Bank of America
Bank of America Merrill Lynch has added a $5,000 donation to the RV Learning Center’s 2013 Annual Campaign, bringing the firm’s lifetime total support to $173,000. The goal for the annual fundraising campaign, which concludes in June, is to ensure high quality education for the industry at affordable rates.
“We are in the homestretch of our yearly fundraising efforts and this generous gift from Bank of America Merrill Lynch provides a great boost to our campaign just when we need it,” said RV Learning Center Chairman Jeff Pastore in a press release. “Their commitment to the RV Learning Center will ensure that education for RV dealers and their staff will stay on the cutting edge of technological advances and make our industry better. It will help us continue to fund the excellent programs, products and services for which the RV Learning Center is known.”
Donations to the RV Learning Center fund a diverse array of programs including webinars on current topics, training and certification for dealership staff, essential publications and learning guides, and the Convention/Expo. Convenient online donations as well as a printable form that accommodates customized pledges and donations have simplified giving for 2013.
The RV Learning Center is supported by dealers, manufacturers, suppliers, distributors and other RV industry members committed to dealership education and the high levels of customer service provided by educated employees.
For more information go to www.rvlearningcenter.com. The RV Learning Center is a tax exempt organization as described in section 501(c)(3) of the Internal Revenue Code. Contributions may be tax deductible as charitable donations.
National wholesale and retail lender Ally Financial Inc. made its presence known at the 48th Annual National RV Trade Show, Nov. 30-Dec. 2 in Louisville, Ky., with stand-alone booths and desks within the displays of Thor Industries Inc. with whom Ally established a “preferred lender” relationship earlier this year.
“We wanted to be in Louisville to support the industry. If you are going to be a major participant in it, there are obligations to support the industry event,” stated Tim Russi, Ally’s executive vice president for North American Operations, who was joined at the show by more than 20 associates from the Detroit-based lender.
“With the announcement that we are getting into wholesale financing — and knowing the season that we are about ready to get involved in from an RV perspective — we want to make sure the dealers have us on their minds,” said Russi.
Indeed, Ally has its sights set on becoming a major factor – a national-scale RV industry lender – along with GE Capital and Bank of America. And that’s pretty big news, considering Ally Financial extended $22.3 billion in U.S. auto consumer financing for the first nine months of 2010, making it likely the No. 1 ranked provider of new car financing in the U.S. in 2010.
“We want to be part of the upswing of this industry,” Russi, a former Bank of America executive who oversees Ally’s automotive and RV lending services in the U.S. and Canada, told RVBUSINESS.com. “Some lenders have left the market while others in it are potentially retracting, and there are not many providers in the industry. So, we think the time is right to enter the market.”
In a way, Russi points out, Ally has been in automotive financing as GMAC for a long time. Formerly the captive finance company of 90-year-old General Motors Corp., Ally became an independent financial services company in 2006 and a bank holding company in 2008, launching Ally Bank in May of 2009. Ally’s parent company changed from GMAC Inc. to Ally Financial Inc. in May, followed by the rebranding of its automotive finance business in July.
In 2009, meanwhile, President Obama named Ally Financial as preferred financial provider for Chrysler Group LLC. “We have preferred provider relationships with GM, Chrysler, Saab, Fiat, Suzuki and Thor,” said Russi. “And we’re looking to expand our relationship with other OEMS as well, which is an important concept as we diversify our book of business from what was historically almost 100% GM. As a bank, what you’d like to see is a diversified business.”
Ally Financial offers a variety of auto-financing products, indirect retail financing for new and used vehicles and RVs, auto leasing as well as wholesale financing and remarketing services.
Leading the RV industry lending team are some familiar faces, including the bulk of the former Thor Credit staff. Industry veteran Ed Arienti runs the retail sales force for the RV sector as director of recreational finance sales and teams with Rich Morrin, commercial operators leader, for RV dealer wholesale financing.
Also key is Mark Manzo, who, as vice president of alliance sales, manages OEM relationships, including that between Ally and Thor.
Ally’s RV industry entry started with an April announcement by then-GMAC Financial Services that it would provide RV consumer financing, working with Thor Industries Inc. as a preferred retail lending provider.
Then, on Nov. 23, right before the Louisville Show, Ally announced that it would diversify into wholesale financing, focusing from the outset on Thor’s dealer network.
“We benchmarked current options and needs in the industry and will offer a very competitive wholesale financing product for RV dealers,” Russi stated. “Our program is tailored to the recreation vehicle business with attractive terms and flexible credit lines that will accommodate the seasonal fluctuations in RV inventory. We view our retail and wholesale financing, along with remarketing tools, as a full-service offering for dealers.”
Qualified dealers may obtain wholesale financing from Ally Financial for all or a portion of their inventory, reported Ally, which currently extends retail financing through dealers in about 40 states and plans to expand its RV retail financing nationwide by the end of the year.
“The way we like to create a relationship is a full spectrum relationship credit offering through the dealer,” Russi emphasizes. “Everything centers around the dealer. The more we do with them, the better our value proposition is.”
So, is the Thor relationship exclusive to Thor dealers?
“We are not exclusively Thor,” said Russi, “but because of our relationship with them we obviously are going to focus on their dealer network needs first. That’s our entry point into the industry. Keep in mind that Thor dealers — and I think they number 1,200 — represent about 75% of the RV space. We think by focusing there, we are going to build relationships with the majority of the industry.”
When a Thor dealer has multiple brands and sells non-Thor brands, he noted, Ally will still provide retail or wholesale financing for the products of those other branded companies.
Is Ally in it for the long haul?
“We wouldn’t have entered it to exit it,” added Russi. “We’ve got plenty of auto business. We are not going to run out of capacity. We’d like it (the RV segment) to be substantial. We’d like to systematically grow our book.”
The fact that Ally has a dedicated RV sales staff based in Orange County, Calif., is also a testament to Ally’s commitment, adds Russi. “But we also intend to leverage our entire structure into the space,” adds Russi. “If we don’t have someone conveniently located from an RV sales perspective, we will leverage the existing sales force, which is a national sales force of about 200.”
