A sign of the times?

Brunswick also recently sold Baja to Fountain. Didn't think Fountain was that strong financially. I'd always heard Fountain owed Brunswick a lot of money.

Surprised fountain bought them also, but they were likely sold cheap and it just gives Reggie another chunk of that market to control, which will benefit him a bunch. I'm sure he will improve the quality a lot, he does not settle for poor quality so once he gets his hands on those boats you will likely see changes over time. Things are very slow in the power boat industry, but that is when well managed companies will outshine those who are not run well and will still be standing after. Not to be mean, but most of those brands Brunswick got rid of were junk anyways, glad they are off the water!! Plus I'm not a Brunswick fan, they are a competitor of mine !!

A friend of mine races boats for Reggie and he told me that Reggie has a deal with Brunswick that will allow them first option to purchase Fountain's holdings when Reggie wants to retire, which is in 4 years if I remember right.

Here is Brunswick's press release from their web site.



News Releases
Marine
Brunswick Bluewater Brands to Cease Production at Newberry, S.C., Facility
LAKE FOREST, Ill., May 13 /PRNewswire-FirstCall/ -- Brunswick Corporation (NYSE: BC) announced today that it will cease production of its Bluewater Marine brands -- including Sea Pro, Sea Boss, Palmetto and Laguna -- with the upcoming 2009 model year, which commences July 1. As a result of this action, Brunswick will close its production facility in Newberry, S.C., by the end of June.

"The U.S. marine industry has been in a prolonged slowdown since late 2005, driven by an uncertain economy, high fuel prices, the housing slump and other economic factors that have affected consumers' confidence and eroded their discretionary spending," explained Dustan E. McCoy, Brunswick chairman and chief executive officer. "As a result, we are assessing the recovery potential for all marine segments in which we participate, their fragmented nature, the costs of our continued presence in certain of them, and the position of our brands. Our work is ongoing and is focused on developing profitable brand positioning in all segments. With this action, we believe we will solidify our presence in the highly fragmented saltwater segment by concentrating our efforts and leveraging our resources on such brands as Boston Whaler, Triton, Trophy, and our sportfishing offerings from Hatteras, Cabo and Albemarle, while sharpening our market focus and providing necessary cost reductions."

Brunswick plans to cease production at the Newberry facility by the end of June 2008. Approximately 175 positions will be affected by this action, and qualifying employees will receive assistance aimed at helping them transition to other employment.

"This market-driven action should not be viewed as a reflection on the performance of our employees," McCoy added. "As always, we will work hard with all affected-employees, dealers, suppliers, communities and consumers-to minimize the disruption that this decision may cause."

As a result of these actions, the company said it will record a pretax charge of approximately $25 million to $30 million in the second quarter of 2008 to cover asset write-downs and other costs associated with the plant closure. Of that total, approximately 75 percent of the charge is non-cash and the remainder is cash. The company estimates that it will realize annualized pretax savings of approximately $9 million stemming from this decision.

Here's the Baja announcement back in March.

Brunswick Announces Sale of Baja Marine Assets to Fountain Powerboats
LAKE FOREST, Ill., March 20 /PRNewswire-FirstCall/ -- Brunswick Corporation (NYSE: BC) today announced the signing of a letter of intent to sell certain assets relating to its Baja boat business to Fountain Powerboat Industries, Inc., of Washington, N.C. Terms of the agreement were not disclosed, and completion of the sale is subject to certain conditions. In preparation for the transition, Brunswick plans to end production of Baja boats in Bucyrus, Ohio, by the end of May, consistent with the end of the 2008 model year. As a result of these actions, the company said it estimates that asset write-downs, along with severance and other costs associated with the plant closure, could total between $10 million to $15 million, pre-tax.

"This was a strategic decision to further refine our product portfolio and best focus our resources on brands and marine segments that we believe are core to our success going forward," said Brunswick Chairman and Chief Executive Officer Dustan E. McCoy. "This action in no way reflects upon Baja or the abilities and performance of the Bucyrus work force. We believe, however, that Baja and its dealers will ultimately benefit from being a part of Fountain Powerboats, a company that, like Baja, is a leader in high-performance boats."

