Winnebago Industries, Inc. is one of the largest manufacturers of mobile homes within the United States. Sold under the Winnebago, Rialta, Ultimate, Vectra, and Itasca brand names, these self-contained vehicles are aimed at the recreational and leisure markets through an extensive dealer network throughout the United States and Canada. Built with state-of-the-art computer-aided design and manufacturing systems, on highly efficient assembly lines similar to the automotive industry, the company has grown into one of the leaders in the industry. Winnebago Industries celebrated its 40th anniversary in fiscal 1998 by introducing new designs for over 75 percent of its motor homes.
Winnebago Industries was formed in Forest City, Iowa, as a community project. In the early 1950s local businesspeople were eager to establish factory jobs for those leaving farms to seek work in Minneapolis or beyond. The town--with a population of 2,500 in 1955--formed a trust, the Forest City Industrial Development, to attract industrial ventures to their area.
In these postwar years, Forest City businessman John K. Hanson had noticed the growing popularity of recreational trailers among travelers on holiday. Hanson bought two trailer models to learn more about the burgeoning industry before approaching the Industrial Development trustees with a possible venture. In October 1957 the trustees voted to investigate making travel trailers, and Hanson became chairman of the search committee.
During a three-day drive, $20,000 came in from the Forest City community to begin the business venture. Forest City Industries was born, its board of directors including Paul Carse, president, Bob Smith, secretary, and John K. Hanson, treasurer. Smith and Hanson eventually struck a deal with Modernistic Industries Inc., a trailer factory based in California, for Modernistic Industries of Iowa to become a subsidiary. They would build Modernistic's "Aljo" brand trailers for the Midwest market under supervision from California.
Work began at Modernistic Industries of Iowa on January 29, 1958. The first trailer rolled off the assembly line in mid-March. The trailer could sleep five people, had kitchen and lounging facilities, and cost $895. Because of the great demand for these trailers, a host of Forest City natives broke away to form Forest City Industries Inc., a rival to the Modernistic Industries operation. This development unsettled Modernistic management, which was led by C.T. McCreary.
The Aljo plant was shut down for Labor Day weekend and did not reopen as planned for the new 1959 model production in September. After negotiations failed to reopen the Forest City plant by February 1959, five local businessmen purchased the trailer company, and John K. Hanson offered to manage it for the coming year. Modernistic Industries of Iowa survived the year and by 1959 it had 17 employees. On February 28, 1961, the company's name was changed to Winnebago Industries, Inc.
Growth, Diversification, and the Challenge of Success
In 1973 Winnebago Industries, by now the continent's largest recreational vehicle maker, had amassed more than 400 acres of land holdings in Forest City, including 46.5 acres of factory floor space, or two million square feet in all. Winnebago has since increased its land holdings to 860 acres.
To encourage superior after-sales service, the company had invited more than 1,000 dealer personnel to the Forest City head office for service school classes. Also in 1973, Winnebago established two subsidiaries: Winnebago Realty Corporation and Winnebago International Corporation. The realty arm was formed to help dealers establish or enlarge outlets at selected sites, while the international arm was meant to forge overseas markets for the company's products.
In 1974 the company began to feel the full brunt of 1973's oil shortage, which discouraged sales of gas-guzzling motor homes. Compounding financial difficulties, the United States suffered a mild recession that year, further denting consumer spending. To compensate, Winnebago diversified its holdings. The Maroff Division was formed to market a new Eze-Hauler fifth-wheel trailer for use on farms. In addition, the company moved into the mass-transportation market during a time of mounting energy conservation. Winnebago buses were unveiled to encourage companies to bring employees from outlying areas to work, thus saving on gas consumption.
At the end of 1974 Winnebago's payroll stood at 1,600 people. In order to revive sales of recreational vehicles amid the OPEC oil embargo, a Grand Giveaway program was established. Under the plan, motor home buyers were offered merchandise premiums. In 1976 John Hanson removed himself from day-to-day management of the company, stepping in as vice-chairman. Gerald Boman was elected chairman of the board and John V. Hanson, son of the founder, became president and chief executive officer.
A year later, the company began constructing a 126,000-square-foot factory in Riverside, California, to build motor homes. In addition, a 66,000-square-foot plant was leased in Asheville, North Carolina, to build van conversions. Also in 1977, Winnebago celebrated the manufacture of its 100,000th motor home. Journalists from across the United States turned out for the event.
