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During a recent conference call with investors, Monaco Coach Corp. said it benefited from a plateau in material goods costs that surfaced in the company’s fourth quarter, ended Jan. 1.
“Right now there is a decent environment with regard to raw material costs,” stated CFO Marty Daley. “There is good availability and we are no longer seeing a negative trend in pricing.”
That tendency is welcome news to industry suppliers and manufacturers. In 2004, steel costs reportedly doubled while other materials, including wood and plastics, also rose significantly, signaling price increases that will eventually reach the retail level.
Craig Wanichek, director of corporate communications for the Coburg, Ore.-based builder, noted, “Material costs, including wood, have leveled out, and there has even been some decline in steel prices. It helped our margins for the fiscal fourth quarter. However, we’re still watching the petroleum-based products, primarily plastics.”
Monaco also is intent on adjusting inventory levels, slowing production to match a softening in the retail sector that arose late last year. In Monaco’s year-end earnings report, the manufacturer indicated that it reduced production days from 65 to 57 in its first quarter to account for “a challenging retail environment.”
“We believe there was some overproduction in the industry, which resulted in frustration in the distribution channels on pricing and a variety of factors,” said Monaco Chairman and CEO Kay Toolson. “It has taken some time to sort that out.”
Wanichek added, “As retail slowed in August, September and October, production levels didn’t slow. There were a number of variables – hurricanes, the presidential election and fuel costs – and the industry wholesaled more units than it retailed causing inventories to get out of balance. Our announced slowdown will restore that equilibrium.”
Another area of focus for Monaco is the development of its dealer franchise agreement program. Toolson anticipates having 75% to 80% of the company’s motorized dealers participating by the end of 2005.
“We’ll be rolling out the motorized program during our Dealer Congress at the end of June,” Wanichek said. “Basically, the agreements provide more incentives for the dealers with regard to such areas as pricing and training for technicians and service people. The idea is to provide stronger service and sales support that will benefit the dealer and the consumer.”
Wanichek likened the business model to franchise agreements in the auto sector, although he said RV dealers would still carry multiple lines as opposed to being exclusive Monaco dealerships.