A Line in the Sand

[Jon Wehrenberg]

There is one fly in the ointment and it goes beyond our ability as individuals to have any control.

Not too long ago some converters either went belly up or got in financial distress. Legendary and Royale left the business and their remaining inventory was sold at bargain basement prices. There was one Legendary sold that went for less than $700,000 brand new. Royale had four coaches remaining when they stepped out of the business and they went cheap.

Then Vantare slashed prices on a significant number of coaches, creating an instant and large devaluation of Vantare coaches. They took coaches listing for $1.3M and in one day valued them at $.9M retail. I'm sure glad I hadn't just bought a Vantare immediately prior to that.

In the eyes of any potential buyers the value of all coaches new and old just had a significant drop. So here is Marathon and Liberty and Millenium, and others now faced with a marketplace that uses the publicly known prices for other brands of new coaches having to defend their asking prices which are absurd compared to what people were paying for a Vantare, a Legendary or a Royale. Who among us can identify $400,000 of additional value between a Marathon and a Vantare? I sure cannot.

So after that sent a shock wave or two across the market, we begin to see the entire market soften. Every coach, regardless of age becomes tougher to sell because the folks buying coaches are a little unsure of the economy, and worse, those willing to buy right now are not finding it easy to get appropriate financing.

Whether we owners like it or not the market, not the sellers determines the value of a coach. Within a specific range we can affect the pricing, such as to maintain the coach and keep it and its records pristine. But having the nicest 1998, or 1992, or 2005 only means as a seller you can ask for the price to be at the high end of the price range. As the seller you cannot move the price range up or down because the market has proven if something is overpriced it will be available for sale forever.

I happen to think a rivet coach, with no slides and OTR, well maintained is the most desirable coach going. But the market says otherwise, and as a result I could only get the price for my coach that the market is willing to pay. If the buyers and sellers were all highly knowledgable about these coaches and their respective utility, then we would never value a coach on the basis of miles of use or year of manufacture, but on condition, maintenance history, and projected years of service as a result of the coach's previous upkeep and care. Unfortunately, a coach that has been parked in the Palm Springs sun at ORA for almost its entire life may show low miles, but because it was rarely moved, but lived in almost continuously it may have a lot of the house worn out or seriously used, but it will be valued highly by folks that don't know how damaging it is to let a coach sit.

We in POG can hope coaches retain value, but they won't and we will have little or no influence unless an entire marketplace finds it beneficial to brag about how much it paid rather than bragging about how little one paid for his coach.

[0533]

There is one fly in the ointment and it goes beyond our ability as individuals to have any control.

Not too long ago some converters either went belly up or got in financial distress. Legendary and Royale left the business and their remaining inventory was sold at bargain basement prices. There was one Legendary sold that went for less than $700,000 brand new. Royale had four coaches remaining when they stepped out of the business and they went cheap.

Then Vantare slashed prices on a significant number of coaches, creating an instant and large devaluation of Vantare coaches. They took coaches listing for $1.3M and in one day valued them at $.9M retail. I'm sure glad I hadn't just bought a Vantare immediately prior to that.

In the eyes of any potential buyers the value of all coaches new and old just had a significant drop. So here is Marathon and Liberty and Millenium, and others now faced with a marketplace that uses the publicly known prices for other brands of new coaches having to defend their asking prices which are absurd compared to what people were paying for a Vantare, a Legendary or a Royale. Who among us can identify $400,000 of additional value between a Marathon and a Vantare? I sure cannot.

So after that sent a shock wave or two across the market, we begin to see the entire market soften. Every coach, regardless of age becomes tougher to sell because the folks buying coaches are a little unsure of the economy, and worse, those willing to buy right now are not finding it easy to get appropriate financing.

Whether we owners like it or not the market, not the sellers determines the value of a coach. Within a specific range we can affect the pricing, such as to maintain the coach and keep it and its records pristine. But having the nicest 1998, or 1992, or 2005 only means as a seller you can ask for the price to be at the high end of the price range. As the seller you cannot move the price range up or down because the market has proven if something is overpriced it will be available for sale forever.

I happen to think a rivet coach, with no slides and OTR, well maintained is the most desirable coach going. But the market says otherwise, and as a result I could only get the price for my coach that the market is willing to pay. If the buyers and sellers were all highly knowledgable about these coaches and their respective utility, then we would never value a coach on the basis of miles of use or year of manufacture, but on condition, maintenance history, and projected years of service as a result of the coach's previous upkeep and care. Unfortunately, a coach that has been parked in the Palm Springs sun at ORA for almost its entire life may show low miles, but because it was rarely moved, but lived in almost continuously it may have a lot of the house worn out or seriously used, but it will be valued highly by folks that don't know how damaging it is to let a coach sit.

We in POG can hope coaches retain value, but they won't and we will have little or no influence unless an entire marketplace finds it beneficial to brag about how much it paid rather than bragging about how little one paid for his coach.

Like you say Jon, I respectfully disagree. Yes people do panic when they see other sellers panic, but lets examine what you have just said. Your examples of panic selling that is.

You have referred to two converters who have left the marketplace and had or have a few buses left in inventory, plus one or two from Vantare, but the sum total is still a handful and in these cases are as a result of distress sales or cash crunches. I would not form my business plan around a few converters who where not prepared to compete in this marketplace and are gone or have real issues that might affect their future in this business.

