AUDIO EXCLUSIVE: Jacobs talks about Genmar bankruptcy

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060309_jacobsAbout three months ago, Genmar Holdings chairman and CEO Irwin Jacobs, along with two other individuals, put $40 million in cash into his business, a move he said would not have happened if he thought he would be filing for bankruptcy.

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“That should tell you where I thought our business was,” Jacobs said yesterday in a phone interview with Soundings Trade Only. “I didn’t think two or three weeks ago that this was possible, but the banks just became unreasonable, and we just couldn’t deal with it.”

Genmar, the nation’s second-largest boatbuilder, filed Monday for Chapter 11 reorganization in U.S. Bankruptcy Court in Minnesota.

Citing unprecedented economic conditions, Jacobs said the $75 million the company owes the bank is nothing compared to the millions it owed at one point in 1989 and was able to fully pay back.

“The banks pushed us to a level that we couldn’t put up with,” he said, adding that Genmar has assets of $237.5 million, compared to $216.5 million in liabilities, along with more than $400 million in intangible assets.

Despite the filing, Jacobs said it’s “business as usual” at Genmar’s 15 boat brands, adding that he’s taking steps to help his network of more than 1,000 dealers worldwide.

“What we’re trying to do is prevent [dealers from going out of business]. We’re not trying to make people go out of business. We’re trying to make them stay in business, and we’ll be in a position to hopefully support them as good, if not better, than we were before this happened,” he said.

Genmar will ask the court to allow it to pay appropriate dealer warranty and rebate claims, he noted.

Hoping to come out of Chapter 11 “sooner rather than later,” Jacobs said this should serve as a wake-up call for the industry that change is needed.

“This is the most unprecedented time in the history of our industry, bar none. I can’t sit here and make predictions as to what the business is going to be like, but I will say this to you: There has to be a fundamental change in this industry” he said.

“Dealers cannot take the risk that they’re taking on, floorplanners cannot take the risk that they’re taking on, and factories cannot just produce all the boats they can produce,” Jacobs added. “There’s something that has to fundamentally change.”

Jacobs said he could not predict what Genmar will look like after reorganization and whether he will go forward with all 15 boat lines.

“We may need to do more consolidation of our manufacturing. We’re not going to sit here and have factories running at 30 percent capacity,” he said. “We’ll come through this thing. We’ll be a more stable and, I think, a stronger company when it’s done.”

— Beth Rosenberg

b.rosenberg@tradeonlytoday.com

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Comments

23 comments on “AUDIO EXCLUSIVE: Jacobs talks about Genmar bankruptcy

  1. Walt

    Who is the largest if Genmar is second?  I wish them well as they have some very quality lines.  I think Mr. Jacobs is trying to save not just Genmar but the industry by calling greater attention to the need for change.
    Best of luck.

  2. Steelblue

    Why not go back to the old fashioned idea of ordering a boat built for you and paying as the build progresses?

  3. BARRY

    DO YOU THINK IRWIN WILL KILL TRIUMPH? I AM THINKING OF TAKING THESE ON IN OUR LINEUP. WHAT DO YOU THINK OF THE PRODUCT?

  4. Lenny

    Brunswick is the largest boat builder in the U.S. Are they next? I’ve been in the marine business for twenty years and never gone through anything like this. Until the dealers get some workable and reasonable floor plan financing and viable and realistic sources for boat retail lending, this industry is going to be in freefall for sometime.The current sources for dealer floor plan financing and retail lending for boat loans are so unrealistic that many dealers are caught in the middle and will be forced into bankruptcy themselves.
     

  5. marc grove

    We will find out what he is trying to save when we send our next warranty claim in ………………
    Marc Grove

  6. tim

    I beleive Brunswick is the largest boat builder.  Corporately they are diversified with bowling/pool equipment manufacturing…..but they are still not in good shape either. 

  7. Ed

    Back in the 70′s when floor plan interest was sky high the good manufacturers allowed their dealers to buy a few boats for display and sell off them at shows where regional dealers cooperated. Then the manufacturers produced a limited number of models on scheduled slots and that dealers were assigned but could trade off to other dealers. Perhaps it’s time to move away from truckload orders and return to this conservative formula. It got us through those tough times….

  8. George

    As Mr. Jacobs was an ardent Obama supporter, is this ths ‘Hope and Change’ he was waiting for?

