With manufactured home shipments at 40-year lows, even top HUD-code builders are struggling for profits. In September, Champion Enterprises, the country's biggest manufactured housing builder, announced plans for ending its red ink: the closing of four factories, 35 stores, and HomePride Finance Group, a loan origination business for manufactured home financing.

The moves weren't unexpected. Champion's board recently named Al Koch, formerly of Kmart Corp., where he was involved with the discount retailer's restructuring, as chairman of the board, replacing long-time leader Walter Young.

But they do illustrate the challenges the industry is facing. As shipments slip to an annual pace of 137,000, the Auburn Hills, Mich.­based Champion has sharply reduced capacity. In mid-2002, the company operated 46 factories and 208 stores. Today it runs 30 factories and 80 stores. "The board is moving to lower the cost structure of the company, so it can be profitable even in a weak market," explains John Diffendal, senior analyst for BB&T Capital Markets, where he covers manufactured housing.

Those costs included HomePride, which the company bought just last year. Champion had purchased the business with hopes of easing the credit crunch for buyers after major lenders left the consumer finance market. Instead, HomePride lost millions. "The company was reevaluating its entire holdings," Diffendal says. "This was low-hanging fruit."

Luckily for Champion and its customers, financing options for HUD-code homes may be improving. "As several new lenders emerge [including Minneapolis-based U.S. Bancorp], I think it will take the pressure off Champion to replicate that lending organization," Diffendal says.