Thursday, January 18, 2007

Biggest Industry Challenge for 2007

"The Necessity of Comprehensive Marine Warranties"

Jacobs says Brunwick’s strategy is flawed.

I am outlining some of my thoughts and candid views regarding the recreational wholesale and retail boating market in conjunction with what I believe is going to create both several opportunities as well as some very difficult times for certain boat manufacturers and dealers in the recreational boating market in 2007 and beyond.

Although the recreational boating industry has not been exactly robust over the past two years, there surely has proven to be several independent boat manufacturers and dealers who have been able to more than hold their own and in several cases certain manufacturers and their dealers have even grown their businesses in spite of the fact that the market overall has been flat to down.

I believe that Brunswick’s acquisition binge of several boat companies over the past three to four years has up till now proven to be nothing short of a disaster for Brunswick. Based on the public information available both from Brunswick itself and from Statistical Surveys, I don’t believe there is a single boat company that Brunswick has purchased over those three to four years that are better off today than they were at the time that Brunswick purchased them. In fact, most of them, if not all of them, have continued to substantially lose market share and business far in excess of the overall difficult market conditions.

I further believe that Brunswick’s poor timing of being extremely aggressive in purchasing the boat companies they acquired over the past three to four years is going to offer several of the well-run independent boat builders and their dealers a golden opportunity to grow their businesses in 2007 and beyond at the expense of Brunswick, even if the retail recreational boat market continues to show little or no growth in 2007 and beyond.

The fact that the independent boat builders and their dealers have the flexibility to offer the retail customer their choice of engines, I believe that it in itself is enough to take market share from Brunswick’s boat companies. Whereas Brunswick offers, for the most part, only their Mercury engine products and the fact is by their own admission, Mercury has outright lost market share for their engines over the past several years in the U.S.

A further fact, I believe, is that Brunswick’s overall strategy to become a vertically integrated marine company is flawed for the simple reason that in order for Brunswick Boat Companies and their Mercury Engine Company to grow they cannot do it without the support of the independent boat builders (their competition) and their dealers.

Therefore, my conclusion is simple “why would any competitor of Brunswick’s want to help them grow there businesses at the same time that Brunswick is competing against them every day in the recreational boating business?”

I believe the answer is quite simple and I predict that Brunswick is going to continue to lose market share and businesses both in the boat and engine business to the well-run independent boat manufacturers and their dealers who compete with Brunswick Boat and Engine Company. In other words, even with a continued difficult boating market I believe there is going to be a lot of business out there for the taking.


Irwin L. Jacobs
Chairman and CEO, Genmar Holdings


Irwin L. Jacobs January 16th, 2007
 

COMMENTS

Ed McKnew wrote:
January 16th, 2007 at 2:48 pm
  I believe Mr. Jacob’s comments regarding Brunswick are prescient and worth serious consideration. I’ve had many conversations with readers of our publication who have expressed frustration that they can’t purchase a Brunswick-owned product without being forced to take a Mercury engine. Boston Whalers are terrific boats — certainly among the best in their class — but how many sales are lost because a potential buyer can’t fit one out with Yamahas? Like it or not, there are plenty of buyers out there who don’t want Mercs.

  Mr. Jacobs may not be everyone’s idea of an industry sage, but he’s done a good job of identifying a genuine Brunswick weakness. This engine issue has the potential to become a huge Brunswick liability.

Keith V. Maling wrote:
January 16th, 2007 at 3:30 pm
   In support of Mr. Jacobs comments the boating industry lost a competitor of Searay by Brunswick's acquisition of Sealine Yachts of England. As soon as they had purchased the company they began to destroy the brand. This was a profitable company and dealership that was establishing a foothold in the American market. A product that offered an alternative choice to the consumer but was suppressed and taken out of the market through dealership litigation, poor customer support and intentional destruction of it’s market share.

  First hand knowledge reveals that as a company expands and takes over it’s competitors through acquisitions, it also inherits a responsibility to maintain profitability of the companies it takes over. This was not apparent in the Sealine acquisition as a matter of fact it has destroyed the brand.

  These acquisitions reduce the choices of the consumer. This enables price fixing and market share control. It surly benefits no one as the cost of owning a company you acquired and destroyed is passed on to the consumer. A once profitable company becomes a liability of Brunswick. Again the consumer is the ultimate looser.

  Brunswick is headed for disaster as the independent boat builders can control their product production and marketing of their brand while still offering personal service to the consumer Brunswick cannot and has totally lost touch with consumer relations.

  This is just one example of corporate leadership and the board rooms handling business when it is best left to the family owned and operated brands.