In October of that year, another boardroom shuffle saw J. Harold Bragg become chairman and chief executive officer of the company. John V. Hanson retained his position as president, but Gerald Boman became senior vice-president of the company. The change was attributed to growing demands on the company, on top of continuing shocks from the domestic energy shortage. The response required more senior managerial experience in the boardroom.
But the boardroom renewal did not succeed. In March 1979 company founder John K. Hanson stepped in to end what he termed, according to The Winnebago Story, 1958--1988, "a difference in management philosophy." J. Harold Bragg and John V. Hanson were replaced by John K. Hanson, who ended his semi-retirement to become chairman and chief executive officer of the company. This boardroom crisis was a precursor of a general business downturn. In May 1979 motor home production at Winnebago was halted for six weeks to reduce excess inventory owing to reduced consumer demand. A continuing drop in revenues led to the sale of the newly built Riverside, California, plant.
Restructuring in the 1980s
The 1980 lines of motor homes were smaller and more fuel efficient. Winnebago's new LLT trailer, for example, came in 16- and 18-foot models and had a road-to-roof height of just 86 inches. A more easily towed trailer was seen to be more fuel efficient for car owners on the highway. High interest rates and undercutting attempts at financing new vehicle purchases by consumers made 1980 a difficult trading year for Winnebago. That year, inventory, debt load, and overhead expenses were reduced. The company's workforce was substantially reduced--from 4,000 employees in January 1979 to 1,000 by August 1980.
Remaining employees began working in quality circles in 1981 to improve productivity. That year, Winnebago had a net positive cash position of $23.7 million at its fiscal year-end. This allowed the company to invest its own funds where only a few years earlier it had to borrow amid high interest rates.
With a more assured business future, Winnebago saw yet another boardroom shuffle in 1981. John K. Hanson remained as chairman of the board, but Ronald E. Haugen assumed presidency of the company. John K. Hanson was feeling more confident about Winnebago's comeback. He was quoted as saying in The Winnebago Story: "We've done our homework and ... are about to enter a period of rapid growth." An increase in sales allowed more investment in the development of fuel-efficient vehicles, and the company's workforce was expanded to 1,350 people in 1982.
In the spring of 1983, the company enlisted a number of companies to manufacture a line of Winnebago brand products--from outdoor apparel to backpacks, rubberized air mattresses, picnic jugs, and coolers. Winnebago received royalties for the use of its company logo under the licensing arrangements in more than 2,000 retail outlets across the United States. Sales that year reached $239.26 million, up sharply from $146.6 million a year earlier. Earnings in 1984 were even better: profits totalled $27.8 million, or $1.10 a share (an increase of 77 percent on 1983 earnings). Rising sales were in part attributed to increased demand for the company's LeSharo and Itasca Phasar brand vehicle lines.
In order to further improve productivity, Winnebago moved part of its sewing operation from Forest City, Iowa, to Juarez, Mexico, in 1984. This was part of a long-range plan to move labor-intensive manufacturing from Forest City to cheaper labor markets.
Capital expenditure at Winnebago reached $24 million in 1985, as the company continued modernizing its manufacturing operations. Winnebago followed the suit of the big three automakers in Detroit, who were developing modernized operations--including computer-aided design and manufacturing facilities. Winnebago installed a "System 85" telephone system encompassing its entire workforce and dealer network. Yet another innovation was the Education Center, where Winnebago employees were instructed in the latest electronic and computer techniques being introduced on the shop floor.
Changes to the Winnebago boardroom in 1985 included John V. Hanson rejoining the company management as deputy chairman. In 1986 Gerald Gilbert became president and chief executive officer of the company, while Richard Berreth was appointed executive vice-president of operations. Also that year, Winnebago entered the Fortune 500 list of major U.S. companies, ranking number 500 in sales and 340 in net income.
In October 1986 Winnebago diversified its portfolio by acquiring majority control of Cycle Video, Inc., a satellite courier business specializing in transmitting television commercials from advertising agencies to broadcast affiliates. Also that month, Winnebago celebrated the manufacture of its 200,000th motor home. Sales for 1987 were posted at $406.4 million, leading to earnings of $19.97 million, or 78 cents per share. Changes made that year to promote increased productivity included strengthening the marketing department and expanding its training program for dealers.
