Bates International RV Blog

Peter J. Liegl has preached a simple and consistent sermon since forming RV manufacturer Forest River Inc. a dozen years ago and building the Elkhart, Ind., company into an RV industry powerhouse:  Sell the best products at the best prices and then provide quality service for them.

Of course, it’s not an unfamiliar mantra amount RV manufactures but few have built a dynamic company that sells nearly $2 billion in product a year.

“We still have the same philosophy as when we started out,” said Liegl, 64.  “If you stacked up everybody’s products and looked at them in depth and looked at what you’re getting for a certain price, somebody’s going to be best and someone’s going to be worst.  We expect to be the best.   We pay more attention to detail, we work harder and we’ve got better, experienced people.”

Liegl founded Forest River in 1996; two years after he was dismissed as president of publicly owned Cobra industries Inc., which soon went through bankruptcy.  Two years later, Liegle, who got his start at Coachmen Industries Inc., purchased the remnants of Cobra to form Forest River. 

Before a decade was out, Liegle had turned Forest River into the No. 2 RV manufacturer in the U.S.  In July 2005 he sold privately owned Forest River to legendary investor Warren Buffett’s Berkshire Hathaway Inc., Omaha, Neb., which in 2007 had $118 billion in revenue from such diversified subsidiaries as GEICO, Dairy Queen, Helzberg Diamonds and World Book encyclopedia.

Buffet made an offer to buy Forest River during a telephone conversation with Liegl just one day after he learned about the company.  In Berkshire Hathaway Inc.’s 2005 annual report, Buffett said, “Pete is a remarkable entrepreneur.  You can be sure that I won’t be telling Pete how to manage his operation.”

During the intervening period, Buffett has kept that promise, communicating with Liegle no more than once a year “If that,” Liegle said. “I see him at the stockholder’s meeting.  We just had one (in April).”  The annual meeting this year attracted some 26,000 investors, some of whom paid more than $150,000 per share of Berkshire Hathaway stock.

By Liegle’s account, Forest River’s annual sales have risen by about $400 million to just under $2 billion since the sale three years ago.

“The advantages of being a public or private company balance out,” Liegle said.  “When we were in the rapid growing stage, we were private.  But to raise capital, it’s a little more difficult for a private company.”

And even in a soft RV market, Forest River is holding its own, Liegl reported.  “We are bumping $ billion (annually) right now, “Liegle said.  “We’re a little ahead this year over last.”

Forest River is highly decentralized, with only about 60 employees in the Elkhard headquarters, most working in accounting and finance.  Forest River’s many dividing in accounting and finance.  Forest River’s many divisions are run by general managers in the field who report directly to Liegl and share in the financial success of the company.  “We have GMs who take a certain pride of authorship at each division,” he said.

With some oversight from headquarters, Forest River divisions make their own buying decisions.  “I don’t personally believe in centralized purchasing,” Liegl said. “If we have 15 or 20 people buying supplies, it seems like we are going to buy better than if we only had one person here buying. One person could become skewed.”

“There is some synergism in purchasing,” he continued. “If you look at all the tires we buy for something like 135,000 units a year, that’s a lot of tires. That passes on to all of our divisions. That’s our mentality. Same thing with wood, aluminum and anything else.”

Although Forest River is the No. 1 manufacturer of cargo trailers and No. 2 in shuttle buses, RVs make up three-quarters of the company’s revenues — 75% to 80% of which are built in northern Indiana. The company has, however, established towable RV factories in California and Oregon to overcome high shipping costs. “With a $200,000 motor home, it’s different,” Liegl said. “Trailers need to be closer to their market.”

Forest River’s towables range from entry-level folding camping trailers to high-end fifth-wheels. “Our strength is towables,” Liegl said. “We had a game plan to have product in each category.”

This year through March the Elkhart-based Corporation posted a 16.3% market share in towables for a No. 2 ranking and a 5.7% motorized share for a 7th place ranking, according to Grand Rapids, Michigan-based Statistical Surveys Inc.

Consequently, growth in motor homes remains a prime objective. “We’ve got a long ways to go (in motorized),” Liegl said. “It takes a little longer (to build motorized market share). We are not in all the product lines that we could be.

“We are going OK in Class A gas, and in diesels, we’ve made it around the corner. We are gaining momentum every day.” 

Despite Forest River’s explosive growth during the last 12 years, Liegl describes the company as “conservative” in many ways. “We don’t believe that we should go around base two until we go through base one,” he said. “Until we have our act together in a particular situation, there’s no sense expanding it. That’s our approach.”

Liegl, with typical candor, terms the RV industry’s current downturn as “a godsend” for Forest River. “Let’s say the industry shrunk in half,” he said. “That means there’s still going to be half left, and somebody’s going to get that half, which is still far more than I can produce. But I’m going to get my fair share. We might have to work a little longer and harder, but we are going to get it.”

Liegl said it’s already too late to be making adjustments to cope with the soft RV markets. “It’s not what’s happening today,” he said. “It’s what you did last week and the week before that and last month that is going to determine your results today.”

All in all, Liegl expects that the RV market, despite current setbacks, will recover in short order. “It’s a very cautious individual who buys RVs,” Liegl said. “That doesn’t mean they aren’t going to buy. They might buy something a little less than what they would if the economy was blowing and growing, but this is short term. I’m very confident of that.

“I don’t know why (people are worried). When I say short-term, this year is going to be tough as far as the economy goes. But that’s short term.”