signal12's Blog

The Demise of the RV

• RV's hit the skids: How record oil is putting the brakes on this season's
  wanderlust.

• Eric Fry, reporting from Laguna Beach, California…

The summer driving season has arrived, but many Winnebagos will never leave the driveway. The soaring price of gasoline will force RV owners to curtail their gas-guzzling wanderlust.

"I never would have bought [my motor home] if I thought that gas would go this high," a retired firefighter in Westchester County told the Hudson Valley's Journal News. "My wife always wanted to go to Napa Valley," the firefighter lamented. "But with gas so high, it probably would be cheaper to fly and rent a car, rather than take the motor home."

The firefighter is probably right. We did the math:

Assuming gas mileage of 10 miles to the gallon, a 31-foot motor home would consume about $2,500 worth of gasoline to journey from the Hudson Valley to the Napa Valley, and back again. By comparison, two roundtrip plane tickets from JFK to San Francisco would run about $375 each. Even after paying another $450 to rent a midsized car for a week, the fly/drive combo would only cost about $1,200 – or less than half the cost of the RV's gas.

Of course, the fly/drive vacation would also incur the costs of staying in hotels. So after all is said and done, the direct cash costs of these two vacation options would be very similar, assuming you ignored the tens of thousands of dollars one must pay to buy an RV in the first place and the thousands of dollars one must pay to insure and maintain the thing.

Non-owners of RVs are probably making similar calculations, which is probably why RV sales are plummeting.

According to a forecast by the University of Michigan Survey Research Center, wholesale shipments of RVs will slump about 14 percent this year to 304,700 units - down from 353,000 units last year and about 390,000 units during that delightful "cheap gas" year of 2006.

Not surprisingly, the Hudson News reports, "the slowdown is having a large impact on the profits of major RV manufacturers such as Winnebago Industries Inc., the industry giant based in Forest City, Iowa. Revenue for Winnebago's fiscal second quarter fell 17.5 percent to $164.2 million. Net income plummeted 66.6 percent to $2.5 million. In response to weaker orders, Winnebago cut 300 jobs, or 9 percent of its work force, through layoffs and attrition.

"The weak RV market also is taking a toll on industry suppliers that include Drew Industries Inc. of White Plains. Drew, which supplies windows, doors, chassis and other components for RVs," the Hudson News continues. "Drew has closed 20 of its 51 factories in the past 18 months and laid off 130 salaried workers and more than 200 hourly workers."

But Drew is not alone. Fleetwood Enterprises, a leading motor-home manufacturer, is also boarding up factories at a rapid clip.

"Last year, we closed half our plants. We somewhat underestimated the magnitude of the decline in sales," Fleetwood's CEO recently admitted. "Our dealers tell us, however, that sales of new, improved models have been hampered by existing inventory of older product, and we are working with them on moving these aged units."

Good luck!

Aged units, virginal units, neither one is selling. Business is bleak, as the downward sloping price trend of Winnebago's share price testifies. Curiously, the share price of Fleetwood has barley budged during the last few months. At least not yet.

Joe Finch, sales manager at Best Buy RV’s, said the price of RVs has not had to be adjusted to stimulate purchases. Trailers and RVs run from $20,000 to about $160,000.

“Somebody who is seriously looking for an RV will not care about cost,” he said. “The price of gas has eliminated the casual looker.”  This arrogance will be the demise to many RV dealers, who think the fuel cost will eventually drop back to normal.

Just a reminder to those complaining about fuel costs, remember the RV owners are in worse shape than you.. ;o(