Prominent Tucson, Ariz., dealership Beaudry RV Co. has suspended operations as bankruptcy creditors say the company’s recent sale has forced its real estate loans into default, theArizona Daily Starreported.
All the company’s employees have been laid off, with some saying they haven’t been paid for their last two weeks of work.
The inventory has been cleared from its sales lot on East Irvington Road near Interstate 10. A chain and padlock hold the doors to the guest lobby closed.
Customers who dropped off recreational vehicles to get service with the company were left in limbo for days, wondering if they’d have access to their coaches.
Meanwhile, attorneys for Bank of America, Wells Fargo and Comerica Bank — creditors in Beaudry’s 2008 bankruptcy — filed a motion in U.S. Bankruptcy Court saying they were surprised by the recent sale of Beaudry to an investors group.
They’re asking for immediate appointment of a liquidating trustee, arguing the sale violated loan documents and real estate loans in default. That liquidating trustee would have sole authority over the company’s real estate collateral, the motion says. Beaudry filed two years ago for Chapter 11, or reorganization bankruptcy protection.
A group of investors led by Greg Harrington and Peter Workum completed a series of transactions in mid-September to acquire Beaudry RV’s properties and operations in Tucson and Chandler. Harrington said at the time the new investors had plans to expand the company.
Those plans quickly hit a snag. The turnaround proved impossible because of Beaudry’s current legal situation, the RV market and budget constraints, the investors group said Thursday.
When asked if the company’s temporary shutdown could become permanent, Harrington said he couldn’t address that issue at this time.
Clive Bowden, who lives in Green Valley, said he was getting close to pursuing criminal charges against Beaudry as he hadn’t heard anything from the company since mid-September. He had left a 42-foot coach at Beaudry’s Tucson location for body work and additional service.
Bowden was able to get his vehicle Thursday afternoon, he said, though others are still working out the details to get their RVs back.
“There are other people in the same situation as I was,” he said.
The scene is the same at Beaudry’s Chandler location, said Bud Bates, who bought an RV there early in September.
“Anybody who’s got a vehicle in there is totally befuddled,” Bates said.
Bates said he’d left the RV he purchased with Beaudry as he’d been out of the country for a few weeks. He went to the Chandler location Monday and found it completely shut down.
With Harrington’s help, Bates said he was able to get his coach back and only has to make sure the proper paperwork has been filed with Arizona’s Motor Vehicle Division.
Harrington said he’s working to make sure everybody who left a vehicle with Beaudry gets back their property.
The company’s roughly 100 employees are also dealing with the fallout.
The workers, who’ve survived several rounds of layoffs at the financially struggling RV dealership, were notified of the temporary suspension toward the end of last week.
Dennis Cotton, a service manager in Tucson, said the employees were told the company would reopen by the end of the year and they might have the ability to do some contract work in the meantime.
On Monday morning, though, workers learned there was no authorization for any offer of temporary employment, Cotton said. There was also no money for the employees’ last paychecks, he said.
Workers haven’t been compensated for work they performed between Sept. 15 and Sept. 30, he said.
Even without the incentive of a paycheck, some employees have been helping customers get their vehicles, Cotton said. But they’ve done so in Tucson without much guidance from the new investors, he said.
As for his immediate plans, Cotton said there’s a lot of uncertainty about how he’s going to earn a paycheck.
“I’m still trying to accept and realize what’s happened,” he said. “I’ve got some feelers out at this point, but I’m really not sure what we’re going to do.”
Manheim Specialty Auctions has introduced “Platinum RV Collection Sales,” a new opportunity for dealers to exclusively buy top-quality, highline RV units valued at $75,000 or more.
The new monthly sales, currently held at two Manheim locations, are also accessible nationally through Manheim Simulcast, according to a news release. The combination of in-lane and online buying opportunity gives dealers convenient, targeted access to the cream of pre-owned luxury RV inventory, saving them time and hassle in the process.
“We are constantly looking for new ways to improve the auction experience for our customers by listening closely to their unique needs,” said Karen Braddy, general manager, Manheim Specialty and Heavy Truck & Equipment. “Our highline RV buyers and sellers have told us that the diversity of products within the RV category often means they waste valuable time searching for just the right configuration – and that feedback drove the creation of our Platinum program.”
The first Platinum Sale was held at Manheim Lakeland, Fla., in February of this year, and strong sales results prompted an expansion to Manheim Tucson in June. Based on the success of these sales, additional locations are expected to be added in the coming months, including Manheim Dallas-Fort Worth.
More than 160 buyers participated in Manheim Tucson’s first sale both in-lane and online via Manheim Simulcast. Commercial consignors, such as Bank of America and GE Money reported blue-ribbon days, with Bank of America selling 100% of its inventory.
“Our customers have told us that the key to successful customized sales is having enough specialized inventory to make attendance worthwhile,” said Jeanie Hinz, general manager, Manheim Tucson. “The positive results from our first sale confirm that Manheim is definitely meeting the needs of these buyers.”
Kelly O’Banion, purchasing/pre-owned manager, Motor Home Specialist, located in Alvarado, Texas, agrees that specialized sales save time for everyone. “As a buyer, one benefit of having the Platinum units sold at a separate event is definitely that it takes less time to get to the units you’re interested in buying. My target inventory is late-model units $100,000 and up, so these events decrease the amount of time that I have to spend away from my lot.”
Sellers also benefit from the targeted marketing, red-carpet presentation and dedicated buyers of Platinum Sales units.
“Manheim understands that there is a unique set of buyers for highline RV units,” said Martin Smith, vice president, remarketing, Bank of America. “When the Platinum units are sold at separate sales, my target buyers from all over the country travel to attend the sales or purchase units online. The higher quality of buyers ensures that I maximize my return.”
Manheim Specialty Auctions’ Platinum RV Collection Sales are hosted monthly at each of the designated locations. Manheim Lakeland hosts its sale the first Tuesday at 2 p.m. and Manheim Tucson presents Platinum RV units the fourth Tuesday at 3 p.m. Transportation options are available for dealers located outside of the normal pick-up area for these locations.
