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A rough state of the industry – November 13, 2006

Michigan’s economy ranks as one of the worst in the nation, and it could get worse. The big automakers announced plant reductions and layoffs that will take place in the next year, and small auto-dependent businesses throughout the state are on notice that business will likely dry up soon.
As the state with the most registered snowmobiles (301,805 in 2006), it stands that an economic downturn could make a major impact on snowmobile sales. Dealers and aftermarket companies have already started to notice a change in customer attitude.
“Now that [people’s] futures are changing, they’re refocusing their toys and out-of-pocket expenses in general,” said Rob Musselman, president of International Engineering & Manufacturing in Hope, Mich. “People are more focused on things in the future, like their children’s education, their retirement rather than on today.”
“The Michigan economy has people in caution mode,” Fred Groves, owner of three Michigan dealerships, said. “I will do well at this show, but overall profit margins are down.”
On With The Show
If the most recent Snowmobile USA consumer show is any indication, snowmobiling certainly isn’t dead in the state. The show, held on Nov. 3-5 in Novi, Mich., is considered one of the largest indoor consumer shows in the nation. Crowds were steady the entire weekend, and consumers were walking out with bags of merchandise.
“Theoretically, the economy should be making an impact, but I got here at 6 p.m. [on the show’s opening night] and the parking lot was full,” said Christine Jourdain, director of the American Council of Snowmobile Association, based in nearby East Lansing, Mich.
Others pointed out the convention center is located in the heart of one of the more prosperous areas of Michigan.
At the show, however, Musselman had not heard any complaints about the economy. “Not a word. But people who are here aren’t worried about their next house payment.”
The Entire Equation
It’s not just the economy that has Michigan snowmobile buyers in a funk. Gas prices, financing, snowfall and a contentious fall gubernatorial race have affected snowmobile sales, say those in Michigan’s snowmobile businesses.
Snowmobile sales are definitely down, but dealers say it’s likely a combination of reasons.
“If we get good snow, the economy probably won’t make any difference,” Jourdain said.
She’s not alone in that thought. “If we had one good winter, it’s not a fix, but 80 percent of the worry would be gone,” Groves said. “Bad snow is more of our downfall. The economy won’t hit hard for a little while.”
Gas prices are an issue, too. Dale Israel, secretary of the Michigan Snowmobile Association, said he’s heard more complaints about gas prices than the economy from his membership. Jack Nelson, owner of Nelson’s Speed Shop in Greenville, Mich., blamed gas prices for a downturn at his annual summer snowmobile show.
Groves said it’s been a rough three to four years, especially with the amount of product clogging the pipelines. His dealerships cover all four brands, and he said there have been problems with each of them.
Both Groves and Nelson have seen slow parts, garment and accessory sales. Groves said his service departments have taken hits, but Nelson said he’s seen an increase in older sleds in his shop for fall tune-ups.
Nelson and Groves are high-volume dealers. Groves said he sells about 500 units annually with his three stores: Groves Motorsports in Mason; Kensington Motorsports in Milford and US 27 Motorsports and Trailers in St. John.
Groves said financing had been an issue, especially with the 18- to 25-year-old buyers. “My belief is that banks see a tougher economy ahead and don’t want to take the gamble.”
Musselman predicts the economic troubles in Michigan today will make it a healthier economy in as little as three years.
As for his traction product business, Musselman has noticed a couple trends. He’s finding higher skill-level employees at a more reasonable cost. He’s also noticed more inventors calling him with ideas. “I get a lot more interesting phone calls,” he said. He reasons that people who are laid off have more time to tinker in their garage and more time to investigate new ideas. psb

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