Ailing Fleetwood Replaces Its CEO

Beleaguered Fleetwood Enterprises Inc. replaced its chief executive Wednesday, recalling from retirement a 30-year employee who helped build the company’s recreational vehicle business into an industry leader.

The Riverside-based company said that Elden Smith, the 64-year-old former head of Fleetwood’s RV division, would replace Edward Caudill, chief executive since 2002.

The company’s shares jumped 9% on the news.

The decision marked the second time in three years that Fleetwood’s board has moved to oust its CEO. The company has been struggling to recover from a persistent slump in manufactured housing, which represents about a third of its $2.6 billion in annual revenue. And its RV business has been flagging of late.

Smith “brings a wealth of knowledge back to Fleetwood,” said Thomas Pitcher, the company’s chairman. “We believe his experience and strong dealer relationships will enable him to make an immediate positive impact.” Neither Caudill nor Smith was available for comment.

The departure of Caudill, 62, comes less than a week after Fleetwood reported a wider-than-expected fiscal third-quarter loss and warned of additional losses in the current quarter -- considered a key RV-selling period.

Last month, the company’s shares hit a 52-week low after it lost a trademark suit to Coleman Co.

Fleetwood’s loss last quarter was $55 million, or 99 cents a share. Revenue fell 5.5% to $565 million.

More significant, the company hasn’t posted a profit in the last three fiscal years.

Fleetwood’s problems “should have been cleaned up before now,” said William Gibson, senior research analyst for investment advisor Nollenberger Capital Partners.

Some of its troubles can be pinned on the industrywide slowdown in prefab home sales, which have been hurt most recently by low interest rates.

For Fleetwood, the situation has been made worse because its housing business is concentrated in such states as Texas, North Carolina, Alabama and Kentucky -- soft housing markets where so-called site-built homes can be purchased for about the same price as manufactured houses.

In the most recent quarter ended Jan. 23, Fleetwood saw manufactured housing revenue rise 18% to $207 million but reported an operating loss of $14 million. Since 2000, the number of manufactured homes Fleetwood has sold has plunged 66%, to 20,000 in fiscal 2004.

The company also has suffered from problems of its own making, analysts said. For example, RV sales and shipments industrywide have been rising steadily in recent years, despite higher gasoline prices. But Fleetwood’s revenue from RV sales fell 16%, to $343 million last quarter.

In a conference call with investors last week, Caudill explained that the company chose to hold the line on offering discounts or other incentives, making it harder for dealers to sell Fleetwood RVs or make room for additional inventory. What’s more, company executives acknowledged waiting too long to scale back production, which led to an unsold inventory of about 5,000 motor homes and travel trailers in the fiscal third quarter. In fiscal 2004, Fleetwood sold 60,000 motor homes and travel trailers.

On top of that, Caudill’s warning that the current quarter -- which ends in April -- is bleeding red ink was unexpected.

“That caught me by surprise,” analyst Gibson said. Most RV makers tend to see a boost in sales during the spring when the weather improves and consumers start planning summer trips.

“The losses on the manufacturing side weren’t unexpected, but the losses on the RV side were,” he said.

The selection of Smith, who headed the RV division for 24 years before retiring in 1997, fueled speculation that Fleetwood might sell its manufactured housing division. The unit is the second-largest such company in the U.S. but has been a drag on Fleetwood’s profitability. Two years ago, Warren Buffett entered the market when his Berkshire Hathaway Inc. acquired the No. 3 company, Clayton Homes, raising the stakes for Fleetwood.

Selling the division has been “something that’s been under discussion for some time,” spokeswoman Kathy Munson said, “but I don’t believe you can read that into this appointment today.”

Smith’s appointment signals that the company is heading in the right direction, said Barbara Allen of investment banking firm Avondale Partners. She raised her rating from “market perform” to “market outperform” on Wednesday’s news.

Fleetwood shares rose 83 cents to $9.74 on the New York Stock Exchange. The stock has lost 28% in the last year.