  9. Tony

    Number 1 is Brunswick.  This is not good news for the boating industry.  Crownline is still in trouble too, as are most boat manufacturers.  Not when, but if the industry recovers it will surely look different.

  10. Tom Fischer

    A quote by Erwin Jacobs……..
    “The banks pushed us to a level that we couldn’t put up with,”
    That quote can probably be repeated hundreds of times by boat dealers, big and small throughout the country.
    And I am one of them. I am surviving, but by no means with the help of the government or banks.
    I have been in business for 20 years and have never been out of trust or deliquent on any obligations, however, the financial resources I have had available to me in the past to “make it” through the down cycles are simply non-existant today. This is in spite of my flawless track record of always paying back my debts on time.
    Also, this new “Floor Plan Relief” SBA program is a joke. If you read the requirements you need to qualify, you will quickly come to the conclusion that if you are struggling you can’t qualify.
    We need the MRAA and the NMMA to get the government to come up with a better solution or this industry and the lives of the people in it will never be the same.
     
     
     

  11. Brent

    Hey Barry-
    If you like a company that ships boats that flex, leak and warp; a company that changes management like I change socks; and a company with a factory outlet down the street that sold boats at retail cheaper than I could buy them at “dealer cost”, then Triumph is your company.

  12. Anthony A. Cavallo

    First I would like to say that Brunswick Is the largest boat builder in this country, But like all of the U.S. we want to keep everybody working , So we build more & more , Just like the Auto Industry ,
    The Boat Business Will never Be The Auto Business, Realy Do we need 1million cars built a Day, Do We realy Need So many Boat Built in one year,
    We Should be Asking Questions Like ?
    How Many People In The U.S.A, Would Want to Own A Boat,
    Just like they did a sences on how many people are in this Country,
    How Many People Realy Want to Own a Boat ?
    Then Build That Many Boats , Plus a Small Percent more.
    And Build that many Engines , Plus A Small percentage of , As the Industry says Loose Engines,
    The Boat Busness Will Be Back ,
    Not Like It Was , 
    So We all need to buckel Down the Hatches, Hang On ,
    Turn Your Attention To Service Of Our Engines ,
    Lets Keep The Good Old Boats Running ,
    Don’t Worrier (  We Will Be  ” Back “  )
    Thank You   Anthony
     
     
     

  13. Capt. LJ

    Yes,
    Times are tough but they have been tough before, we as dealers got caught up in the banks financing anyone or anything that had a pulse. They built and we stocked customers bought. Customers stopped and the train wrecked. FLOORPLAN COMPANY/S are picking the bones of the dealers and manufactures. A little regulating of the banks on how the get whats due them would help keep more companies from the same fate.
    Remember the flooring sources are the root system of these industry problems and should put in place kinder gentler aproach to this whole thing,, discounting or allowing dealers to short pay on floor planned product, this would help sell through feild inventory and get the industry at least out of the ICU and back to a position to change its lifestyle for a healthier future.
    Pigs get fat and hogs get slautered, lets do the things that it takes to never be led to slaughter by a artificially inflated excitement boom that comes from financing anyone who fogs a mirror.

  14. Chris

    Come on guy’s. What is at the core of the marine industries problems? You have boat buyers walking in to your location that want to buy a boats but they can’t qualify for the loan. You have dealers that want reasonable floorplan financing and can’t get it. You have builders like Irwin that would not have filed for BK if it was not for his so called banking partners. We have our trade associations asking for help from the gov. and other banks and they come up with the SBA loan program. I’m not knocking the program but it will only help a few. Let’s not get into all the trickle down company’s that are effected by credit issue’s.
    The core problem in our industry is clear. BANKS. We all counted on them to help us but they are having there own troubles. We as an industry need to take control of our own financial future. Most of you have read and heard from me regarding our own financial instition that is not controlled by one group or one person but controled by the Marine Industry. Yes I’m talking about a Marine Industry Federal Credit union that could be a BILLION dollar strong that helps the industry in hard times. Ask yourself  “what could a billion dollar financial instition do to help you with your business?” The sad part of starting our own credit union is that it would not be that difficult to make happen but we as industry can’t come together to make it happen.
    OK. I’m off my soap box and back to working trying to start our own credit union.
     

