Friday, September 28, 2012

Rumors Fly, Factories Die

Update 9/29/12: Cheri and her family are being released from their obligation to buy from Taylored Building Solutions so that they can move forward and purchase their new home from another modular factory. Tom Schott, one of the principles of Taylored released the assignment of funds bit no word as yet as to whether Cheri will ever see a penny of the $12,000 that she is out.

Over the past few years a good number of modular home factories have closed their doors forever. Some of these closures were expected and some took many by surprise. There are many other factories that are working in bankruptcy while a few have emerged from it and are still operating. Champion, Palm Harbor and Excel are some of the factories still operating and going strong.

But what happens when a modular home factory is rumored to be in trouble? What happens to their builders, employees and homeowners? Recently Taylored Building Solutions has been caught in that situation and their competitors, builders and especially their customers are waiting to hear what is going to happen next.

The president of a top modular home factory had this to say about what really happens:
To say that the modular industry is in a unique position when a plant closes and people loose deposits is not fair. It does happen in the stick built world, but the effects are localized and rarely reported as wide spread. So if a site builder goes out and takes the customer’s deposit with them when doing so, the competition in the immediate area are usually the only ones talking.
 When it happens in the modular housing industry, everybody and their brother talks about it. We live to watch one of our competitors go down and we feed off the negativity of their doing so to bolster our own businesses. The effect is just the opposite of what we would think it is.
 Remember, the people you wrote about in your article are in Vermont, so when it was reported on your site, most of the other states builders already knew about it. Situations like this help to further mistrust what should be a thriving industry.
 The consumers think that they don’t want to get into something like those folks in Vermont. Lenders start thinking that a building technology that should help to finish a house faster and give them equity against the loan they made sooner, start thinking about failures instead of all the successes. And Builders get shell shocked, in most cases they lose their deposits, which usually represents their profit and they wind up honoring a contract with little or no profit potential and with no shelter against a loss should something go wrong.
 Take a look at how Haven decided to go out. They set a dead line for new contracts that would be honored, made certain all of their subs and suppliers got paid and took care of their people while doing so. So there are good people in the industry.
A sales manager with years of experience in our industry had this to say about a trend within our industry:
Unfortunately the problem is indicative of the industry. Here you have company that has failed (Sun) before and just reopens under a different name (Taylored). Same people running the company but possibly different investors. What do they say about doing the same thing over and over again and expecting a different result? This has happened all too many times in our industry. It hurts the folks who are fighting to keep their heads above water and run a trustworthy business. It’s undeniable that every company has their problems but the constant retreading of failed management is dooming our industry. 
Will this happen again in our industry? Yes. Will it continue to happen in the site built industry? Yes.

Even big companies have their share of problems. 24/7 Wall Street is predicting that American Airlines, Talbots, RIM (Blackberry), Pacific Sunwear, Suzuki America, Avon and even the Oakland Raiders of the NFL may not be around at the close of 2013.


Anonymous said...

Maybe consumers should get their lawyers involved upfront and avoid being turned into unsecured general creditors. This isnt a tough problem to solve. Letters of credit have solved this issue for years - no performance, no pay. And ask the owners to sign personally, with thier own assets on the line, if they're such great, upstanding folks.

Anonymous said...

I would rather have a modular home builder and factory to build my home than someone that only has an investment of a pickup truck and a quickly obtained contractor's license. That sums up most site builders.

Randall said...

To Modcoach. I want to thank you for bringing us the good, the bad and the ugly about modular homes. I enjoy reading your stories and I think that one of the reasons that poor woman was released from her contract was due in large measure to the pressure you and your readers put on the Taylored Homes. Keep up the good work. I just sent you a donation as a way of showing you that you are good for the entire building industry. Thank you.

Anonymous said...

Builders and manufacturers have a responsibility to work with partners that have financial capacity to survive. Selecting one simply because of lower prices or open territory could be a signal of what you are getting in to. Either party's failure can leave the homeowner with a financial and emotional nightmare, and such bad news travels farther and faster than any good we bring.