posted 01-03-2005 09:46 AM ET (US)        

Michael W. Myers, currently president of Boston Whaler, will head up the new business unit, and will report directly to Dustan E. McCoy, president of the Brunswick Boat Group. The Saltwater Boat Group, will be based in Edgewater, Florida.

posted 01-03-2005 06:55 PM ET (US)            

To be comptetitive today, your whaler has lots of parts and features from China and overseas. How much would a Whaler cost built in Rockland like the old days according to the company's current performa? 70 grand with the hand worked mahogany?

I can see why there are Classic purists here on CW. The Sales Rep said it right here, you can't get a boat today like the classic outrage with the teak accents. I don't discredit Whalers new boats, they are awesome and in many ways probably better than the old, but certainly different than a boat built in the 70's as far as manufacturing. The purists know as well as any of us the manufacturing and corporate worlds are different today. Whether or not that is a good thing remains a question.

This will be an interesting topic to follow. These dramas over the last year and the dumping cases will probably affect many of us who own whalers.

posted 01-03-2005 10:05 PM ET (US)            

I understand what you say, but in reality, it isn't always so. I have many more examples, but just one that is timely is the web browser FireFox.

posted 01-03-2005 10:22 PM ET (US)            

Sea Pro boats has a nice website;

http://www.seaproboats.com/

I found this information from the website to be interesting:

"Factory Installed Outboard Engines

Controls and gauges mounted in the boat at the factory to make installation of a motor easier at a dealership later. Pre rigs are available with the following motors: Yamaha, Mercury, Bombardier, Suzuki, and Honda."

Let us revisit that policy in a few months.

I also find it interesting that the announced price of this acquisition was "approximately $51 million in cash." On March 29, 1996, Brunswick Corporation announced that it "had agreed to purchase the Boston Whaler line of fishing vessels from Meridian Sports Inc., for about $25.3 million."

Sea Pro boats also have some foam in their hulls: Compare:

http://www.seaproboats.com/foam.html

Disclaimer: I have never seen any of the Austin Powers movies.

posted 01-03-2005 10:26 PM ET (US)            

errrrrrrrrrr!

posted 01-04-2005 08:30 AM ET (US)            

I agree with Jim, the barriers to entry into the boat building business are not that high. So Brunswick's acquisitions of independent boat builders from time to time just incentivizes those laminate shop workers to start their own companies and strike exclusive or large volume motor deals with the other outboard manufacturers with the hopes of a big Brunswick payout some day because Brunswick needs to take some transoms away from their competitors. In a way, Brunswick's acquisition strategy is sort of a vicious cycle for it and a series of temporary patches for the Mercury business. I don't think that Brunswick will ever be able to hold a monopoly in the outboard boat building business.

What I find interesting in all of these acquisitions is that they keep adding to their portfolio of low margin businesses to support a higher margin business at a time when most large corporations on the Wall Street carousel are trying to shed low margin businesses rather than acquire them.

posted 01-04-2005 09:05 AM ET (US)            

Oh, beee-haaaaaaaave:-0

posted 01-04-2005 10:22 AM ET (US)            

I think that's a great point. I wonder if they thought about that ahead of time and made a conscious decision based on information on market share.

I.e. - if you can capture 10% of outboard boat companies with 35% of the market, when you add in even 10% of independent market business, you whave 45% of the new boat outboard market - a majority share.

Since the repower market is rather slim (Let's face it, not a ton of boats ever see more than one motor on the transom), perhaps it's not as important. What I mean is that the repower market is more price sensitive; leading to an increased demand for "replacement" motors of the same make so that one can save on rigging costs. For instance, I'd love to repower with Merc because it's what I already have. To repower with Evinrude or Yamaha will require new guages, new control cables, etc.

So if they have about 45% of the new boat outboard Market, which is the most lucrative and accounts for the most volume and keeping those workers in Wisconsin busy, they can afford to have a smaller share of the repower market, but of the less than about 20% of boats that ever see new power, they can probably expect that about half will stay with the same brand as was originally there...meaning, they keep a 50% share of that small repower market.