For more information, visit www.manheimspecialtyauctions.com and click on the RV tab.
Alliance Coach Inc., Wildwood, Fla., has become a full-service RV dealership.
A sprawling RV service center in Wildwood, Fla., built in 2003 near the junction of I-75 and the Florida Turnpike by now-bankrupt Monaco Coach Corp., has become a full-service motorized and towable RV dealership.
Alliance Coach Inc. opened in September under new ownership — 10 days after the 62,000-square-foot service center went on the auction block during Monaco Coach Corp’s. Chapter 11 bankruptcy proceedings.
”When Monaco built this, they needed a factory service center on the Eastern Seaboard,” said Cy Whisnant, Alliance Coach general sales manager, who for 15 years was vice president of Tennessee-based Buddy Gregg Motorhomes overseeing that company’s sales operation in Lakeland, Fla., until it closed.
The new owners are Brett Howard and Carolyn Champion, who had operated the facility as Monaco employees, and Holiday Rambler motorhome owner Alan Shapiro, all of whom teamed up to bid on the property.
”With his help, they bought the entire facility and the ground around it and formed an alliance, hence the name,” Whisnant said. ”Over $1 million in parts came with the building.”
The facility sits on 30 acres and has 40 indoor and 26 outdoor service bays along with a 40-site campground.
Alliance Coach initially operated as a service center. But the company in December took on the Monaco McKenzie and R-Vision towable lines from Monaco RV Inc., a new company created when certain Monaco Coach assets were purchased by Chicago-based truck and engine builder Navistar International Inc.
Alliance Coach later obtained the local Holiday Rambler and Monaco motorized franchises, and expects the first shipment of Monaco motorhomes to be delivered by early July. More recently, the dealership added Holiday Rambler towable brands.
A motorhome undergoing repairs in one of Alliance Coach Inc.'s 40 indoor service baysmotorhomes to be delivered by early July. More recently, the dealership added Holiday Rambler towable brands.
Currently, Alliance Coach has $1.8 million in Monaco RV motorized and towable inventory, and in addition to new models, also is selling used RVs, some on consignment.
Alliance’s sales department is open six days a week, while the service center, headed by Michael Hawkins, operates Monday through Friday. Dennis Burke will join the company as F&I manager on Monday.
Currently, Alliance Coach will service any brand of motorhome or towable RV and is certified to provide warranty work on Tiffin motorhomes and Workhorse and Spartan chassis.
As a service center that can do collision repair, Alliance Coach also has its own metal fabrication, woodworking and upholstery shops in addition to two 65-foot paint booths. Alliance Coach employs 35 people, 25 of whom are service technicians.
”It’s incredible what we can do here,” Whisnant said. ”We can do everything here for an RV but build them.”
And good fortune came quickly, he reported.
”Since the day they opened here, it’s just been absolutely packed,” Whisnant said. ”And here it is in the middle of summer, which isn’t the high season in Florida, and the shop is nearly full.”
Since Alliance Coach opened as a Monaco RV dealership in March, business has steadily increased, Whisnant said, with floorplan and retail financing arranged through Bank of America.
”Sales have been picking up and we are seeing people putting more significant amounts of money down to get financing in place and a lot of cash buyers have been coming in who don’t need any financing whatsoever,” Whisnant said. ”Right now, we are exclusively Monaco RV, but we are leaving our options open.”
Alliance Coach plans an open house Friday and Saturday (July 2-3). An updated website — www.alliancecoachonline.com — will be completed by the end of July.
Bank of America’s decision last week to discontinue its indirect retail lending through marine dealers sent a ripple of concern throughout the marine business. However, Bank of America, a heavy-hitter in the RV business, will continue to offer direct consumer financing on marine products through its online e-lending channel at bankofamerica.com, according toSoundings Trade Only .
“We remain committed to the industry and continue to offer wholesale, or floorplan, financing to marine dealers,” Bank of America spokesman Jefferson George said in an e-mail toSoundings Trade Only . “In addition, the above change does not affect our origination process for auto and RV dealers.”
But despite the bank’s assurance of its commitment to the marine industry, some dealers say they will be hurt by the move.
“It’s devastating. It continues to shrink the available markets for consumer lending,” said Larry Russo Sr., of Russo Marine. “As the largest boat dealer in New England, we’re down to two sources. A couple of years ago, we had a dozen retail sources for our customers; we’re down to two. Ouch. And Bank of America was getting half of our business.”
Though the dealership may continue to process loans through a third-party broker, Russo said Bank of America’s decision just adds another layer to the loan process for consumers and makes it more complicated.
“That really hurts because we’re the one on the street, face-to-face with the customer, and a lot of boat dealers have enough volume to earn a dealer-direct relationship and not have to push the customer through a third-party broker,” Russo said. “It just layers the process. It makes it more difficult for us and it certainly reduces our profitability because now we have to share it with a broker.”
Phil Keeter, president of the Marine Retailers Association of America, said it’s just another obstacle dealers have to face at a time when they don’t need any more challenges to doing business.
“It seems like whenever we open one door a little bit, another one slams behind us,” he said.
Bank of America, Keeter said, is a large funding source for consumer loans, possibly accounting for 20% to 25% of the nationwide total.
But not all dealers are adversely affected by the changes.
Darren Plymale, from Galati Yacht Sales, says his dealership lends for Bank of America on a direct and indirect basis, so it’s one of a handful that won’t be hurt by the changes.
“We’re one of the few dealerships that have that ability. I’m probably one of maybe five dealers in the country that will not be affected,” he said. “Anytime you have an indirect lender that is exiting the industry it’s always a concern, but I understand their reasons. They’re trying to curb their losses.”
Wolters Kluwer Financial Services announced today (March 15) that Bank of America’s Dealer Financial Services unit will join its AppOne platform to automate and help simplify the marine and RV finance process.
