Top stories of 2009

There weren't a lot of positive stories to tell in the marine industry in 2009. It was a year that saw the collapse of the world's second-largest boatbuilder, countless industry workers facing long-term unemployment, dealers struggling to pay rising interest rates on floorplan loans, and falling consumer confidence.

Despite the many challenges, there were boats sold in 2009, and there will be boats sold this year, though many veterans acknowledge that sales levels may not return to where they were in the mid-2000s for some time.

So it's no wonder that - once again - we've chosen the economy as the top story of 2009. As one year ends and another begins, the editors of Soundings Trade Only compiled this list of the top 10 stories of 2009.

1. The Economy - In the fall, economists declared the recession officially over as the nation's gross domestic product began to rise slightly in the third quarter. But what economists say and what consumers feel often are two different things. Consumer confidence remained low, the housing market was still flat, and the unemployment rate held fast in double digits as the year closed.

The sputtering economy changed the way the industry does business. Manufacturers could no longer crank out boat after unsold boat. Dealers could no longer finance more floorplan and stock model after unsold model. Last year was a year of downsizing.

Marine companies furloughed and laid off thousands of workers, and in July Soundings Trade Only reported that the National Marine Manufacturers Association estimated 17,600 direct manufacturing jobs had been lost in the previous 12 months. The Marine Retailers Association of America estimated employment at dealerships was down 40 percent.

Brunswick Corp.'s Mercury Marine saw its Fond du Lac, Wis.-based union workers vote down a contract with concessions to the company. But when Mercury said it would close the Wisconsin operation and move to its Stillwater, Okla., facility, the union backpedaled and agreed to the changes. The company now plans to shut down the Oklahoma plant.

If the story said ‘Genmar,’ you read it Genmar Holdings’ Chapter 11 bankruptcy filing dominated the top 10 Trade Only Today stories of 2009, accounting for seven of the most-read stories in the daily e-newsletter. “Genmar files for bankruptcy protection,” posted June 2 — one day after Genmar’s filing — was the top story of the year and is the second most-read story since Trade Only started tracking such statistics. “If someone would have said to me as recently as even one month ago that Genmar would someday be filing for Chapter 11, I would have said it was not even a remote possibility,” Genmar chairman and CEO Irwin Jacobs said that morning. “I’ve always looked for ways to enhance Genmar’s balance sheet and felt that even though business conditions were incredibly difficult, there were alternatives available,” he added. “Unfortunately, I didn’t have the necessary time to complete any of the alternative financing acceptable to the banks.” “Genmar moves from reorganization to sale,” posted Oct. 30, comes in second on our list. Until this time, Genmar had been looking to reorganize, but court documents showed a sale of its assets was imminent, and Jacobs confirmed he would bid for the company. “Unfortunately, I can’t give you the information for that right now because it’s not public, but I plan on being a bidder for the assets and continue the business as it is,” Jacobs told Soundings Trade Only. “I tried to do the reorganization and couldn’t get the cooperation of everybody necessary with which to do it. I was going down that path and, frankly, had what I thought was — in place — a transaction to do it. But there were people who weren’t cooperating with it, so I had to go in a different direction.” The article that publicly named the “stalking horse” bidder in the Genmar case was the third-most-read online story of the year. “Genmar working with stalking horse bidder” was posted Nov. 30 and detailed plans by Project Boat Holdings LLC, an affiliate of Platinum Equity, to purchase the Ranger, Stratos, Champion, Wellcraft, Four Winns, Glastron and Larson boat lines, and facilities in Flippin, Ark., Cadillac, Mich., and Murfreesboro, Tenn. The proposed purchase price was $55 million, according to court documents. “More details on Genmar’s Chapter 11 filing” was the fourth-most-read story of 2009. The article, posted June 2, provided more information on the Minnesota company’s bankruptcy filings. On Nov. 10, Trade Only Today reported that Jacobs was stepping down as head of Genmar to pursue a sale of the company and avoid a conflict of interest. In the article, “Jacobs resigns as head of Genmar,” Jacobs said, “I’m keeping all of my options open. Everyone will just have to wait and see what the outcome is. I’ve stepped aside. I resigned from the board so that I’m free to do whatever I want to do. Otherwise, it would obviously be a conflict.” This single article — the fifth-most-read of the year — drew 40 comments, the most to date for any one Genmar-related article. The remaining top 10 stories are: 6. “Audio Exclusive: Jacobs talks about Genmar bankruptcy,” posted June 3. 7. “Fountain files Chapter 11,” posted Aug. 24. 8. “Industry reacts to Genmar bankruptcy,” posted June 3. 9. “Hard times continue for manufacturers,” posted March 4. 10. “Three manufacturers announce cutbacks,” posted Feb. 26.

Lending - both retail and wholesale - remained challenging in 2009, as those looking for loans needed higher credit scores and down payments. In February and March, dealers were largely caught off guard when GE Capital announced rate hikes it said were necessary "to provide the level of service and liquidity the industry     requires."

In October, NMMA president Thom Dammrich projected sales of 135,000 new boats in 2009 and about the same number - possibly a few more - in 2010. He said the industry probably would build just 52,000 new boats in 2009, but he expected that number to climb to 135,000 in 2010 as inventory levels continue to drop.

