Many RV dealers have used up their borrowing power under their floorplan loan agreements with their lenders, which helps explain why dealers are reluctant to order more units from the manufacturers, according to Monaco Coach Corp. Chairman and CEO Kay Toolson.
Toolson expressed that opinion during a conference call with investment analysts last Thursday (April 3).
Monaco scheduled the conference call last week to explain why it decided to shut down all of its production plants this week (April 7-11) and to lay off 850 of its 5,900 employees. The aim of those moves, he explained, was to reduce Monaco’s output by 20% when its factories reopen Monday (April 14).
Toolson believes many dealers have exhausted their borrowing power because retail sales of Class A motorhomes declined by 5.5% in January, while factory-to-dealer shipments of all types of RVs increased by 18% in January.
“Obviously, a lot of people (dealers) were a lot higher on their floorplan than they were anticipating and, as a result, there isn’t a lot of floorplan availability out there at the moment,” Toolson said during the conference call.
“A lot of people are bumping against their limit,” he said, Monaco is trying to get units delivered to dealers when they dealers are trying to get units sold to retail buyers.
“Things were running pretty much normally through the month of January,” Toolson continued. “We didn’t have any more open units (unsold finished units) in our inventory than we did in any of the prior couple of quarters. “It was in February that dealers, perhaps, decided they had bought all the motorhomes that they wanted to buy for the time being.”
At that point, he said, “some of our assumptions regarding what we’d be able to sell towards the end of the (first) quarter went out the window. We wish we would have recognized this slowdown a little earlier and adjusted our production rates in advance.”
However, Monaco has no plans to permanently close any of its production plants in Indiana or Oregon, despite the fact it will be using only 50% to 60% of its factory capacity as a result of the layoffs. That’s because Monaco can operate profitability at that level of capacity utilization and because it wants to be ready to quickly ramp up production once the economy and dealer demand for motorhomes improves.
Monaco also will continue with its towable RV factory expansion project in Elkhart, Ind., although at a slower pace than was originally planned, Toolson added.