Golden West Pins $5 Million Loss on Mobile Homes Slump
Golden West Homes of Santa Ana, one of California’s leading manufacturers of mobile homes and modular housing, reported the biggest quarterly loss in its history and blamed the $5-million fiscal third-quarter loss on a decline in mobile home sales in the West and a trend toward lower-cost products that yield slimmer profits.
The loss for the period ended Feb. 23 represents a 10-fold increase from the $497,000 loss reported for the previous third quarter. Sales were off 9%, to $14 million from $15.6 million.
Included in the loss was $3.1 million in write-downs and reserves to cover expected losses from joint venture developments of mobile home subdivisions and the costs involved with selling two manufacturing facilities that were shut down in Riverside and Phoenix.
For the first nine months of the 1985 fiscal year, the company lost $7.3 million, up sharply from $492,000 in the corresponding period in fiscal 1984. Golden west showed a modest rise in sales, to $54.9 million from $51.7 million.
Lawrence Wessel, Golden West’s vice president and chief financial officer, said, “There has been a shift in the market to lower-price, less profitable products and a decline in the market in general on the West Coast.” The market changes have hit Golden West particularly hard, he said, because the company had specialized in luxury mobile homes. Over the last year, he said, lower-priced product lines have been added.
Fewer elderly persons are interested in buying mobile homes, Wessel said, because Proposition 13 limited home property tax hikes to 1% a year and made it affordable for retirees to remain in homes they bought during their careers. So, he said, the mobile home industry has to gear itself to a younger, first-time buyer.
Wessel said that sales of mobile homes on the West Coast also have suffered because rising land prices have halted the development of new mobile home parks. At the same time, he said, mobile home sales are flourishing in the East and Southeast, where land is cheaper and mobile home spaces more abundant.
David Jackson, director of research for Morgan, Olmstead, Kennedy & Gardner in Los Angeles, said he follows Golden West closely and had anticipated the company’s large third-quarter loss. He said that most mobile home manufacturers who sell primarily on the West Coast also experienced losses.
But Jackson said he had expected the recent dip in interest rates to have helped more than it did to revive mobile home sales. “It is a little confusing to me why interest rates came down and demand hasn’t picked up more,” he said.
