Fleetwood Enterprises, Inc.

FOUNDED: 1950 as Coach Specialties Co.

Contact Information:

HEADQUARTERS: 3125 Myers Street
Riverside, CA 92503-5527
PHONE: (909)351-3500
FAX: (909)351-3500
URL: http://www.fleetwood.com

OVERVIEW

Based in California, Fleetwood Enterprises, Inc. is the largest maker of recreational vehicles, including motor homes, folding trailers, and travel trailers, in the United States. The Fortune 500 company is also the second largest maker of manufactured homes. Along with selling its products via 190 retail outlets, Fleetwood also uses roughly 2,600 independent dealers. Manufactured homes account for 56 percent of revenues while motor homes bring in 23 percent, travel trailers 16 percent, and folding trailers 4 percent.

COMPANY FINANCES

After three consecutive years of growth, sales in 2001 fell to $2.5 billion compared to nearly $3.8 billion the previous year. Net income fell from $108.5 million in 1998 to $107.1 million in 1999, and to $83.4 million in 2000. In 2001 Fleetwood posted a net loss of $283.9 million. Earnings per share dropped from $3.01 in 1998, to $2.94 in 1999, and to $2.41 in 2000. In 2001 losses per share totaled $8.67. Stock prices, which peaked in 1998 at a high of $48 per share, had fallen to a high of $16 per share by 2001.

ANALYSTS' OPINIONS

Despite a 35 percent drop in housing sales and a 37 percent drop in RV sales in 2001, due in large part to the North American economic recession, some analysts believed that Fleetwood stock was worth a second look. The firm's drastic cost cutting measures, which included the elimination of one-third of its workforce and the shuttering of 13 plants, was predicted to boost performance in early 2002. However, when Fleetwood's performance worsened during the first three months of 2002, Standard & Poor's downgraded its stock from "hold" to "sell." Some analysts criticized the firm for weak product development, as well as for failing to build strong relationships with dealers.

HISTORY

Fleetwood was established in 1950 as Coach Specialties Co. by John C. Crean. Initially, the new California-based firm sold window blinds for travel trailers. Early in the decade, Crean built his own personal travel trailer, and one of his window blind customers who happened to be a trailer dealer asked Crean to assemble trailer units for him during the busy summer months. When the summer travel trailer season ended, Crean began building mobile homes instead of trailers. Increased demand for inexpensive housing in southern California boosted sales of mobile homes, which typically cost one-third the price of traditional homes in the 1950s. By 1954 operations had grown to encompass three production plants. Three years later, Coach Specialties changed its name to Fleetwood Enterprises, Inc.

In 1964 Fleetwood diversified into recreational vehicles (RVs) with the purchase of Terry Coach Industries, Inc. and Terry Coach Manufacturing, Inc. The RV market was booming, thanks to the growing number of U.S. residents who had made traveling a hobby. Low gasoline prices also contributed to the industry's growth. Eventually, Fleetwood created a line of fifth-wheel travel trailers designed to be towed behind larger pickup trucks. The firm completed its initial public offering in 1965. Fleetwood continued to expand with the purchases of Pace-Arrow, Inc., a motor home manufacturer, and Avion Coach Corp., manufacturer of luxury class trailers.

Although the 1970s proved to be lucrative years for Fleetwood, the industry had begun to slow by the end of the decade. Soaring gasoline prices, public fears about a recession, and rising interest rates all contributed to a sales slowdown. Because nearly 66 percent of Fleetwood's products were reliant upon gasoline, fuel shortages (which prompted rationing in some states) battered the RV market. RV retailers began to shutter operations and many manufacturers saw their orders slow to a trickle. To stay afloat Fleetwood found itself having to slash both production and staffing. In 1980 Fleetwood shut down nine of its production factories: three travel trailer plants, three motor home facilities, and three manufactured housing plants.

Early in the 1980s, Fleetwood restructured its housing operations along regional lines. As the recession eased, RV sales began to recover. In fact, the firm achieved __BODY__ billion in RV sales in 1989. However, this growth was not without problems. In 1985 the U.S. Department of Housing and Urban Development (HUD) began investigating Fleetwood for potential safety defects in 4,000 mobile homes manufactured in the early 1980s. The investigation resulted in a U.S. Justice Department complaint filed against Fleetwood in 1988. The Justice Department sought civil penalties in excess of $20 million, alleging the existence of standards violations in manufactured homes produced by Fleetwood. The following year, Fleetwood, HUD, and the Justice Department reached a settlement.

The firm's legal woes didn't end there, however. A class action lawsuit filed in Delaware in 1985 alleged that Fleetwood, among other manufactured housing makers, had charged excessive prices and finance fees to veterans by sending false certifications to the Veterans Administration. In 1990 two Fleetwood subsidiaries pled guilty to six counts of filing false certifications. As a result, Fleetwood paid $650,000 in fines.

Fleetwood diversified into financing in 1986 with the creation of Fleetwood Credit Corp. By the early 1990s, Fleetwood Credit had lending operations in California, Oregon, Indiana, Massachusetts, Georgia, New Jersey, and Texas. Growth continued with the purchase of the folding trailer assets of Coleman Co., which held a 30 percent share of the U.S. folding trailer market. The firm also introduced a line of less expensive trailer models.

In 1996 Fleetwood sold its credit arm to Associates First Capital Corp. for $156.6 million. The firm created 49 Fleetwood Home Centers, retail centers selling Fleetwood homes, in 1997. That year, Fleetwood also established a joint venture with Bloomfield Hills, Michigan-based Pulte Corp. to create a nationwide network of retail centers selling manufactured homes as well as home financing and insurance. Recessionary economic conditions undercut sales in 2000, prompting the firm to lay off 800 workers and shutter five plants. Another 13 plants were closed in 2001 as Fleetwood reduced one-third of its workforce.

