Industry Numbers....

[East_TX_Spa]

For those looking to buy a sustainable product, I would strongly suggest doing a great deal of research on the manufacturer before shelling out your cash.  Desperate dealers are slashing prices in a last ditch effort to remain solvent.  It will be their last hurrah.

The world's a changin'....ya'll stay warm.

Terminator

[Vanguard]

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, Watkins is immune from this because they have a separate program with Textron.  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.

[Chas]

I have always paid cash for my tubs. We did the flooring program when we added Caldera a few years back, but wow the fees and interest really added up! We sold the floor models asap and have not replaced them. I always figured if I didn't have enough cash to own my inventory then I didn't have enough cash.

We have been selling spas! Two yesterday. Way down, but still alive and kickin'

 8-)

[Summitman]

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.

I find it hard to believe that Watkins will be immune.  If the industry is down so will Watkins, and their dealers.  No doubt its a tough time for the industry.  I never believed in the floor financing deals either, I always went the cash route.  I would hate the idea of selling something I didnt truly own.  

[hottubdan]

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.

[Chris_H]

Just recently, a Cal dealer in the Philadelphia area declared bankruptcy.  It is a pretty big dealer too.  I doubt that the Textron thing had an affect, but this economy is hurting dealers.

[Summitman]

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.

I completely understand Vanguards comment, I find it hard to believe that Textron will finance for watkins but no one else.  The industry impact is the same for all, its slow.  I absolutely agree that the weaker manufacturers and dealers will be wiped away.  Its already happening here locally with a few dealers.

[Chris_H]

It is true about Watkins.  They actually finance though a different legal entity than the other spa manufacturers.  Good stuff if you are a Hotspring/Caldera dealer.  Bad stuff if you sell other things.  This is related to Textron only.

[Bonibelle]

good time to be buying a truck though..What was the big dealership in Philly that went Chris?

[Chris_H]

Pelican in Quakertown

[Bonibelle]

They had pools too, right? I believe I used to get their catalogs...they were big

[Chris_H]

Pools, spas, and skis.

[Vanguard]

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.

[Summitman]

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???

[James]

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???

With all due respect, goartic, I think that in this case, those of us that did go with the biggest spa co out there feel that they have made a very good choice on two levels.

1) It was not blind luck or happy coincidence that Watkins dodged the Textron bullet. They saw it coming.

Watkins put this separate exclusive agreement in place with Textron 2 years ago.

At the very most, Watkins was the ONLY spa company that saw this coming from Textron.

At the very least, it was one of many spa companies who saw it coming, but was the ONLY one who did anything about it. They protected themselves by protecting their dealers.

How come Watkins was the only manufacturer that saw it coming and protected it’s dealer base?

Lets give credit where credit is due. They did a good job for us.

2) You may be right. Textron at some point might pull the plug on Watkins as well. Or, it may not. Neither you  nor I can, with any certainty, say they will or won’t. Neither of us really knows.

What I do know and what the evidence continually shows: Watkins always seems to be ahead of these issues and when they do happen, plans have been made and put into effect that make such changes typically painless. I am comfortable with the notion that when and if Textron pulls the plug on Watkins, Watkins will be in front of it and have other plans in motion to protect itself by protecting their dealers.

I can’t ever remember Watkins’s having to scramble because they just didn’t see it coming.


On a personal note:  

I have the cash to pay for tubs. Textron goes away,  I am still in business.

I do however use my Textron account as a business tool. My gut tells me cash is king in 09 and I want to hang on to the cash.

Buy properly, manage your inventory and turn the product when you need to, the interest charges can be pretty insignificant. It's not a risk as I see but rather just my comfort level with cash flow managment.

Just my view.

Others of course see it differently and that is OK.