There comes a point with this strategy that they simply perpetuate their business based on the fact that they start out with the most transoms.

Make sense? (This is just a theory!).

Dave

posted 01-04-2005 02:29 PM ET (US)            

Compare to Genmar's Ranger (Bassboat), Wellcraft, Carver and Four Winns?

An Italian group (Ferrettigroup) owns Bertram.

What other reputable names are out there?

Grady? - Independent
Chris Craft? - Indy too.

Let's be real about the bashing and keep it to a minimum.

Boston Whaler was a great independend boat company which today, if not for Brunswick, would probably not be producing any boats at all.

I agree that Brunswick is operating as if they believe that the boat industry will be like the car industry (all corporate giants), but who can blame them? It's the way they're going. If they thought otherwise, don't you think they'd change their strategic direction? They'll either be proven right, and be in a great position moving forward, or they'll be proven wrong, and will have to play catch-up to compete.

There is no evidence that "Mercury has been living off Mercruiser for years" - in fact, Mercury enjoys a major share of the US outboard market even today, and has arguably one of the most extensive dealer/service networks in North America.

Travel into Canada and you will notice that Evinrude and Mercury dealers/service centers outnumber Yamaha or any other OB brand by a wide margin.

posted 01-04-2005 03:55 PM ET (US)            

Whaler stopped being an independant boat company long before brunswick bought it. They were bought and sold a few times. The owner before Brunswick also owned Mastercraft, Skeeter, Wetjet and others. They had financial problems with defects in Wetjet and use Whaler's profits to make up for it. Whaler was the only profitable co. they had for a while. Whaler was a strong company, Brunswick pulled them out of nothing.

Also it doesn't matter how much of the OB market Mercury has if they don't make a decent profit margin off motors. They make a lot more money off sterndrives over outboards. How many of those dealers are also Mercruiser?

posted 01-04-2005 04:14 PM ET (US)            

Regarding buying more reputable co's:
Perhaps Grady, Regulator, etc. are happy being independent right now. If they're competing (and they are) as independents, and they're financially healthy enough to continue to compete, what reason would they have to sell at any price to either of the two major boat groups?

It's like trying to buy t/t Whale Lure from LHG. Good luck. Not everything is for sale - even at rediculous prices.

Boston Whaler finds itself where many other companies these days are. It's a particularly interesting point in history. The greatest Generation started so many companies and generated so much economic growth in this country over the past 50 years. Hundreds of thousands of great companies were started and prospered through the knowledge and work ethic of the founders...but for many of those enterprises, when the time to retire came around, there was no one there to take over the reigns...and they sold to corporations looking for an entre into new arenas and to diversify their holdings.

Look at the advertising industry: Leo Burnett, J. Walter Thompson, etc. were all great companies started as independents and later bought by huge holding companies such as Publicis, SA from France, Interpublic and WPP.

If nobody (children of founders, employees, or other business men and women who are interested) step up to run Edgewater, Regulator and Mako, they're in for a similar fate: either close shop, or sell to an interested party. Brunswick and Genmar will be sitting there with bags of money waiting, and will be happy with two of the three options facing those indy companies...Buyout or closeout; either way, it's less competition for them or more transoms for them.

And really, it's not a will problem for these successful independents...it's a financial one. What independent guy who has the desire/hunger to run it will have the financial backing to do so? Not many people can do that (I believe Hinckley recently had just such a storybook chapter in that company's history).

I guess what I'm frustrated about with this thread is that everyone seems to think that it is a machiavellian scheme to provide consumers with inferior product, when in fact, Mercury is one of the premium outboard brands.

I agree and acknowledge that they're not the motor for everyone, but for those people, there are still other choices available to them.

I think that what the recent announcement by Brunswick noted above is illustrating is simply the growth of Brunswick's boating division. It's gotten so large, they're splitting it off into different types of boats that they sell...meaning that we'll probably see a Recreational/cruising division and a freshwater fishing (i.e. bassboats) division soon, and then further specialization seen in the boats that are offered in each division. We may even see some of those companies become "brands" instead of separate companies (pure speculation here, but it makes sense) that will specialize in their respective niche markets.

