Motoring Along

Last year was the best year for RV sales in 25 years. The leading maker of recreational vehicles is Winnebago Industries. In part two of our conversation with Winnebago (NYSE: WGO  ) CEO Bruce Hertzke, David Gardner asks about the competitive landscape.

David Gardner: Let's talk about the competition a little bit. Who do you regard as your primary competitor?

Bruce Hertzke: Well, our primary competitor is Fleetwood Motor Homes (NYSE: FLE  ) . Winnebago was No. 1 in total sales for motor-home sales in 2004. Fleetwood was in the No. 2 position. Then that was followed by Monaco (NYSE: MNC  ) , Thor (NYSE: THO  ) , and Coachmen (NYSE: COA  ) , and so those are kind of our major competitors in this industry.

DG: We read that "RV" was the most popular search term on eBay last year. Do you look at eBay as a serious competitor?

BH: Well, first of all, we are very proud of the fact that we have seen that same thing about eBay, and we think that is just great, because what it tells us is that there is an awful lot of people that are interested in recreational vehicles. Now, we also believe that there will be some used products sold over eBay. Right now, we think eBay is really not competition because only 1.9% of the households in America have a motorized RV, so we still think we have a long way to grow. So the more people that get out and experience the RV lifestyle, the better, because some of those people will want to move up to a brand-new product, and hopefully that is when we can sell them a brand-new Winnebago.

DG: What about low-cost airlines, Southwest, JetBlue? Are they competitors in a broader sense in your mind?

BH: Well, I think everything in the travel industry could be classified as a "competitor," whether it is cruise lines, airlines... all those could be competitors of ours. The one thing that the RV lifestyle gives you is control over your destiny. If you want to stay an extra day, you stay an extra day. If the weather gets bad and you want to leave earlier that day, you take off earlier that day. I think people really like that type of freedom.

DG: Now, what if my wife wants to stay and I want to go?

BH: Well, you'll have to work that one out. I can't help you with that!

DG: Bruce Hertzke, we are students of the game, and that game is the stock market. Looking over the stock since we last talked with you in August of 2002, the stock dropped from about $18 down to $11, a precipitous drop in early 2003. It has since more than tripled. Can you describe what happened in the first quarter of 2003 and what has happened since?

BH: Yeah, what you had in the early part of 2003 is you had the Iraq war, and we were just like a lot of companies. We were impacted in 2003 by the Iraq war, because all of our dealers and consumers wanted to take time to find out exactly where the market was going. After the Iraq war, we actually had pent-up demand. We had to not only catch up with some of the pent-up demand, but the industry continued to grow, and so we had an extremely good 2003. In fact, that was a record year for us until we hit 2004. We continued to supply the dealer chain and the consumer with product through 2004, which was our record year.

DG: I want a comment from you about one other company that isn't exactly a peer of yours, but probably you see some similar soulfulness between your company and Harley-Davidson (NYSE: HDI  ) . What do you think of Harley-Davidson these days?

BH: Well, Harley-Davidson is a very good company. In fact, we have kind of targeted some of the financial returns after Harley. I admire them as a company because they try to (produce) good returns for their shareholders. They built up a great name, similar to... Winnebago, and they have also built a very high-quality product, and they don't worry so much about how much they have to grow each year. They are more worried about how they continue to sustain profit and continue to be a very profitable company. I admire companies that work hard to try to give a shareholder a good return, because that is important for the employees also. If you are not a good, financially sound company, that is when your company is at risk.

DG: And if we could get in our time machine and go back 33 years and tap young plumber Bruce Hertzke on the shoulder and say, "Hey, you're going to be the CEO of this company one day," what do you think you would have said?

BH: I'm sure I would have been a little bit skeptical, and say, "Well, I definitely want to work my way up to some type of salary job, either in accounting or finance, or maybe a manager or director of operations at Winnebago Industries." But that was never really a goal, to be the CEO and chairman of Winnebago Industries. It has been a very great career, and it is a very good industry to be in, too. We've got a lot of good people, suppliers, and competition that I enjoy, so I have been very fortunate to be able to progress in this industry.

Fool co-founder David Gardner heads-up theMotley Fool Rule Breakersnewsletter service. The Motley Fool is investors writing for investors.


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