When completed, the closing of the Baja plant will mean a loss of approximately 285 positions. Baja leadership will be working diligently to transfer as many employees as possible and practical to either Fountain or other Brunswick manufacturing facilities. For those employees who do not have the opportunity or do not wish to transfer, severance will be provided.

About Brunswick

The funny part is that even when times were good Brunswick always had an issue with at least one of their brands, they cannot manage them all and having so many really compromises the end product. also, since they have shareholders they build boats to make profits, not build the best boat for you, there are some good companies under Brunswick that have great leadership, but many do not. I know lots of guys who work for them and even when times were good they said the companies stunk. I applied for 2 positions with them and after interviewing had no interest to work for them because of how things were run and handled. They are probably taking the hit from the economy worse then most with all the brands they own, especially with the ones that barely were making it when times are good. Things will rebound, it is just a question of when. The sad part if Brunswick is not hiring anyone in engineering to help better their products during these slow times, and are laying off many excellent workers that are necessary to design and build boats, all well managed companies are cutting hours or taking other precautions to hold onto their staff so when times rebound their products are still top notch. Part of the mismanagement with Brunswick and other big corps is that they do not have savings set aside to deal with times like this since profits go to stockholders and workers, other companies have money set aside to help deal with slower times so that the company does not take the hit, but the owner's or management might have to take cuts until things rebound. I know many have criticized Grady cutting hours saying that says something about the company, but in all honest it is a very wise move, yes maybe workers are not making as much, but they won't leave, who will hire right now? Grady is guaranteeing they can keep their workers on board and not have to lay off while times are slow so when things improve they are on top ahead of the rest. This is a management move that was done by many builders when there were luxury taxes on boats and almost no boats were sold, the companies that cut hours and took money from their own pockets to stay on top are now the top notch builders in the market, everyone else was far behind and were always playing catch up.

Does anyone know the story on the 32 hour week at GW? I assume they are running a 4 day production week to cut costs. Do hourly workers received 80% pay? How about exempt workers?

Doing this makes much more business sense then layoffs. It keeps a well trained workforce rather then hiring inexperienced workers when the market improves. It also promotes higher morale and retention.

Not so sure I agree. Taking a 25% pay cut for all personnel is tough. I guess it is better for the folks that would have been let go, but for the other 75% it is yet another blow in a tough economy.
Maybe 10-15% of the bottom performers should have been trimmed instead. Either way it hurts, but I'm a big believer is feed the eagles and starve the turkeys....

Danny, for a 32 hour week I *assume* the pay would be 80%. This is all speculation but it makes sense. Poor performers may be laid off when times are tight as well. There are no easy answers for a tough economy.

I also suspect that cutting production back to 32 hours saves a good deal of energy costs. It is a far better fate that what lies ahead for several other boat builders.

I stand corrected on the percentage. Hopefully employees can swallow this much of a percentage hit in addition to the other economic issues.

I'd still cut versus a broadbased action if I had to, but that just me....

There may be no cut, not sure though, just closing the plant itself and not using utilities saves the company a LOT of money, you would not believe the bill for just one day's work in a factory like that. Plus, there is no need to build so many boats and have them sit around, sure Grady could sell them for less and "liquidate" them or pack showroom floors, but that is not how Grady works. Hopefully there is no pay cut, just wise management to save money and run the company more efficiently.

Not unusual in the manufacturing business such moves, including furloghs or long holidays like two weeks at Christmas.

With no unions down there, should however still be based on seniority, & flexibilty of individual's skill base. And ask for volunteers first, many times the older guys want to scale back days worked instead of full retirement. Me too one day!

I suggested years ago that Grady open a factory refurbishment/reconditioning business line to take back old Gradys and restore them to OEM level, including evaluation, rotted wood replacement, new wring, cosmetic repairs, upgrades to customer specs, etc,. Those who choose to pass on new models in favor of keeping their older ones longer can bring in such a business and more so during these times, when the opposite occurs as new boat production backs off. They can even base prices on a fixed priced menu by model, with upgrades priced individually. Then have their dealers push, during these times, as an alternative for sticker shock and more so the uncertain times.

