.
That said, Terlep and Lavers pointed to some signs that the company is on the right track in reducing costs and improving products:
• The company has reduced its RV product offerings by 50%, simplifying matters for its dealers.
• Operating improvements at the lamination facility in Middlebury and the return to profitability of a plant that makes gas-powered motorhomes helped make September “one of the best months in over a year in the RV Group.”
• Fifth-wheel production is being moved from its plant in Fitzgerald, Ga., to the main complex in Middlebury.
• The company will consider an extended holiday shutdown to match run-rates with demand.
• Coachmen has instituted in the last 60 days some rebate programs to help dealers move ’06 inventory and make room for ’07 models.
• Though traffic was down by as much as 35% at the recent retail show in Pomona, Calif., dealers report that sales were in the 80th percentile of last year’s show.
• Gross profit for the RV Group in the third quarter increased to 4.1% of sales from 1.1% last year as a result of the company’s cost reduction efforts and restructuring.