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Textron has announced they are getting out of the floor planning business as of the end of February. For those of you not familiar with this, I'll explain the impact this could have.Most dealers do not pay cash for their hot tubs they have in inventory. They finance them through a company such as Textron Financial, GE Capital or maybe a local bank. Textron is by far the largest of the finance companies providing this service. However, the cost became too high. They were losing money so they are out. This is going to impact both the dealer and manufacturer. Manufacturers rely on the cash flow provided by floorplanning. They get paid right away. The dealer pays interest to the finance company and then pays for the spa when it is sold. If Textron is out of the business, the dealer may not be able to get new financing. If the dealer can't get the financing, they'll have to pay cash. If they can't pay cash, the orders won't get placed. If the orders don't get placed, the manufacturers won't sell hot tubs. They both suffer. The dealer has no inventory to sell and the manufacturer can't sell the inventory they have.GE does offer a plan, but one has to question if they will remain if the cost of business is too high. If a dealer is strapped, will GE even approve them for financing?From what I understand, [glow]Watkins is immune from this because they have a separate program with Textron[/glow]. However, the other manufacturers and dealers are going to have to scramble.This is not a good thing for the industry. This could be the beginning of the end for some of the less stable manufacturers. I'm sure the more stable companies will figure out a way to keep things going, but that remains to be seen.
Vanguard's comment about Watkins immunity was specifically related to Textron. While goarctic and Chas may go the cash route, the vast majority of the industry uses flooring plans. Textron was the largest. I Vanguard's scenario is accurate. There will be weaker manufacturers and dealers disappearing.
Goarctic,As Chris_H said, Watkins does have a separate program with Textron. They are in a group that is not shutting operations down. Watkins is the only spa manufacturer with this program with Textron. This is not made up. As to your comment on Watkins being down. Absolutely they are down and will be down. There is no argument about that. I never said they weren't. All you have to do is look at the industry numbers to know they are down.As I said before, this is not good for the industry as a whole. Certainly some of the bottom feeders will go away - both manufacturers and dealers- and that will be good. However, as a whole this isn't going to be a good thing. GE Capital just announced 10,000 lay offs. I don't think they are going to be in a position to pick up the dealers have been financing with Textron.Kudos to you for paying cash. You are in a much stronger position than many. The large majority of dealers in this country use financing. The dealers who pay cash should be able to keep their heads above water.
All Im saying is that if Textron is shutting down some of its operations with spa financing and the industry as a whole is bad, then its a matter of time before the Textron/Watkins agreement would go away. The Watkins dealers will be having the same problems that all the other spa dealers that use Textron do. I personally think this whole mess that is going on with the economy is a lesson for many that bigger isnt always better. A perfect example is Circuit City and their big news today.It seems to me that Circuit City which has been around for over sixty years got to big to fast. To be around for sixty years and have 750 stores and to have to shut down is a bit ridiculous. Especially when if their is one sector that has done really well as of late its been the video game industry. If you cant pay cash for it, or have to rely on HUGE sales numbers why take the risk???