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A Shot Fired Across the Transom
|Author||Topic: A Shot Fired Across the Transom|
posted 05-19-2001 09:44 AM ET (US)
A copyrighted article on Dow Jones Newswire quotes Irwin Jacobs, chairman of Genmar Corporation, as saying "For the first time, Brunswick engines won't be offered as an option on several of our boat brands."
Previously Mercury engines had been used on about 30% - 40% of the boats sold by Genmar, which was one of Mercury's largest customers.
Instead, Irwin announced he would purchase engines from Canadian maker Bombardier, as well as Japanese makers Yamaha, Suzuki, and Honda.
Irwin cited "noncompetitive" pricing as the reason behind the change.
posted 05-19-2001 12:56 PM ET (US)
From a consumer's perspective, having just purchased a new 2002 Merc 4-stroke 40 hp, Merc's prices were lower than both Yamaha's and Honda's. The price for a basic Yamaha 4 stroke 40 (manual start, tiller, short shaft), was nearly the same for a Merc with pt&t, electric start, remote steering and long shaft. The comparable Honda model was even more.
I believe there will be a substantial decline in the boating industy. Having run a small business for some time, when things slow down, a smart tactic is to slightly raise prices. By doing this, one increases the profit per sale to offset a slowdown in new customers or a lag in sales. Also, a loyal customer has come to the conclusion that he/she is receiving a fair exchange in goods/services for their dollar, and is usually willing to pay a little more. Finally, in a market downturn, the last thing you want to do is follow your competition into bankruptcy court by matching their price discounts. Just my two cents worth...
posted 05-20-2001 09:50 PM ET (US)
Didn`t Brunswick just do that with Boston Whaler, only offering Mercury`s with Brunswick products? I think Genmar is just playing the same game to some extent? Regards-Jack Graner.
posted 05-20-2001 09:58 PM ET (US)
Let's test your analogy, Jack.
Brunswick makes boats.
Brunswick makes outboards.
Your analogy does not work.
posted 05-20-2001 10:09 PM ET (US)
Let`s see Jim, does you`re deletion button work? Yes it does! Seriously, I just figured maybee Genmar and Bombardier made some sort of deals behind closed doors for purchases of OMC engines? They did work together to beat out Brunswick to purchase OMC? Regards-Jack Graner.
posted 05-20-2001 10:42 PM ET (US)
I kind of agree with Jack on this one. Bombardier can't be successful with J & E on there own, They have to have a major boat manufacturer to buy their product. It stands to reason that Bombardier and Genmar have been sleeping together since this whole mess started. Don't think they will pull it off though. J & E hasn't had much of a market share in years and have lost even more since the bankruptcy. Mercury, Yamaha, Suzuki, Honda & Tohatsu will come out the winners.
It's been years since I have seen a J or E dealer that didn't have a second line of outboards, not so with other brands.
posted 05-21-2001 12:10 AM ET (US)
I'd like to address this first.
You can always cut costs by buying a hull prerigged for an engine offered in a package deal. That is what boston Whaler has done and many other boat manufacturers with ties to certian engine brands. The fact is that you can get a Boston Whaler rigged with just about any engine you want. It will cost more because you will being paying rigging costs, at around $75/hr, and a higher retail cost of the rig and engine. I have confirmed this with two dealers. It is like paying Ala Carte vs a Combination plate. That is why there are many Dealers that carry more than one brand to allow the customer the option of what engine they want hanging off the back of their boat. It allows them to make more money and more attactive to a customer where the dealer's competition can only offer one engine make.
As for Genmar's reason for the change, noncompetive pricing, sounds very good. I means that Mercury's competition has finally figured out how to get back some of the market share, and it will be good for everyone.
posted 05-21-2001 09:25 AM ET (US)
Because of the recent sale of OMC engines to Bombardier, I wonder how much production capacity they actually have or will have available to produce engines.
Then, when they do start cranking out engines, there is the question of their suitability. It's not exactly like they've got a Roll-Royce reputation going for them with their Ficht technology at the moment.
As for Mercury's "Market Share Discount" program, we're pretty familiar with that.
