Little RV Maker That Wants To : Tiny Rexhall Industries Is Going Strong, but Faces a Tough Climb to the Big Time

After graduating from San Fernando High School in 1969, William J. Rex and his brother bought a chain saw and a pickup truck and started a tree-trimming business. About a year later, the brothers got into an argument. When it ended, William Rex quit the business and walked around the corner--age 19 and out of work.

It so happened that around the corner was Dolphin Camper Co. where Rex’s uncle worked. Rex got a job puttying stapler holes in the campers’ paneling for $2 an hour.

Sixteen years later, Rex is still building recreational vehicles, but for a lot more money. He is chairman of Rexhall Industries in Saugus, a manufacturer of motor homes that he founded in 1986. In three years, Rexhall has built more than 1,200 of its Airex motor homes, with annual sales shooting from zero to $17.4 million in 1988, and on a pace to nearly double to about $30 million this year. Even though Rexhall is still virtually a start-up, its profit last year soared nearly fourfold to $918,000 from $234,000.

Plans Expansion

A month ago, Rex, 38, took Rexhall public, raising $6 million for his company, which he plans to use for expansion. The company recently doubled its production to 80 motor homes a month.

So, there’s nothing ahead but open road for Rex? Hardly. As it keeps growing sharply, Rexhall is nearing a head-on collision with the RV market’s biggest cruisers, named Fleetwood Enterprises and Winnebago, which together hold nearly half of the $3-billion motor home market. And they’re not about to take a back seat to tiny Rexhall.

Rexhall is trying to best Fleetwood and the others by matching them on quality but undercutting them on price. “I wanted to build a Price Club of motor homes,” Rex said, referring to the discount store. “We set out to build a better motor home and sell it for less money.”

“You pay for what you get,” sniffed James Sheldon, marketing director for Riverside-based Fleetwood, which is the General Motors Corp. of RVs, with $1 billion in sales. Sheldon declined specific comment about Rexhall or any other rival, but said “we haven’t changed our basic mode of operation” because of Rexhall’s emergence.

Cost Comparison

Depending on options, the Rexhall’s Airex costs $32,000 to $55,000 retail, but the company’s bread-and-butter models typically cost $44,000 to $48,000. Rex contended that when a typical Airex is compared with, say, a similarly equipped Fleetwood, the Airex costs $2,000 to $5,000 less.

“It’s in a price range where not a lot of others are, and he does a good job building them,” said Bill Whitledge, who owns 10 motor home dealerships in Southern California. About half of his business comes from selling expensive motor homes costing nearly $100,000, models made by Airstream and Executive. But Whitledge also sells the Airex at one of his dealerships, American RV in Irvine.

Some other of Rex’s new dealers--he has more than 50 overall in 22 states--say the Airex’s price and quality are catching customers’ attention.

Consider what has happened at National RV, a motor home dealership in Burbank. For years National has carried the familiar brands of motor homes, such as Fleetwood’s Pace Arrow. But recently it began ordering the Airex.

Why? Because customers kept asking to see it, said Merv Jones, National’s general sales manager. “When you hear that continually, naturally you want to get an Airex,” he said.

Jones of National RV said that in comparing similarly equipped brands, the Airex is “a minimum of $2,000” less expensive, which “will appeal to first-time buyers.”

That could be a crucial constituency for Rexhall. A typical motor home buyer is a senior citizen with no children at home and time for travel, and that’s the demographic profile that today’s baby boom generation will reach in the next 20 years. Many of them will be looking for their first RV.

“We feel the baby boomers could really expand the market,” Rex said. “But we’re not counting on it.”

Among other things, Rex says his motor homes stand out because the Airex has a welded, “unibody” steel roll cage that forms the motor home’s frame, which makes the vehicle more solid and less prone to the rattles that can infect the riveted frames of other brands. Rexhall also touts the aerodynamic design of the Airex with its “radius” sidewalls that curve up to the roof, eliminating that boxy look of RVs.

Fleetwood and other rivals naturally disagree that Rexhall beats them on both price and quality, and note that they, too, have aerodynamically designed motor homes.

Plant Manager

Rex learned the motor home business from the ground up. He worked for Dolphin Camper for 13 years, and by the time he left in 1983 he was plant manager in charge of production. He left because he heard Establishment Industries, a motor home maker in San Fernando with about $5.5 million in sales, was struggling and looking for a new leader. Establishment then was owned by H.F. (Bert) Boeckmann, a San Fernando Valley businessman who also owns Galpin Motors in Sepulveda. Rex told Boeckmann that he wanted the job, and he got it.

“Frankly, he did one helluva job on selling me on the fact he was the person I needed,” Boeckmann recalled.

Two years later, Establishment’s sales had climbed to $28 million, Rex said, the company was profitable and Boeckmann sold it to Thor Industries (which also makes the Airstream line of RVs) for $6 million.

Rex stayed on another year as president, but then left to start his own company. He and a colleague, Charles A. Hall, who had a one-third stake in the company, started Rexhall in part by borrowing $105,000 that had Rex’s house pledged as collateral.

But within two years the partners had a falling out. Hall claimed that he was forced out of Rexhall because Rex wanted to maintain control of the company after it went public. (Rex still owns 56% of the company’s stock, now worth $11 million.) But Rex said his partnership with Hall “just wasn’t working out. I didn’t feel Andy was doing the job he was capable of.” In February, Hall sold his stock back to Rexhall for $763,000 and left the company.

Their start-up investment in Rexhall could have been several hundred thousand dollars, but Rex said his reputation in RVs persuaded many friends and suppliers in the industry to give him some free services or extend him credit until Rexhall was up and running. And because Rex knew lots of RV dealers, “it was very easy for us” to persuade at least a few dealers to carry the new Airex, he said. “That got us rolling.”

The question now is at how fast a clip Rexhall will keep rolling. Rex declined to predict sales growth but said Rexhall should be able to keep its overhead costs low enough to keep its prices a nick below its competitors.

How? At its Saugus plant, Rexhall makes several of the components that go inside its motor homes--such as the driver and entrance doors, the chairs and other upholstered furniture, the showers and bumper guards--and does so for less money than if it simply bought the products from outside suppliers, Rex said.

Rexhall would need an edge on costs if gasoline prices were to rise sharply at any time ahead; industrywide sales plunged in the late-1970s when gas prices soared. Even with gas prices currently stable, analysts expect a 5% to 10% drop in RV sales nationwide this year.

Because Rexhall is still small, Rex said the company can quickly change its motor homes--and their assembly process--to satisfy customers’ changing tastes. A Fleetwood or other big manufacturer might not be able to respond as fast, he said.

“If interior designs change tomorrow, he can be there the day after with a product,” Boeckmann said of Rex.

But if Rexhall keeps growing so rapidly, it could loose its nimbleness. It’s a classic dilemma in business, and Rex knows it. The biggest danger for Rexhall would be to “try to build too much too fast,” he said. “But I really don’t feel we’re going to get cocky.”

He can count on Fleetwood and Winnebago seeing to that.