The Grissim Guides to Manufactured Homes and Land

News & Notes Archive - August 2008

When considering a manufactured home, selecting a reputable dealer is paramount. But the financial health of the home’s manufacturer should also be considered in these uncertain times.

I’ve made no secret in my consumer guides that the most important responsibility a home buyer has is to exercise prudence in choosing a reputable dealer from whom to purchase a home. Doing so–and taking the time to ask questions and get references–can save you many headaches, not to mention money. A reputable dealer with be there for you and make sure that your problems, if any, are dealt with promptly to your satisfaction. This is why I recommend going with a reputable dealer even if he or she may cost more than a competing retailer who offers the same home model for thousands less. In the long run, you’ll end up spending less.

In these difficult economic times, with the manufactured housing industry suffering through a horrendous eight-year slump that has seen a nearly 70% decline in production and a slew of bankruptcies and failures, home shoppers would also do well to check on the current financial health of the manufacturer from whom their considering buying a home. The last thing you want is to move into your home only to discover months later that the manufacturer has closed its doors, leaving you without any warranty coverage and no one to turn to when problems arise.

In some cases, it’s not easy to get a handle on a company’s financial health, especially when it’s privately held and the details of its financial health are not available for public inspection. For example, in January, 2007, when employees of the Waycross, GA-based MH builder General Manufactured Housing showed up for work one Tuesday morning, they were shocked to be told they were being laid off immediately and that the plant would be closing permanently (see February 2007 News & Notes). That was a real blow not only to nearly 200 employees, but to scores of homeowners. Aside: I felt GMH’s behavior to its employees was chicken-hearted and reprehensible, a blight on the industry.

On the other hand, large publicly held MH manufacturers can’t hide bad news, at least for long. A prudent home shopper would be well-advised to do a little research (Google the name, for starters) to check on the company’s financial health. I’m reminded of this after reading the latest news about the venerable Fleetwood Enterprises which makes RVs (abut 70% of its business) and manufactured homes (the remaining 30%). The company has which has been taking a terrible beating from a perfect storm of rising oil prices and the housing market crash.

On August 20, the rating agency Moody’s cut Fleetwood’s bond rating to “junk” status, to Caa3 from Caa1 (nine levels below an investment grade rating). In 2007, the company’s market cap was $750 million. As I write this, it’s down around $163 million. Adding insult to injury, this past January, Fleetwood’s MH plant in Woodland, CA was fined $75,000 by federal regulators (HUD) who discovered the plant had been turning out homes with significant durability and safety risks. A total of 77 defects were discovered, including problems with proper ventilation and appliances. In once case, HUD inspectors found the defects were potentially life-threatening. For the record, Fleetwood rectified the problems and brought in new management (see February 2008 News & Notes).

Does this grim news about Fleetwood suggest you should pass on considering a Fleetwood home? No. This is a national company that’s been around forever and it’s managed to survive. Plus, over the years they’ve come up with some very innovative home designs. But knowing a company is in pretty tough financial straits and looking at many months before any kind of a turnaround, would give me pause, at least enough to shop around to find a comparable home model from a manufacturer that is in more robust financial health. Again, the key here is finding a reputable dealer, one who will step up and take care of your needs (especially warranty work) in the event that a manufacturer closes its doors.

Interview: 15 minutes with...Bill Trottier

Note: In my role as an industry observer and consumer advocate I speak with people at all levels of the manufactured home industry (MH) to gain insights I share with my readers to help them be better informed. Some I have interviewed for a one-page column that runs in an industry trade publication. In return the magazine runs an ad for the Grissim Guides. No money changes hands. I insist on this. Aside from book sales, I neither solicit nor accept a dime from the industry, and my readers have my assurance I intend to keep it that way. Here’s this month’s interview:

Bill Trottier

Bill Trottier, President, Arizona Housing Association

Who: President/Executive Director, Arizona Housing Association (formerly Manufactured Housing Industry of Arizona). 2007-08 Chairman, Manufactured Housing Executives Council. Two-time recipient of the industry’s Association Executive of the Year award –Wisconsin (’82), Arizona (’07).

