Greg Gerber posted on March 20, 2009 05:16
FOREST HILLS, N.Y. -- RV makers may be in crisis mode as warranty claims increase significantly, Warranty Week reports today.
"Incredibly, the pain began to impact more specific product types even earlier than it became obvious for passenger car makers. And no segment seems to have been harder hit than recreational vehicles," reports Warranty Week. "We've looked at the accruals made by manufacturers in the RV industry over the past six years. And what's immediately apparent is that accruals peaked in the second quarter of 2005. Accruals were $79 million in that quarter. In the final quarter of 2008, they were barely over $41 million."
"While bankruptcies may have been avoided by the passenger car makers and their suppliers, thanks to government support, there was no such safety net in place to help the RV makers," the editors noted. "Warranty claims had little to do with the collapse of these companies, but in both cases their claims rate rose dramatically in 2008. We can see that Fleetwood's claims rate rose from 3.2 percent at the end of 2007 to 5.7 percent at the end of 2008. Normally, anything over 5 percent is a sign of trouble. Meanwhile, the accrual rate, which should be less impacted by changes in sales, rose from 2.6 percent to 4.1 percent during the same time period.
"Fleetwood Enterprises was one of only two companies to make the maximum of four top 10 lists in the March 13 newsletter. Monaco Coach was not included in that ranking because its annual report has yet to be filed, so there's no annual data to be had. But just in the first nine months of 2008 the company saw its claims rate rise from 3.1 percent to 5.8 percent, while its accrual rate rose from 3.2 percent to 6.3 percent.
"Winnebago Industries isn't a large enough warranty provider to make it into the top 100 list, but its warranty claims rate nearly doubled since the end of 2007, from 1.7 percent to 3.3 percent. Coachmen Industries already had a claims rate over 4 percent even before it missed the deadline for filing its latest annual report," said Warranty Week.
"The point is that RV makers have been hit hard by the dual perils of falling sales and rising warranty costs. And it makes perfect sense, if you think of RVs as the cross between autos and homes, and if you think of autos and homes as the industries hardest-hit by the recession," reports Warranty Week. "Spartan Motors is the only major RV industry player to see either a sales increase or a claims rate reduction in 2008, and we think that probably has more to do with the momentum in its fire truck, ambulance, and military vehicle lines of business."
SOURCE: Warranty Week