When Thor Industries and Jayco Corp., both based in Elkhart, joined forces in July, it became the biggest story in the recreational vehicle industry world in 2016.
Yet, the acquisition was just one example of RV companies looking for ways to keep pace with rising demand.
“We went into the year thinking it was going to be a very strong year and what ended up happening was we surpassed our own expectations,” said Kevin Broom, media relations director for RVIA, the Virginia-based trade association.
An association forecast committee, working with the director of consumer surveys for the University of Michigan, projected RV shipments would reach 395,000 this year and, as of mid-December, they exceeded 400,000.
“It’s the highest total we’ve had since 1981, when we started tracking the numbers in exactly the same way that we do now,” Broom said. “Certainly strengthening of the economy helped, and companies introducing products that are the right mix of size, amenities and price consumers are looking for.”
The industry increased the versatility of its products to appeal to a wider array of consumers in terms of how different people use RVs. Changes were evident in the introduction of products with a smaller footprint, lighter weight and improved aerodynamics, Broom said.
Some of the products launched this year were made in part with building materials new to the industry, and their production involved significant process improvements, he said.
Appealing new features multiplied in the industry this year because engineers at the companies “are looking at what future buyers are going to want and are starting to introduce that now, with the integration of Wi-fi and technology to make things a little easier to use,” he said.
The forecasting now expects 2016 shipments will come close to 420,000. For next year, shipments are projected to reach 438,000.
“The baby boomers are entering retirement age, an age group where RV ownership levels have been the highest,” Broom said. “We are seeing growth at strong levels for all age demographics…. A lot of people who have children are purchasing RVs, and a lot of empty nesters are and retirees as well.”
The rising demand for RVs helped increase Indiana’s employment, especially in the northern part of the state, according to a first-of-its-kind economic impact study released by the industry association in June.
Indiana has 49 percent, or 111 of the nation’s 228 RV manufacturer plants, according to “RVs Move America.”
All of the industry’s Indiana plants are in the state’s neighboring 3rd and 2nd Congressional districts. The 3rd district, which includes Allen and LaGrange counties among others, has been served by Rep. Marlin Stutzman. It has 22 of the plants. The 2nd district, which includes Elkhart County, is served by Rep. Jackie Walorski and has 89 of the plants.
Nationwide, the RV industry contributed $49.7 billion to the U.S. economy last year, and provided its workforce with 289,852 full-time jobs. Those employees earned $15. 8 billion in wages and benefits. They and the businesses employing them paid $5.7 billion in federal, state and local taxes.
Of the 372,043 RVs made in the United States last year, the study shows 296,383 – or four out of five – were made in Indiana, where the industry employed 22,469.
The industry’s direct economic output in Indiana last year came to $6.8 billion, including $6.5 billion from RV manufacturers and suppliers, $129.4 million from RV sales and service and $133.8 million from RV campgrounds and travel, the study shows.
The study does not provide a production breakdown by Congressional district, but it shows a direct economic impact of $4.6 billion for Indiana’s 2nd district, where the industry employed 14,247 last year, and an impact of $1.4 billion for its 3rd district, where the industry employed 4,753.
About one-third of Elkhart County’s workforce is employed by the RV industry and it was hit so hard by the Great Recession that President Obama visited Elkhart in February 2009 to call attention to the city’s high unemployment rate – which peaked that year at 19.6 percent – and to offer encouragement.
He had promised during that visit recovery was possible by working together. He returned to the city this June to praise the hard work and determination that helped lower Elkhart’s unemployment rate to about 4 percent.
Increased demand for RVs helped the industry’s suppliers as well as its original equipment manufacturers, and Indiana beneficiaries on the supplier side included Patrick Industries and Drew Industries, both based in Elkhart.
Drew completed three acquisitions during the first half of the year: Project 2000 S.r.l., an Italian manufacturer of retractable RV steps and bed lifts; Flair Interiors, a Goshen manufacturer of RV furniture; and Highwater Marine Furniture, in Elkhart.