  Good luck to all the small independent boat dealers that deserve more market share for their hands on consumer oriented approach to boat building.

Regards.

Keith

Warren Lally wrote:
January 16th, 2007 at 4:05 pm
  It seems odd that A CEO would bash another company using this media outlet . More unusual is the content of the post considering Mr. Jacobs previous history for buying and breaking up companies costing good people their livelihood. I own a repair company and find that most people that own gasoline powered boats are very faithful to the mercury product line and also faithful to what are now Brunswick owned boat manufacturers .We all know sales are down but perhaps another way to look at low sales figures is people are happy with the boats they have and would rather repower or maintain/repair those boats with products that can be purchased at a reasonable cost with easy availability . What really strikes me as strange is Brunswick bought three brands from Mr. Jacobs company Genmar Holdings . By the way, does anyone recall that Conseco debacle ? Remember Mr. Jacobs , people in glass houses.

Fred Muehl wrote:
January 16th, 2007 at 4:09 pm
   Jacobs is still a heroic voice in the wilderness. Although his motives are probably driven by Genmar self interest, he speaks with non forked tongue. Eighteen months ago I sold York Harbor (ME) Marine Service (YHMS). Although I was ready to retire, my decision in part was due to the lessening of my business by Brunswick. For twenty five plus years, twenty under my ownership, YHMS was a Boston Whaler dealer offering Johnson/ Evinrude product. Sales were robust, even through slumps and constantly showed steady growth, significant enough that it became a profit center in a service oriented company. Along came Honda and we were one of, if not the first, dealer of these 4 stokes engines in Maine. YHMS were pleased that this small company offered the consumer choice in powering their Boston Whaler boats. Our customers always wanted top rated product. Boston Whaler was my ticket to customer satisfaction. When OMC stumbled, the Honda reputation filled the gap and my Whaler sales hardly missed a beat as we switched to Honda power. Along came Bombardier and we were ecstatic that we now had a top notch 2 stroke to again offer our customers. Just think you could offer you customer (the one that is actually giving you money) consumer choice!!

   Life was good. Sales were good. Along comes Brunswick as it acquires Boston Whaler. The boats become homogenized and look like a host of other boats running around with reverse transoms. Metals show the signs of mass purchasing; rust spots on stainless. Warranty times go up as the Whalers look as if the were put together on a production line staffed by a temp agency. More devastating power options have become dark –I should say black. I’m now dealing with a company that believes consumer’s are dopes and the company knows what’s best. for the first time my customers are pressuring me to look at (god forbid) boat lines other that Whaler. Not that they do not want the Whaler, they wanted engine choice. They wanted top notch progressive that held up the reputation of the old Boston Whaler they loved so well

Rogenald Jean Keller wrote:
January 16th, 2007 at 4:12 pm
  I believe, Irwin’s argument is correct as far as it goes; but, I believe, the industry, with it’s great number of independent boat manufacturers, should be free to buy and sell anything, new style or old, that their potential customer may have heard of and want to see.

  My new style, KROP System, with it’s safety and other efficiencies, can “Grow Boating” for all.

Rogenald Jean Keller, Inventor and owner

Mike webster wrote:
January 16th, 2007 at 4:27 pm
  I was employed by a well established high volume Johnson dealer who decided to sell Yamaha in the 1980’s,therefore I certainly understand the draw “branding” has on the buyer.

  That was then. The fact is the engine packages offered for all of the Brunswick vessels are just fine. The service aspect is more critical than perceived or real product feature/benefit.

  Give the Brunswick product sales staff training on the order I witnessed during the Yamaha US market entry (…”expect a lot” ) and the playing field just got even more competitive. I hold fond regards for Mr. Jacobs.

Here he is off the mark.

Jim wrote:
January 17th, 2007 at 6:11 pm
  All this hot air coming from a guy who is anything but “independent”..Glastron, Larson, Four Winns, Ranger, Carver, Hydrasports, Triumph, Wellcraft, Stratos, Carver, SeaSwirl & Marquis.

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November 27th, 2006

On Lake of the Woods

  V12 Engineering plans now to expand aggressively in the recreational marine engine market. We believe there is room for us with our high quality, dependable, prestigious product.

  The first issue of our business plan is nearing completion and will begin distribution in mid January 2007.

  If you own or ride a BMW  product, have a power or sail boat with a BMW engine and have risk capital available, we would like to hear from you.

After 6 years of work, we now have the foundation for this growth in place. To date it's been a great 'ride'; and promises to be even more of the same. The America's Cup races, this coming summer, in Valencia Spain, awaits us.

Rich Langtry