posted 04-27-2002 07:59 AM ET (US)            

More of the text of the press release appears below.

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Marine Engine Segment

The Marine Engine segment, consisting of the Mercury Marine Group, reported sales of $370.4 million in the first quarter of 2002, compared with $413.7 million in the year-ago quarter. Operating earnings in the quarter declined to $24.7 million versus $49.3 million a year ago. Operating margins were 6.7 percent compared with 11.9 percent in the first quarter of 2001.

The company said Marine Engine segment sales were down versus the year-ago quarter when Mercury was benefiting from a competitor's bankruptcy by signing up new dealers and distributors and picking up market share in outboard engines. Margins were also affected by production slowdowns to keep inventories at appropriate levels.

"While continuing to manage the business in light of current market conditions, Mercury took several steps during the quarter to establish a foundation for future growth. We recently announced the formation of a 50/50 joint venture with Cummins Marine to supply integrated diesel propulsion systems to the worldwide recreational and commercial marine markets. With the added benefit of Mercury's patented SmartCraft(R) technology, Cummins MerCruiser Diesel will offer completely integrated vessel propulsion, power generation, control and information systems. Along with the acquisition of U.K.-based Teignbridge Propellers Ltd., a leading manufacturer of high-quality standard and custom propellers, Mercury is able to offer its customers integrated systems from helm to prop," Buckley noted.

posted 05-02-2002 07:25 PM ET (US)         

Mercury will be bringing out a brand new line of light & fast, high torque 4-strokes in 2003, known currently as "Project X", which will be 100% Mercury engines. There will be six models, 135, 150, 175, 200, 225 & 250 HP.
They say these will have the same performance curves of the EFI 2-strokes. This project has not been abandoned at all, and is about to undergo summer testing for 2003 release. There are rumors that some of these are going to be in-line 4's!

But as a stop-gap, until their own engines are available, they have evidently made a 4000 quantity engine deal with Yamaha in Japan, which will provide the Yamaha 200/225 4-stroke powerhead under Mercury cowlings & lower units. Some of these engines are undoubtedly going to show up on new Whalers. The article in "Soundings" also indicates that the US division of Yamaha was absolutely furious that Mercury bypassed them in doing this deal in Japan. Evidently, Yamaha dealers are not happy with the proposed deal, seeing Mercury dealers come up with some of their hard to get engine supply.

I've got to say, it seems strange that Yamaha would agree to this, which can only take sales away from Yamaha outboard dealers. Maybe home office in Japan doesn't really care about the US dealers, and looks at it as simply selling more blocks. Or more likely, maybe Yamaha will get some of Merc's new higher tech mid range engines in exchange. The 130-175 HP 4-stroke hole seems to exist for them also.

Mercury and Yamaha have been pretty close for a long time, including the current 75-115 4-strokes, and prior 30-60HP 4-strokes, and this co-operation seems to be having one effect - almost complete dominance of the outboard market between the two of them, approximately 80%! All of this could be pretty clever, behind the scenes legal monopolizing, leaving Honda, Suzuki, Tohatsu and Bombardier lost in the dust, sharing the remaining 20% at best.

posted 05-02-2002 11:33 PM ET (US)         

When evaluating total outboard sales, is the percentage discrepancy between the DFI and 4-stroke engines you report a function of the limited HP ranges for which the DFI's are available? In other words with the 4-stroke engines available from about 4HP to 225HP, and the DFI's available from about 50HP (Tohatsu/Nissan) to 225HP (Mercury), it would seem logical that the DFI's would account for a smaller percentage of total outboard sales.

I don't know if two-stroke DFI's being described as a "dead end" is a logical conclusion based on the aforementioned interpretation of the data you presented. It is true that 4-strokes are becoming lighter, but I find it hard to believe that DFI's will be out of the running any time soon. The DFI's are still less expensive, require less service (no valvetrain), and are lighter than comparable 4-stroke engines.
Although EFI is closing the gap in acceleration figures between 4-stroke and DFI engines, a difference still exists. I don't have the objective data on hand, but perhaps I can dig it up.

Also, Yamaha is supposedly coming out with a 250HPDI engine. (I can only imagine how much that will cost!)

posted 05-03-2002 08:21 AM ET (US)         

I hope you predictions are true. Personaly I would rather have an EFI 4-stroke than DFI 2-stroke. I wish there was a smaller Mercury 75 HP 4-stroke. There aren't any boats that I would by that would justify that motor. It is far too heavy for 15 Sport or Dauntless 14. And for a Montauk one might as well use the 90 4-stroke. The Dauntless 16 would be underpowered. The current 60/50 4-stroke block is probably at it's limit for reliable operation. So this leaves a "practical" hole in Mercury's line of 4-stroke motors. Yamaha has the F80 and Suzuki has the 70 4-stroke. Want to bet the pending 15' whaler is working on will have a 60 HP limit? Want to bet the EFI 4-stroke will be the package motor?

As far as valve maintence goes it isn't needed. Don't misunderstand, all of the current 4-strokes need periodic valve lash adjustment. But, engine makers can make engines with self adjusting valves. Honda did this on several of their motorcycles. There is a small HP price to accomplish this. Truth is that you can do it yourself with a few tools and it takes a couple of hours. Granted it isn't needed on 2-strokes, but I wouldn't consider it a major reason to forgo a 4-stroke.

posted 05-03-2002 11:34 AM ET (US)         

Sean, your point is well taken. I concur that maintenance isn't a "major" reason to opt for 2-stroke over 4-stroke power. However, for those of us (I'm probably in the minority here!) who posess limited mechanical skills and knowledge, the cost of the scheduled services for the two types of engines vary markedly.

When powering a boat, I look at the entire picture: the purchase price, the estimated annual use, the fuel (and oil) economy, the longevity, and the cost and frequency of maintenance. The percentage of the total cost to which each of these factors contribute will vary from person to person, depending upon his intended application. The cost of maintenance, in this context, may not be insignificant for some owners.

posted 05-03-2002 12:06 PM ET (US)         

In 2001, it appears the conventional 2-strokes, carb & EFI, still held about 70% of the market, all brands being included.

It will be interesting to see how 2002 shapes up. The word is that 4-strokes are gaining ground, probably at the expense of conventional engines. This winter season in south FL, the largest US market for high HP outboards, Merc Opti's & EFI's are everywhere. Also have seen a surprisingly large number of Yamaha 115 & 225 EFI 4-strokes. They must really be cranking those off the assembly lines.

posted 05-03-2002 12:19 PM ET (US)            

http://www.boating-industry.com/news.asp?N_ID=31193&mode=4

posted 05-03-2002 01:58 PM ET (US)         

For other participants in this forum who have read this thread: This is the most civilized, interesting, and practical discussion in which I have engaged while visiting the Classic Whaler Website.

It is a PLEASURE to correspond with the others in response to Whaletosh's intial post. I thorougly enjoy exchanging information in this fashion.

Now let's all get ready with the comments and suggestions, as I am about a week from placing the CPD order you've been wondering about! (FINALLY, you sigh!)