Since boating is a recreational/discretionary type of category, they can afford to specialize far beyond what automakers (who have very few truly specialized vehicles, and a great many different styles of generally utilizeable vehicles for the masses).

Dave

posted 01-05-2005 01:17 AM ET (US)            

The margins are greater in the manufacture and sale of sterndrives than in outboards. This is acknowledged and documented by Brunswick themselves. (But Volvo is a formidable and growing competitor there, too.)

I think the selling and servicing dealers are fond of sterndrives, too. They seem to need perpetual mantenance, particularly on boats that are left in the water all season where the outdrive is submerged all the time.

As a part of the Brunswick Boat Group, the U.S. Marine division a.k.a. Brunswick Family Boat Group, has been losing money lately.

The stated goal of Brunswick is not to just acquire a bunch of transoms, but rather to take over total control of the boating experience provided to customers, making it more like an automotive purchase. You go to a dealer, they make all the stuff you find on the boat, they do all the service, they make everything in your boating experience right.

The real concern for a company in the recreational marine business is to generate growth. The problem for a long time has been that every year about one-quarter of the people who own recreational boats sell them and do not get another boat. Thus each year 25-percent of your customers just drop out. Life-long enthusiasts--like most of us--are the exception.

The thing that turns most people away from boating as a recreation is all the problems that happen with their boats. How can you sell more outboard motors and more boats if every year 25-percent of your customers give up boating? One of the keys to the success of SeaRay has been retaining their customers. They love to keep selling bigger boats to their existing customers. The dealers love someone who buys a 16-foot bowrider at the boatshow, then ten years (and five boats) later is taking delivery of a 39-foot cruiser.

posted 01-05-2005 03:15 PM ET (US)         

It's looking to me that BRP is going to be very lucky to survive the Japanese low price, 4-stroke juggernaut, yet alone compete with Mercury, if the tarrif initiative fails.

Things are not looking up for the US outboard industry.

posted 01-06-2005 12:57 AM ET (US)            

Is it usual for a company to sell for less than its annual sales?

posted 01-06-2005 12:56 PM ET (US)            

It's also possible that they don't care if whaler is a niche market boat while sea ray picks up all the pleasure boater sales and water ski types. Maybe it's like one company owns the entire NFL so who cares who wins the super bowl. The payoff trickles down to the same bucket.

I guess because we're whaler cultists, we can't stand to see other (sinkable) boats outsell the finest boats on the water.

When companies like Brunswick become monopolies (or market share dominators), they don't care as much about the customer because they rule the market. Companies like GEICO insurance are clever and do cartwheels for the customer because they are working to win you over a list of competitors.

I think whaler needs an outspoken, free thinking leader to think outside the box and really push the product. How about wheeling some whalers up to costco and letting the middle class, SUV purchasing soccer mom see an unsinkable quality boat worth a few extra bucks over a sea ray. If whaler could grab the wives of fishermen, they would sell tons of boats. Only boat nerds go to boat shows. Hell, I'm a boat nerd and I don't go to boat shows. I go to marinas and drool over classic whalers that are still floating after 20 years of getting the crap beat out of them.

posted 01-07-2005 08:07 AM ET (US)            

quote:

---

BRP, Yamaha drop new Brunswick brands

Both BRP US Inc. and Yamaha Motor Corp. USA have canceled their outboard engine supply agreements with Sea Pro, Sea Boss and Palmetto, the saltwater boat brands acquired earlier this week by Brunswick Corp.

“Obviously we’re disappointed,” Dan Kubera, director of public and financial relations for Brunswick, said today in a telephone interview. “Our goal was to continue to offer a choice of brands on the backs of those boats.”

“This decision reflects our long-term strategy to support the independent boatbuilders and build our common success with dealers that are committing to our brands,” said Roch Lambert, vice president of BRP’s outboard engines division, in a special issue of the company’s “Real Deal” newsletter.