  15. Jef C Nelson

    O.k. maybe out of line here, but i remember not to long ago when toy’s were affordable. I paid 23,000 for a Ranger bass boat and a top of the line Ranger Commanche was like 7,000 more! Know you got about a 20,000 dollar difference between high end and low end bass boats. Why do we the American public put up with everything going up in price instead of coming together and driving prices down. Is it possible? the rich get richer and working america keep fliping the bill for them. How about making them flip the bill and giving something back to working america,how about keeping companies in america and making more goods and services here instead of letting companies leave and send their product back. If they leave because labor is cheaper then they should make it up in importing it back! The american people better ban together and fast before we all end up living in cardboard boxes!!!!!

  16. Chase

    Is Mr.Jacobs just posturing so that he can get a peice of the goverment bailout pakage, similar to the auto industry? Now that the bruswick supporting Bush clan is out of power and Mr. Jacobs freind Obama is in?

  17. pontoonguy

    This is the time to be with INDEPENDANT BOAT BUILDERS. These investment companies along with Brunswick and Genmar really don’t care about the dealers, they are after the numbers. Once they see they are not getting the return on their investment, they are gone. The family owned businesses have their name at stake and usually dealers that have been with them for years. Get in business with a independant boat builder and you will feel like part of a family not a dot on the map.
    Premier, Crest and Avalon are the top independantly owned Pontoon builders.
     

  18. B Myers

         Housing, Boats, Automobiles, The real problem is lenders (not necessarily banks) making loans to people who are not responsible with credit and can not afford to pay back their debts. Then the Government mandates that a certain amount of a lenders loans be made to people so they can have affordable housing, boats, cars, When our country starts to realize that you have to live on less than you make we will all do well again. dealers and lenders are willing to do anything to make a sale including making people who do not qualify look better on paper so they can get the loan.  In response to Mr. Nelson’s  statement about driving down the cost of the boats.  When you live in a free market you have to take the good with the bad. If you want a higher quality item you have to pay the price or settle for a lower quality and a lower price. The “rich” get richer because they keep doing the things that made them “rich”. The “poor” get poorer because they keep doing the things that made them “poor”. Like buying homes they can not afford, cars they can not afford, and boats they can not afford.       

  19. Gordon Schwarzer

    An old saying,
    “Banks will lend you an umbrella when the sun is shining, but
    want it back when it starts to rain”.
    This being true 40 years ago, so nothing has or will change.
    Our big government doesn’t help.  Have a great year!!!

  20. WW

    Think about what is really happening to drive the Mfg. into BK!
    When sales stop the dealer files bankruptcy. The floor plan Co. then has a recourse agreement with the Manufacturer requiring the Manufacturer to repurchase the inventory on floor plan. When multiple dealers close the Manufacturer is forced to use all of its cash to meet its recourse obligations. When the banks refuse to lend to the Manufacturer to meet the recourse agreement the Manufacturer is forced into bankruptcy, just to stop the drain. This is not a management problem at the Manufacturer level but once again a Lending problem that is caused by the most inept individuals in the world (the Bankers). If these Banks had any brains at all they would give the entire industry some breathing room and thing would self correct and be profitable. The Banking industry has no concept of how to manage the foreclosure problem if they would finance the foreclosures at all levels instead of dumping, and even retail finance the product, the Banks, Dealers and Manufacturers all could come out of this in a far better position than the total destruction of the industry.
    It just seams to be the absolute stupidest business model ever devised. You force the dealer into bankruptcy and take back the inventory. Then you force the Manufacturer into bankruptcy by recourse. Then you refuse to retail finance the units because the unit has no warranty. So now the inventory held by the Bank is worth pennies on the dollar and you have to sell it for cash! How does any of this make business sense.
    Unfortunately under these conditions I don’t see how any Manufacturer of any Recreational Product can avoid Bankruptcy if they have a recourse agreement on the floor plan. You would have to have pockets so deep you couldn’t find the bottom. Irwin didn’t, who else does.

  21. Ken Lucas

    There are way too many boat lines for a fewer buyers.  Even with Genmar, do we really need Larson and Glastron.   How many different ways are there to design a deck boat.

  22. common sense

    Manufacturing 101 – Build things people want to buy, Build what is sold, dont leverage your business, treat dealers with respect, treat customers with respect, get dealers to help the manufacturer by providing a program that helps them. Let the market drive your business, dont be so arrogant that you believe you can drive the market. Think about your manufacturing business as if you were building it in your garage – In that environment you cant assume anonimity allows you to be greedy and unethical.
    Ask yourself – Why am I building it, who wants to buy it,  I want to build good quality so I will get repeat business, I have to be honest so people will keep dealing with me.
    It aint much more than that.

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