The big converters cannot withstand this level of price reduction, and my guess is that none will take this course of action, at least not publicly.

Converters come and go and its my understanding that several have morphed or gone away over the years.

Like stocks, it is not time to drop ones pants when the market is readjusting, hold the stock, wait for the market to return and the price will as well, same goes for the Bus market.

I do not accept the notion that POG or other bus owners should feel that when there is a blip on the radar that causes a few dealers to fall by the wayside that we all should react in a precipitous manner.

I know you do not personally feel this way, but It appears that some do I guess.

[rfoster]

It seems to me that business is good within or around the POG group. (see Steves post form the left coast) There has been several hundred thousands of dollars moving around amongst these old buses. People still want stuff and if they can get or have the lewbucks they are going to act. Its' Human Nature to want something new or different, It is Red Blooded, the American way and Tradition to buy stuff. And when a willing seller and willing qualified buyer hook up- wheels go around.

I LIke Stufff. It just happens to be a big shiney bus.

Don't listen to the poison coming from the mouths of the liberal news media, they would have you asking permission to go pee. I say pee on them..

[garyde]

I agree with you Bruce, but what I have learned over the years, sometimes painfully, is the market is the Market.

[Coloradobus]

We were told by Marathon Fla that older "H"'s with the 4 windshields just aren't selling for whatever the reason. So, we are holding onto our coach. The market has been needing an adjustment. Knee-jerking is just part of that adjustment. With the coming election, market uncertainty, its normal to panic, but Don't!!!!
Free enterprise always has its ups and downs, regardless of why, or who.
Sit tight, it's going to be interesting to see how things pan out.

[ajhaig]

I'm intrigued with this discussion and very interested in everyone's views. One of the nice things about POG is that its membership is so diverse yet one common trait is that POGers tend to be highly successful.

Most people here are so quick to share their views on things like tire brand preference and proper tire pressure yet I get the feeling that many are reluctant to chime in on the coach market.

Our decision to sell our coach was driven exclusively by the fact that we would not be able to use it the way it should be used. I think the sale price was fair market value for both us and the new owner and I believe that we sold into the "real market." I suppose we could have held on to it with the hope that the market would improve, but I determined that when you take into consideration the cost of depreciation, insurance, storage, maintenance, and cost of tied up capital we were at the point of diminishing returns, so we hit the bid.

The idea that markets always "come back" is a bit of a myth, point in case the NASDAQ market traded over 5,000 at one point, so for anyone waiting for that one to come back, it has been 8 years and counting, NASDAQ is currently at 1,650.

It will be interesting to see the fate of the converters over the next few years. Although 2001 was officially a "recession", consumer spending actually increased through that event. Many converters failed during what was perhaps the greatest economic expansion in history, how will they fair in a real recession (yet alone a potentially severe one)?

A friend of mine owned a Rolls Royce store and I recall him complaining about business during the 1991 recession. He told me that although his clientele were largely unaffected personally by the then recession, they couldn't justify driving such a fancy car while they were laying off employees.

The idea that the coach market is being punished like the sub-prime market shouldn't be a surprise. They were both driven by easy credit availability, that game is over for the time being.

The damage that has been done to the banking system is hard to fathom, the way business gets done going forward will be very different than it has been in the past. I would be careful to lightly dismiss these events as just another correction.

AJ

P.S. Our next coach will be a late 90's 40 foot with a series 60, I can't wait! For the time being I've bought a 1959 International Harvester Farmall tractor to keep me busy... Photos to follow.

[0533]

You made the correct decision, especially if you could no longer dedicate the time to use the bus.

Never look back once you have done anything, just reflect, learn and be grateful for tomorrow.

We will all look forward to your return and hope to hear from you and keep up with your Vermont Lifestyle. We love Vermont, hope to see you next summer.

[jelmore]

Interesting, this market. Ours is for sale and has been for three months. We started out on a one year adventure and got it done. There's not a financial crisis for us, so we don't HAVE to sell. Continuing what we've been doing is certainly no penalty. We'd like to sell, but the only urgency is wanting to do something else. We're not willing to take the hit to sell it immediately. The market for these is so small that I think it's more about what someone wants, like us when we bought this one. Linda said "I could live in that" and the deal was done. We were offered $245,000 the other day. Interested? No way. We'll do our part to keep the market up. I would imagine that it will cost the same each year we keep it in depreciation and upkeep and I'd just as soon use it than give it away. Of course, our "hope" is that someone will come along that sees this coach the same way we saw it. They will end up with a well maintained machine that is in far better condition than it was when we bought it. But, who knows. The entire financial market may collapse, the bank may own another coach, and I'll work at Walmart. Until then, we'll have a ball.

[sawdust_128]

How big is the market for our buses? How many new conversions are sold annually with what kind of gross sales? Anyone venture a guess. I know that services are a big part of the business, but what is the new conversion sales number?

[jack14r]

Here are the numbers that I have heard for new coaches a year ago or so.
Marathon 65
Liberty 28
Country Coach 18
Featherlite 20?
Parliament 12
Millennium 8

I doubt that these are accurate now,I bet the numbers for 08 and 09 will be much less than 07 production.What numbers have others heard?