Bank of America’s Dealer Financial Services unit provides retail loan financing and commercial banking services to auto, marine and RV dealers across the U.S. AppOne automates the indirect lending process for lenders and dealers by providing credit application workflow automation and compliant document preparation.
AppOne enables lenders and dealers to more easily connect for applications as well as funding packages nationally. AppOne helps lenders and dealers deliver quicker application response times and faster loan transactions with its DocOne document printing engine and validation tool. DocOne allows dealerships to print loan documents from a standard color laser printer onto plain paper at the point of sale and finance at the dealership location. DocOne also helps ensure that loan documentation is accurate and compliant before reaching the lender for funding consideration. DocOne utilizes Wolters Kluwer Financial Services’ Bankers Systems line of documents, which is built upon more than 50 years of experience and is protected by Wolters Kluwer Financial Services’ industry-leading compliance warranty. DocOne provides data merging and population of these forms through a centralized Web-based delivery source.
“Not only does AppOne automate the finance and credit approval processes, but it also provides forms that are covered by the industry’s leading compliance warranty to document every marine and RV loan,” said Deborah Nunnally, senior vice president of fulfillment at Bank of America’s Dealer Financial Services unit. “Current and accurate loan documents that can be easily reviewed and processed help increase efficiency and improve the dealer/lender experience.”
“Our relationship with Bank of America provides great opportunity for marine and RV dealers to simplify the lending process,” said Lee Domingue, CEO of indirect lending at Wolters Kluwer Financial Services. “Dealers working with Bank of America are now able to more easily connect with this lender through the AppOne platform, which helps them serve their customers faster and more efficiently.”
Bank of America announced on Friday (Aug. 14) its intention to curtail arbitration in a wide array of consumer accounts. The change covers the company’s credit cards, consumer recreational vehicles and marine loans and banking customers.
The announcement came after the Obama administration’s proposal to ban arbitration clauses from credit card agreements as part of a wider push for consumer protection. The administration has already passed sweeping regulations that prohibit widely criticized credit card practices such as arbitrary interest rate hikes and unfair penalty fees, according to Zacks Investment Research.
Although banks more commonly use arbitration to go after unpaid debts, it also provides an important shield against costly class-action cases. Opening the door for class-action and other lawsuits would push up the costs of banks’ legal costs, which in turn would be passed on to consumers.
Unknown to many consumers, card agreements typically include an arbitration clause that waives a card holder’s right to sue. This gives banks the ability to use the clause defensively to protect themselves from lawsuits or offensively to go after debt collections.
Consumer advocates faulted the arbitration process saying that if the arbitrator or the arbitration forum depends on the corporation for repeat business, there may be an inherent incentive to rule against the consumer.
Last month, two major arbitrators — the National Arbitration Forum and the American Arbitration Association — announced that they would stop accepting new arbitration cases.
Other banks scrambling to comply with the new law includes American Express, JP Morgan Chase & Co., Capital One Financial Corp. and Discover Financial Services.
Makers of recreational vehicles and mobile and manufactured homes fared well on Wall Street on Wednesday (Aug. 5), led by RV maker Thor Industries Inc. and by Drew Industries Inc., a maker of parts primarily used in travel trailers and fifth-wheel RVs, according toInvestor’s Business Daily .
Thor climbed for 13 consecutive sessions through Wednesday, gaining 30% in July and 14% in August.
On Tuesday, the Ohio-based company said second-quarter earnings fell 92% to 4 cents, a full 60% below consensus views. Revenue dropped to $415.5 million, 41% below year-ago levels.
Despite the miss, the stock climbed 6% Tuesday and another 6% Wednesday in huge trade.
The trigger appears to have been a rising backlog of undelivered orders.
Thor’s total backlog rose 45% to $588 million by July 31, its highest level in two years.
Thor’s RV segment backlog was $298 million, up from $146 million a year ago.
The increase suggests RV dealers have worked through the bulk of an inventory reduction imposed by their lenders, primarily Bank of America and GE Capital, says analyst Bret Jordan with Avondale Partners.
That could mean increasing orders for manufacturers, Jordan says, but it doesn’t show an increase in consumer demand.
Drew, which reported July 31, saw second-quarter earnings drop 71%. That was 300% above analysts’ consensus views.
But the company says most of the surprise came from low-end, towable products, rather than its higher priced fifth-wheel RV lines.
“The RV category is not dead,” Jordan said, “but the consumer has sort of traded down.”
Bank of America reported today (July 17) that profit in the second quarter slipped slightly but exceeded analysts’ expectations — yet mounting credit woes may dampen that superficially good news, according to AOL Daily Finance.
Net income of Bank of America fell 6% to $3.2 billion, after removing the effect of paying some $805 million in dividends on preferred stock, the lion’s share of which was held by the U.S. government. That’s compared with a $3.4 billion profit a year ago.
Income from retail banking and wealth management fell compared with a year ago, and B of A’s credit card business swung to a massive loss. But like Goldman Sachs and JPMorgan Chase earlier this week, a surge in revenue from investment banking fees and the trading desk helped Bank of America post a profit.
Meanwhile, more of the company’s borrowers fell behind on payments. Bank of America said it had $31 billion in non-performing assets on its books at the end of the second quarter, an increase of nearly 69% over last year. The percentage of loans charged off as uncollectable also surged, from 1.13% a year ago to 3.31% now.
To cushion future credit losses, Bank of America set aside $4.7 billion in the quarter, it said.
“Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010,” said CEO Ken Lewis.
Bank of America is under intense government scrutiny. Regulators’ stress tests, completed during the quarter, found it needed to raise an additional $33.9 billion in capital to withstand the recession. And, as The Wall Street Journal reported, it has been operating under a secret agreement with Washington that mandated an overhaul of its board, among other things.
Ellsworth “Ellie” Clarke is president of Bank of America Dealer Financial Services. Based in Jacksonville, Fla., he heads a department including 1,300 associates involved with sales, underwriting and customer service for the auto, marine and RV industries. Clarke’s staff includes 100 sales associates scattered around the country, nationally supporting dealer floorplan, retail direct and indirect loan programs for the RV sector.