By the end of 2009, most industry veterans agreed that 2010 would be another tough year, but not as bad as the last one.

"Our forecast is certainly brighter for 2010 than it was for 2009, even though the retail sales increase may only be minimal," Phil Dyskow, president of Yamaha Marine Group told Soundings Trade Only. "In 2010, we're likely to return to a more normal environment. ... The most promising piece of information circulating right now is the fact that the boating lifestyle has never been more popular."

2. Bankruptcies/dealer failures - An increase in bankruptcy filings was an unfortunate reality in 2009, with many companies seeking court protection as they reorganized or sold assets.

Ritz Camera Centers, parent company of Boater's World, filed for bankruptcy protection in February and closed its 100-plus Boater's World Marine Centers. In August, Fountain Powerboat Industries filed for Chapter 11 reorganization, which is ongoing. But the biggest stunner was Genmar Holdings, the world's second-largest builder of fiberglass boats, which filed June 1 for Chapter 11. Later in the year, the reorganization changed to a sale and it looked as if the company's 15 boat brands would be sold off, breaking up the empire that Irwin Jacobs built.

The final chapter in the Genmar saga should be written this year (see story on Page 16). Only time will tell what this will mean for the more than 1,000 Genmar dealers and the company's approximately 4,000 unsecured creditors.

Dealership failures also became more common in 2009. MRAA president Phil Keeter predicted another 400 to 500 dealerships could close by mid-2010 as retailers struggle to balance meager sales with operating costs.

3. Repossessions/inventory liquidations - As dealers failed and consumers no longer could afford loan payments, boat repossessions and liquidations skyrocketed last year.

As evidence of this trend, Skipper Bud's, one of the largest dealers in the Midwest, launched the Midwest Marine Repo Center in Oshkosh, Wis. The location was so successful that the Repo Center later expanded into the Ohio market.

CrankyApe.com, a leading supplier of repossessed vehicles and boats, landed on Inc. magazine's 2009 list of 500 fastest-growing companies in the United States. And in the last week of December, National Liquidators, the country's largest vessel recovery, custody and remarketing company, was advertising more than 400 boats for auction.

"I'm looking at another six months to eight months of a purging process to get things back to some normality, meaning inventories in line, repossessed inventory out of the system," Genmar's Jacobs told Soundings Trade Only late in 2009. "People don't realize the repossessed inventories are the best buy that's ever been made in the history of this industry."

4. Inventory control - The past year saw boat production significantly reduced to bring it in line with sales. The result: plant closings, layoffs and furloughs.

Inventory control was a hot topic at November's Marine Dealer Conference & Expo. "This whole inventory situation is quite multifaceted. We ... said we've got to attack this thing at three levels," says Dusty McCoy, chairman and CEO of Brunswick, the world's largest boatbuilder. "We've got to attack it at production, wholesale and retail. Let's never get in this situation again. We've got to have real dialogue throughout the industry. Our industry's got to move from thinking wholesale to thinking retail. Ultimately, every discussion has to be, 'What does the consumer want?' "

"I'm a believer in a made-to-order type system, but you'll never reach 100 percent," says dealer Alan Bohling, of the Seattle Boat Co. "I know for a fact that we can hit 50 percent and maybe a little bit more of presold, made-to-order boats. The way we can presell boats is when we can convincingly tell the customer the date and the time their boat will arrive."

By the end of the year, some manufacturers, including Brunswick, Centurion and Cigarette, announced plans to bring employees back as production ramped up.

5. The SBA loan program for marine dealers - The Small Business Administration created a new dealer floorplan pilot program last year. Beginning July 1, boat, auto and RV dealers could apply for SBA-guaranteed floorplan financing to enable them to borrow against inventory and increase cash flow.

Dealer floorplan loans of $500,000 to $2 million are available under the SBA 7(a) program. The loans must be repaid within five years and are 60 to 75 percent government-guaranteed. Most marine dealers, however, couldn't find lenders that would participate in the program. By year's end, only a few marine dealers had been able to get into the program.

"This is brand-new for us. This has been a tough sell," SBA's Ralph Ross said at the Marine Dealer Conference & Expo. "It may be that the banks just do not like your industry. It seems almost irrational. You have to teach them about your industry."

The program runs through Sept. 30 this year, at which point the SBA will decide whether to extend the pilot, end it or make it a standard part of its lending programs.

6. Boat shows, MAATS canceled - The economy forced the cancellation or postponement of many shows in 2009, and that trend likely will continue into 2010. Among the shows discontinued were the Virginia In-Water Boat Expo & Sailfest, Schaumburg (Ill.) Boat and Sportshow, and the San Diego Boat Show, all produced by the NMMA. The NMMA also pushed the Liberty Boat Show, held in Jersey City, N.J., from October 2009 to April 2010 and canceled the 2009 shows in New Orleans and Toronto.

Other shows canceled for 2009 include the Washington (D.C.) Boat Show, Tri-State Boat & Sport Show in Evansville, Ind., Downtown Hampton (Va.) In-Water Boat Show, Charleston (S.C.) In-Water Boat Show, Racine (Wis.) Boat Show, and the Boston In-Water Boat Show.

