Winnebago: Gas Prices, Consumer Confidence Cause For Concern

Jan. 17, 2006
RV giant works to combat high fuel prices.

When your product is a gas-guzzler you have to expect a surge in energy costs will impact the bottom line.

Fortunately for motor-home manufacturer Winnebago Industries Inc. , one of IndustryWeek's IW 50 Best Manufacturing Companies in 2005, gas prices have gone down. According to the Energy Information Administration, an arm of the U.S. Department of Energy, retail price for regular gasoline averages $2.26 per gallon -- much lower than the average $2.90 per gallon the EIA recorded for September 2005.

Unfortunately, record high gas prices dominated Winnebago's 2006 first fiscal quarter, which ended Nov. 26. The Forest City, Iowa-based company reported net income for the first quarter was $14.6 million, down from $19.5 million recorded in the first quarter of fiscal 2005.

Winnebago Industries Inc.
At A Glance

Winnebago Industries Inc.
Forest City, Iowa
Primary Industry: Motor vehicles
Number of employees: 3,875
2004 In Review
Revenue: $1.1 billion
Profit Margin: 6.3%
Sales Turnover: 2.8
Inventory Turnover: 7.8
Revenue Growth: 31.8%
Return On Assets: 18.7%
Return On Equity: 33.5%
"Revenues and net income for the quarter were negatively impacted primarily by lower motor home deliveries as a result of lower consumer confidence, which in our opinion is due mainly to the increase in fuel prices," said Bruce Hertzke, Winnebago's chairman and CEO, in a Dec. 14, 2005, press release.

Fluctuating gas prices create the biggest obstacle for Winnebago, Hertzke told the Forest City Summit. "It's really consumer uncertainty. If gas would just settle in at $2 or $2.50 and stay there, it would help us. But right now, it goes up and it goes down and no one's quite sure where it's going to settle at."

To combat high fuel prices, Winnebago has introduced a line of lower-priced RVs that are more fuel efficient. The Winnebago View and Itasca Navion Class C (mini) diesel motor homes have caught consumers' interest.

"Following industry trends, the sales order backlog demonstrated a shift in mix of products to lower-priced motor homes," according to Hertzke. The company's sales order backlog was 2,013 units as of Nov. 26, 2005, compared with the backlog of 2,080 units Nov. 27, 2004.

The company also notes that corporate citizenship helps it sustain.

According to an essay that Hertzke wrote for IndustryWeek (Good Corporate Citizens Sustain Companies), "Maintaining a healthy, safe workplace environment is of utmost importance."

The company's corporate safety committee oversees policies and practices on a daily basis.

Winnebago also has maintained a recycling program for more than 15 years. In fact, it annually diverts 40,000 pounds of textile scrap from landfills.

The company also knows that its surrounding communities, where its workers reside, need corporate attention. The Winnebago Industries Foundation provides donations to non-profit organizations.

As for awards, the company has received the Quality Circle Award from the Recreation Vehicle Dealers' Association (RVDA) for the 10th consecutive year.

Quality Circle Award winners are determined by the Dealer Satisfaction Index (DSI) survey, which RVDA conducts annually with its dealer organization. The DSI survey asks its members to rate their manufacturers' performance in four categories: sales, product, management and service/warranty/support.

"We are extremely proud to receive the Quality Circle Award this year, and particularly proud to be the only manufacturer to receive this award each year for the past decade," said Hertzke in a Nov. 17, 2005, press release. "We consider the DSI survey to be a critical measurement tool for the quality of our products, our sales and service programs and our manufacturing processes. The survey provides us with an important annual benchmark that shows how our dealer partners perceive the quality of Winnebago Industries products and services."

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