Q&A with John Peterson. president of Hunter Marine Corp.

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John Peterson is president of Hunter Marine Corp., which is part of the Luhrs Marine Group, an employee-ownership company that builds Hunter sailboats, Silverton and Ovation motoryachts, Mainship trawlers and Luhrs sportfishing boats.

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Peterson, 58, joined the Alachua, Fla.-based company in 1994 as director of sales. He was named a vice president in 2007 and was promoted to his current position in September.

Before joining Hunter, Peterson worked in sales and marketing at Carver Boat Co. and Thompson Boat Co. He began his career with Allis Chalmers Corp., working in dealer finance with the company's Internal Credit Corp. He later moved to its engine division in dealer development and marketing.

Peterson earned a bachelor's degree in business in 1974 from Marquette University and a master's in business administration from Golden Gate University in 1978. He received an advanced marketing series certificate from the University of Wisconsin, Madison, in 2006.

Married for 35 years with five grown children, Peterson lives in Gainesville, Fla. He is active in Sail America, serving as its president for four years. He also is on the board of St. Patrick's School in Gainesville.

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Peterson's hobbies include boating, fishing, going to the beach and rooting for the Green Bay Packers, the University of Michigan and University of Florida football teams and Marquette's basketball team.

Q: You were recently promoted to president of the company. What are your immediate, as well as long-term, goals?

A: The environment we've been forced to compete in and work in the last couple of years has been tough. The morale of the longtime employees can get down in the dumps. So the first thing we want to do is get the morale back. Communication, we think, is the key, and we've held some little meetings to tell all of our employees about some of our successes across the world [and] try and make them feel more part of the team.

After two years of clawing and fighting and struggling, we really want to be serious about that now. We've developed a team concept in 14 different departments of the company. We've had some team meetings religiously now - once a week for 15-20 minutes. We're seeing a lot more empowerment of the employees; [they 're] taking much more interest in it. We are an employee-owned company - 30 percent of the company is owned by employees - so they have a vested interest in it.

Products are what makes a company strong and our dealer network out there is one of the best in the sailing industry, and we want to try and exploit that where we can. We have an aggressive product schedule. We haven't really geared back on that. Right now, we're looking at doing some OEM work for the first time. An example of that is the Gemini catamaran company that had been located in Annapolis; we are building their catamarans, starting shortly. We've built one already, we have another one that's down here, and shortly we'll be building them full time for them. So that's going to add some work to our factory.

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Q: How has Hunter Marine survived the prolonged recession? What steps have you taken to cut costs? How much smaller is your work force?

A: There's been some unbelievably tough decisions that have had to be made to right-size our company. I don't want to say downsize, to right-size it. We had a factory in England and we were a little bit ahead of the curve on that [when] we closed that and brought [it] back home in 2007, one of the best years we had in both sales and profits. So we lowered that overhead and actually are building out of this facility [in Florida] for the world, which was a great help when the U.S. economy went down fast and hard in October of 2008.

Our employment level was reduced by about half almost immediately. It has never really recovered because ... the market hasn't, either. We've had some rolling furloughs, starting in late 2008. At one time we had over 450 employees; we're down in the 200 range. I think there's 31 on furlough that we plan on bringing them back shortly.

We've been blessed with a real good work ethic out here in rural northern Florida and we're [doing] the best we can to keep everybody employed. We've gone to four-day weeks; we've gone to some job- sharing ideas. We're trying to be innovative and keep the best possible workers because we know that ... it's going to certainly be better than it is. We can already see that happening in front of us.

Q: What is your mix of international sales versus U.S. sales?

A: We're maybe two-thirds international, if you count Canada as international. Canada's been very good to us. We count that in our North American sales. So we're about 50-50. Outside of North America, hot spots continue to be France, followed by England and Australia and Germany.

But [there have been gains] in some emerging countries. We've put some emphasis on Southeast Asia - in South Korea, a couple of dealerships now in China and another one just coming on board.

From a sales perspective, our dealer network grew internationally almost fourfold. In the U.S. it's been a struggle to stay about even, but we have what I call the 18 major markets in the U.S. well-covered and the 14 secondary markets for the sail industry well- covered in North America.

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Q: How has your production model changed?

A: The pedigree of Hunter Marine has always been: let's not overbuild. Coming out of the sales and marketing area, I pretty much led the charge and ... we had a pretty good record. We sold everything we built every month. Usually the 30th or 31st of the month, we try to get down to a zero level at our yard and we watch our dealer inventory every month to make sure we have the right models and we don't get overloaded. We look at the [unsold] inventory at our dealers as an extension of us and we don't want to get overburdened.

That's one of our successes during this downturn. We had pretty good control of our field inventory going in and we got a little bit less restrictive [toward] the dealers for what they should carry. We cut that back quite a bit.

At one time we had 72 months in a row where we didn't have any inventory at the end of the month.

Q: Can you talk about the ripple effect that other manufacturers' furloughs and bankruptcies have had on vendors and your ability to get the parts you need?

A: The repercussions of the bankruptcies and the slowdowns ... and the surprise element of it ... certainly set the industry back. The supplier/vendor base in this industry's pretty tight and, as things slowed down, they got hit pretty bad. So they see someone that's producing every month, they say, well, ... we can get some cash flow there. I applaud all the vendors for hanging in there. It's a big trickle effect.

