Irwin Jacobs - Tough times for Aluminum Boats

[rpieske]

It is easy to say that it is the owner's choice to run his company into the ground if he so choses. But with owning a company comes responsibilities to employees, investors, suppliers, communities, etc. Too many "owners" seem to forget that.

To be successful today in business, "owners" must make decisions that are certainly going to offend the sensibilities of one or more of those entities. The first responsibility is to make a FAIR profit. Without doing that the company goes under and hundreds or thousands of people are adversely affected. Making sure that the company employes the right people for the job, ascertaining the suppliers who provide the best materials for the best price, developing dealers in tune with the consumer needs, using good advertising and marketing efforts, producing a quality product or service, fitting the product to meet the consumers' needs, etc. The list is a long one. But the owner's primary duty is to plan for the future. If the "owner" is not spending at least 50% of his/her time in planning, the company cannot thrive. It is not easy being an owner and meeting all these expectations. Greed only compounds the problems.

No, we don't need to blame China or anyone else. This problem is home grown and we need to focus on long range goals. Part of the problem today is that long range or strategic planning is considered to be 6 months out, instead of 5 years or more.

[walleyedmike]

> I being a car nut support American companys. I want the big
>three automakers to survive for USA`s sake. I wont own a
>Toyota by choice.
> I never really thought the same of boat motor manufactures
>but the same applies.
> We all should support American industry. But American
>industry should support American workers who buy the product.
> Its getting harder to buy American because of American
>companys not supporting local labor. Our government also
>should level the playing field. Nafta works with Canada but
>not with Mexico.

What kind of reels do you use? Ardent, right?

Gloat all you want Irwin.... I'm an Aluminum LUND fan. Always have been, always will be!!! So, Mr. Irwin, you won't be getting ANY of my business....

[K Gonefishin]

I have a new 621 and it's not a 70K boat, your way off.

Just talked with our local Ranger dealer yesterday. They have three new 621's with Verado 300s, kickers, & Lowrance units. Pretty decked out units. List price is just about $72,000.00.

[Juls]

The 300 Verado is probably more than half the cost of the rig itself. :)

Juls

[Matches]

Irwin didn't raise the cost of boats, the demand did. Basic Economics 101. Supply and demand drive the price. Everyone complains about the price, but how many people do you know buy a boat every year or two?? If people would just sit back and let their current boat age a while, prices wouldn't be so high. Baby boomers need their toys and Wallstreet knows it. Don't blame Irwin.

<<It's the owners choice to drive his own company down to the ground if he wants>>

Actually i think it might be illegal, if it's public owned.

Went through this at maytag. Many feel previous CEO intended to run this company down so as to sell it to whirlpool. His previous employer.
At a meeting with state and federal people who were asking if they could help when the stock was low and before offers to sell were talked about,he was asked about some of his decisions, that made no sense as far as building the company up. His answer was simply " I thought it would work". How would you prove intent?

Like rpieske said, they have a much larger responsibility than just to themselves!!

These decisions to shut these plants down just for greed affect many THOUSANDS of lives.

The scary part is that some people agree with it, and feel it's just business. It's all good.

[Todd_NE]

Very interesting article from rom Bassfan.com below. It appears fiberglass sales are down over aluminum according to this research.

Hull Lull?
Bass Boat Builders Optimistic Despite Industry Downturn

Thursday, March 27, 2008

A fundamental corner-post in the fishing industry is certainly the boating market. Among expenditures, boats are in most cases the costliest item an angler might buy.

Lately, reports have painted a doom-and-gloom picture of the boating industry.

The result has been a trickle-down fear-effect throughout the industry, with consumers, pros, leagues, media companies and just about everyone else wondering how "tough" 2008 will be for the boat market.

Several factors have combined to create that fear-effect.

Statistical Surveys, which conducts boat-market analyses, reported in Soundings Trade Only that sales of boats were down significantly in 2007. Fiberglass boat sales declined 8.9% on 151,990 units sold, and aluminum sales were down 7.4% on 118,662 units sold. Bass-boat sales declined 11.8% between 2006 and 2007, although that number is overstated due to varying manufacturer participation.

Mercury Marine recently suspended manufacturing at its Fond du Lac plant to match declining demand. The company is also entering union contract negotiations (the present contract is set to expire in June).