During the first half of the year, Patrick closed on the business and certain assets of Mishawaka Sheet Metal, a full-service distributor and fabricator of aluminum and steel products based in Elkhart.
Then, in July, Patrick completed an $11-million acquisition of the the business and some assets of the thermo-formed plastic parts manufacturer, Vacuplast, which did business from its Elkhart headquarters as L.S. Manufacturing.
Earlier this month, Patrick completed the acquisitions of Elkhart-based Sigma Wire International, and Mishawaka-based KRA International. The total cash consideration for the two purchases was about $25 million.
Sigma is a manufacturer of a wide range of PVC insulated wire and cable products primarily for the recreational vehicle and marine markets. KRA is a manufacturer of wire harnesses and associated assemblies for recreational vehicles, commercial vehicles, lawn care equipment, marine products, the defense industry and automotive aftermarket products.
Indiana-based original equipment manufacturers working to expand their RV production capacity this year included Jacyo, which has its headquarters in Middlebury, and Thor and Forest River, which each have a headquarters in Elkhart.
Forest River opened in September the first of three 100,000-square-foot buildings it will use as a production complex in White Pigeon, Mich., 10 miles north of the Indiana state line. The $7 million complex eventually will employ about 400.
Hiland Ridge RV, which is part of Jayco, announced plans in February to add 65 new jobs by 2019 in Shipshewana to 330 the company already employs there after it moves production to a 92,000-square-foot, $5.7 million plant it is building, which will double its production in the community.
Thor Motor Coach announced in March its purchase of a 128,000-square-foot production facility on 18 acres in Bristol with plans to establish a dedicated production line in it for its new Quantum Class C motorhome.
Thor began making the Quantum there that month. The purchase was expected to free up capacity on the company’s Elkhart campus to increase production for its other Class C motorhome lines there.
Thor’s Dutchmen and Heartland subsidiaries bought existing production facilities in Middlebury saying they planned to making towables there early in Thor’s 2017 fiscal year.
A Thor subsidiary, Keystone RV, broke ground early this month on the south side of its Goshen campus for the construction of two plants, which will total 200,000 square feet, and will employ 250-300 additional workers.
The $576-million deal Thor struck to buy Jayco was seen as a vote of confidence in the future of the recreational vehicle industry.
At the time of the July announcement, Thor was a $4.6 billion company, and one of the industry’s largest, with 10,500 employees. It reported earnings of $258 million for its 2016 fiscal year ended last July 31.
With income before tax of $70 million on revenue of $1.5 billion last year, Jayco was the RV industry’s last large private company left to acquire. It employed about 3,200 at the time of the merger and was know for its Jayco, Starcraft RV, Highland Ridge and Entegra Coach subsidiaries.
Thor has a history of not liking to take on debt but, in this case, it considered the purchase worth it. The deal was funded through existing cash balances and $360 million in borrowings from an asset-based revolving line of credit arranged through Thor’s lenders.
Thor plans to repay the loan through cash flow generated internally, and said in a statement it expects the debt to be paid down within three years of closing.
The company’s 2016 fiscal year “was the largest year in our history both in revenues and earnings,” said Jeffrey Tryka, director of corporate development and investor relations. “It was a record year, which followed a record year the year before and a record year the year before that. It was very positive for us, for the industry and for our employees.”
Thor’s company-wide employment, including Jayco employees, came to 14,900 on July 31, he said, which was up from 10,450 a year earlier.
For the six months ended June 30 this year, Thor’s combined U.S. and Canadian market share, without Jayco, was 35.7 percent for travel trailers and fifth wheels and approximately 25.3 percent for motorhomes.
For the same period, which reflects results prior to its acquisition by Thor, Jayco’s combined U.S. and Canadian market share was 14.7 percent for travel trailers and fifth wheels and 9.2 percent for motorhomes.
In a Nov. 28 investor presentation, Thor said at the end of September its market share including the acquired Jayco business came to 47.7 percent. It said that compared with 35.7 percent for Forest River, 3.1 percent for Winnebago, 2.6 percent for Grand Design, 1.3 percent for Gulfstream and 0.8 percent for REV Group.