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Just a year ago, when RV dealers were cautious about ordering new units because they worried about the impact war with Iraq would have on consumer confidence, Winnebago Industries Inc.’s opening of a new Class C motorhome assembly plant in Charles City, Iowa, appeared to be ill-timed.
The RV wholesale and retail markets quickly rebounded last year, however, and because Winnebago employees worked 45-hour weeks during the company’s winter quarter, Chairman, President and CEO Bruce Hertzke said, more expansion might be needed.
“We don’t have anything to announce, but we have a big Board of Directors meeting May 4th and 5th to review some future strategies for growth for the company,” Hertzke said last week during a conference call with investment analysts.
“I have to have a three-year plan for my board on industry growth and where the company can grow,” Hertzke continued. “We’ll be looking at if any additional capacity will be needed for the company to grow in this three-year period.”
During his 32 years at Winnebago, Hertzke said he never experienced a second fiscal quarter, which for Winnebago includes the months of December, January and February, when its factories worked overtime during the entire three-month period.
Winnebago opened the new Class C plant in Charles City primarily to create more room at its main Forest City, Iowa, assembly complete to build more diesel pusher Class A motorhomes.
And the wholesale and retail markets have, so far, responded enthusiastically to Winnebago’s diesel offerings, particularly its “value-priced” Winnebago Journey and Itasca Meridian models along with its redesigned Winnebago Vectra and Itasca Horizon units, said Ed Barker, senior vice president and CFO.
Consequently, 30% of Winnebago’s Class A motorhome volume during the December-through-February period was diesel units, with the remainder being gas engine coaches. That is below the industry average of 40% of all Class A’s being diesel-engine models. And, Hertzke added, “I’m not sure we’ll ever be able to get to 40% in diesel if we remain strong in gas. We’ll see where the market grows. If it continues to grow in diesel, at least, we feel we’re in a position to grow in that now.”
A year ago, Winnebago forecast its new Class C plant in Charles City would produce 3,000 to 4,000 units a year. It now is building at a rate of 3,500 units a year.
Hertzke estimated Winnebago’s Forest City and Charles City plants both are operating at 80% capacity.
A labor shortage in Forest City is the reason why Winnebago’s complex there is working overtime even though it is not at full capacity, Hertzke explained. “We cannot get all the people that we want in a fast mode so we hire only so many so we could control the quality and slowly ramp-up rather than bring a whole bunch of people into the manufacturing cycle at one time,” he said.
One alternative is for Winnebago to add a second shift of production at Charles City, located in a larger labor market about 65 miles east of Forest City. That way, the company could increase output without having to invest in more brick & mortar, Hertzke said.