UPDATE 1-Winnebago cuts jobs as RV sales stall

(Recasts, adds quote, background on market trends, byline)

CHICAGO, Jan 24 (Reuters) - Winnebago Industries Inc WGO.N, the No. 1 maker of motor homes, said on Thursday that it had begun laying off workers at its plant in Forest City, Iowa, blaming what its spokeswoman characterized as a discouraging and severe slump in sales.

The company did not say how many workers would be affected by the layoff, the first since the fall of 2006, when Winnebago laid off 170 employees in what Sheila Davis, its spokeswoman, called a “small” cutback.

But Davis told Reuters that Winnebago had become “discouraged” by the retail trends in the motor home marketplace, which she said had been down “pretty severely” since late summer.

“We’re a cyclical company and certainly the general economics have been unfavorable for a while and it’s definitely showing up in the wholesale and retail numbers,” Davis told Reuters.

She said the company had tried to avoid layoffs at the Forest City plant, which produces 90 percent of the company’s products and employs about 3,300 workers, by shortening work days and work weeks but it had “come to a point where we know we need to do something more.”

Winnebago and other recreational vehicle makers have seen a sharp drop in showroom traffic over the past 12 months as turmoil in the U.S. housing market -- whose ups and downs are highly correlated with RV sales -- have weighed on consumer confidence.

In November, the most recent month for which there is data, motorhome sales continued to weaken with total unit registrations down 14 percent.

And a bevy of more recent data, including Thursday’s report showing slower-than-expected existing home sales in December, has prompted many Wall Street analysts to predict the pullback in spending on the industry’s pricier vehicles may last well into this year.

In a recent report on the RV market, Bob Simonson, an analyst at William Blair, predicted that shipments of Class A motor homes, the bus-like behemoths that provide the industry with its fattest profits, would decline for a fifth consecutive year in 2008.

In the report, Simonson asked dryly: “If consumers aren’t buying houses on foundations, will they buy houses on wheels?” (Editing by Phil Berlowitz)