Fleetwood Introduces Hybrid Motor Home

(MoneyWatch) 

• The Company: Fleetwood Enterprises, a producer of recreational vehicles (RV) and manufactured homes.
• The Filing: FORM 10-Q filed with the SEC on December 4, 2008.
• The Finding: Fleetwood Enterprises Inc. unveiled its first-ever hybrid motor home at the annual National RV Trade Show in Louisville, Ky., last week. The Fleetwood Hybrid features increased fuel economy, getting up to 12-miles to the gallon, about 42 percent more than its conventional recreational vehicles. Despite its "green appeal," Fleetwood said it had no plans at this time to manufacture the concept hybrid -- likely due to weakening demand for motor homes and cash flow problems endemic to Fleetwood.

The Upshot: Motor home and travel trailer shipments for the RV industry fell for the sixth straight month in October, slipping 52.8% year-over-year to 12,000 total vehicles, according to an RV Industry Association's survey of manufacturers. Fleetwood is not immune to the slowing economy, diminished home equity values, and volatile fuel prices, too. For the first six-months of fiscal 2009 ended October 26, Fleetwood said RV group sales declined 57 percent year-on-year to $284 million.

Fleetwood's decision to delay the introduction of its hybrid vehicle probably was influenced by continued discounting by dealers (to move inventory off their lots) and turmoil in the credit markets. Heather Everett, a Fleetwood spokeswoman, told the Press-Enterprise a hybrid RV would likely cost $40,000 to $45,000 more than a conventional RV. A few gallons of diesel saved per mile does little to offset a higher sticker price -- and tighter lending terms, including higher down payments.

There is also a legitimate concern that Fleetwood might not have the necessary funding to refurbish its factory operations to manufacture the hybrid RV. In view of the deterioration in market conditions and the likelihood of operating losses for the balance of the fiscal year, Fleetwood's existing cash position of $70.6 million will evaporate quickly. In addition, repurchase obligations ($420 million total exposure) could swamp unused borrowing capacity of approximately $30.2 million if struggling dealers do not make it through the winter (and file Chapter 11).

The Question: Would a renewed upward climb in fuel costs be enough to get interested RV buyers to consider purchase of hybrid vehicles?