Clarke provided an overview of Bank of America programs and the RV market during an interview with Jeff Kurowski, director of industry relations for the Recreation Vehicle Dealers Association (RVDA). This story appears in the July issue of RVDA’s RV Executive Today.
RV Executive Today : Over the past year, terms have changed significantly for both RV retail and wholesale loans. First, what are the factors driving bank lending policies on the wholesale side of the business? Dealers tell us there have been significant changes in what the bank considers
a “new” unit and in curtailment policies.
Clarke: As the economy turned down, unemployment went up and investment portfolios lost value, more people have defaulted on RV loans, putting more product on the market. Thus, product values declined as the supply went up. To protect the bank from large losses on repossessions, we are asking customers to put more down payment into the product.
Concerning dealer inventory finance, we require dealers to begin paying curtailments after 12 to 18 months. Curtailments are a portion of the value of the RV being floorplanned.
If a dealer goes out of business, then the manufacturer buys back the units that were floorplanned, less the amount of the curtailments paid by the dealer. If a manufacturer goes bankrupt, curtailments are the only protection we, as a lender, have against taking a loss. This hasn’t changed; it’s always been our operating model.
When extending floorplan credit, we focus more on the financial health of the dealer than the financial health of the manufacturer. We underwrite based on the financial strength of the dealer. If an otherwise profitable dealer has been struggling financially through the recession, we will work with them as long as they have a well-defined plan to return to profitability or to re-capitalize.
RV Executive Today: On the retail side, we are hearing that some financing deals that would have been approved quickly last year are now being rejected by the bank, or offered at terms that customers won’t accept. There are RV dealers who say their customers cannot get loans for more than $100,000, and in some cases, $75,000. What has changed on the retail side? Is there a “cap” on the amount the bank will loan for the purchase of an RV?
Clarke: There is no cap from our perspective. The problem is that with the rough economy, there is a larger number of consumers who don’t quality any longer. When considering loan to value, we base value on dealer cost, and we’ve lowered loan to value, on average, from 105% of dealer cost to 95% in the past 12 months.
As an illustration, if an RV has a sticker price of $100,000, let’s say the dealer paid $80,000 for it. Now, we will loan the customer up to 95% of $80,000, instead of 105% a year earlier.
The reason we’ve lowered loan to value is when we, as a lender, sell a repossessed unit, we get considerably less than we did two years ago. So, we attempt to get more equity in our collateral. In order to reduce our potential losses and lower our risk, we’re asking consumers to make a bigger down payment.
Otherwise, the terms have not changed. You can still get a 20-year RV loan, but if you’re wanting to buy a $500,000 RV, the added amount you will need for a down payment now is a large amount of money.
In the case of 2008 model year product, we have lowered the value of those units, which makes sense because they have less value on the market.
RV Executive Today: What do sales and F&I professionals at RV dealerships need to do to help prepare their customers so they can get financing in today’s market?
Clarke: The days of 100% financing are pretty much out the window. Dealers and F&I professionals need to change their sales model to collect larger down payments, because the market will not support these higher loan to value.
This is the time to de-leverage, so dealers may need to sell the customer a less-expensive product in order to qualify them for a loan.
RV Executive Today: Bank of America received billions in TARP funds, and now the bank has stated its goal to repay that government money by the end of the year. What can you tell us about the connection between the TARP program and its impact on bank lending policies?
Clarke: We are lending out every nickel we can to any qualified borrowers. I have no restrictions, but the economy is rough and there are large numbers of consumers who don’t qualify any longer. The government didn’t say, “Go make bad loans that won’t be repaid.” They said, “Go make good loans.”
RV Executive Today: What is Bank of America’s outlook for the RV market? Has it hit bottom yet? When do you think the RV market will show signs of improvement?
Clarke: I wish I knew. It will depend on when home prices and unemployment stabilize.
Sales are still down and we’re out of season (Editor’s note: as of the end of May). People are more likely to buy an RV or boat in June than in September. Repossessions are declining, but I think it will be pretty rough the remainder of 2009. I think we will start to see some slow improvement by late 2009.
Late 2009 will feel much better than late 2008, because in late 2008, we were trending down. But I think 2010 will be a good retail year. It won’t be as good as 2007, but better than 2008 and 2009.
By 2010, dealers will have right-sized their businesses and should be profitable. When we come out of this, those who make it will have some tremendous money-making opportunities.
Bank of America is the largest bank in America, we serve one out of every two U.S. consumer households, so there’s no reason why we wouldn’t be in the RV industry both wholesale and retail. There’s business out there; it may be smaller now, but it’s out there.
Monaco Coach Corp., which not so long ago was a major employer in Junction City, Ore., and in Indiana and a national power in the RV industry, has been reduced to a handful of properties that will be sold or be subject to foreclosure by creditors, according to theRegister-Guard , Eugene, Ore.
On Tuesday (June 23), a judge agreed to the company’s request to convert its Chapter 11 bankruptcy filing, which gives it the protection of the court while it deals with financial matters, to a Chapter 7 case so it can liquidate its remaining assets: seven pieces of real estate in Oregon, Indiana and Florida.
The Oregon real estate is all that’s left after Monaco Coach sold its major assets – factories, inventory, brands and intellectual property – to Navistar International Corp. earlier this month for $47 million, and RV resort properties in California, Nevada, Florida and Michigan to assorted buyers for about $16 million.
Navistar intends to revive the brand as Monaco RV LLC and resume production at its Coburg factory, but it has not yet said when that will happen or how many people it will employ.
“It’s a work in progress,” Navistar spokesman Roy Wiley said Tuesday. “It takes time.” And, given current market conditions, he said, “there’s no sense to rush.”
At a brief hearing Tuesday in U.S. Bankruptcy Court in Delaware, Monaco Coach attorney Timothy Cairns said the company was unable to come to terms with its major secured creditors, Bank of America and Ableco Finance, to obtain a continuing line of credit that would enable it to sell off its remaining properties.
