The following is an interview with Tom Walworth conducted by RVB Publisher Sherman Goldenberg offering insight into the current state of the market. Walworth is president of Statistical Surveys Inc., a Grand Rapids, Mich.-based firm that tracks retail information for the RV, manufactured housing, marine and commercial trailer markets.

RVB: Tom, when is the market going to bottom out?

Walworth: While you can say the market is really crippled, I don’t believe it as crippled as it appears because they (finance companies) are not allowing the new products to come onto the market. Manufacturers debuted new products from Louisville – lighter models, more gas efficient lines, newly designed teardrop towables – all this stuff, and the dealers can’t stock it in the volume that they need it on their lots. And the product they have on their lots continues to sell. Demand for RV’s is still out there.

RVB: Is the credit situation in this market any different than other markets?

Walworth: It’s all the same. The marine and automotive industries have the same problem with flooring.

RVB: Do you think that the stimulus program that’s being introduced along with the tax elements that go along with it will be beneficial to the RV industry?

Walworth: There are some benefits. They are giving some favorable tax advantages right now to the motorhome side of the industry. I don’t believe it’s coming to the towable side. But certainly that will help.

When President Obama was in Elkhart, he outlined the need to come up with a program. In fact, they called our office looking for information in developing incentives for the RV business. Will it be enough? Probably not. We need to have the flooring open up so that dealers can start stocking the product they are selling. If you put the right product on the dealer’s floors, this market will take care of itself.

RVB: How long do you think it will take for dealer inventories to drop to the point that wholesale outpaces retail?

Walworth: What’s happening right now is that the lien holders are changing the mix on the dealers’ lots. Everybody buys a clunker every now and then – you always have some product that is not moving. What’s happened, though, is that that’s the only thing left on a number of dealers’ lots. So, somebody comes in to look at an RV but sees that it’s stuff they don’t want to buy. They (lenders) aren’t allowing an influx of new stuff so dealers can get some movement.

Now, if they are allowed to increase inventory on their lots, they are going to get some people in to sell new product or make a deal on older product. But if they have nothing to entice the consumer to come to the lot, it’s not going to happen. Wholesale is only going to outstrip retail in a growing market. We are not in a growing market.

What we have in this industry is a five-month selling window from April through August; it’s a bell shaped curve. You can go back historically 30 years and see that bell-shaped curve. Our industry ordinarily cannot make enough product to meet that demand. Our industry always has to do some loading in the spring. And right low, loading in the spring is seen as bad by the financiers. You have to increase inventory to meet the demand of the summer. If we don’t start increasing inventory now, we are not going to be able to meet demand in the summer and it will be a self-fulfilling prophecy that this will be a terrible year.

RVB: Normally, a lot of Louisville Show purchases start delivery in March, right?

Walworth: Right. And what’s happened is they’ve made the purchases in Louisville and they can’t get them delivered because the guys at the flooring end of things are so conscious of inventory that they’re holding back what normally has to take place.

RVB: How bad is the glut of dated units out there?

Walworth: I don’t really have an idea about what the dated inventory is out there. Obviously, there’s ’07’s. That was a big shipment year. And ‘08 products certainly were held back due to the slow market that was taking place. As you know, RV shows that didn’t ordinarily let older units in are relaxing the standards and letting them bring older units in for their displays.

RVB: So, Tom, back to the first question. When is this market going to bottom out?

Walworth: I think if they were able to bring that new product developed for the Louisville Show to market, you’d see the retail market respond. There is a lot of pent-up demand just waiting for the right product. But as they (finance companies) continue to change the mix on the dealer’s lots so that it’s not an attractive product that is out there, people probably aren’t going to go after it.

So, I would say that you will see this market start to come back in April/May. First off, product is the cheapest, most affordable it’s ever been because manufacturers have given incentives. Dealers are accepting thinner margins. Interest rates are at historic lows and we are back to fuel prices from four years ago. You will not see $4-a-gallon gas this year, I guarantee it.

There are a lot of incentives out there. So, sooner or later here, people will start to turn the corner; consumer confidence will pick up. With the current administration, you have so many positive reporting events – Obama gets along better with the media than Bush did — that you are going to see the consumer feeling good about themselves and probably getting into the market. You can’t hold them out forever. There are things happening out there.

RVB: What sorts of strategies will RV builders develop from all of this?

Walworth: Successful manufacturers are going to look at consumer demands. Temporarily, they are going to come out with light, more fuel-efficient units. But in the long run, that’s not what the consumer wants. The consumer wants space, home-like items and that’s not going to be low-end units.

Back in the early ’80s, ultralight units brought people into the showrooms and they sold, at least initially. But what consumers clamored for were the big fifth-wheels, the big Class As, the diesels, all that stuff. They will come back to that product.