Lambert said BRP will stop supplying its Evinrude and Johnson outboards to the three boat brands, effective immediately. However, he said, the company will “make every attempt” to fulfill orders received by the close of business Feb. 6.

“As Brunswick and Mercury continue to implement their strategy and force dealers to exclusively do business with their brands, we will strongly believe in our plan to support and commonly grow sales with the high quality independent boatbuilders we do business with,” said Lambert.

Phil Dyskow, president of Yamaha Marine Group, said this morning he already has notified Sea Pro, Sea Boss and Palmetto of Yamaha’s plans to cancel its supply agreement.

Dyskow says the contract requires 60 days notice for cancellation. However, he maintains, since Brunswick gave no advance notice before purchasing the boat brands, it has no credit line with Yamaha.

“The new owners have to apply for a credit line with us, and they haven’t done that,” he said in a telephone interview.

Meanwhile, Genmar Holdings chairman Irwin Jacobs again is urging independent boatbuilders to terminate their relationships with Brunswick and its Mercury Marine engine subsidiary. He points to both the anti-dumping complaint Brunswick has filed against Japanese outboard builders and the fact that Brunswick boat companies compete with Mercury’s independent boatbuilder customers.

“I don’t understand for a minute that the independent boatbuilders and the non-Mercury and non-Brunswick boat dealers are going to want to continue to do business with their biggest competitor, particularly after what they are attempting to do to raise outboard engine prices through their self-serving filing of the anti-dumping complaint,” Jacobs said Wednesday in a letter distributed to its own dealers and to other U.S. boatbuilders.

“Although it has become very apparent that Brunswick and Mercury are attempting to become completely vertical by continuing to purchase boat companies and then converting those companies’ engine usage to 100 percent Mercury engines, I believe it is virtually impossible for Mercury to exist as a viable engine manufacturer being solely dependent upon Brunswick’s boat companies’ engine usage without the independent boatbuilders also purchasing Mercury engine products,” said Jacobs.

---

posted 01-07-2005 08:26 AM ET (US)            

Erik

posted 01-07-2005 02:19 PM ET (US)            

It sure would be nice to sit down and pick your brain about whalers and the manufacturing process. To hear from an insider is a real treat. I'm sure you have great insights on the changes to the boats over the years.

Draftsman, would you be willing to elaborate a bit on your reasons why the new boats won't have the longevity of the older classics?

Thanks for posting.

posted 01-07-2005 04:00 PM ET (US)         

It could very well be that with much of their profit coming from dumped Yamaha engine pricing, the Owners saw the handwriting on the wall with the 20% tarrif on the way, and decided to bail out while they could still recoup some of their investment. Mercury would be the logical buyer.

posted 01-07-2005 09:27 PM ET (US)         

I have figured out one thing, however, that is not being mentioned by the marine press. This dumping issue involves a lot more than engine sales. It involves Brunswick and Mercury tie-in BOAT sales too, since most new engines come out on new boats. The re-power market is small, as evidenced by the very few that take place on this website. A dumped engine also allows the US independent boat manufacturer to sell his BOATS, with Japanese power, cheaper than BRUNSWICK, and their tie-in companies, can sell their equivalent Mercury powered boat package. This is why BRP, which can't afford to price below the Japanese, have no "transoms", and are really hurting in national market share. So if the tariff is imposed, not only will Mercury and BRP sell more engines (BRP will have a chance to get more "transom" deals), but companies like Boston Whaler should be able to sell more boats. So should Mercury's other non-owned tie-in companies, like Sea Craft, Mako, Fountain, Pro line, Tracker, etc. Yamaha powered Grady's and Regulators will cost more in relationship to a Whaler. This is why all of the independent companies like Grady and Regulator are howling at the moon, and at Mercury! They are going to have to improve their own efficiencies of production to lower their costs, to make up for the loss of engine related profit, if they can.

