John E. Sztykiel, CEO of Spartan Motors Inc., a chassis supplier to the RV industry, told investors during a conference call on Tuesday (April 28) that he expects from the company’s RV segment “flat to declining sales, with really the potential growth in late 2009, moving into 2010.”
Sztykiel had these additional observations about the RV business:
“As we looked to the motorhome market or the RV market, it is still in a very, very distressed state.
As mentioned earlier, we have proactively right-sized our RV business model to match demand. And we are currently working on a number of initiatives to take advantage of some of the changes in the marketplace. As we look at the industry from a recovery perspective, there are still opportunities for some recovery in the second half of 2009. However, we do not expect it to be gigantic.
As we look at 2010, obviously, we are more excited about 2010 than we are about 2009. But, for the first time, consumer confidence is starting to stabilize, pick up a little bit. Consumer spending as a whole is starting to stabilize. We’ve seen a large inventory adjustment in a variety of industries, which bodes well for a variety of industries in the second half of 2009. So, as a whole, from a North American perspective, a lot of positive things are happening within the current markets or economic conditions, to honestly provide some growth in the second half of 2009 into 2010. And we expect to take advantage of that.
On a very positive side, despite the bad economy, people still intend to drive or use RVs. What’s interesting is a recent RVI survey in March of 2009, indicated that 55% of the respondents intend to use their RVs more this spring in summer than last year. And 45% are considering another RV purchase. Only 4% say they will use their RV less.
And after being in the business 23 to 24 years, this does not surprise me, really for two reasons. One, the biggest economic indicator I’ve seen that drives the RV business is consumer confidence. As consumer confidence stabilize and start to pick up, people will start to buy RV units. Most RVs are still bought for cash, not financed over 50%, which means as consumer confidence starts to move in the right direction, RV purchases will start to move up.
Another positive is there has been a significant inventory correction over the last basically nine to 12 months, which bodes well for a potential significant uptick just from a wholesale perspective.
The third, and this just gets back to the use and the confidence with fuel prices significantly lower this year than last year at this time, we are singing — seeing increase attendance at shows. We’re seeing increased number of units on the road. So, as people travel, as people move, and as their attitude move in the right direction, right now we’re cautiously optimistic that the second half of 2009, will be positive from an RV perspective versus the first half. And last, and not least, there is 8.2 million RV owners in our nation, and the market is there…
There is no guarantee for the future. I believe as Fleetwood, Newmar, Tiffin and Travel Supreme, which is now a part of Jayco, which is the Entegra Group.
As we looked to the future, we still see us being a very viable chassis partner with those four respective companies. As we move into the future though, there’s a huge benefit to the situation in the RV business today. And that is the business model is basically broken about zero for lack of a better term, which means that you can’t get much worse really what you’ve got is upside opportunity.
You have a chance not just to participate as the model rebounds, but also to help create a much more effective business model. And as we looked to the future, we believe that we will be a partner on an increasing number of platforms, and whatever we provide to the marketplace, in addition to have an increasing customer base i.e. size. We’re selling to more customers. Whatever we sell, the dollar content will be higher.
So, from an attitude perspective, I will be the first one to admit, I would love it, if the RV business was similar to the numbers of 2006 or ’05. But, the reality is, it’s not. So, the beauty of it is it can’t really get any worse when you are at zero. You can’t go negative in this business.
So, how do you make the best? And the good news is, it will come up at something different, speed, agility, innovation will be all be tenants of that. And we’re excited about the initiatives in which we have ongoing. Now, it doesn’t guarantee we’re going to have a great future. But, we were at zero at 1985. And it became a great business model for us. So, we’ve done it more than once. The challenge is now for us to do it again. And we have absolute confidence we can make that happen.”