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OUTBOARD MARINE CORPORATION FACING
UNCERTAIN FUTURE
(BANKRUPTCY JUDGE APPROVES SALE)
by Steve McCadams
www.stevemccadams.com
(Story from June 2001)
Once billed at the leading manufacturer of outboard motors,
Outboard Marine Corporation (OMC) sent shock waves throughout the
industry back in December when it announced it was filing bankruptcy.
Makers of Evinrude and Johnson outboards, along with such boat
companies as Chris-Craft, Four Winns, Seaswirl, Pricecraft, Lowe and the
Tennessee based Hydra Sports, Javelin and Stratos brands, the company
had commanded a third of the US marine outboard market.
Citing a disappointing operating performance of the OMC Corp., and
unsuccessful efforts to secure additional financing, the company who had
become a household word among the ranks of fishermen and recreational
boaters, seemed to be sinking.
OMC had laid off 7,000 of its worldwide staff of 7,700. Authorized
OMC dealers were facing uncertain futures as parts and warranty service
for repair was at a standstill. Research and development came to a halt.
Customer bases began drying up too as anglers didn't want to
purchase a motor from a company or dealer who might not be able to stand
behind the product.
Promotion and advertising were factors too. Suddenly, here it is
in the heart of the boat, sport and travel show season where local
dealers display boats and motors to thousands of potential customers.
The recreational season is looming yet suddenly OMC was not there to
give dealers co-op money to display and advertise.
At every turn there was a high level of uncertainty. It had
affected the entire industry including boat manufacturers and suppliers
here in Tennessee. Javelin and Stratos boats are manufactured in
Mufreesboro and Smyrna. Hydra-Sports got it start in Nashville before
changing into the saltwater market and moving to North Carolina.
A BRIEF HISTORY
Based in Waukegan, Ill., the company got its start back in 1909
when Ole Evinrude first invented the gasoline powered outboard motor on
his farm in Christian, Norway. Two years after inventing it he launched
a national advertising campaign and the concept of a internal combustion
engine took off. It was the birth of the recreational marine industry.
Ole's hand-built Evinrude outboard--a 1 1/2 horsepower, single cylinder
unit---would make rowing a thing of the past. Four years later he had
sold 9,400 units.
He sold his company in 1914 but by 1921 had re-entered the
outboard manufacturing business with his light weight, twin-cylinder
motor. At two-thirds the weight of his original engine, the newer motors
pioneered the use of aluminum for marine engines. By 1924, his newer
company ELTO, was outselling the original Evinrude motors.
In 1929, ELTO was merged with Evinrude and the Lockwood-Ash Motor
Company forming Outboard Marine Manufacturing. It later merged with
Johnson motors. In 1956, the company adopted the name of OMC.
The company kept refining and many innovations were industry
firsts, including the first V-4 in 1958, and the first V-8 in 1985. Just
a few years ago it introduced Fict Ram Injection which offered 35
percent better fuel economy, lower hydrocarbon exhaust emissions and up
to 50 percent reduction in oil consumption.
In the late 1980's many outboard manufacturers,
including such giants as OMC and Brunswick's Mercury Marine Division,
began buying boat companies and established packaged deals where
consumers purchased this or that boat already rigged out with a certain
brand of outboard, trolling motor, electronics, etc....
Some analyst say this was the beginning of a problem. Others saw
it as a strategic move in the marketplace. The consumer did get a little
price break and the dealers could cut costs of rigging.
There were, however, problems in the road ahead as many consumers
didn't like having to buy this or that brand outboard in order to get
the boat they wanted. And, the maneuver alienated some dealers who had
long been loyal to this or that brand of boat. Suddenly, they found
themselves having to choose one over the other as the OMC Corp., started
offering its boat brands to its Evinrude and Johnson authorized dealers
only.
OMC had enjoyed success with its two lines of outboards that had
interchangeable parts but different cosmetic appearances. This way, they
had provided dealer protection with two different brands yet the boating
industry was somewhat different.
OMC'S PRESENT SITUATION
Earlier this week a federal bankruptcy judge approved the sale of
OMC's main assets to Canadian based Bombardier Inc. and
Minneapolis-based Genmar Holdings Inc. A joint bid of $95 million
cleared the way for the likely recall of some of its workforce.
Bombardier, which makes business jets and other products, will get
the Johnson and Evinrude marine engine brands. Genmar gets the boating
divisions which included the two Tennessee based companies of Stratos
and Javelin.
The judge, before issuing the ruling, threw out Brunswick
Corporation's objections to the sale of the previous day. Brunswick,
which owns among other companies that of Mercury and Mariner outboards,
had made an initial offer before withdrawing from the auction.
OMC filed for Chapter 11 protection on December 22. Since then,
many customers and dealers, not to mention creditors and suppliers, have
been in limbo.
FUTURE UNCERTAIN
Just how much damage has been done to OMC remains unclear. Many
potential buyers have no doubt abandon ship over the last three months.
Dealers have a lot of questions about the past, present and
future. Some marine dealerships who were established with several
different brands of boats and outboards have weathered the storm in
pretty good shape.
There have been a few dealerships that offered both Mercury and
Evinrude products which gave them warranty and parts for the other
brands of Johnson and Mariner. And, such outboard companies as Suzuki,
Yamaha, Nissan and others have likely taken advantage of the situation
at hand with increased incentives for its dealers and potential
customers. OMC has no doubt lost a lot of its marker share over the last
three months.
On the other side of the coin are those marine businesses who were
exclusive OMC. Suddenly they found themselves at boat show time with the
peak season on the threshold yet representing boat manufacturers and
outboard motor companies that were shut down.
How could they sell a product and stand behind it with claims of
warranty and service when they didn't know themselves as to the future
situation? While in the minds of most such a good company as OMC had to
be bought, sooner or later, by someone who had the capital to keep it
afloat. However, no one knew who would buy it or when?
Just what these two companies will do with the assets of OMC
they've just purchased is anyone's guess. Some experts feel the boat
companies will be sold here and there and may once again manufacture on
the name and reputation of the boat brand itself.
If that's the case, the industry may revert back to the days of
boats being boats and motors being motors where the consumer chooses
specifically the line of options he or she desires. The days of the
package deals may be fading but that, like the overall OMC deal, is
still going through uncharted waters.
Looming in the midst has also been the employees of OMC. Engineers
and designers, executives and sales representatives. The rank and file
workers on the line are factors as well. All these people and more may
have scattered over the last three months looking for and finding jobs
elsewhere in the marketplace.
Getting these people back or finding quality personnel is yet
another ingredient in the recipe for reviving OMC and rebuilding the
company's reputation.
It will be interesting to see what moves take place in the months
ahead. A sluggish economy may add more bumps to the road but the recent
steps taken to sell off the company's assets is a step in the right
direction. The "not knowing" has caused turmoil for OMC's
legions of supporters.
( Part I of a two-part series on the transition of OMC. In next
week's column I'll have comments from area OMC dealers regarding the
changes at hand within the industry and how it has effected them
locally. Also, comments from local boaters and manufacturers
representatives.)
For
Part Two Click Here
Steve McCadams
is a professional hunting and fishing guide
here in the
Paris Landing area and host of The Outdoor Channel's television series IN-PURSUIT.
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