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 Business News | March 2007 
Fleetwood Moving Some Trailer Production to Mexico
 Jonathan Shikes & Josh Brown - Press-Enterprise
| | Fleetwood will shift production of trailers known as toy haulers, which are used by off-roaders, from Rialto to the Pacific Northwest, while two trailer models now made in Oregon will be built in Mexicali. (Greg Vojtko/Press-Enterprise) |
Fleetwood Enterprises Inc. said Thursday that it will open a plant in the border town of Mexicali this May, becoming the first U.S. company to make RVs in Mexico.
The news comes six days after the Riverside-based RV and manufactured-housing producer announced plans to close three of its nine U.S. travel-trailer factories, including a 35-year-old plant in Rialto with 429 employees.
Fleetwood also reported a loss Thursday of $29.9 million for its third quarter, primarily due to sliding travel-trailer and mobile-home sales.
Elden Smith, the company's president and chief executive officer, said the closures were linked to the falling sales numbers, not to the Mexicali plans.
"It's not a replacement situation," Smith said Thursday in a conference call with analysts and investors. "Our commitment to Mexicali was made months before the decision was made to close Rialto or any of the other plants."
 Assembly of two RV models - Pioneer and Mallard - will begin in Mexico with about 150 employees, said Lyle Larkin, Fleetwood's vice president and treasurer. The company is leasing the 80,000-square-foot factory there, near several other American companies.
"This will allow us to do one of two things, and maybe both: Price them more competitively or provide ourselves with a higher margin," Larkin said.
Fleetwood pays full-time employees in Southern California about $20 an hour in wages and benefits. The company will pay $4 an hour in Mexico, he said.
Tom Walworth, president of Statistical Surveys Inc., which tracks RV sales, said no other U.S. RV companies are currently manufacturing in Mexico.
"They are the first to break the ice," he said. "But I think it makes sense."
Struggling Since 2001
Fleetwood has struggled since 2001 and has admitted to several strategic errors that resulted in losses totaling more than $728.8 million between 2001 and 2006.
It has also suffered through declining demand for manufactured housing and an uneven market for motor homes and travel trailers since 2005.
The third-quarter loss, which equates to 47 cents per share, was a result of poor travel-trailer and mobile-home sales in 2007 and also reflected typical seasonal weakness, Smith said. So far this year, Fleetwood has lost $50.7 million.
Last Friday, the company told employees it would close its 112,000-square-foot Larch Avenue plant in Rialto by May 1, along with factories in Maryland and Texas, in order to consolidate travel-trailer production at six other locations.
Together, the three plants employ 993 people. Fleetwood said some Rialto workers may be hired at one of the company's three other Inland facilities.
"Everybody has a family. Everybody is scared because everybody pays bills," said Ivan Melendez, a 51-year-old RV assembler on break Thursday at the Rialto plant. "I don't know another job that pays as much as them."
Melendez, a 17-year Fleetwood veteran, and Abel Martinez, who has worked there 13 years, both said they will apply for other jobs within the company.
"It's just an opportunity for someone else," Martinez said about the Mexicali factory. "They (Fleetwood) had to do it. We have no hard feelings."
But Jose Hernandez, 18, who has worked at Fleetwood for three months, said he is disappointed. A temporary employee, he was hoping for a permanent job at the Rialto plant.
"It makes you angry that all these people are going to get their jobs lost to take the jobs somewhere where people will work for less," he said.
Toy Haulers
The Rialto plant made trailers known as toy haulers, which have living quarters up front and storage space for off-road vehicles in back. Those models will now be manufactured at factories in the Pacific Northwest, Fleetwood said.
Production of Pioneer and Mallard trailers - lower-end models ranging in price from $15,000 to $30,000 - will shift from Oregon to Mexico. The Mexican-made units will be distributed in California, Arizona and Nevada, said Larkin, the Fleetwood vice president.
If Fleetwood gains a competitive advantage, other RV makers could follow suit, said Statistical Surveys' Walworth. For now, they will take a wait-and-see approach for now, he added.
Wall Street had anticipated Fleetwood's quarterly loss, but shares of the company's stock still fell 67 cents Thursday, or 7.75 percent, to $7.97.
Reach Jonathan Shikes at 951-368-9552 or jshikes@PE.com |
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