Too bad.

The factory setting, equipment, supplies, worker skills, can make it very attractive in price, and something diferent for the factory guys - not the usual widget production line mundane work. Each old boat coming in is going to be different.

A "Grady factory reconditioned" re-labeled used boat will be worth more on the market too.

Too bad.

That is a GREAT idea Bob! I am sure many GW owners would like to have their older models reconditioned by the factory. What a perfect way to generate some work and revenue when new sales are slow.

IIRC there is at least one builder who actually does offer such a service. Scout maybe?

That is a great idea as long as you can manage it when business gets good again. The worst thing GW could do was offer a service they couldn't deliver on when the boat business is good. They would have to get a handle on the volume of refurb business they could likely expect and staff accordingly so that they could handle the volume of refurb always not just when the new business was off. Besides I thought GW only built a boat when they had an order from a dealer. In other words no spec boats, only sold orders or dealer requested inventory models.

I'm sure there is enough work for GW to start a repairing older models, who knows what you'll find when you open them up (many people have the best intentions but really @#$@# things up). The hard part for them is to be able to compete with the other repair shops dollar wise. Take someone like Jimmy and compare the costs to GW. Jimmy doesn't have a "corporate", sales team, .... Jimmy is busy during the whole job where GW may have someone waiting to be able to glass or paint and that costs money.

If GW does look at it to keep them busy in these times and they can be competative $ wise go for it.

If Grady is taking orders from dealers as you say, they must be well in advance by years - how can that be so firm ?
The factory has to negotiate long term contracts for Yamaha engines and boat building supplies.

I think Grady is saying this to sound (to some) like they are a custom fabricator, like a few others. They are the opposite, a mass production widget factory, nothing custom comes out of Greenville any more. There are more choices coming out of the robot car builder factories in Shreveport.

Since Grady a boat builder has access to the same materials needed for reconditioning but at term order high volume low low rates negotiated for new boats, unlike the local small shops that spot buy, and Grady can develop a plan for each model not taking the "stand at door with sawzall in hand" approach of the local shops. They can brace the hull using adapters for the existing hull molds and seperate it properly to work from the inside out, as it was built, using their overhead cranes they already have. No saw marks or painted brown decks covering up the repair scars. The local shops work the same way as back yard guys at classicmako.com work. Very inefficient.

I paid $95 a sheet for 3/4 marine ply, what does the local shops pay? How about the factory ? The factor wil be getting trucks load.

Grady can offer factory repowering as well, leveraging their relationship with Yamaha for mass quantity motors at prices well below what any local Yamaha dealer can get down to. Heck, I had one dealer on LI quoting me MSRP for the 2006 HPDIs, he must have rocks in his head or thought I did.

Grady has the knowledge, skilled workers, access to discounted cost materials and engines, technical support from engineers already on the payroll, the sales force already in place at dealers, they can do it from the inside out and at a reasonable price I bet not too much over the local guys working sawzals form the outside in. And when they finish, no sawzall traces left behind. The local dealer can take his cut too, keep everyone greased.

Shall I go on ?

It is a better adventure for Greenville to undertake than the tigers were, where they had zero experience in and no customer base.

Too bad we won't see it.

This sounds interesting, but there are several hurdles that need to be vetted.

