Oakwood Homes Corporation

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Oakwood Homes Corporation

2225 South Holden Road
P.O. Box 7386
Greensboro, North Carolina 27417-0386
U.S.A.
(910) 855-2400
Fax: (910) 852-1537

Public Company
Incorporated: 1946 as Oakwood Trailer Sales
Corporation
Employees: 3,600
Sales: $579.1 million (1994)
Stock Exchanges: New York
SICs: 2451 Mobile Homes; 5271 Mobile Home Dealers; 6141 Personal Credit Institutions; 6351 Surety Insurance

With about six percent of the highly fragmented $9.4 billion (retail) market, Oakwood Homes Corporation is America’s largest mobile home dealer and ranks seventh among the leading mobile home manufacturers. Generally regarded as one of the industry’s best-managed firms, Oakwood has targeted the middle and upper ranks of the manufactured housing market. The company has evolved from a postwar trailer park into a fully-integrated mobile home company with ten factories in four states, over 150 dealerships in 18 states, and financing and insurance services. Nicholas St. George, who led the company from 1978 into the mid-1990s, planned to more than double annual sales by the turn of the 21st century.

The mobile home industry is uniquely American. Although its roots can be traced to the 1920s, when early models were used as temporary shelter for farm and construction workers, mobile home living took hold during the post-World War II love affair with the automobile. Wartime defense contracts for temporary barracks had helped raise awareness and acceptance of mobile homes, which were more accurately called “trailers.”

Oakwood was established on the cusp of the industry’s postwar boom in 1946 as Oakwood Trailer Sales Corporation. Founder Jack Jones named the trailer camp for the Greensboro, North Carolina, oak grove in which it was located. Since all the industry’s production went to the war effort during this period, Jones started out selling renovated models. From 1946 until 1966, the company operated as essentially a dealer, marketing trailers manufactured by other firms.

Ralph L. Darling assumed control of Oakwood in 1952. He established a second sales outlet in Danville, Virginia, in 1955 and changed the company’s name to Oakwood Mobile Homes in the early 1960s. The name change reflected more than an image makeover; it belied a significant industry shift from travel trailers to mobile homes. In the mid-1950s, manufacturers recognized that industry sales were driven more by afforda-bility than portability, and they introduced ten-foot-wide models, which were two feet broader than their road-going predecessors. Furnished with carpeting, appliances, and furniture, these pre-fabricated abodes often found permanent locations in what used to be called “trailer camps” and came to be known as “trailer parks.” Newlyweds and retirees constituted a significant proportion of the market’s clientele.

Jim LaVasque took over Oakwood in the early 1960s. Described as “seat of the pants smart” by employees, LaVasque began a program of vertical consolidation and geographic expansion that reflected an industry-wide consolidation trend. Over the course of the decade, the company opened eight new sales outlets and acquired the heretofore independent Oakwood Land Operation. Oakwood made a bold move at the end of the decade, adding manufacturing to its growing slate of interests. The firm launched its first model, the “Richfield,” in 1969. The company’s sales division continued to offer many other manufacturers’ models through the 1970s. By the early 1970s, Oak-wood had established itself in the high-end of the mobile home market, offering large, well-equipped models. In order to depict the home’s sturdiness, each sales lot featured a model with a car parked on its roof. The strategy apparently helped; Oakwood’s revenues more than doubled, from nearly $4 million in 1967 to $10.9 million in 1970.

It was a heady period for the mobile home industry overall. Architects and bureaucrats as well as industry representatives praised mobiles as the flexible, low-cost housing of the future. Mobiles became the preferred mode of low-cost housing, offering low down payments and manageable monthly payments.

LaVasque seized the opportunity, floating a $3.1 million initial public offering of stock in Oakwood Homes Corporation in 1971. A concurrent corporate reorganization merged the retail operation, Oakwood Mobile Homes Inc. (established 1952); manufacturing operations, Homes by Fisher Inc. (established 1969); and the original mobile home park and sales operation. The infusion of cash, combined with the unparalleled expansion of the mobile home industry as a whole, fueled dramatic growth in the early 1970s. Oakwood opened 23 new retail sales centers, built a new headquarters, and doubled production capacity with a new factory, as annual sales blossomed to over $20 million. The mobile home industry grew at an annual rate of 20 percent from 1967 to $4.4 billion in 1972, and its share of single-family housing increased to 33 percent in 1973.

However, the bubble burst in mid-decade, when industrywide unit shipments dropped by 63 percent from over 575,000 in 1972 to 212,700, and sales volume plunged by more than 40 percent to $2.4 billion. More than one-third of America’s mobile home dealers went bankrupt, overall production capacity dipped 43 percent from 1973 to 1974, over 100,000 housing units were repossessed, and tight lending conditions limited new sales.

Although Oakwood was affected by this steep market downturn, it survived in much better condition than many of its rivals. Annual sales actually increased in 1974, then declined by 19 percent the following year. Nevertheless, the company opened eight new sales outlets during these difficult years, launched a finance department, and its stock was listed on the American Stock Exchange.

One key to Oakwood’s success during this crisis and beyond was its marriage of homes and sites on which to put them. In a virtual abandonment of the concept of mobility, Oakwood packaged its homes with sites, creating “mobile home subdivisions.” During the early 1970s, the company developed six separate locations, totaling nearly 700 acres and over 600 homesites. These planned communities more closely resembled their conventional counterparts, featuring larger-than-normal lots, landscaping, and other amenities, and were more accepted both by potential buyers and owners of neighboring real estate. Oakwood was also located propitiously. A 1979 article in Financial World observed that “buying a mobile home happen [ed] to be viewed with greater acceptance, and less stigma, in the Southeast than in other regions of the country.” In fact, North Carolina remained Oakwood’s largest market into the mid-1990s.

