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The Honolulu Advertiser
Posted on: Sunday, September 13, 2009

Rebounding RV business auspicious for economy


By Jeff Green
Bloomberg News Service

Hawaii news photo - The Honolulu Advertiser

Heritage One RV is a startup that took over the site of a failed RV maker in Indiana. It may be that as the RV industry goes, so goes the nation — economically speaking.

MARK SHEPARD | Bloomberg News Service

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ELKHART, Ind. — George Graber was unemployed for three months this year after the shutdown of a recreational-vehicle plant in Indiana's Elkhart County. Now, he's building $15,000 travel trailers at startup Heritage One RV Inc.

His job-hunting luck reflects a rebound in RV demand that may signal the end of the worst U.S. recession since World War II. In the past four domestic cycles, Winnebago Industries Inc. and other RV makers foreshadowed the economy's decline and heralded its recovery in government and trade-group data.

"The RV industry is always the first in and the first out, and there's already been a noticeable beginning of it coming out of the current recession," said Dave Hoefer, 66, an adviser to Earthbound Recreational Vehicles, which was founded this year on the site of another bankrupt maker in Middlebury, Ind.

Elkhart County builds about half the RVs sold in the U.S., making it the center of a $14 billion domestic market. Evidence of a turnaround is showing up in new companies like Heritage One sprouting from the remains of failed manufacturers, and in no-vacancy signs at a motel favored by RV-hauling truckers.

Analysts watch RV sales because motor homes and travel trailers are discretionary purchases that consumers defer in an economic slump.

Sales in July, the latest available, ran at the strongest annual rate since October, according to the Recreation Vehicle Industry Association.

Wholesale deliveries to dealers averaged 355,000 over a six-year period that ended in 2007, then tumbled to 237,000 last year as the recession took hold, according to RVIA data.

Showroom visits and consumer-loan approvals are rising for the first time in more than a year, said Heritage One partner Steve Smith.

"Customers' interest is obviously rising, which is making the dealers feel better," Smith, 47, said from the building in Nappanee where Graber and about a dozen other workers were assembling so-called stick and tin trailers of metal sheets over wooden frames.

Elkhart County needs that kind of news. On the Michigan border and home to about 200,000 people, the county has a jobless rate of about 17 percent, the worst in Indiana.

President Obama has visited the area three times to talk about economic hardship.

Before coming to Heritage One, Smith worked at Travel Supreme, a maker of $160,000 trailers that shut its plants in January after another company bought out the operations. Nearby sit two vacant buildings owned by motor-home maker Monaco Coach Corp., which went bankrupt in March.

Earthbound, the company advised by Hoefer, is on the site of Pilgrim International, which went out of business in September 2008. Earthbound has been working on $42,000 lightweight trailers since January and is betting on a recovery in time for a sales push in early 2010. Lightweight trailers improve fuel economy for their tow vehicles.

In the past year, 15 new RV makers have begun operations, according to the RVIA.

Among the investors betting on the industry is Warren Buffett's Berkshire Hathaway Inc. Berkshire's Forest River Inc. RV unit paid about $42 million for the RV business of Elkhart-based Coachmen Industries Inc.

For Graber, 45, who had to sell his pickup for a cheaper model after losing his purchasing job at Travel Supreme, the Elkhart recovery and the hiring for it can't come fast enough.

"People I know personally, a couple of them will get back every week now," he said. "Three months ago, everyone was just down and they weren't even taking applications."