Q&A with Nautic Global Group CEO James Malone

Posted on Written by Reagan Haynes

qa1Jim Malone began his tenure at Nautic Global Group in October and he’s going out of his way to make it clear he’s not the type of CEO Nautic Global Group dealers might be accustomed to. After two months on the job, he invited key dealers to ask him tough questions in an open forum — in front of the boating press.

Nautic Global Group builds Godfrey pontoons, Hurricane deck boats and Parti Kraft pontoons, as well as the Polar Kraft and Rinker brands.

A longtime boater, Malone might be new to the industry, but he has led several Fortune 500 companies through transitions. He is senior managing partner at Qorval and he headed the crisis consulting team for IniCom Corp., a public company with 1999 revenue exceeding $5 billion that filed for bankruptcy in the summer of 2000.

He formed Qorval to emphasize saving, improving and rehabilitating companies instead of liquidating them, according to Qorval’s website. His experience includes heading Avborne Inc., one of the 10 largest aviation maintenance, repair and overhaul companies in the United States. He also implemented an initial $110 million in cost savings at Jackson Health Systems, the third-largest public health organization in the country.

Also on his resume is a stint as chairman of Brown Jordan International Inc., a company that designs, manufactures and markets luxury furnishings and accessories to residential and commercial customers around the world. It’s no surprise, given this background, that he seeks to tap what he calls an underutilized parts and accessories business, which now accounts for less than 0.25 percent of the company’s overall profits.

Malone and Nautic flew reporters (including me) and dealers to South Bend, Ind., where the company is based, and hosted a dinner, a breakfast and a question-and-answer session moderated by Matt Gruhn, president of the Marine Retailers Association of the Americas.

Malone sat down with Trade Only for a question-and-answer session regarding the industry and his background. He speaks candidly and off the cuff, which seems to both unnerve and delight the team around him. (See story, Page 26).

Q: Can you give me some insight into your background, and what drew you to this industry and this company?

A: In many ways I feel like coming here is coming home. I went to school in Indiana, and a good part of my growing up was in Indiana, and my early boating experience was in lakes in northern Indiana and southern Michigan. Aside from that, I’ve been involved in boating for the last 25 or 30 years. I’m long on boats.

Q: You mentioned that you were a Hurricane owner prior to stepping into this role.

Malone says Nautic has "a name that allows us to do a lot of things." The 29-foot Rinker Captiva 276 BR is shown.

Malone says Nautic has “a name that allows us to do a lot of things.” The 29-foot Rinker Captiva 276 BR is shown.

A: I am a Hurricane owner and a Polar Kraft owner. And due to me not being involved in the Nautic Global Group until recently, I’m also the owner of a number of other brands that will go nameless. It was just a circumstance of time and opportunity and enthusiasm and a knowledge of the industry. This is the first time in probably 25 years that I haven’t spent the better part of the winter in sunny Florida. And here I am in cold, though today sunny Indiana, and I’m happy to be here.

Q: How do you think your background in industries other than boating can be a potential asset?

A: Well, I actually think in every situation that I go in that it becomes an asset. And this may sound crazy, but it allows me to ask really stupid questions and not feel bad about it. That’s one of my skill sets, I guess. I can ask questions and not be accusatory in nature. It’s because I don’t know. It’s very helpful and it sometimes allows the people that are in place when questioned about why this, that, or ‘have you thought about this or that?’ — it allows a conversation where people don’t have to feel defensive about what was done. And it allows an opportunity to think about or ask the question why this is the way this is. And it allows me to learn at the same time in a non-defensive way.

Because when you go into a company as an outsider, if you go in on the basis that you know what you’re talking about, you’re making a huge, huge mistake. But you go in with the understanding that the people in place know what’s going on and have a great idea of what needs to be done and a way to go and do it. I’ve been lucky enough or smart enough to have people feel comfortable enough to say what needs to be done and empower them to go do it. So I think that needs to be part of it.

Q: You’ve spoken a lot about the dealer network and its role. Can you talk about that with me?

A: Our relationship with our dealer network has to be the centerpiece of our success. I think any company that does business through a dealer network, if they think the dealers are their enemy, or somehow resent a dealer’s success, or don’t understand the dealers’ needs — not that we’re perfect, because we’re not — but I do think, from an attitudinal point of view, we’ve been able to be helpful to the sales and marketing group to be successful in a short period of time in having all 900 of our associates understand that the centerpiece of our success has to be our dealers’ success.