The lenders were willing to let Monaco continue in Chapter 11 so it could sell off those properties. But the parties couldn’t agree on how much money would be left over for other creditors, or on a budget that enabled Monaco Coach to take the necessary steps to sell the properties, said Rob Orgel, one of Monaco’s bankruptcy attorneys.
Judge Kevin Carey agreed to sign an order converting the case to Chapter 7, effective June 30.
Once Monaco’s case is converted to Chapter 7, a U.S. trustee will be appointed to oversee selling off the remaining assets and convert them to cash, Orgel said.
If the trustee determines he doesn’t have the cash to properly sell off the properties, they may be abandoned, and the creditors will have to foreclose to get their money, he said.
“The likely result is the trustee will talk to the lenders and work out a deal we couldn’t work out,” he said. “They’ll work out a deal or the trustee will tell them to go to foreclosure and get your money that way.”
Orgel said it’s not clear what the seven properties are worth, but he estimated between $5 and $15 million – nowhere near enough to pay off unsecured creditors, who are owed somewhere between $50 million and $100 million.
A conversion to a Chapter 7 case effectively spells the end of Monaco Coach Corp., said Andrea Coles-Bjerre, an assistant law professor at the University of Oregon and a former bankruptcy lawyer in New York.
Once the remaining assets are liquidated under Chapter 7, “the entity ceases to exist,” she said.
Monaco Coach was founded in 1968 in Junction City as Caribou Coach Co. It changed its name to Monaco in the 1970s and became a publicly traded company in 1993.
Monaco ceased production last December after a brutal 2008. It filed for Chapter 11 bankruptcy protection in March and terminated 2,000 workers who had been idle since December.
About 100 employees remain on the job at the Coburg plant.
Editor’s Note: Here is the latest installment by MSNBC.com on its look at Elkhart County, Ind., and the RV industry.
If you want to see what a credit crunch looks like, head south on Indiana State Road 19 out of Elkhart, Ind., – past the strip malls, bank branches and restaurants to the still-beating heart of “the RV Capital of the World.” There, scattered along a 2-mile stretch of Nappanee Street, you’ll find a ragtag assortment of RV dealerships that are in many ways symbolic of the nation’s crazy-quilt lending landscape.
One has lost the battle for survival after its credit lifeline was pulled, as its vacant showroom attests. Others are hanging by a thread, trying to outlast an RV industry downturn that has been exacerbated by a lack of credit for manufacturers, dealers and customers. Still others contend that their credit problems have largely disappeared and that business has picked up substantially in the last few months.
The availability of credit, it seems, depends largely on perspective.
For the owner of Elkhart County RV, the situation remains “brutal,” following the sudden withdrawal of big national banks from what’s known as the floorplan financing market.
“I cannot buy any new product unless I use my own money,” said Tony Gaideski, who is down to seven units and can’t secure financing to purchase more RVs. “None of the banks in this town will lend me money, and I don’t know anywhere in the country where anybody is doing any financing for RVs. ”
Just up the road, however, Rob Reid, president of Great Lakes RV Center, said he still has the same $3 million floorplan credit line he had before the recession. He said his biggest problem is getting would-be buyers qualified for loans.
“The biggest thing is retail credit,” he said. “They have to start giving the customers money to buy. That’s what’s going to get the whole thing going again.”
A block to the south, International RV World General Manager Dave Titus said business at the company’s three lots in Elkhart, northern Michigan and Florida is up 15-20% this year. That’s in part due to decreased competition, he said, but also because his company never relied on lenders to buy inventory.
“We planned ahead for a slow time,” he said. “A lot of businesses didn’t .”
Some in the industry see opportunity in the chaotic credit situation.
RV manufacturer Thor Industries Inc. this week launched its own credit service to provide retail financing for purchasers of its units, much as GMAC does for autos.
“So many lenders exited or dramatically scaled back their RV lending that Thor saw it as a need and a benefit to its dealers,” said Ed Arienti, president and CEO of Thor CC Inc., which is initially licensed to operate in eight states.
In Elkhart County, however, bankers willing to talk on the record about the credit situation insist they have money to lend.
‘Still making loans’
“We’re still making loans to qualified buyers, but that’s been part of our philosophy all along,” said Jim Hyatt, president of the First State Bank of Middlebury, which extended credit to Reid’s dealership after his previous bank, Goshen Community Bank, called in his line of credit. “We’re also seeing opportunities with some very good, very solid companies, where they have banked at other banks and are now saying, ‘We want to do business with someone who’s going to be around to take care of us.'”
His comments were echoed by Tom Stark, a commercial loan specialist with Lake City Bank.
“To be honest, we’ve been very busy with (businesses) who have been asked to leave other institutions,” he said. “They’ve had a couple tough years, but they’re going to come back and we’re going to help them as much as we can.”
Dallas Bergl, president and CEO of INOVA Federal Credit Union, a 67-year-old institution that was founded by employees of Miles Laboratories, the manufacturer of Alka-Seltzer, said his organization is limited in its ability to provide big commercial loans but is actively courting would-be RV buyers.
“We’ve done a whole marketing campaign around, ‘We do have money to loan if you’re looking to purchase a home or a car,'” he said. “The mortgage side has been fairly robust, but we haven’t seen much in autos or RVs.”
But another local banker, who spoke to msnbc.com on the condition of anonymity, said his bank won’t be making new RV loans until there is solid evidence the local economy is reviving.
“Because of the uncertainty in our area, I almost have to project future losses over the next nine to 24 months,” the banker said. “If I’m not going to see profits, my capital will go down. If I fear I’m going to be undercapitalized, either I have to go get more capital or shrink my balance sheet. So, no, the situation hasn’t gotten easier yet. If anything, it’s getting more difficult. Until the economy picks up, until my commercial customers are making money again, I can’t really free up the credit.”
Strange as it seems, all of these representations may be true, given the uneven ways the credit squeeze has affected homeowners, would-be homeowners, prospective purchasers of big-ticket items, credit card users, retailers, investors, banks and just about anyone else with a stake in the economy.