More management changes occurred in 1989, following poor earnings performance a year earlier. Sales in 1988 had reached $430 million, but earnings slipped to $2.7 million, or 11 cents per share. In September, Gerald Gilbert was replaced as president and CEO of the company by a seven-person management council appointed to manage day-to-day operations. John K. Hanson said of the company's performance that year, according to a 1988 annual report: "The company failed to fully participate in the growth of the motor home industry during the second half of the year."
On the international sales front, Winnebago signed a 1988 agreement with Winnebago Trading GmbH, based in Hamburg, Germany, to sell its motor vehicles in 14 European markets. The company also reached an agreement that same year with the Tokyo-based Mitsubishi Corporation to sell Winnebago products in Japan.
But the company's fortunes did not improve in 1989. Winnebago posted a loss of $4.67 million on sales of $437.5 million in 1989. The beginning of the recession that year had dented consumer confidence and demand for motor homes decreased. Still, John K. Hanson saw grounds for optimism about his company's future. The United States was seeing an increase in the population of elderly people able to afford recreational vehicles. In addition, international markets for motor homes continued to mature, especially in Europe and Japan.
The 1990s and Prospects for a New Millennium
That optimism was short-lived, however. Revenues for the company plunged to $332.8 million in 1990 from $437.5 million a year earlier. Earnings continued to be in the red; this time the posted loss was $17.8 million. The effects of the Persian Gulf War--which drove up the price of oil and raised fears of an oil shortage at the gas pumps--undercut sales in the motor home division. In addition, the Cycle-Sat subsidiary continued to post operating losses. To stem losses, Winnebago began an austerity program in 1990 and increased the marketing of its Warrior and Spirit micro-mini motor home models, which offered superior fuel efficiency.
Fred Dohrmann, appointed chief operating officer of Winnebago in 1990, added the position of president to his nameplate in 1991 as the company continued to struggle amid the gathering recession. Company sales, dented by the impact of the Gulf War, continued a slide of 34 percent to $222.6 million for fiscal 1991. An earnings loss in 1991 was posted at $29.3 million, or $1.18 per share.
John K. Hanson termed the year a difficult one for the company. The manufacture of commercial vehicles was discontinued to direct more investment toward the recreational motor home division, the company's core business. Sales of motor homes in 1991, at $180.8 million, represented 81.2 percent of total company sales. In 1992 sales for the company increased to $294.9 million. The company, however, continued to lose money and posted a net loss of $10.5 million. Nonetheless, the recession had eased in 1992, and the Gulf War and its harmful trading effects had ended.
During the mid- and late 1990s, Winnebago Industries continued to struggle. Yet, by 1997, the company's management had implemented a comprehensive revitalization strategy that brought life back to the company. Most of Winnebago's non-RV holdings were sold off, and the company returned to what it did best, namely, manufacture recreational vehicles. All new 33- and 36-foot designs for the Winnebago Chieftain and Itasca Sunflyer, loaded with innovative and functional amenities such as a galley/coach slideout, a dinette/couch slideout, and a bed/wardrobe slideout where a queen-sized bed and mirrored wardrobe are moved out to reveal nearly 132 cubic feet of added living space, soon became the envy of the industry and two of the most popular RVs on the market. The company also made the commitment to install the latest technological advancements in RV manufacturing, thus resulting in the increase of its original equipment manufacturing program that brought in over $30 million in new sales during 1998. All of these measures contributed to a cash reserve of over $50 million by the end of fiscal 1998, and growing confidence within management that the company was ready to embark on a growth through acquisitions strategy, with the intention of enhancing its ability to build and market top-quality motor homes.
Although Winnebago Industries will need to work hard in order to maintain profitability, recent demographic studies indicate that the company should be confident about its future. Moreover, as long as there are people who want to travel in the comfortable and relaxing surroundings of their own motor home, Winnebago Industries will provide them with the most luxurious recreational vehicle on the market.
Principal Subsidiaries: Winnebago Acceptance Corporation; Winnebago R.V., Inc.; Winnebago Realty Corporation; Winnebago Products, Inc.