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Jacobs says Brunswick's strategy is flawed

I am outlining some of my thoughts and candid views regarding the recreational wholesale and retail boating market in conjunction with what I believe is going to create both several opportunities as well as some very difficult times for certain boat manufacturers and dealers in the recreational boating market in 2007 and beyond.

Although the recreational boating industry has not been exactly robust over the past two years, there surely has proven to be several independent boat manufacturers and dealers who have been able to more than hold their own and in several cases certain manufacturers and their dealers have even grown their businesses in spite of the fact that the market overall has been flat to down.

I believe that Brunswick’s acquisition binge of several boat companies over the past three to four years has up till now proven to be nothing short of a disaster for Brunswick. Based on the public information available both from Brunswick itself and from Statistical Surveys, I don’t believe there is a single boat company that Brunswick has purchased over those three to four years that are better off today than they were at the time that Brunswick purchased them. In fact, most of them, if not all of them, have continued to substantially lose market share and business far in excess of the overall difficult market conditions.

I further believe that Brunswick’s poor timing of being extremely aggressive in purchasing the boat companies they acquired over the past three to four years is going to offer several of the well-run independent boat builders and their dealers a golden opportunity to grow their businesses in 2007 and beyond at the expense of Brunswick, even if the retail recreational boat market continues to show little or no growth in 2007 and beyond.

The fact that the independent boat builders and their dealers have the flexibility to offer the retail customer their choice of engines, I believe that it in itself is enough to take market share from Brunswick’s boat companies. Whereas Brunswick offers, for the most part, only their Mercury engine products and the fact is by their own admission, Mercury has outright lost market share for their engines over the past several years in the U.S.

A further fact, I believe, is that Brunswick’s overall strategy to become a vertically integrated marine company is flawed for the simple reason that in order for Brunswick Boat Companies and their Mercury Engine Company to grow they cannot do it without the support of the independent boat builders (their competition) and their dealers.

Therefore, my conclusion is simple “why would any competitor of Brunswick’s want to help them grow there businesses at the same time that Brunswick is competing against them every day in the recreational boating business?”

I believe the answer is quite simple and I predict that Brunswick is going to continue to lose market share and businesses both in the boat and engine business to the well-run independent boat manufacturers and their dealers who compete with Brunswick Boat and Engine Company. In other words, even with a continued difficult boating market I believe there is going to be a lot of business out there for the taking.

Irwin L. Jacobs

Chairman and CEO, Genmar Holdings

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