Gas prices continue to rise, and have averaged $3 per gallon over the last 4 months. Some estimates predict $4 a gallon prices this summer.


The sub-prime mortgage crisis has curtailed consumer spending on luxury items such as boats as home values and equity in certain markets plummet.

America is currently at war, and currently in an election year.

Certainly, several factors seem to be in play both inside and outside the current boating market, but based on conversations with four major bass-boat manufacturers, there's more to the above than meets the eye.

For one, bass boats are a segment of the boat market and represent collectively about 20,000 units per year. The biggest downturn in the market, manufacturers say, has been in saltwater – particularly in pleasure-craft, and particularly in regions like Florida and California where the sub-prime mortgage crisis has hit the hardest.

In fact, based on conversations between BassFan and bass-boat manufacturers, the bass-boat market, although down somewhat, appears to be healthy.

Still Buying

"We're having a good year," said Bass Cat boss Rick Pierce. "We're up a few points over last year, and we were up a few the year before. So we've had a sequential increase every year for a number of years.

"The bass-boat guys are off a little bit, but they're not off as much as other (segments)" Pierce added. "It's down a few ticks, but some saltwater (segments) are off 40%."

Triton president Earl Bentz has been in the boat business for 40-plus years now, and has seen several downturns. But like Pierce, he said sales are holding. Bentz noted too that certain regions remain strong, while others have dipped.

"Our business has held up very well, considering all that's going on in the economy," Bentz said. "The oil-producing states – Texas, Arkansas, Oklahoma and Louisiana – are strong. As strong as I can remember. And fortunately those are very good markets for us and Triton has fared very well there. California and the West Coast – business is soft. Florida is soft. But the Upper Midwest and the Rust Belt – that's getting a little better for us.

"The middle part of the country – Tennessee, Alabama, Georgia, Mississippi – our business has held up well in most of those states," Bentz added. "The good thing about being in the fishing business is that our customers are passionate about what they do."

Skeeter senior VP and GM Jeff Stone noted: "We feel very good about (the market). We'd like for it to be stronger, but in some of the reports I've read on various segments of the economy, we're performing extremely well."

Stone also noted that right now, from mid-March until the middle of summer, is when sales "typically increase by a few notches, so the next 90 days will be a very big indicator of the year." And he sees another positive: Several areas in the South are now getting much-needed rain.

Ranger marketing VP Bart Schad also feels the next several months are critical in judging the market. The season has arrived, anglers are starting to get out to tournaments, and there's growing excitement in the marketplace, he said.

Still, Schad noted that the market could be stronger. "Sales in general this year in the bass market are a little bit tougher than in some of the years past. But at the same time, I think this industry runs in cycles. There are some real good areas of the country right now that are doing well, and obviously there are some that are not doing well."

He also pointed to Florida and California, "where a lot of the economy is tied to the housing market," as being slow. And gas prices "haven't helped." But he remains optimistic.

"I'm not going to begin to say it's doom and gloom by any stretch," he said. "We've been through a long winter, it's springtime, and we're starting to see people get real excited about fishing again. I think (the market) will be just fine, and it's just part of a more normal trend."

The Housing Crash

The recent downward spiral of the housing market is the result of a complex set of factors. But the net result is a general loss of home equity.

Several years ago, homeowners were buoyed by skyrocketing home values and used the equity in their primary homes to often fund luxury or second-home purchases.

But as the market adjusted – or crashed, if you prefer – primary-home equity fell, while interest rates increased. Many were unable to sustain their mortgages and lost their primary home. Many others were simply left with little or no equity to fund other purchases, such as vacation homes and boats.

And since Stone, Pierce, Schad and Bentz each referenced the mortgage crisis, it's clearly a central factor in the boat market right now.

At the same time, however, the Federal Reserve has steadily lowered interest rates to combat the crisis, and the prime rate now is at 5.25% – a full 3 points below the March 2007 mark. History shows that such interest rates are capable of generating sales of depreciating commodities, like boats and trucks. Or at the very least, interest savings can help offset some of the costs associated with rising gas prices.

On a $35,000 purchase, current interest savings could easily total $3,000 or more.