1.) Reverse logistics. Will people really pay to send their boat back to the factory? Would they shrink wrap and secure it? If/when does customer, hauler and/or GW take responsibility?
2.) Cancer factor. Often once you open things up, you realize the extent and likely cost of the damage. Will people agree to the scope and pay for the repairs or will GW have issues getting payment? What happens to the boats and who is liable when there is a dispute or lack of payment?
3.) Distance. People are can be doubting Thomas like (especially when paying a lot of money) and likely need to observe the initial damage and see things as they progress - again especially if the meter is running and more than original work is needed.
4.) Custom vers Mfg. As stated, GW is a production boat builder. Work and processes are clearly defined. They are likely not built to do one off/job shop activities nor do their people likely possess the generalist skills required to assess & size the job, identify the materials, set the plan and execute the non-standard work. This sounds too custom to me for a production shop.
5.) Variation due to scale. Having a few very skilled people that do repairs is one thing, doing it on a large scale is very tricky and likely would take more engineering oversight and field adjustments versus building new boats with an very controlled process.

If started, this would likely need to be a new focus area with a different skill set team. Not that it cannot be done and that labor can be shifted from new builds to repairs, but it surely is a different business and if you are not careful, it may not be as profitable as initially thought. As stated, once new boat building (I assume larger margin) heat up, I would imagine new boats comes first. GW would then have a cust serv issue on it's hand and this is one of the core differentiations that exist between them and others - you don't want to mess this up.

On a positive note, since GW is private, there likely isn't margin impliations. Tough for a company that is built for the high margin sale to cover the cust serv end to get into a lower margin business. The street usually kills public firms unless they execute flawlessly.

I'd say they would be crazy to enter this line of work, but then again.....

Grady is not going to enter this work because they are doing well enough on new boat sales, so why bother? Easier to send the workers home early every week until the situation clears.

I wonder if the workers who will now have one day off a week without pay will be willing to work the one day instead on such a new venture(?)
After all, Grady has nothing else for them to do.

Rebuilding a Grady's structural grid is a piece of cake, once the entire area is exposed. That's the good part about conventional boat construction. And the grid is nothing but wood and very little glass tabing comparable to the rest of the hull. I would say the entire grid of my sailfish amounts to no more than 6 sheets of 3/4, 4 more sheets for the transom. That's right, less than $1000 for the wood (for me to buy). Another couple of 1/2 in. sheets for the deck and gunnel coring. And all the tabbing is just one combo layer of 1.5 oz mat and 24 oz cloth, that's it. Simple enough. Grady can cut the wood to spec on their automated routers, for transoms too, they already have the original build drawings.
can the local guys do that?

That's why they can have a fixed set price for full stringer grid replacement by model, another for the transom. And all the pieces pre cut before your boat even shows up. Can the local guys do that, or do they make templates of evry pice f wood they need? The price can be very reasonable, and extend the profit margin for upgrades like A/C, vacuflush, windlasses, and the like. These are not necessary like the grid restoration. How abot a new hardtop frame?

Can you imagine how cheap Grady can get one for vs. your local fabricator?

The key to doing it in a cost effective way is to avoid rejoining what was cut with the sawzall and the fairing that goes with it, very time consuming, takes too long, that's why seperating the liner from the hull is important.
Grady can use their existing overhead cranes to lift off the liner and super structure, can the local guys do that? How about how cheap they get 2 lb foam for flotation and the applicators they already have to spray in it? Can the local guys do that as cheap?

As far as new panels, wiring, hoses, and say gas tanks, Grady has contracts I'm sure in place that can get these items for less than half you pay at the store, same for the local guys.

If Grady can undertake the design and tool up to mass produce cat hulls, what do you think is a more challenging task?

Grady can have an annual schedule, for instance, in 2009 take just Sailfish and Gulf models, in 2010 take in just 20 footers, etc., this way they can align it more like production work.

In the long term, this type of work will benefit new boat sales too, and hold resale even higher. Grady's conventional build design is based on humans only, so for as long as humans do the build, and have fights wit their sposes and get drunk after hours, they will always screw up boats and down the road those boats will require reconditioning primarily in their wood structural elements.

The car industry solved their quality problems by turning the car over to robots, all 5000 or so welds done by robot, not a human signature on one of them, each then checked by another robot. Until Grady goes robot, in as little as 5 to 10 yrs after production, a percentage of these boats will require some form of restoration to their stringer grids, transom, and coring, forever.

Too bad we won't see it. And the skilled workers now getting part time jobs at Kmart.