The mobile home industry overall continued to evolve during the late 1970s. Federal building codes and warranty standards were enacted and lending policies were relaxed to encourage mobile homeownership. Within the industry, manufacturers launched larger, 14-foot and “double-wide” models, and also placed a greater emphasis on quality control. Oakwood’s strength through the early 1970s proved telling in the later years of the decade. While total mobile home shipments declined from 1976 to 1980, Oakwood returned to the growth trail in 1976 and chalked up new annual sales records throughout the remainder of the decade.

By 1979, Oakwood had expanded its reach into South Carolina, Virginia, Tennessee, and West Virginia. Upon the 1978 death of Jim LaVasque in a plane crash, Chairman Ralph Darling returned to the post of president until 1979, when Nicholas J. St. George was elected to lead on a permanent basis. A former investment banker, St. George had been asked to serve on Oakwood’s board after helping to organize the 1971 initial public offering. Darling continued in the post of chairman through the mid-1990s.

Unit production in the mobile home industry never recovered to the levels of the 1972 boom, but sales volume rose to a record $4.78 million in 1983 on unit price increases. Oak-wood’s vertical integration helped balance out the vagaries of the retail mobile home market. The company manufactured, sold, financed, and leased homes and the land on which they were parked, rendering a bit of profit at each step in the transaction and insulating itself from the industry’s violent cycles.

In fact, Oakwood’s real estate development operation proved vital in the 1980s and 1990s, as potential sites for mobile home parks dwindled in the face of a wave of anti-mobile home zoning. From 1981 to 1985, the company added a net total of 22 new sales offices and expanded its geographic reach to Florida and New Mexico. The firm also continued to expand its financial services operations throughout the early 1980s, adding Oakwood Acceptance Corporation in 1983 and life insurance arm Oakwood Life, Ltd. in 1985. Financing, in fact, proved an important service; conventional lenders were prone to reject mobile home loan applications since mobile homes, unlike most conventional housing, tended to depreciate.

These various activities enabled Oakwood to record the industry’s longest string of consecutive sales and production increases, a ten-year streak from 1975 to 1985. Eleanor Johnson Tracy of Fortune called it “a stunning achievement in the highly cyclical industry.”

Unfortunately, this extraordinary rise was followed by a spectacular decline that Business North Carolina described as a “near-death experience.” The late 1980s brought an attenuated industry shakeout, during which half of the 200 mobile home companies operating in 1978 went bankrupt as unit sales slid to 170,000 and sales volume flattened at about $4.25 billion per year. One of Oakwood’s primary competitors, Conner Corp., succumbed in 1987. This North Carolina-based company’s Chapter 11 “fire sales” flooded the market with bargains that Oakwood simply couldn’t meet.

Mid-decade, the “oil bust” thwarted Oakwood’s fledgling efforts in Texas, leaving the company with costly repossessions. Oakwood had counted on the fast-growing Texas market to provide one-fifth of annual revenues, but instead took a $93 million charge in 1987 to close operations there. Sales dropped by over 20 percent from 1987 to 1988, and earnings declined 94 percent from $6.5 million in 1986 to $400,000 in 1987 and 1988.

The crisis drew some negative attention from analysts. Wounded by bad press and determined to refute it, St. George undertook a drastic turnaround plan in 1988. A “reorganization of management” sacked 40 percent of Oakwood’s top managers. The CEO also cut selling, general, and administrative costs from 29.4 percent of sales in 1989 to 21.8 percent by 1993 by enlisting employees to come up with economizations and rewarding them with up to $1000 for their ideas. Oakwood also expanded from its base in single-wide models into double-wides or “multi-sectionals,” which by this time constituted nearly half of the market. The late 1994 acquisition of California-based Golden West Homes helped boost Oakwood’s revenues from double-wides to one-third of annual revenues.

Earnings rebounded to $9 million and sales were up over $106 million by 1991. Industry observers and colleagues alike credited St. George with the turnaround, but the leader may have taken even more satisfaction from the fact that Oakwood was one of only 90 mobile home manufacturers remaining after the late 1980s shakeout. From 1989 to 1994, Oakwood chalked up the New York Stock Exchange’s seventh-best record of financial growth, as sales rose two-and-a-half times from $223.1 million in 1990 to $579.1 million in 1994. Net income quadrupled during that same period, from $7.2 million to $33.9 million. Nicholas St. George capped his early 1990s achievements with The Wall Street Transcript’s 1994 gold medal for “best chief executive in the manufactured housing.” Buoyed by the renewed success, St. George predicted that Oakwood would break the $1 billion sales mark by the year 2000.

Principal Subsidiaries

Oakwood Mobile Homes, Inc.; Homes By Oakwood, Inc.; Homes By Fisher, Inc.; Oakwood Land Development Corp.; Oakwood Acceptance Corp.; Oakwood Realty Services, Inc.; Oakwood Agency, Inc.; Oakwood Funding Corp.; Oakwood Financial Corp. (North Carolina); Oakwood Financial Corp. (Delaware); Acorn Acquisition Corp.; Acorn Financial Corp.; Pin Oak Financial Corp.; Oakwood Life, Ltd.; Oakwood Mortgage Investors, Inc.; Golden West Homes; Golden Circle Financial Services.