‘It’s hard to make sweeping statements’
“It’s hard to get our arms around it because you’ve got different situations in different parts of the country,” said Phil Ingrassia, a spokesman for the Recreation Vehicle Dealers Association (RVDA). “Just like with the overall economy, it’s hard to make sweeping statements that it’s getting better.”
That is borne out by conflicting signals being sent by federal agencies and senior officials in recent weeks.
Treasury Secretary Timothy Geithner told a banking group on May 13 that the national lending picture is improving. Two weeks later, the Federal Deposit Insurance Corp. warned that “the credit picture remains grim,” The Wall Street Journal reported. And on Wednesday, Federal Reserve Chairman Ben Bernanke warned that credit could tighten again if the U.S. does not begin to get its fiscal house in order. (Click here to watch a CNBC video on a new Standard and Poor’s report on the state of credit in the U.S.)
Most experts and government officials say the credit freeze has slowly been thawing nationwide as a result of massive infusions of federal money into the banking sector.
That meshes with the experience of many small business owners in Elkhart.
Thad Naquin, owner of Naquin Chevrolet-Cadillac-Nissan, said that his problems qualifying buyers for auto loans, which began in the fourth quarter of 2008, largely vanished in March, when $5 billion was released to GMAC for lending.
And Carl Higley, owner of Higley TV & Appliances, said his difficulties ended in early April when he changed buying groups and gained access to a new preferred lender. Independent retailers like Higley often join together in such groups to better compete with the big chains. “We had three (loans) approved in one day last week,” he said. “That’s huge.”
But the RV industry has proven to be a tougher nut to crack.
“Most dealers are OK with retail lending right now, but there still seems to be a big problem on the wholesale side,” said Mark Bowersox, director of the Recreation Vehicle Indiana Council. ” It’s one thing to make a loan to a consumer; it’s another thing to open a $5 million credit line to an RV dealer.”
Tom Walworth, general manager of Statistical Surveys Inc. (SSI), which tracks RV industry sales, said the inability to get product to the showrooms has played a large part in the demise of nine RV manufacturers in the last year and a half.
He said that as of March, wholesale sales of towables – fifth-wheels and trailers – were down 60.9% from a year earlier, while motorized RVs were off by 78.2%. But at the retail level, the declines were far lower, at 43% and 55%, respectively.
“You can lay the lack of wholesale activity at the feet of the lack of wholesale flooring,” he said.
An exodus from the market
Walworth said the absence of wholesale financing was created by near total pullout from the market late last year by the big banks that controlled most of the market, including Textron Financial, GE Capital, Bank of America, KeyBank, U.S. Bank and Bank of the West. That’s a big problem for an industry in which 79% of motorhomes and 72% of towables were purchased with financing in 2005, according to statistics from the Go RVing Coalition.
And floorplan lending is not a niche that local and regional banks or credit unions can easily fill, because it is a labor-intensive practice that requires the lender to carefully evaluate the quality of the collateral, which means it typically takes a high volume to make it profitable.
The Small Business Administration has moved to address the situation, expanding an existing loan program and initiating a pilot inventory lending program, which will take effect on July 1.
But Gaideski, the owner of Elkhart County RV, said neither of those programs will solve his liquidity woes.
“From what I understand they’re only offering a 75% (loan guarantee), which means I’d have to go even deeper in debt to come up with the rest,” he said.
Gaideski also feels that he got a bad shake from his former floorplan financier, Textron Financial, saying that the company suddenly sent him a letter on Dec. 30 withdrawing his line of credit.
“It said, ‘Here’s how we’re going to help you out, we’re going to pull our line … and we’re going to allow you to sell the inventory that you have on hand.'”
(A Textron spokeswoman did not return a call from msnbc.com seeking comment.)
Credit extended to some dealers
But several other dealerships contacted by msnbc.com said they were able to continue pre-existing credit lines with GE Capital and KeyBank, even as the companies were pulling back in the floor financing market and turning away new customers.
Dan Davis, owner of RAD Transport, an Elkhart company that delivers RVs to dealers around the nation, said GE Capital has simultaneously been weeding out other dealers. “GE Capital has foreclosed on a lot of dealers … taking their inventory and shutting them down,” he said. “Some of the factories are actually having to buy back the inventory.”
Ned Reynolds, a spokesman for GE Capital, acknowledged that the company made some “adjustments in the first quarter in terms of its credit program,” but said it intends to remain active in providing floor financing for the RV industry.
“We think this is a viable business for us,” he said. “We’re just making the best of a tough environment and working through this cycle.”
(Msnbc.com is a joint venture of Microsoft Corp. and NBC Universal, which is 80% owned by GE Capital’s parent, General Electric.)
Big national lenders weren’t the only ones yanking credit lines when the freeze was at its worst last winter.
Steve Riegsecker said Goshen Community Bank pulled the plug on his business, rescinding his $350,000 line of credit and thereby forcing him to default on a $1 million floor plan loan from Textron that he had used to purchase inventory for his 20,000-square-foot showroom in nearby Middlebury.
“I was struggling at the time, but I was making my payments,” Riegsecker said. “But they always wanted to know, ‘How are you going to make it?’ Then they came in on a Tuesday night about 5 o’clock and handed me a letter (rescinding the credit line), and that was it.”
Reigsecker didn’t declare bankruptcy and is instead working to pay off the outstanding debt, though he’s not sure if he’ll ever be able to.
“I’m starting completely over, selling cargo trailers and mini-pontoons (small boats),” he said. “That’s how I started my business, and that’s how I grew it.”
Goshen Community Bank President Doug Johnston cited privacy laws in declining to comment on matters involving individual customers and said he had no comment as to whether the bank had rescinded credit lines extended to local RV businesses.
Survivors have a different view
Survivors of the RV retail downsizing see it in a different light.
“My opinion is that they simply culled the ones that weren’t operating good businesses,” said Todd Cornell, president of Tiara RV of Elkhart.
And Titus, the general manager of International RV World, said, “The (dealers) who are hollering about floor plans, sad to say, they shouldn’t have had them to begin with. There were guys out there with $10 million floorplans who couldn’t buy you lunch.”