We make boats and we sell boats and, if we don’t have dealers out there selling boats, then we don’t have anything to make. It’s just that simple.

Q: We heard a lot from the dealers today regarding the claims and warranty issues. Can you talk about how you want to move forward in that and continue to grow your parts strategy, as well as address the warranty concerns that some of them have discussed?

A: Well, I got a lesson in warranty today. Shame on me, but it didn’t occur to me that the dealers view warranty as a profit center. It sure as the world isn’t a profit center for the manufacturer. You want to have as little of that as you can. But in fairness to the dealer, if there are warranty issues and they’re taking care of them we want to be sure that it’s in their interest to be done right. So I stand corrected on that issue.

Parts are a very, very tiny part of our business, and they shouldn’t be. We have a huge installed base throughout this country, and in terms of the percentage of our overall revenue it’s less than two-tenths of a percent. It’s crazy. That ought to be a profit center.

In the past, the way we’ve handled parts has kind of been viewed as a pain in the neck instead of an opportunity. We have made great strides in that. It’s not something we’re going to make great strides in: We have made great strides. We have cut our parts time. We had over 5,000 orders that were late, and we’re down to 348. Now that’s still 348 line items we ought to have out the door and in the hands of our customers, but this is something that is happening.

We fully intend to make it an important part of our advantage for our dealers dealing with us — that they have faith and confidence that they have the parts they need so they don’t need to find alternate sources, so they don’t need to invent this solution themselves.

Malone says Nautic has 75 percent of the outboard deckboat market. The Hurricane Sun Deck Sport 232 is shown.

Malone says Nautic has 75 percent of the outboard deckboat market. The Hurricane Sun Deck Sport 232 is shown.

Q: Especially when you think about the numbers we hear regarding the aging fleet.

A: What an opportunity — for both of us. Parts is a high-margin business. If you doubt that, try to buy a part for an airplane or your car. It’s a breathtaking experience.

Q: You touched on the 75 percent of market share you enjoy in the outboard deckboat market.

A: It’s a beautiful thing, isn’t it?

Q: It’s quite a position to be in. When you see how that segment is faring against others that have been more continually challenged, can you talk about some of the competition and the advantage you see having been participating in this segment almost singularly for so long?

A: Yeah, almost 40, 50 years. So there can be no doubt in any dealer’s mind that we’re around. During the recent downturn we never stopped production, and not many boating companies can say that. So there’s no question in our dealer network’s mind as to our consistency and our constancy of being of service to them, our constant innovation. And yes, we’ve got 75 percent in the outboard deckboat market, but gosh, we’ve only got 50 percent in the overall deckboat market, so there’s room to grow. And the segment’s growing. We fully intend to be aggressive — not just in protecting, but in growing the segment and growing our presence in the segment because if you don’t do that, then you’re going be to run over. It’s not a question of whether you’re going to get run over. It’s just a question of when.

Q: What are some opportunities you see for growing deckboats and other segments?

A: To continue to innovate. And that’s to your question of reacting to or anticipating the market: This one we’re doing in anticipation because we’ve got a lot of people nipping at our heels and we’re very, very anxious to be the car being chased by the barking dog. And the issue will be what happens when they get run over.

Q: Can you speak any more specifically about any innovations or plans that might be on the horizon?

A: I’d have to kill you (laughing). You know, we are very, very excited about new Hurricanes that are on the drawing table and in the manufacturing process. People will be seeing them at the next dealer show and seeing more of them at the next dealer meetings. It’s breathtaking stuff.

Q: What do you see the market looking for, and where might the industry not be meeting the demand?

A: I think there are two ends of the spectrum, and on one end is size and capability and utility and at the other end of the spectrum is a continued terrific value.

Q: Talk to me a little bit about value. It’s been a big topic lately, on top of the aging of the boating population. Can you talk about that?

A: I suppose you’re trying to put me in that aging category! I’m after you on age discrimination. I mean, look, it’s just demographics. That’s what it is.

Q: Well, put differently, how do you attract a generation that might not have as much monetary flexibility?

A: Well, when we were that age we didn’t have much monetary flexibility, either. I just think it’s been hurt the last five years because of a sick economy and a sick way of looking at having the economy recover. So have we lost five or six years as an industry of potential young people, such as yourself, coming into the industry? Yeah. And I think that’s a direct reflection of the economic policy of our country.

