LV sees big shift in retailing of manufactured homes

Manufactured home retailers in Las Vegas and throughout the nation are being gobbled up by manufacturers in a trend called "vertical integration."

This has left independent dealers in a tenuous position holding their own in the $13.9 billion industry.

Tom Terry Homes became the most recent Las Vegas retailer to join the trend as Champion Enterprises of Auburn Hills, Mich., expanded its corporate retail operation by purchasing two Tom Terry locations in Las Vegas and two in Pahrump.

The purchase comes on the heels of Champion's acquisition three months ago of Homes America from majority owner Gene Whitworth of Reno. The eight-state retail operation included one dealership in Las Vegas and two in Reno. Both the Tom Terry and the Homes America names will remain in place.

Concurrent with the Tom Terry Purchase, Champion agreed to acquire the retail operations of the ICA Group, which operates 23 dealerships in five states under the names A-1 Homes, Homes of America, and USA Homes.

Champion calls itself the nation's largest housing manufacturer.

Tom Terry, who will become Vice President of Tom Terry Enterprises under the new arrangement, said the manufactured housing industry, like many others, is becoming more fully integrated with manufacturers looking to expand into other areas of business.

Mark Rabon, general manager of a Fleetwood Home Center in Las Vegas, called the process "vertical integration."

Fleetwood Enterprises Inc., one of Champion's major competitors in the manufacturing of homes, has opened two local retail outlets since February.

The two dealerships include Rabon's in Las Vegas and another in Pahrump. A third location is scheduled to open next month in Arizona, he said.

Rabon said in conjunction with these consolidation efforts Fleetwood has agreed to acquire large retail chains including HomeUSA Inc., which Fleetwood called "the nation's leading independent national retailer of manufactured homes." The sale is scheduled to close in August.

Fleetwood also announced last week it agreed to acquire America's Best Homes -- a Georgia based retailer with 19 dealership in North Carolina and South Carolina. In May the company agreed to acquire Better Homes Inc. to expand its corporate retail operation into Kansas and Oklahoma.

Several other large transactions are in the works, Rabon said.

Champion has big plans for vertical integration.

"We plan to open 25 new retail locations this year. Champion should start 1999 with at least 200 home centers, compared with 22 at the beginning of 1998," said Chief Executive and President Walter Young Jr.

Joe Stegmayer, president, retail operations and chief financial officer for Champion, said his company began a strategy of acquiring retail chains in the fall of 1997. According to Stegmayer, these retail operations compliment roughly 3,500 independent dealers Champion supplies.

Stegmayer said integration is not simply a move to increase manufacturing because his company's retailers are not obligated to sell only Champion products.

Rabon said Fleetwood policy prevents the sale of its product to retailers owned by other manufacturers.

But the company will supply its product to independent dealers selling other manufacturers' products as well.

Companies involved in the vertical integration trend speak highly of its benefits.

Dick Breidenbach, president of Homes America in Reno, said he is pleased with his company's move.

"It has been as good a relationship and changeover as we hoped for."

Champion provides expansion capital while giving local managers freedom to manage, Breidenbach said.

Terry, who said local management would remain in place at the Tom Terry dealerships, is excited about the alignment with Champion because of the opportunity for growth it provides.

Breidenbach said while there is still room for the retailer that owns one or two dealerships, alliances are important for expansion.

Rabon is worried about the prospects for independent retailers.

He said vertical integration provides the manufacturer with better control and allows it to ensure customer service.

This trend "takes you away from smaller dealers that may not be able to fulfill the promises they represent to you," Rabon said.

He said the benefit for consumers is "when they call me, they are calling the factory." He also said that vertical integration can offer better prices by cutting out middle men.

But bigger is not better, said Michael Colbert, president and owner of Nationwide Homes -- an independent dealer with locations in Las Vegas and Pahrump.

Colbert said he has price flexibility -- he can choose to accept less profit on a sale and offer a lower price.

"Here (at Nationwide) you're dealing with the guy that owns the place" he said.

Today most manufactured homes, which some call mobile homes, cost between $30,000 and $70,000 although high-end models may run well above $100,000.

Linda Butterfield, owner of Butterfield Homes, which has a dealership in Las Vegas, was more uncertain about the future.

"We're in a constant state of flux," she said.

Manufacturers offer tremendous competition and have a special kind of leverage.

"You have to be willing to be bought because you run the risk of being a dealer with no product," she said.

Soon Colbert's resolve will be tested.

He said Oakwood Homes Corp., Nationwide's supplier and one of the largest manufacturers in the nation, is opening a retail outlet of its own in the Las Vegas area.

Growth in the industry and the Southern Nevada economy appears to be driving this recent rush of local activity.

Stegmayer expects the entire manufactured housing industry to grow as costs rise in other forms of housing. He said homes can be built more efficiently and more cost effectively in factories and offer a wide variety of options.

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