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Winnebago back on a rough road

Published Oct. 18, 2005

With a gasoline rebate offer yet to recharge stalled motor-home sales, Winnebago Industries Inc. has cut back to a four-day work week and says it will begin laying off white-collar workers. The recent moves by the recreational vehicle giant are a dramatic illustration of how a business already hurting from softness in the economy has been walloped by the unexpected, in this case a stunning rise in fuel prices since Iraq's invasion of Kuwait nearly three months ago.

An industry analyst said Winnebago appears to be taking the right steps to return to profitability once the gasoline price outlook and the nation's economic prospects brighten.

Analyst Michael Sabbann, who follows the recreational vehicle industry for the Minneapolis investment firm of Piper Jaffray & Hopwood, also said Winnebago is not alone and that other manufacturers are in a bind.

The Commerce Department said Wednesday that orders to U.S. factories of durable goods, such as appliances and vehicles designed to last three years or more, fell 1.7 percent in September. Transportation orders fell 6.8 percent.

Winnebago, with products priced at $27,000 and up, has reported five straight quarterly losses and had a record $17.8-million loss in the fiscal year that ended Aug. 25 as sales fell 23 percent from the previous year.

In May, directors suspended semiannual dividends to shareholders. In late September, Winnebago began layoffs and temporary factory shutdowns.

Earlier this month, it began offering rebates to new buyers, guaranteeing to reimburse gasoline expenses above $1 a gallon for the first 12 months or 12,000 miles of ownership, whichever came first.

Sheila Davis, a Winnebago spokeswoman, said Wednesday that the rebates have not led to any noticeable increase in sales. "It's a little too early to tell" about the success of the program, she said.

She said company factories in the Iowa communities of Forest City, Hampton and Lorimor have been on Monday-to-Thursday schedules since last week, with 1,000 production workers idled each Friday. The four-day week will continue indefinitely, she said.

An additional 500 workers were laid off since the end of September with no plans to recall them. Later this week, an austerity program will be announced that will include layoffs among the ranks of 800 office workers, supervisors and executives, she said.

"Unfortunately, those are the things that have to be done," Sabbann said. "The whole industry cycle has turned against them."

But he said Winnebago is in a good position to regain ground once the economy improves. He noted the company's claim to more than 60 percent of the market in sales of micro-mini motor homes, a more fuel-efficient recreational vehicle that has taken a growing share of the RV business.