By all estimations, this is going to be a rather slow year for boat sales. We'll have to see if that affects pricing much at the retail level.
posted 05-21-2001 10:41 AM ET (US)
Several months back, I shared an article that I can't remember its source, but the bottom line was: OMC is just the start. Contrary to what Dick said, OMC was the second largest producer of outboard engines in the world when they went bankrupt. Their market share was only second to Mercury, and not by very much I might add. The industry will look different very shortly. Better or worse, who knows!!
posted 05-21-2001 09:19 PM ET (US)
I would have to see some facts to back that up.
I have been an Evinrude dealer and a Mercury dealer over the years. I have lived in areas where J&E were predominant and the same with Mercury. I am and allways have been a Mercury owner. Two years ago when I bought my new Montauk I would have put any power on it that the dealership I worked for sold. I think J,E,M,S &Y were all good engines.
J&E has been losing market share, except on pre-rigs, they have screwed over their dealer network in the past couple years. Pulling franchises from many small, longtime dedicated dealers in favor of "The big one".
With what has transpired since December I think Bombardier, if and when they start production, is coming out at the bottom of the ladder and hoping Genmar can save their butt.
It still looks to me like Mercury and the Japanese are the winners.
posted 05-22-2001 10:14 AM ET (US)
Dick, no doubt Mercury and the foreign manufacturers will benefit. OMC pulling the plug left 31% of the outboard market for them to fill. OMC and Mercury had 65% of the market as of September 2000 (per industry stats). My point was that when an industry looses its second largest player in a flash (31% to 0% in three months), the world, as we knew it has changed right under our noses.
This happening may offer several benefits for us as consumers. With pressure on the industry as a whole, pricing should become more buyer favored. A new player in the field with huge resources, using a proven brand identity, could become a major player virtually overnight. Yamaha did this almost 20 years ago. They jumped on the scene, and created a third choice that forced all players to take notice and create good products. Engine technology development never moved as fast before.
It's unfortunate that in an industry transformation there are workers that sometimes loose. But, that is life. The good aspects, better product, better cost and more choice, are always a forward move in any industry. And we get to participate in it.
posted 05-23-2001 09:26 PM ET (US)
This subject catches my interest, since I have been closely following the OMC disaster.
Beginning at the top, it should be no surprise to anybody that Genmar would drop Mercury outboards to accomodate Bombardier. Just remember how the deal went down. Genmar and Bombardier were both interested in the OMC products, but Brunswick was in there also, and had actually outbid Bombardier for the engines. To knock them out, Genmar had to quickly make a deal with Bombardier for the purchase. Genmar picked up the real spoils (the boat companies) of this bankruptcy CHEAP, and left Bombardier with all of the headaches, the engine division. Just look at where things stand now. The boats have been back in production for two months now, but the engines are still dead.
To have gotten Bombardier to go for this sweet deal for Genmar, obviously Genmar had to promise product purchases to help get the J & E engines back in circulation. None of this is any news to Mercury. They knew they would lose most of Genmar. I suspect that Genmar is still stuck with Mercury on Stern Drives, since there is no other viable alternative here, and this announcement only affects outboard offerings.
CarlRobert is right on engine pricing. Because they are the biggest, Mercury is the most competitively priced, the most HP for the dollar. You can decide if you like Black or not. All of the Japanese engines cost more, but better quality to substantiate the premium price is debatable. Simply a matter of personal preference, brand loyalty and personal experience with a given brand. I am continually amazed to see all the OMC brand loyalty even though they are gone, and the kind of outboard Bombardier will produce is an unknown. After all, people still bought Whalers made by a gym shoe company, and we're still debating whether they are as good as the previous models!
And JimH, I think you're being too hard on Jack. Because of the partnership buy out, Genmar almost HAS to purchase outboards from Bombardier, so they are going to force that on their buyers, like BW has done with Mercury, and like Century has done with Yamaha. It's a risk for Genmar if the engines are no good, but probably worth the risk because of cheap access to all these boat companies. Mako is now solidly aligned with Mercury, and Grady White with Yamaha. I think that was what Jack was trying to say.
Jim in New Orleans, I think your figures on outboard market share may be low for Mercury.
posted 05-25-2001 12:20 AM ET (US)
As several posters have commented, the boating industry is in for a rough season. Perhaps a harbinger of that is the recent bankruptcy filing by Mariah Boats.