Now without going any further into the politics of that, I just think it’s delayed. I don’t think it has eliminated the entry of younger boaters, but I think it has delayed it five years. So do I think that part of the push we’re seeing in a couple of our segments is because those people are getting more confident about an improving economy and improving job prospects and a more visible career path? I think it’s yes. So I don’t have any reason to believe that young people — and I’m not an expert in this, so part of what I’m telling you is from my gut and my instinct — but I don’t see any reason that I’m aware of that young people aren’t boating. People love boating, but for five years economic uncertainty kept people out of the market. It doesn’t have anything to do with whether the boating industry has fallen out of favor or not. I think it just has to do with people’s ability to have discretionary income.

Q: How do you factor in all the choices people have about how they’ll spend their free time, especially when many families these days have two full-time working parents? That’s partly an issue of the economy, but that happened 10 years ago as well.

A: That started 20 years ago.

Q: So how then do you make boating stand out, and to segue into affordability, how does a certain price point play a role in attracting people to the industry in general?

A: You know, to buy a good set of golf clubs and to play golf, and I happen to be a lifetime golfer, is not an inexpensive decision. You can spend four hours on the water a lot cheaper than you can spend four hours on a golf course. You can buy a boat, a WaveRunner or a jonboat for not a lot of money. It all has to do with the millennials’ expectations of where they should be allowed to start and where they want to start. So if somebody is passionate about getting on the water with a Zebco 33 closed-bail fishing rod and some plastic worms in a jonboat, they can do that for, I don’t know, a couple thousand bucks. But if they want a Hurricane 2690, it’s going to cost them more than that.

So I would argue there are ample opportunities, from a WaveRunner to an aluminum boat, to have entry-level [access to boating]. But people’s anticipation of where they would like to enter the market is maybe a little outside of their means. But as the economy improves, and as people get older and get more comfortable in their career path, I personally don’t see how the same number of people [won’t] choose boating as they have in the past. And in fact, I think of the comparison with golf — and I could be slightly wrong in this, but directionally I’m right — for the past 10 years the amount of rounds of golf played per year has dropped by 1 or 2 percent per year. In a way, that speaks to the concern of how families spend time together. I would advance that part of the reason the numbers of rounds of golf have diminished is the time commitment of it. You don’t have to commit five hours to go boating. You can commit an hour and a half and have a lot of fun boating. So I don’t share the pessimism around that.

Q: What about the pontoon segment? This has been an energized segment. What do you see coming there? I hear some say it can’t maintain this momentum. What do you think?

A: Nothing goes up forever, but I don’t think we’re at the inflection point now in pontoons at all. I think we have to remember we can’t get enamored with the percentage increase because it’s coming off a relatively low base, given the economic crisis that we’ve all lived through. I think it continues to improve, both in the average selling price as well as the number of units. But do I think it continues at double-digit growth? Not as a segment, but for those with a strong position in terms of our share, we anticipate driving that.

Q: You have alluded to growth before today. Are you looking at branching out within the brands you currently have or considering achieving that expansion through acquisitions?

A: You asked earlier about what attracted me to the company and the industry, and I talked about those things that were generically right. But given that question, one of the fascinating things about our company is the name of it. Nautic. Global. Group. That leaves a wide-open pallet that is up to us to paint what that looks like over the coming years and over the next business cycle we go into.

Nautic Global Group can include lots and lots of different things and stay within the boundaries of our name. That’s the limitation I see, and that’s not much limitation. So we love the way we’ve got ourselves positioned. In the segments we’re currently in, we build that foundation; we understand it’s a great big, wide, wonderful world out there, that we need to populate this firm with some of the best and most talented people in the industry; and we have a name that allows us to do a lot of things.

Q: How does being privately held factor into what you want to do? Do you think being public or private makes a difference, having led both?

A: I have had the privilege of running very, very large multibillion-dollar public companies and private companies, and there are advantages and disadvantages to both. I’m not trying to parse words here. Right now I like where we are as a private company. Particularly when you’re rebuilding and the industry is healing itself and a company is healing itself, I think it’s an advantage to be a private company because you have ownership that can take a longer view than just a quarter-to-quarter-to-quarter [pressure] over your head.

That’s not to say we don’t have that pressure. We’re paid to have that pressure and deal with things with opportunities and innovations. But you can deal with them with a little longer-term view than if you’re under the hammer of your stock price quarter after quarter. There are advantages and disadvantages to both. Right now, we are advantaged by being a privately held company.

This article originally appeared in the February 2014 issue.

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