Q&A with Chaparral and Robalo Boats president Jim Lane president and vice president Ann BaldreePosted on Written by Reagan Haynes
Chaparral and Robalo president Jim Lane does not want to come across as boastful when he talks about how the two brands have weathered the recession.
Still, he and vice president Ann Baldree are proud of what the publicly held and conservatively run company has been able to accomplish from the development of its 1 million-plus square-foot production site to the successful launch of H2O. In 2011, the companys 18-foot to 19-foot market share was about 1 percent in the second quarter. In the second quarter of 2012, it was 13.31 percent. Its share of the 19-foot sterndrive fiberglass market is even greater 20.71 percent.
They speak affectionately about their employees, and even their competition, and their open-door work environment seems to foster a sense of inclusion. The companys third-quarter profits were up 75.9 percent, and year-to-date profits are up 91.1 percent.
Q: I loved the stories about how you dipped into cash reserves to help support your dealer network when the recession hit. Can you talk about that?
Lane: As we came out of the downturn, not that were actually out of it, but as we started to see some improvement we thought of some other areas that deserved some attention. We had a plan, and we stuck with it. We didnt go into debt. We just dipped into our cash reserves. We had significant cash reserves because were conservative in how we run our company. We had to commit a significant portion of our resources to make sure our distribution channels stayed constant. Thats just a sign of good management that you have a sufficient amount of resources to do whats necessary.
We took out $18 million to help support the dealers. We also committed a significant amount of resource dollars to R&D to keep a steady stream of new models coming into the marketplace. Just since 2008 or 2009, its rather spectacular the amount of new product weve developed, including boats like the 327, which won an NMMA Innovation Award. Chaparral and Robalo have introduced 29 new models since the 2008 model year.
Q: Its really impressive to invest in that kind of commitment to your distribution channels. Not all builders did that.
Baldree: It was a very bold move. Jim and Buck [company founder William Buck Pegg] decided to dip into all that cash we had for the first time in the companys history. It was the first time we were not going to make money. We have shareholders to think of, and we had to tell them that after 450 consecutive months of profitability we were not going to make money.
Lane: I told them we have dealers out there who need our help. We turned the boardroom into the war room (laughing). We needed the right amount of assistance. It was a big commitment. And the interesting thing about the board of directors was it was never even a question. They said, You guys do what you need to do to protect the business and protect the distribution channels.
Baldree: We also maintained our commitment to education. We have awarded almost $200,000 in scholarships to children of our employees; thats something we didnt forfeit in the downturn. Thats one of the things our company probably doesnt rattle its own saber about as much as we should, but its something were very proud of internally.
Q: Can you talk about some of the employee benefit programs you rolled out at a time when many builders were cutting back?
Lane: When you look on our website you can read the report issued to dealers called Strength and Stamina. It showed why during the downturn we were the right company to do business with. Another thing people are amazed at: We have well over a million square feet of space. (There are 1,206,318, to be exact.) I have heard it said that we are one of the largest facilities in North American all in one place.
During the downturn we had our series of plant closures and days off. As we started to see light at the end of the tunnel our leadership team recommended some rather interesting proposals to make sure that all of our employees were on board as we were starting to hire back a large number of people.
In 2009, we dipped to an employee count of 270 and have now rebounded to 585. We realized during the downturn people struggled, so we wanted to improve benefits and make people more committed to our company. We did that by upgrading pay standards, benefits and vacations. Hourly workers, we let them have the opportunity to earn paid time off [by having exceptional attendance].
Q: You mentioned some great success with the H2O product line. Can you tell me about that?
Lane: Its been a nice success story for us. We realized some product lines are not as successful in this marketplace as they were, such as cruisers, so we decided to introduce a market that we cut our teeth on when we first entered. Our dealers were a little skeptical initially because they were not accustomed to selling entry-level boats, but these boats allowed them to reach out to new customers.
Baldree: It brought completely new customers into boating.
Lane: The contribution those little boats brought back allowed us to be more profitable on other boats, too. It was win-win for us.
Baldree: The dealers are very excited. Theyre totally behind this project. It wouldnt be successful without dealers being behind it. They have generated the excitement within the dealerships, and its brought in a lot of first-time boaters. We determine the best dealers in an area. We dont automatically give Robalo to a Chaparral dealer. We do have some that carry both, but each one is vetted differently.
Lane: One of our philosophies is we feel success is based on relationships, not transactions, and that goes for our employees, our suppliers and our dealers. We put that in almost every presentation we do, and I think thats true.
Baldree: We spend a great deal of time as a company and leadership team to define mission, vision and values. Were very proud of those. We do it all with unyielding integrity and honesty. Theres nothing that describes our company better than the way we treat our employees fairly and honestly. We have a lot of employees that have stayed on 15, or even 30 years. Most of our employees who have been here a long time help steer the company. Jim and Buck have a very open-door policy when it comes to opinions or recommendations. They always listen to us and seek our opinions.
Q: How did the investment in your dealer network pay off for Chaparral and Robalo?
Lane: Back before the downturn, there were plenty of dealers and plenty of business for everyone. Today we have 30 or 40 percent fewer dealers. We have a comparable reduction in the number of customers, or even fewer. So competition is more dynamic than its ever been. I dont like it nearly as well because you dont like having to feel like youre competing for every dealer and every deal.
Dealers are taking on many brands because their margins are so low, and they need something to help offset that. The business isnt quite as fun as it was, but businesses that are operated in a fiscally conservative manner are still those who are going to be successful. I think weve proven our middle-management team and employees are capable of stepping up and competing, but its not as much fun anymore. Its just a different world, and were all trying to find a way to be successful.
We dont want to appear like were gloating. We dont want to be arrogant or rub anything in peoples faces. Ive got a lot of friends who are boatbuilders and I dont want any of them to think were saying were better than them. Were just proud of what weve done.
The real success story for us, too, is in the success of our dealers because we can build any boat that we want, but really, when it gets down to it, where the rubber meets the road is distribution. No matter how good the boat is or how conservative we are in operation, the dealer is the one who has to take the boat to the customer and convince the customer that we have a good product.
Baldree: And we listen to our dealers and seek their advice.
Lane: In real estate its location, location, location. In boatbuilding its distribution, distribution, distribution. Thats why weve worked so hard. As I mentioned, the competitive atmosphere is more tense than its ever been. Dealers might be looking at us and four or five other brands.
Q: Do you think there is enough market and distribution for all of the builders to stay competitive?
Lane: I think its an interesting question: Will there be fallout or consolidation, or will companies just operate at very low margins? Back in the old days we had very high margins and very high profits. I ask myself the same question: How do all these boatbuilders make a good living in this market? Some sold out, some got out and there arent enough distribution channels and customers for everyone to be successful.
I dont know how the industry will get past that. Theres not enough business for all of us to be very successful. In the long run you would think there would be more consolidation.
The boat business is a very concise group of people that enjoy boating. Thats why I was telling you before its not as much fun as it was in the past because a lot of boatbuilders that Im such good friends with we are more competitive in the marketplace than we have been in the past. When things are super-competitive, feelings get hurt.
This article originally appeared in the December 2012 issue.