You may recall that Brunswick Corporation cited Mariah Boats in the appeal of their anti-trust judgement as an example of how there were no significant barriers to entry in the boat building market. Marish Boats was started in a rented garage and grew into one of the largest independent builders, all happening after Brunswicks acquisition of Bayliner/US Marine and SeaRay.
Apparently there are no significant barriers to exit from the boat building business, particularly these days.
posted 05-25-2001 07:28 AM ET (US)
Why is it called a shot fired over the transom? I though a warning shot was always over the bow?
posted 05-25-2001 08:40 AM ET (US)
It's a play on words - this is about outboard motors. Where is an outboard motor attached to a boat?
Get it? :-)
posted 05-25-2001 10:50 AM ET (US)
First, most of the people posting on this web site are not "Typical" of the customer that I think large boat companies rely on for the bulk of their sales. This we site appears to cater to a very informed group and a group that is not reluctant to do-it-yourself to save $$ or get it right. Also, as a group, we are about as impulsive as a 100 year old sea turtle. On the other hand, I think "Typical" customers that provide high volume sales are impulsive, want package deals, low price, and just turn the key complication. Even now, and certainly by next spring, all of the bankruptcy stuff will not even be a memory for the "typical" customer, and whoever sells the most flash for the least money will be selling boats to this group.
Second, between now and 2006, all outboard motor manufacturers will be changing over production and introducing new products. Internal combustion engines and outboard motor technology are not a mystery at this point. Sure, some seem to do it consistently better than others, but they can all make good product, or at least have good product made for them. I imagine that Bombadier is already in talks with Suzuki for four strokes, and possibly some other company for other engines. Also, OMC has such a huge number of motors out there that have been sold over the years that their dealers and service people will continue to have relationships with those customers, and more importantly, maybe first shot at those customers when they need a new boat or motor.
There are many factors that determine if a company can sell boats and motors. I sometimes wonder if having the boat and motor groups tied together was the problem for OMC and will prove to be a problem for Brunswick in the future, at least for high quality boats. In my opinion, the connection has lowered the quality of Whaler. Whaler is not the highest quality boat being manufactured today. I think Grady White still trys to make the best boat possible. Whaler is forced to make a boat that can be mass marketed. Eventually, people will not pay a premium for the legend if the product does not justify the cost. I fear Brunswick will squeze as much of the legend out of Whaler as possible, and eventually, just sell Whaler as an unprofitable subsiderary(sp) in the future. Remember, Brunswick has no love for a great boat unless it is profitable. There will always be room for companies that want to make great boats, because there are people like us that appreciate them. Just my view.
posted 05-25-2001 11:07 AM ET (US)
If we as consumers are lucky, the boating industry could be going through a paradigm shift a little like Detroit went through in the Eighties.
posted 05-25-2001 11:50 AM ET (US)
You make some excellent points - I agree with your "typical" customer description. I agree with your comments about how BW quality has probably dropped off over time, but you must remember that those older Clasic Whalers were never inexpensive boats - Mr. Fisher was not afraid to charge a premium price. I wonder what the inflation adjusted cost of a 13' was 40 years ago?
I don't think Whaler now makes the highest quality boats. If someone is looking for the highest quality 20-26 CC these days, they are probably looking at Regulator and Contender. I doubt BW has ever made boats that are the equal of these, but Regulator and Contender are definitely priced at the high end.
I think Brunswick recognizes that it must balance cost with quality if they want to stay in business. Think of all the small boat makers who have come and gone when they couldn't sell enough boats to justify the high cost of high quality (Bertram, 1970's SeaCraft, Carolina Classics, Rampage, etc.)
Therefore, I guess I disagree that there will necessarily be room for people who make great small boats, because while there are those like us who appreciate them, not many of us will pay for them. Witness all the owners of used Whalers here.
I have seen several threads on this site where people have considered new "Classic" 18-24' Outrages from the Commercial Products Division, but backed away due to the high cost (and I know several members have gone this route - if money were no object, I would probably have CPD make me up an 18 or 22 Outrage (No Euro transom!!). Then I would have a true Neo-Classic with a proven design. However, I'm sure the cost would not make my wife happy and if it came in close to what a Regulator 21 runs, I would probably lean towards the Regulator.
I suspect probably we are all here since Classic Whalers provide the best bang for the buck on the market - a high quality, well-designed durable used boat that is available for a reasonable price.
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