News & Notes Archive - March 2009
A deep recession causes the end of the line for some of the factory-built industry’s big names. More likely in the months ahead.
As the two stories below indicate, not even old well-established brands have been immune from the current recession’s deep grip. Both Patriot and Fleetwood were in serious trouble as this year began. Patriot went into Chapter 11 last fall, hoping to work out something with creditors while it sought new investors to tide the company over. But the money just wasn’t there. This was a highly regarded company, well-run and capitalized. Fleetwood, long a major player in both the RV and HUD-home arenas, took a huge hit in 2007 when gas prices skyrocketed, sending its RV division into the tank, along with housing. That double whammy proved too much.
My recommendation: As a general rule, don’t shop or buy models from any company that is in Chapter 11, or worse, out of business. The principal reason is, no warranty service, something every home needs during the first year (at the very least). This said, going forward, in the months ahead, you may come across deeply discounted model homes from distressed (or closed) companies for which the retailer has obtained warranty coverage from a third-party provider. This arrangement can work but great attention must be paid to the details of that coverage, and the provider’s reputation. In short, there may be deals to be had, but buyer beware.
Patriot Homes pulls the plug on its last plant (Waco, TX), and closes permanently. A sad end for a venerable company.
The below letter from Patriot’s widely esteemed founder, Sam Widener, was recently posted on the company’s web site. Calls to both corporate headquarters and the Waco plant were answered by a recorded message saying the company has closed and all employees have been permanently laid off.
Patriot was a well-run, well-respected family, and I for one, will miss them. They built a fine home and stood behind their products with excellent warranty service.
To our valued Employees, Retailers, Builders, Business Partners and Homeowners,
Patriot Homes has been my life’s work and it is with a heavy heart and much sorrow that I must announce that our final division, Patriot Homes of Texas, will be permanently closed. This closure will mean the end of our company after 37 years in business.
In the end, the weight of our obligations from closed facilities, the cost of operating in bankruptcy, the unavailability of other credit sources and the overall decline in economic conditions proved too much for us to overcome. Our management, sales and production teams did an outstanding job of selling and producing during our bankruptcy and it is ironic that we will leave behind a substantial backlog of orders that we will be unable to complete.
We will be unable to perform any further warranty service as all service technicians have been permanently laid off at all of our facilities. Patriot has posted bonds with some states that will be available to homeowners who cannot obtain warranty service on their homes.
I would like to thank all of you for your business and support over the past 37 years and your continued support during these tough times. I would especially like to thank all of our employees for their hard work and dedication over the years. I wish all of you success in the years to come.
This is one of the hardest decisions I have made in my life and I deeply regret any hardship it has or will cause you.
Sincerely,
Samuel V. Weidner, Sr.
President/ CEO
Patriot Homes, Inc
Fleetwood Enterprises, once an industry power house, files for bankruptcy protection, shuts down its trailer division, and will seek buyers for all or part of the company.
In a March 10, 2009 letter to its retailers, Fleetwood Homes’ president Charles Lott announced that Fleetwood Homes, Inc. of Riverside, CA had voluntarily filed for Chapter 11 bankruptcy, effective immediately. The company’s RV motorized division will continue to operate (although orders are trickling in at best); the trailer division (i.e., towable RVs) will be shut down for good.
Fleetwood’s manufactured housing division, which Lott said has been operating at a profit for the past five years, “will continue to operate...while the corporation seeks buyers for all or part of the company. We have reached out to potential buyers but don’t know yet what will transpire.”
Lott also reported Fleetwood “is asking the Court to immediately approve payment of our existing warranty service; we should hear from the Court soon.”
Current owners of Fleetwood homes that are still under warranty can only hope that the court will act affirmatively to allow continuation of existing warranties. Needless to add, affected homeowners should act quickly to ensure any needed warranty servicing is performed as soon as possible.
As this is written, Fleetwood is reportedly in talks with Bank of America for a loan that would help the manufacturer continue operations while it restructures under bankruptcy guardianship. Of the potential buyers of its RV and MH divisions, a Fleetwood spokesperson said, “There has been interest.”
Comment: Fleetwood has largely itself to blame for its dire straits. As mentioned in the December 2008 News & Notes back in the 90s the company peed in its own swimming pool, squandering cash reserves of two hundred million-plus dollars to create a huge company-owned dealer network that proved a disaster. This move by Fleetwood’s board was motivated by pure greed and hubris. Not only did the move trash relationships with its existing long-established network of independent dealers, the new retailer network was riddled with untrained, inexperienced, incompetent, bungling managers–a recipe for big losses even before the larger industry went into the tank in 1999. Fact is, I can’t see how Fleetwood’s housing division has even operated at a profit in recent years, not if all those lost millions continue to be carried forward on the books, as they should.