The Sea Pro deal is just of these signs, and perhaps why the deal came about. In effect, the dumping claim might have forced this business to Mercury. Another winner in this should be BRP, since some of those Yamaha tie-ins will be lost, yet those comapnies still won't go to "hated" Mercury. So BRP could pick up that business, some of which was lost when OMC died, and that would be good. It seems like the E-tec is a great product. It just needs more exposure to catch on.

I would like to see the US companies get their market share back up over 50%. This will prevent these huge Japanese corporations from collectively taking over the US outboard market, and the subsequent gouging of the consumer that would follow. As has been said here many times, competition is good for all of us.

posted 01-07-2005 09:41 PM ET (US)            

BRP's long-term customers are the independent boat builders, not Brunswick boat builders, and this cancellation action is a move to stick up for them. BRP's long term success depends on the long-term viability of independent boat builders so why would BRP want to support the independent's competitor just to make a few short term bucks? Also, why would BRP want to support the parent of its own competitor? I think its a wise strategic move even if it means losing a few sales in the short term. It also looks like Yamaha had most of the transoms for that brand anyhow so it probably isn't much of a short-term loss for BRP to gain some goodwill.

posted 01-09-2005 09:15 AM ET (US)            

I'm not certain that BRP provides, or provided, the engines directly to the boat builders, to the dealers or both but in reading BRP's comments in the April 5, 2004 REEL DEAL newsletter regarding the Brunswick/Genmar transaction suggests to me that the BRP motors were mostly sold to the boat dealers directly and not to the boat companies under Genmar's ownership (like the good old days). If you read that particular news letter, you will still see that BRP's long term strategy and policy is supporting their independent customers and not Brunswick companies, which makes perfect long term sense. However, if they have no independent aluminum boat companies that they sell engines to, then they need not immediately discontinue sales to Brunswick owned boat companies to remain true to that policy although such sales do facilitate the business of their own competitor's parent company.

Even if they did have such customers, because of the earnout provision, a continued williness to sell motors for those aluminum boat brands until 2007 is actually consistent with the strategy/policy of supporting the independent boat builders. BRP's willingness to sell engines to those boat companies directly supports Genmar's (perhaps its biggest independent boat building continuing long term customer) ability to earn the extra $30 million held back by facilitating further sales of the boat brands that Genmar sold to Brunswick.

Now compare the Brunswick/Genmar deal to the Brunswick/SeaPro deal with a $4 million earn out. Unlike Genmar, the SeaPro folks will not be continuing long term customers so there is no reason for BRP to do anything to continue to support them directly or indirectly to help them with earning the earnout amount. I suspect this is why you see a different action in this acquisition. Thus, continued support of the SeaPro line is wholly inconsistent with a policy of supporting independents. The discontinuing of that support while continuing to support the aluminum boat brands for the time being are completely reconcilable.

posted 01-09-2005 11:00 AM ET (US)            

The deal to purchase these aluminum boat builders was much more significant than the Sea Pro deal. The Lund-Crestliner-Lowe brands had an astonishing combined market share of 31.2-percent!

See: http://www.ibinews.com/ibinews/features/genmar/genmar.html

Consistent Pricing
Also mentioned in the above article was this interesting notion: boat brands sold with captive transoms tend to have more consistent pricing. Now that Boston Whaler, for example, is sold almost uniformly with Mercury engines, selling dealers no longer have to compete against another dealer who might have the same boat with a different engine on the transom and different package price.

Business Model
Going back a decade or more, the boat and motor business had two major companies, OMC and Brunswick, who both adopted the model of owning both an engine building company and many boat building companies. Now it looks like Brunswick will be the only competitor who is using this approach, and this seems to be creating an "us against them" orientation to the market. None of the outboard engine builders (Yamaha, BRP, Honda, Tohatsu, Suzuki, Nissan) appear to be interested in buying boat builders.

posted 01-10-2005 10:24 AM ET (US)         

Mercury didn't get to the position they are in because of bad management decisions. Like it or not, it's the course they have chosen and it will probably work for them. It doesnt' mean the course the others have chosen will not work.