ELKHART, Ind. (Reuters) – Kari Gray points to a junk of mail at a conference table at Renegade RV, one of the leading US manufacturers of high-tech recreational cars. She is buried in bad news from most of her about 350 suppliers.
A production line worker works on a production line at a Renegade RV production plant in Bristol, Indiana, USA, April 16, 2019. Photo taken on April 16, 2019. REUTERS / Tim Aeppel
"We have received letters from 75% of them want higher tariffs, "explains Gray, a Renegade materials manager. About 85 percent of the recreational vehicles sold in the United States were built in and around Elkhart County, making it a popular stop for politicians to advertise their US production visions – including President Donald Trump who organized rallies here last May  Still, this uniquely American manufacturing sector has fallen into the cross-fire of Trump's trade war, according to interviews with industry and economists, along with data showing a sharp drop in sales amid rising costs and consumer prices. Industry has struck US steel and aluminum tariffs and other duties on tens of RV parts manufactured in China from plumbing to electronic components to vinyl seat covers.
RVs to dealers have fallen by 22% in the first five months of this year, down from 4% in 2018, according to the Association of the Entertainment Industry . The troubles of the RV industry illustrate how even the most American producer, the kind of industry Trump has promised to protect, can be heavily exposed to tariffs in a globalized supply chain world.
Tariff price rises forced manufacturers to transfer some of the increased costs, despite higher RV prices, which in turn contributed to slower sales. As dealers cut orders, many factories soothe workers or reduce hours, including Renegade, which reduces the number of employees by 160 with about 10 workers in May at its two factories here. Michael Hicks, a Ball State University economist who tracks the industry, said his decline was far worse than he or other analysts expect and may signal a wider economic downturn. RV shipments have fallen sharply just before the last three recessions in the US. (For RV sales schedule and past recessions see: tmsnrt.rs/2XCPbL2)
"The RV industry is a big cause for the economy," Hicks says, as vehicles are expensive and discretionary, is easily delayed by consumers , which are beginning to worry about their financial stability.
The Department of Commerce said in a statement that it "met with the private industry" to hear concerns about the steel and aluminum tariffs and that it had provided most US companies with tariff-free requests among the applications it handled completely. The Office has raised questions about Chinese commodity tariffs at the office of the US sales agent who has not responded to requests for comment.
RV's industry may have contributed to its own problems by building too many factories during a boom in sales in recent years, leading to oversupply. But tariffs are the main factor behind the decline in the industry, managers at RV manufacturers and suppliers said.
"The increase in tariff rates is what led the RV business – it started the landslide, no doubt," said Tom Bond, the material and purchases manager at Adnik Manufacturing, a Elkhart-based Norco Industries division affected by the higher metal costs he uses to make components such as seat frames.
Bond and Ronald Dick, brand manager of the company, sat in an office near Adnik's front factory and spent an hour experiencing the speed and expense of materials. Yet, as many people in this region, who categorically supported the election of Trump, they have often added that they support the wider target of tariffs to protect American factories from unfair competition from abroad.
"This is good for our country in the long run," said Dick, "but it will hurt."
Thor Industries Inc. – which controls nearly half of the RV market – said its North American sales fell 23 percent in the third fiscal quarter, which ended in April, compared to a year ago. The company reported in a message that it has cut production and has been shifted to four-day weeks in some North American factories.
Workers like Demiris Jamal Williams are preparing for an uneven number of times. He has worked for division of Thor over the last seven years, often working as many hours as he wanted. Recently, however, his hours were interrupted and the weekly closing of his factory in July was extended to three weeks. "This is the worst I've ever seen," he said.
Elkhart County's unemployment rate has risen to 2.6%, compared with a low recession rate of 2.1% in April. During the last recession, the unemployment rate in Elkhart County increased to over 19%.
Tim Sullivan, CEO of REV Group, the parent company of Renegade, said US suppliers have raised prices with their foreign counterparts as rates have triggered a rapid search for parts of the United States.
"It was a complete madness of eating," he said.
Michael Happ, CEO of Winnebago Industries Inc, said he expects tariffs to add more than $ 10 million to the company's costs during this fiscal year, ending in August.
The result, he said, was that most RV manufacturers had to raise the prices paid by dealers. "These make way for the end customer," he said.
Despite the overall American image, the RV industry relies on imports for everything from air compressors and appliances to bedding fabrics and LED light filaments that have become a popular interior.
Metal prices have risen sharply after severe tariffs for steel and aluminum were imposed last year. These prices have since slowed, but manufacturers say that many of the metal parts they buy have not disappeared.
Elkhart's industry is linked to a large network of connected transport companies, including trailer manufacturers and special bus manufacturers, who rely on the same supply chains. Matt Arnold, president of Look Trailers manufacturer Middle Street, Ind., Said the axes he buys had three price rises and are now 28 percent higher than before, while his Chinese tire hit 65%.
(To see how fares increase the cost of trailers, see: tmsnrt.rs/2O3HLvO)
The rider supplier moved to a source in Vietnam, but they still cost 8% more than before. In response, he increased his trailer prices by about 20%, but this reduced sales. So far, he had to close his factory in Georgia, free up 80 people and cut about 10 percent of his Indiana workforce.
RV DEVELOPING PRICES AFTER SALES
Tariffs have so far become a 5% increase in RV sticker prices for consumers, Gregg Fore, Chief Revenue Officer, RV Business magazine, and former owner of a parts supplier for RV based on anecdotal reports and own sales data he has seen. "It does not sound so much until you start talking about adding $ 1,000 to the $ 20,000 vehicle," he said.
Many RVs cost a lot more. Renegade, for example, sells models that cost up to $ 750,000 and can be sold with multiple bathrooms, floor heating and cedar cabinets.
Valorski is a frank critic of President Trump's tariffs, though it is a slight step. In a statement she welcomed the President's cuts in taxes and other policies to boost economic growth. "At the same time, I was not afraid to stand up for the Hoosiers when tariffs and retaliation measures put those profits at risk," she said, using a common nickname for Indiana residents. "As I told the President, we need to put an end to China's unfair trade practices by using a scalpel rather than an ax."
Report by Timothy Apel; Editing by Brian Thevenot