Mazor'sEdge

(BRK.A), (BRK.B)

Back in 2008 the recreational vehicle market hit a wall, a big wall, with sales plunging a precipitous 30% that year, and the next year was just as bad.

For Forest River, which had the financial strength of Berkshire Hathaway behind it, it was a time pull in the belt, and also an opportunity to acquire a competitor in Coachman Industries.

In 2008, Coachman was just days from closing when it sold itself to Forest River for next to nothing.

“With this transaction, we secure the future for this proud brand, and the employees of our RV Group. This announcement will also end the speculation over whether Coachmen itself will survive these extraordinarily difficult times, and preserve the jobs of our employee base, in both our RV and Housing segments”, said Coachman’s CEO Richard Laver at the time.

Hitting Record Numbers

Now, RV sales are back to levels not seen since the 1980s. 2016 sales industry-wide surpassed already rosy projections with around 420,000 RVs sold, and next year is projected to be up another 5%.

The sales also mean profits. In 2008, Coachmen’s sales not only crashed 52%, but it lost money on every vehicle it built. Today, sales industry-wide are not only robust, but profitable. Another leading manufacturer, Thor industries, saw record first-quarter FY 2017 net income of $78.7 million.

Adding Capacity

The strong sales have set up a gold-rush-like hunt for new manufacturing sites as RV manufacturers work to boost capacity. The heart of the gold rush is in Indiana, where 111 of the U.S.’s 228 RV manufacturing plants are situated.

Berkshire Hathaway’s Forest River, competitor Thor Industries, and companies such as Drew Industries, a supplier of components for original equipment manufacturers of RVs and adjacent industries, are all scrambling to secure new production facilities.

The scramble for new facilities is filling plants that in some cases have been sitting idle for almost a decade.

New Plants, More Jobs

With the rush for more facilities comes more jobs.

In September 2016, Highland Ridge RV, a manufacturer of towable recreational vehicles, opened a new $5.7 million, 92,000-square-foot facility in Shipshewana that also added 65 jobs.

More recently, Forest River purchased a 100-acre-plus industrial site in the town of LaGrange. The move brings much needed activity to a facility that has been sitting empty for the past eight years, and jobs to the community of roughly 2,700 people. The plant will provide some 250 jobs in the first year, and as many as 450 by the end of 2018.

Forest River has not announced exactly what it will be building at the new facility, but part of its production line from its Topeka plant is expected to be relocated to the facility.

With Indiana’s unemployment rate at only 4.2% in November 2016, well below the national average of 4.6%, the RV renaissance is clearly having a positive impact on the state’s economy. And the heart of the RV manufacturing in the counties of Elkhart and LaGrange have unemployment rates of 3.3% and 3.2% respectively,

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.