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Schult Homes: a pioneer in Elkhart County's RV and manufactured-housing industry.

Americans have a love-hate relationship with affordable housing. They would love to reduce their housing costs, but they hate the idea of lower-cost housing being built in their neighborhood.

One Indiana company, Schult Homes Corp., is trying to counteract the so-called NIMBY (Not In My Back Yard) attitude people have toward some types of affordable housing.

Schult Homes, a 59-year-old company based in the largely Amish village of Middlebury in Elkhart County, plans to triple its output of "modular" homes, the units that are built in sections in a factory and then attached on site to make a home that looks exactly like a site-built unit.

"A modular home is a site-built home built in a factory," says Walter E. Wells, president and chief executive officer. "We hope to triple our modular sales to $45 million in three years."

Still, the 53-year-old Wells, a son of a co-founder of the company, says Schult Homes will not abandon its core business of "manufactured" housing, the single- and double-section units most often seen in mobile-home parks. "We don't look to replace our manufactured-homes business," Wells says. "We look to grow profitability through modular homes."

Schult Homes, a company named for co-founder Wilbur Schult, has a history of bold moves. The Great Depression forced Schult, a clothing store operator, to look for other opportunities. He found his inspiration in the covered wagons displayed at the World's Fair in Chicago in 1933. He decided, then, to start a company making portable homes for the families moving cross-country in search of a better life.

After months of planning, Schult and a partner, Walter O. Wells, father of the current president and CEO, rented a garage in Elkhart where their firm, originally called Sportsman Trailer Co., built "house trailers."

Most of their early trailers were small and compact, offering little in the way of luxury. But the company built products for other market segments too, including the lavish, 50-foot Continental Clipper portable house trailer. It was custom-built for a U.S. publishing magnate, who later sold it to King Farouk of Egypt, who eventually sold it to the Maharaja of India.

So Schult Homes' current strategy of building units positioned at the economy end of the price spectrum, while trying to service the higher end of the market at the same time, is not unprecedented.

Schult and Walter O. Wells, 82, a director emeritus of the corporation, also deserve credit for creating products that eventually led to the development of the recreational-vehicle industry, which is the foundation of Elkhart County's thriving manufacturing sector.

The manufactured-housing business is not as big an employer as RVs in the Elkhart area, in part because manufactured-housing companies need to have plants scattered around the country to serve regional markets.

For example, Schult has plants in Pennsylvania, Minnesota, Kansas, Texas, Arizona and Oregon, in addition to its plants in Middlebury. "This is a regional business due to transportation costs," Wells says. "And it's a regional business from the standpoint from the way houses look."

For example, a Texas Gulf Coast retirement community, comprised of manufactured homes, needs to look different from a manufactured-housing community near a resort area in Michigan.

Schult Homes now is the sixth-largest manufactured-housing producer. The company's shares are listed on the American Stock Exchange. It earned $4.5 million, or $1.29 a share, during its fiscal 1992, which ended last June 27, on sales of $172 million. During the first half of its fiscal 1993, Schult Homes' earnings totaled $2.7 million, or 73 cents per share, on sales of $104.4 million.

Many observers believe the manufactured-housing industry experienced declining sales during the 1980s because its image problem discouraged potential buyers and aroused the NIMBY syndrome.

Wells does not agree with that argument. "Our industry complains wrongly about having an image problem," he says. "We wouldn't have an image problem if we built more of what the buyers wanted."

The lowest cost entry-level housing in America is manufactured housing, he says. "But manufactured homes, mobile homes, are zoned out of a lot of places because they don't look like they belong next to a $150,000 site-built house."

In order to build low-cost manufactured-housing products that people want, Schult Homes is taking into account the changing age distribution of the American population. For decades, the manufactured-housing industry relied on newlyweds with little money to buy its products.

But because the percentage of people in their 20s will be relatively small in the 1990s, Schult Homes is looking instead towards retirees and empty-nester couples. "We won't see another boom in household formations until 1998 or so," he says. "But we'll see growth in retirement communities due to demographics."

Large numbers of retirees and empty-nesters are interested in low-cost, basic housing to free up their capital for spending on travel or for use as a vacation home, Wells believes. These people aren't all building in the Sun Belt states, either. "Seventy percent of our business in the East is empty-nesters and retirees," Wells says. "They aren't all moving to Florida and Texas."

Meanwhile, retirees and empty-nesters who do not want to live in mobile home parks and similar developments, might choose modular housing, Wells believes.

Modular homes can be more than one story high and can be designed to look exactly like a home built by a contractor on the site. Since the sections of a modular home are built in the more efficient, controlled environment of a factory, they can be built for at least 15 percent less than a site-built unit.

Schult Homes' high-end modular homes could easily fit into a subdivision where the value of the other homes, not counting the land, ranges from $80,000 to $150,000, Wells says. "By 1995-97, you'll definitely see our top-of-the line modular units scattered into subdivisions," Wells says.

Many manufactured-housing dealers are interested in developing scattered-site modular housing, and some real-estate developers are also interested in having high-quality factory-built modular homes sited within their subdivisions, Wells adds.

The manufactured-housing business needs to go through a product quality improvement revolution similar to what happened to the auto industry in the 1980s, Wells believes. "Our industry can do a much better job serving the consumer, and we will," he says. "Our aftermarket service will be like autos; your service at the car dealer is 400 times better than it was in 1980."

Schult Homes plans to provide world-class warranty servicing and maintain close contact with the owners of Schult Homes units, Wells says. "We'll set up a system to contact all our customers and ask them, 'Will you buy another Schult? Will you buy from the same dealer again? Our objective is to get 95 percent 'Yes.'"
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Title Annotation:Schult Homes Corp.; Elkhart County, Indiana; recreational vehicle
Author:Kurowski, Jeff
Publication:Indiana Business Magazine
Article Type:Company Profile
Date:May 1, 1993
Words:1119
Previous Article:Northern Indiana update.
Next Article:Hoosier Magazines.
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