While RV industry players are divided on financial strategies, they stand united in taking a bullish view of long-term prospects.
“Manufacturers are burning through inventory, and the dealers have developed new local credit sources like credit unions and regional and community banks,” said Walworth of SSI. “That’s going to pay dividends in the future.
“I’ve seen this industry go down in the early ’80s, in the late ’80s, in the early ’90s and after 9/11, and each time it’s come back stronger than it was,” he continued. “There’s been so many times when people have shoveled dirt on this industry, but it comes back every time.”
Keith Leggett, a senior economist with the American Bankers Association, said that even if demand for RVs picks up, it will take a while for the credit market to catch up.
“As the economy weakens, banks see a deterioration of their balance sheets,” he said. “But those sheets tend to lag the economy, so while most economists are looking for some recovery in the second half of the year, it’s going to be at least a year before you start seeing an increase in credit quality.”
That may be too late for Gaideski, owner of Elkhart County RV. He said he’s not sure how much longer he can last without being able to buy new inventory.
“My dream is to stay in business – I love what I do,” he said. “But the reality is a different story.”
After 19 years, the owner of JC’s RVs in Livermore, Calif., never thought it would end like this, with his main sales lot empty and his files headed for storage
J.C. Foreman is just waiting for Bank of America to repossess what’s left of his inventory, just like they did last month at his Rancho Cordova location, when it took 30 drivers accompanied by two sheriffs deputies all day to drive away 150 coaches and trailers, according to KGO-TV, San Francisco.
Until this year, Foreman had a long-standing line of credit with Bank of America to finance his $30 million inventory. And he says, despite the bad economy, he made his payments on time, even though the inventory was no longer worth what he paid for it.
It’s not that RV’s aren’t selling. In fact, Foreman says he’s sold $10 million worth in just the past few months. The problem is no one wants to pay full price, so a luxury unit will sell, but for far below retail.
“Ultimately I went to them in March and said you’re going to have to take a short pay, I can’t continue selling this stuff at a discount to the public, paying all my sales people, doing the advertisement, there’s no money left for me,” said Foreman.
At that point, Foreman says the bank refused to negotiate and chose to repossess.
A bank spokesperson told the TV station: “Bank of America has been working since August 2008 to help James C. Foreman and his company. Unable to keep his business afloat, Mr. Foreman made unfortunate decisions that have forced the bank to take legal action.”
Foreman said he’ll see the bank in court.
Despite a bankruptcy court judge’s ruling late Friday (May 22) approving the sale of Monaco Coach Corp. to a unit of Navistar International Inc., it remains unclear whether Navistar will resume production at any of the plants in Oregon or Indiana or rehire any of the 2,000 employees laid off just before the company filed bankruptcy.
U.S. Bankruptcy Judge Kevin Carey approved the $50 million sale after learning there were no other bidders for the assets of the RV manufacturing company, which has major manufacturing plants in Coburg, Ore., and northern Indiana, according toThe Register-Guard , Eugene, Ore.
“We don’t have any answers either – no tangible answers,” said Mike Johnson, a middle manager at Monaco’s Coburg plant until he was laid off in March. “It’s just a big question mark.”
During Friday’s court hearing, Monaco attorney Malhar Pagay told the judge an “ancillary benefit” of the sale could be some rehiring.
“(Monaco’s) former employees may be called upon by Navistar to restart some of the plants that were shuttered,” Pangay said. “I also note that the debtor’s former dealers will enjoy a revitalization of the Monaco brand, and depending upon Navistar’s determination, may have a relationship with Navistar.”
The sale is scheduled to close June 2.
Roy Wiley, spokesman for the $14 billion truck and engine builder, declined comment on the fate of the Coburg plant. Navistar has 17,000 employees at plants in Ohio, Alabama, Arkansas, Oklahoma and Canada.
“It’s not done until it’s done. It’s a step in the process,” Wiley said. “Ask me after June 2, and I’ll probably be able to tell you more.”
Options for Navistar might include restarting some of the factory production now, keeping everything idle until the economy improves substantially, or shifting Monaco production to some of Navistar’s existing facilities.
Navistar’s $52 million purchase price would not be enough to repay Monaco’s secured creditors, including the $38.2 million owed to lender Bank of America and $37.4 million claimed by lender Ableco.
The sale dims the chances that unsecured creditors will recover any of the money Monaco owed to them.
Unsecured creditors – those who have no legal hold on a company’s physical assets – typically are paid only after secured creditors have been satisfied.
The sale might eventually benefit local suppliers, though, if Navistar restarts RV production.
Because Friday’s ruling carried no definitive answers about whether the Coburg plant would reopen, workers and community members reacted to the news with muted optimism.
“We look at all of this as potentially good news. That’s how I view it,” said Coburg Mayor Judy Volta.
Kevin Penn, a former team leader at Monaco, has been working part time in landscaping and has signed up for some summer classes, but he said he’d be ready to go back to the plant.
“It would be really good if they could get the company going again. I’ve seen a lot of people from the company who still don’t have jobs,” he said.
Former Monaco supervisor Sandy Kadash has been looking for work.
“Nothing has come up so far,” she said. “We made a pretty good living there and it’s kind of hard to think about taking a step backwards.”
Kadash said she keeps in contact with Monaco’s human resources department.
“It sounds like they’re getting stuff ready, but I’m not sure anybody knows for sure what that means yet,” she said. “From everything that I’ve been told, it’s a good thing.”
During the bankruptcy proceedings, Monaco has kept an administrative and sales staff at the headquarters.
It would be nice, Kadash said, if the sale meant the end of limbo for Monaco employees, who were put on unpaid leave for months before their official layoff.
Kevin Gallagher, who fabricated doors for the motorhomes, said he doubts Navistar would hire anything close to the whole Monaco crew back.
“I still think the market is terrible for motorcoaches,” he said. The market won’t rebound until the national housing crisis has passed and RV buyers can again tap into their home equity for cash. “I’m not going to get overly whoop-de-do about it,” he said.
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Category: Bank loan