Background: Born and raised in northern Wisconsin, Bill received his BA from St. Francis College in Milwaukee and moved to northern Minnesota to become Director of Personnel at a state hospital where he met and later married his wife Barbara. A year later he was inducted into the Army. Specializing in communications center management and cryptography, he was sent to Izmir, Turkey to work in a NATO communications center (“It was located deep inside a mountain, during the late Sixties, and required a ‘Cosmic’ Top Secret Clearance.” Laughs.) Following a two-year hitch, he returned to WI, accepting a full state-sponsored graduate scholarship to the U. of Michigan to get his Masters in Public Policy & Administration, in return for agreeing to work for the state of WI for two years. Moving to Madison, WI, he created Walden Homes, Ltd, an innovative state program for behaviorally challenged children who were placed in group homes located in residential neighborhoods with live-in staffs and close professional supervision. On the side, Trottier was active in Toastmasters International, serving as District Governor of Wisconsin with over 100 TM Clubs. In late ’77 he entered the MH industry, for the next decade serving as President/Executive Director of the Wisconsin MH Association, in ’82 earning his first Association Executive of the Year award.

In ’86 (“and tired of the long cold winters”), he moved to Arizona where he served as the President/Executive Director of a state trade association, President of the Phoenix Institute, and Associate Professor of Graduate Studies at Arizona State University teaching social policy and organizational leadership. In ’97, he was offered an opportunity to get back into MH when his friend Gub Mix, whom Trottier knew from his WI MH days, called to say he was leaving as director of the AZ MH Association. “The challenges were similar (i.e. image, zoning, government relations and financing); the improvements in product quality were significant; and the association’s leaders were impressive. So I decided to jump back into the industry.” This year marks Bill’s 38th year of association leadership at national, state and local levels (with 20 plus years in MH). Bill and his wife Barb have five children (four boys and a girl).

Q: What makes Arizona one of the top markets in the U.S. for MH?
A: Demographically, it's the influx of retirees and baby boomers. But the most important reasons are, there are no tornadoes, no hurricanes, no earthquakes, no long freezing winters, and the sun shines most every day. The forecast is for a tremendous number of new homes sold here in the next two decades.
Q: What’s got you excited?
A: One, the growing public acceptance of MH by some mainstream buyers who view our homes as a desirable housing choice and not just an affordable alternative to site-built homes. Customers are buying our homes because they look good, meet their needs, and enable them to enjoy the benefits of home ownership. They tell me, "It's one of the best decisions I ever made." . . . and they tell others. Two, I'm excited about the change in attitude among state and local government officials who tour our homes. They're amazed, "Wow! You guys have really improved. These homes are beautiful."
Q: Yours is a particularly active state association. How so?
A: We’re fortunate to have an abundance of really talented volunteer leaders who share a common vision, respect one another, and work well together. Our Board of Directors does a great job of involving every segment of our association in solving problems, resolving issues, and taking advantage of opportunities.
Q: What are your biggest challenges right now?
A: The lack of adequate financing, lack of adequate appraisals, and lack of opportunities for customers to sell their current homes so they can buy our homes. Almost every business and organization in the state is being challenged by the downturn in our economy. But during tough times, the industry seems to work ever harder on supporting each other and developing supportive partnerships because it's in everyone's best interest to do so.
Q: As Chairman of the Manufactured Housing Executive Council (MHEC), what do you see state associations doing to help the industry?
A: That’s a timely question. For the August issue of Merchandiser, editor Chris Olvera asked 16 state associations to justify their existence. The responses covered 12 pages and provided some very good insights. State associations protect the industry with their government relations programs (i.e. state legislatures, state agencies, local counties, cities, towns, villages). They promote the industry through home shows, model displays at major events, image advertising, and communications with the media to create positive publicity for the industry or minimize the effect of negative publicity. And they serve the industry with a wide range of programs and products.
MHEC provides state execs with opportunities to learn about what other states are doing, which helps all state associations. This involves email surveys, conference calls, and networking at MHI meetings; and exchanging ideas, experiences, and program materials. Our industry has a lot of very good state associations, dedicated volunteer leaders, and very talented state executives.
Q: What do you see for the future?
A: Our industry's success will depend on how well we manage the customer experience and meet their expectations. Success will depend on the real value our customers receive. Much will depend on the quality of relationships with everyone involved in the home buying process–our employees, business partners, and competitors. We know what our problems and issues are and are taking action to address them. Our success rests in our hands. In spite of our current difficulties, I'm optimistic about our Industry's future.