Stone noted: "I think with the recent interest-rate reductions, we'll start seeing quite quickly some impact. A 1% or 2% reduction in interest will result in major savings on the financing cost. That'll be a big plus for us going into this spring and early summer."

And Bentz noted that the cost of money (interest rates), along with the availability (not price) of fuel, are the two factors that most affect boat sales.

Some Retrospect

There have several dips is the past 40-odd years of the modern fishing-boat era – some minor, some extreme. According to Bentz, the biggest downturns occurred in:


1973–74, when the Arab Oil Embargo created a shortage of fuel.


1980–81, when high interest rates crippled consumer spending.


1990–91, during Desert Storm


2000–2001, when interest rates were high, fuel first cost more than $2 per gallon, and America experienced the 9-11 terrorist attacks.

Like the above periods, Bentz noted that right now, he thinks "we're dealing in turbulent times," but he also feels the government made the right decision in lowering interest rates.

"People are going to be refinancing their homes with the lower rates, which is going to lower their payments and give them more discretionary funds," Bentz said. "Fuel's available if you can afford it. And people are still going boating – especially fishing.

"The fishing industry seems to survive when the runabout industry seems to go down," Bentz added. "People may not run 40 to 50 miles to get to their fish – they may put the trolling motor down and start fishing a mile or two from the ramp. Or they may just fish lakes closer to home."

The Gas Factor

Surprisingly, each of the manufacturers didn't reference fuel cost as a major market inhibitor. In fact, Pierce said the fuel-cost subject is rarely, if ever, raised by customers in the buying process. Instead, their talking point is typically outboard fuel economy.

And as Bentz noted, anglers are still going to fish, as long as they can get fuel. He also said that today's fuel-efficient engines help offset the higher fuel costs. In some cases, he said, fuel cost with a new direct-injection or four-stroke outboard can be equal to what it was years ago for a carbureted engine sucking $1.50 a gallon fuel.

According to Stone, Skeeter's seen the effect of high fuel cost, but it's generally been at a specific product level. "What we're seeing with our product is that the fuel prices have impacted somewhat our lower-sized products, but we continue to see very strong, stable sales with our middle- to upper-sized products," he said. "So going into this year, we feel good."

Rising fuel cost, however, isn't restricted to the consumer. Manufacturers are heavily affected as well. From the fuel used to transport product, to the oil-based products used in manufacturing, to the natural gas used for heating and the fiberglass production process, the cost of manufacturing is rising.

And to simply pass that cost along to consumers could be a risky gambit, since attractive pricing is a major key to boosting sales.

Instead, Pierce said, manufacturers have squeezed their margins ever tighter, which has resulted in less profit overall per boat sold. And for that reason, he doesn't predict a new, sweeping set of hyper-aggressive rebates and incentives, as the auto industry often institutes to jump-start slow sales.

Not So Bad?

Of course, each manufacturer quoted above wants to portray his brand's health in as strong a light as possible. But clearly, the doom and gloom that some boat segments are experiencing has apparently not entered the bass-boat market.

Folks are still fishing, folks are still buying boats, and compared to historic downturns, the current bass-boat market seems to compare well – again, according to the manufacturers.

And the promise of affordable credit seems to be the pin that holds the hinge of hope for the 2008 sales year.

"Interest rates are as good as they've been in a long time," Schad said. "We don't see a big hike in interest rates coming, so it's still a real good time to buy. Dealers seem to have adequate inventory, so customers have good selection. And don't forget – people talk a lot about the gas prices, but with interest rates so low you can buy a lot of gas with what you save in interest. Those savings will certainly buy an awful lot of trips around the lake."

And as Stone noted: "There are still boat-buyers out there buying fishing boats – there are still the individuals who enjoy the sport of fishing on the weekends and their time off. What I'm hearing from our dealers is the business is there, you just have to work harder to get it."

Notable

> Bentz feels that two other factors affecting the Florida market are property taxes and insurance. The rapid rise in property value in the years before the mortgage crisis raised taxes considerably, he said. And two hurricanes have resulted in substantially higher insurance rates for homes and properties.

> Stone said, among the many things helping Skeeter right now, is that the company's "had a very aggressive new product for the past several few years that's paying big dividends now."

[T Mac]

Just so everybody knows....No Verado costs $36,000+.

I think Juls is funnin with ya.