Winnebago Industries Inc. will continue to consider additional growth opportunities outside of its home base of Forest City, Iowa, because of labor shortages in that community, Winnebago Chairman, President and CEO Bruce Hertzke stated in an interview published Sunday (Nov.7) in the Des Moines Register.
And the mainstream motorhome builder, the largest producer in the nation of Class A and C products combined, is evidently still toying with the idea for an entry into the towable sector if the right acquisition can be located, Hertzke told Register business writer William Ryberg.
The following are comments made during the interview by Hertzke, a 53-year-old Lakota, Iowa, native whose personal ascent within the ranks of Winnebago from an hourly production job to the publicly held concern’s top position is noted in the story:
Register: Winnebago had its first billion-dollar year in sales. How did the company do that?
Hertzke: It was a combination of several things. The market itself had a good year for the RV industry. Winnebago gained some additional market share. But, probably most importantly, Winnebago went into a new product line of diesels. Our diesel business last year grew 82 percent. The diesels – because they’re a larger-dollar sales product – were one of the major factors.
Register: Why do some people like diesels?
Hertzke: The diesel offers a larger chassis, so it allows more amenities, more slide-out rooms, more features such as ceramic floor tile, things that weigh quite a bit, and the big diesel chassis has the carrying capacity for a lot of additional features. The diesel is a bigger engine.
Register: What are the company’s keys to success?
Hertzke: The company’s success is innovative products and high-quality products and very good aftermarket parts and service for our consumer. This isn’t just Winnebago saying it, either. Winnebago is very proud of that, that we have won a dealer satisfaction award that is put out by the Recreation Vehicle Dealers Association.
Register: Are record-high gas and diesel fuel prices cutting into motorhome sales?
Hertzke: Not really. In fact, this spring and summer were the highest gas prices across the United States and both the third and fourth quarters and the year were a record for our company in both sales and profit dollars. … California has the highest gas prices and that’s the biggest RV state.
Register: Why do you think it is that the fuel prices don’t have an impact?
Hertzke: It’s going to cost you $20 to $50 extra to fill up. Most of our customers have worked very hard during their life and now they’re trying to figure out how they can enjoy some of their later years in life and they’re not about to say, “Well, I’m not going to enjoy myself to save $50.” If they’re really concerned, they may take a trip a little shorter.
Register: What about costs for steel, fuel used in the business and petroleum-based products such as plastics? Are prices for those materials going up and is it having an effect on Winnebago?
Hertzke: They’ve definitely gone up. This last spring, it’s safe to say I’ve seen more inflation across the board on so many different commodities – steel No. 1, plastics, but also aluminum, copper, wood products, plywood and panels. I think this is the first time I’ve seen so much. But, because our market has been fairly strong, we have been able to continue to pass along these price increases with our products.
Register: In calls with analysts, you’ve mentioned a possible need to expand. Where would you do that?
Hertzke: We’ve had a lot of expansion (including projects of various sizes in Forest City, Charles City and Hampton). Winnebago will continue to look at different regions or different areas that give us the opportunity to grow. We’re still short of labor here in Forest City, and we’re going to have to continue to look at other areas of opportunity that will allow us to expand and grow for the future.
Register: Does that mean you would think about building a plant of some kind in another city?
Hertzke: I would never rule that out.
Register: If you would decide to build a new plant, do you think it would be in Iowa?
Hertzke: Last time (before deciding to build a plant in Charles City in 2003), we had four different states that we were looking at. … Each time we reach a new level where we have to look at expanding, we will start from scratch and say, ‘Here’s what we need to do. What do our current facilities have to offer that we can, first of all, utilize these better?’ That will be our No. 1 choice. But, if that can’t happen then it goes to, ‘Where is the next best alternative?’
Register: Also, in some of those calls with analysts, there have been hints that Winnebago might be getting into the production of towable vehicles. Is that a likely possibility?
Hertzke: It’s not a likely possibility in Iowa. We do not have enough labor pool that we could go into the travel trailer here in the Midwest. If we looked at going into travel trailers, we probably have two choices. No. 1 is go out and buy somebody that’s in that. Or we go out and build different regional travel plants around the United States because you can’t afford the delivery costs (to deliver travel trailers over a long distance). A thousand dollars to deliver a $150,000 motorhome is two-thirds of a percent (of the cost of the home). A thousand dollars to deliver a $10,000 travel trailer would be a very significant portion.
Register: What’s ahead for Winnebago?
Hertzke: I’m very optimistic. The economy will go up and down and business cycles will be involved, but the Baby Boomers are definitely happening and we are going to have more customers to sell our products to. Our average customer is over the age of 50, and that group grows by 350,000 people per month, and that’s over 4 million new additional customers each year. We’ll get a certain percent of them each year. So that should give us an opportunity to grow.
Also, the consumer is living longer and staying a lot healthier. So we’re seeing that people are buying our motorhomes and utilizing them later in life.
Also, we’re getting people as young as 35 coming into the motorhome industry. So our age bracket continues to expand. These new younger people, they’re not so much for just camping. Those individuals are buying motorhomes to go to tailgating events and to go to motorsports events, maybe going to the desert to haul dirt bikes and dune buggies and four wheelers.
So between the popularity, the age demographics expansion and the Baby Boomers, we think we have a pretty bright future.