News & Notes Archive - January 2006
Southern Energy Homes, Inc. to acquire Tennessee-based Gils Industries, Inc.
In yet another sign of the industry consolidation that has been occurring in the past year, Southern Energy Homes, based in Addison, AL, announced on January 12 that it has signed a letter of intent to acquire Giles Industries, a well-known builder of low end entry level homes. For Southern Energy, the move validates the builder’s return to profitability and robust growth in recent years (the company had a rocky time during the 1990s, including a formal HUD recall in 1999). SE is largely known for low-end to mid-range affordable housing with a lot of buyer options, even on its low-end models.
Giles Industries, founded in 1959 has always been a family-run enterprise until now, and it enjoys a good rep for a decent well-built entry level home. For years its largest customer has been Clayton Homes’ dealerships, enabling those retailers to carry a line that’s a click below Clayton’s in features and price points. Giles also has a well-regarded warranty service training school that Clayton and other builders use to train their service techs. SE says that it will be leaving Giles management intact—a good sign. I think these two companies will be a good fit, with no down side for the home buyer.
The author as industry observer and prognosticator
Having observed the MH industry for the better part of a decade in my capacity as a consumer advocate, I’ve adhered to a polite but arms-length relationship with the MH industry. Outside of a single 45 minute workshop appearance at a 2003 industry gathering (my topic: Our industry through an outsider’s eyes—the response was tepid, to say the least), I’ve never attended any industry function and never taken a dime from any industry source. My constituency (and the source of my income) are the home buying consumers. Consequently, I was a bit surprised when the industry trade magazine, Manufactured Home Merchandiser, asked me to be one of the dozen or so Pooh-Bahs who answered questions for the publication’s annual Trends issue.
Why not? I asked myself. I’m passionate about the potential of manufactured homes and here was a chance to speak directly to the industry that builds and sells them. Herewith a couple of excerpts from my comments in the magazine’s 2006 Trends issue:
Q. What would you like to see happen in 2006?
Grissim:
1. Every HUD-code builder particiate in MHI’s customer satisfaction rating program to be conducted by J.D. Power & Associates.
2. The establishment of a Retailing Best Practices program, also conducted by J.D. Power & Associates, with builders insisting their dealers participate as a condition of selling their brands.
3. HUD-code builders, seeing a resurgent demand, resist the temptation to set up new sales centers run by the fast-buck shady operators (and they’re out there waiting), all in the name of getting more of their product into the marketplace.
Q. What is the biggest obstacle in this industry and how do you overcome it?
Grissim:
The public perception that the industry is a provider of poorly constructed, unattractive “mobile homes” that are sold like cars, that don’t appreciate in value, and when placed in neighborhoods of site-built homes, contribute to lower property values.
The solution: First, acknowledge that in many regions of the country, particularly the Southeast and South Central U.S., the evidence overwhelmingly supports the public’s perception. This was my conclusion after a year interviewing and researching all 83 HUD-code builders in the US and phantom shopping many dealerships for the Rating’s Guide. The truth is, there ARE many HUD-code builders who put out dreary, boxy, cookie cutter homes with poor quality construction—how else to make them affordable?—and hundreds of dealerships selling them, many who see no reason to drop the phrase “mobile home” from their names. Why? Because the demand is there— from consumers whose need for basic housing trumps appearance, quality construction and asset appreciation. Parenthetically, I don’t expect this business model to change significantly any time soon, this for reasons having much to do with regional economics, culture and demographics.
Second, focus on the industry’s upper end where an array of national strategies can together do much to repair the industry’s tarnished image. Suggestions: stay the course on industry initiatives (e.g., Lender Best Practices, third-party consumer satisfaction surveys); fully implement the Federal Government’s 2000 MH Act and give it some serious enforcement teeth at the state and local levels; launch a Retailing Best Practices program that stresses ethical behavior and transparency; mount a national media campaign similar to Got Milk? or Go RVing; do some high profile partnering with non-profits like Habitat for Humanity, consumer groups and the sustainable resources community; start a speakers bureau that puts the industry’s brightest most articulate voices before influential audiences; manufacturers, offer more homes that look indistinguishable from mainstream site-built homes, take the lead in providing “outrageous customer service” by re-energizing your warranty service departments; dealers, improve the professional credentials of your staffs, become turn-key builders working closely with area contractors and realtors.”