The past year also saw the demise of the Marine Accessories Aftermarket Trade Show, also produced by the NMMA. MAATS now will become part of the International BoatBuilders' Exhibition and Conference, set for Sept. 28-30 in Louisville, Ky.

7. The fight against E15 - Growth Energy, a group representing U.S. ethanol producers, filed a petition with the Environmental Protection Agency in 2009 for a waiver to allow ethanol blends of 15 percent, or E15. The petition raised the ire of many groups, including the marine industry, who say the effects could be devastating. Ethanol in gasoline has been shown to damage marine engines, fuel systems, fuel tanks, and pollution control and safety equipment.

The EPA planned to make its decision about E15 in December, but that deadline was extended until mid-2010 (see story on Page 26). "While not all tests have been completed, the results of two tests indicate that engines in newer cars likely can handle an ethanol blend higher than the current 10 percent limit," the EPA said in a statement. "The agency will decide whether to raise the blending limit when more testing data is available. EPA also announced that it has begun the process to craft the labeling requirements that will be necessary if the blending limit is raised."

Meanwhile, legislation was introduced in the Senate last fall to protect boaters and manufacturers from problems associated with higher ethanol blends in gasoline. The Mid-Level Ethanol Blends Act of 2009 requires the EPA's Science Advisory Board to study the compatibility of such fuels with current engines before a waiver is granted.

8. Gains in the stock market - One of the few bright spots in 2009 was the resurgence of stocks, including shares of publicly held boating businesses. In the last week of December, the Dow stood at more than 10,500, a sharp increase from its 52-week low of 6,440 last March.

Brunswick Corp. posted significant gains per share last year, standing at more than $12 per share in the final week of 2009, up from its 52-week low of $2.06 per share. December also saw Standard & Poor's Ratings Services revise its rating outlook for Brunswick from "negative" to "stable," as the company reported $624 million of cash and cash equivalents, and about $120 million of available credit. These liquidity sources should be sufficient for operating needs in the coming year, according to Standard & Poor's.

At year's end, other marine businesses also reported jumps in stock prices from 52-week lows. In the last week of December, MarineMax was trading at more than $9 per share, up from a low of $1.19 per share; West Marine was at nearly $8 per share, up from $3.53; and Marine Products Corp. was at $5 per share, up from $2.99.

Also showing improvements were Garmin, which was trading at more than $31 per share at the end of 2009, up from $15.02, and Caterpillar, which was trading at more than $58 per share, up from its 52-week low of $21.71.

In their most recent quarterly earnings reports, many marine companies posted mixed results, though there were signs of improving conditions. Brunswick Corp., for example, reported a 36 percent drop in sales in the third quarter of 2009 compared to the same period a year ago, but it also showed lower inventory levels and an improved cash position. West Marine reported a nearly 7 percent decline in net revenue, but it also said it is debt-free for the first time in company history. MarineMax reported a net loss for the quarter, but also a same-store sales increase for the first time in two years. Garmin's total revenue fell, but its marine segment increased 3 percent.

9. Web 2.0 - Having a Web site is a must for any business, but we found out there's more to it than we thought. Web 2.0, the catchphrase for 2009, includes video, blogs and other interactive features on sites; tricks for search engine optimization; and the use of social networking sites like Twitter, Facebook, LinkedIn and MySpace.

We learned to "tweet" and keep our thoughts and marketing messages on Twitter to 140 characters or less. We created Facebook sites and invited people to become "fans." We joined LinkedIn to network with others in the industry.

According to The Nielsen Co., traffic to Facebook in 2009 was up almost 200 percent from 2008, and Twitter saw an increase of almost 1,500 percent. "Social media is no longer just for techies or younger generations. It has become a mainstream phenomenon," according to Nielsen.

"There are 20 million users of Twitter, 100 million YouTube users and 250 million people using Facebook," Boating Writers International board member Michael Sciulla said during a panel discussion at the Fort Lauderdale International Boat Show. "Let's face it, the world isn't cutting down trees and writing just in print anymore."

10. Weather - Mother Nature spared Florida and the Gulf Coast any major hurricanes, but she wasn't so kind to Northeast boaters. The Northeast endured its ninth-rainiest summer in 115 years of record-keeping, according to the Northeast Climatic Data Center. The region also saw its third-coolest July since 1895, with New England reporting the coldest temperatures.

"I really think the story of 2009 is the weather," Chris Squeri, executive director of the New York Marine Trades Association, told Soundings Trade Only. "The economy doesn't help, but ... as waterfront restaurants will tell you, weather dictates your business. They say location, location, location, but when it's on the waterfront it's weather, weather, weather."

The 2009 Atlantic hurricane season ended Nov. 30 with the fewest named storms and hurricanes since 1997, and for the first time in three years no hurricanes hit the United States. Nine named storms formed, including three hurricanes, two of which were Category 3 or higher. Two systems, Claudette and Ida, brought tropical storm force winds to the U.S. mainland.

This article originally appeared in the February 2010 issue.