STRATEGY

Forced to reexamine its structure during the recession of the late 1970s, Fleetwood drafted a management policy that divided its housing operations along regional lines. This strategic shift was designed to help the firm react more quickly to market trends. Housing design and development operations were divided into five units: West Coast, Central, Southeast, Mid-Atlantic, and Florida. Each plant facility operated autonomously and management decisions were made locally.

Strategic efforts during the mid-1990s centered around refocusing on domestic RV and manufactured housing operations. For example, Fleetwood divested Fleetwood Credit, which it had created in 1986, to Associates First Capital Corporation for $156.6 million in 1996. The firm also sold off real estate holdings and its German RV unit. Later in the decade, Fleetwood began to add retail operations to its holdings. Retail units acquired included HomeUSA, Better Homes, Central Homes, Jasper Homes, Classic City Homes, America's Best Homes, Viking Homes, JR's Mobile Homes, and D&D Homes. However, this strategy undermined the firm's performance in the early 2000s, when retail sales of manufactured homes plunged as interest rates rose and the economy deteriorated. In an effort to boost lagging RV sales, Fleetwood launched a "Rediscover America" advertising campaign that offered rebates of up to $15,000 to customers who purchased an RV in January 2002.

FAST FACTS: About Fleetwood Enterprises, Inc.

Ownership: Fleetwood Enterprises, Inc. is a public company traded on the New York Stock Exchange.

Ticker Symbol: FLE

Officers: Thomas B. Pitcher, Interim Chmn., 62; David S. Engelman, Interim Pres., CEO, and Dir., 63; Boyd R. Plowman, EVP Finance and CFO, 57; Charles A. Wilkinson, EVP Operations, 60; Forrest Theobald, SVP, Gen. Counsel, and Sec., 59

Employees: 14,000

Principal Subsidiary Companies: Fleetwood Enterprises, Inc. operates roughly 60 manufacturing plants and 190 retail outlets across the United States and Canada.

Chief Competitors: Fleetwood Enterprises competes with Champion Enterprises, Pioneer Housing, and other makers of manufactured homes, as well as with recreational vehicle manufacturers such as Winnebago.

INFLUENCES

Fleetwood's decision to refocus on its core manufactured housing and RV operations in the mid-1990s was partially the result of failed efforts to diversify into new markets. For example, hoping to move into traditional home development, Fleetwood had paid $6.3 million for 75 acres of land in southern California in the early 1990s. These plans failed to materialize, however, and the firm sold the land in 1996 for a mere $2.8 million, the lower price reflecting a sharp downturn in the California real estate market. This divestment underscored Fleetwood's need to refocus on its core domestic manufactured housing and RV units, both of which were losing market share to fierce rivals. After peaking at 21.6 percent in 1994, the firm's share of the manufactured housing market had declined to 20.1 percent in 1995. It fell further to 18.5 percent in 1996. Fleetwood's main competitor was the Auburn Hills, Michigan-based Champion Enterprises, Inc. By undercutting Fleetwood's prices, Champion had secured a 16.5 percent share of the manufactured home market by 1996. Similarly, Fleetwood's share of the motor home market, the most lucrative sector of the RV industry, dropped from 34 percent in 1992 to 27.5 percent in 1996. Although Winnebago held only a 16.7 percent share, it had gained ground on Fleetwood by adding popular "slide-out" features to increase space to its motor homes long before Fleetwood made this addition in 1996.

PRODUCTS

Fleetwood sells manufactured homes up to 2,340 square feet in size. Motor home brands include American Dream, American Eagle, American Heritage, Jamboree, Expedition, Bounder, Flair, Pace Arrow, Southwind, Tioga, Storm, and Discovery. Travel trailer brands include Avion, Prowler, Terry, Wilderness, Mallard, Savanna, and Westport. The folding trailer business markets its products under the Coleman name.

GLOBAL PRESENCE

In September 1992 Fleetwood purchased an 80 percent stake in Niesmann & Bischoff, a Koblenz, Germany-based manufacturer of luxury Clou Liner and Clou Trend motor homes. The deal marked Fleetwood's first overseas venture. However, a sluggish German economy resulted in slow sales despite Fleetwood's efforts to introduce less expensive models. In May 1996 Fleetwood sold its stake in Niesmann & Bischoff.

SOURCES OF INFORMATION

Bibliography

"Fleetwood Enterprises, Inc." International Directory of Company Histories. Detroit: Gale Group, 1997.

Fleetwood Enterprises, Inc. Home Page, 2002. Available at http://www.fleetwood.com.

"Fleetwood Lowered to Sell." Business Week, 1 March 2001. Available at http://wwwbusinessweek.com.

Kurowski, Jeff. "New Fleetwood Management Faces Job of Fixing a Giant." RV Business, January 2002.

For an annual report:

on the Internet at: http://199.230.26.96/fle/annrep/fleetwood_ar/default.htm

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Fleetwood Enterprises' primary SIC codes are:

2451 Mobile Homes

3716 Motor Homes

3792 Travel Trailers and Campers

6141 Personal Credit Institutions

Also investigate companies by their North American Industry Classification System Codes, also known as NAICS codes. Fleetwood Enterprises' primary NAICS codes are:

321991 Manufactured Home Manufacturing

336213 Motor Home Manufacturing

336214 Travel Trailer and Camper Manufacturing

522291 Consumer Lending