Last spring, when the market did pick up a little bit, it was rough [to get the parts we needed]. Some of the major components were pretty well strung out. I think their shelves were pretty lean because they wanted to be lean themselves and they couldn't react fast enough. So I think a slow ramp-up is probably going to be the best for the industry.

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Q: What do you consider the biggest challenges facing the sailing industry today?

A: Discretionary income for the average American is pretty rough right now. That's probably the biggest barrier. But I guess that would cross all recreation lines.

We've been a big backer of Sail America, the industry sailing association, by participating in almost any Demo Day they sponsor. We [work to] get people out on the water on a sailboat early in life so they can see the ... enjoyment of it.

With people wanting to stay a little bit closer to home [after the Sept. 11 terrorist attacks], and of course with the oil crisis and the gas crisis, that gave us a bit of a boost psychologically because sailboats are one of the most green products on the water.

We're a big advocate of those 32 dealers that make up the 'key' of our dealer network. Depending on size, they all align themselves with a sailing school and we really push them to either own that sailing school or have a close relationship [with it], so when someone comes out of lessons we can get our first chance with them. We call it the "next-step approach" - the next step to owning a boat or using a boat.

Another thing [is] SailTime, the fractional ownership company that we have an affiliation with. In North America, we're the exclusive supplier to them. They have 35 bases now in North America. They're up to 142 boats and they're all Hunter. That puts a lot of people on the water, in kind of a test mode, and dock talk sells a lot in this business. We can get people on the water for less cost and really train them that sailing is not just an elitist sport and it's not hard to learn.

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Q: The recent Annapolis show reported an increase in attendance. How was this show, as well as some earlier boat shows, for Hunter, and do you think increases in attendance mean the industry has turned the corner?

A: There's certainly a lot more positive vibrations out there this year than there were the last two years. I would say it's not as strong as it was. Will it ever be, I guess, is the question.

I try to explain it in terms of a tall building: The sailing industry, which Hunter is a major component of in the United States, had a potential to be a 50-story building and we were probably on story 42, 43, going for that top, and all of a sudden 2008 hit, and within a matter of five or six months we were down at ground zero. Now it's a long stairway up, there's no elevator and we're on the fifth floor, maybe, but I think we're only going to go to the 20th floor. We were hit pretty hard.

But the future is bright. These shows tell us there's definitely an interest out there, and it's also correlated with our website hits, which we follow very closely, and our lead system we have. With the advent of the Web, some of the buying frenzies that used to happen at boat shows are just not there anymore.

The Annapolis show is probably one of the last big sailboat-frenzied buying shows. We enjoyed that this year. For the first time in three years there was actually some real good business there. We count a sale when we know we have it at the show. ... Right now we're sitting in the mid-20s. These are large boats - boats over 30 feet. We did enjoy a good [reaction] to our 50-footer. That's our highest-priced boat and we sold eight of those. That was sort of remarkable. Large boats are the highlight right now. If you think about it, that income level is more insulated than the average 35-foot range; the average $150,000 boat [buyer] is a middle- income family. They're hit pretty hard with day-to-day living and the day-to-day news about what's happening in the recession. The confidence level has to come back and the banking has to come back, because those boats are financed heavily.

Q: How are you positioning and developing your product line moving forward? Talk about your mix of small boats vs. large boats, new technologies you are incorporating and where you're investing most of your R&D dollars.

A: We've been extremely successful in providing a lifestyle boat and we've always said a boat should have reasonable performance, if not good performance. We kind of build our boats inside out. So we put a lot of time and effort on our furniture building and on our interiors to make it look like your home. We're doing more modern decor, etc.

This year at Annapolis, we introduced an electric boat. We partnered with a company called Elco Motor Yachts [on] a 27-footer to kind of judge the market. We put 700 people through on a single Saturday, so there definitely is an interest there. We also introduced an option for that boat called the energy package, which is made up of solar panels and a wind machine that will generate the boat with free power. It's the ultimate green machine.

One of the things we've tried to get away from is the notion that sailing is hard to do, hard to learn. The ease of sailing is accomplished by having some furling masts whereby using hand winches, or even electric winches, you push the button and the mast goes in and out. We put arches on our boat, which gets the boom up so you don't hit your head.

We have a small-boat lineup that starts at 15 feet. Nobody's going to get rich [on] small boats, but small boats make big boats. We've been very fortunate having our trade-up customers. We have eight 50-footers out of Annapolis and seven of those were trade-ins of other Hunters. So people move up the line.

I don't think we'll go any smaller than 15 at this time. We had at one time tried to have a rooftop-type boat, but you have to sell an awful lot of them to make anything happen, so 15 feet is probably where we're going to be. Fifty feet and up - I guess you never want to say never. We may go bigger someday. There would have to be some major plant investments to do that. That's not in our plans for the foreseeable future.

When I first came here 17 years ago, we studied the market and our average sale was about 32, 32-1/2 feet. Right now, we're right under 36 feet. A 4-foot swing may not sound like much, but it's really grown. A 42-footer was the largest boat that this company built. Now we talk about 40-footers like they're toothpicks. The most popular model now is the 36; 39s right behind that.

Q: You mentioned before your company's involvement with SailTime. How did you become involved with this group and what kind of growth have you seen in fractional ownership?

A: SailTime's founders had called around to almost every major manufacturer in the world of sailboats and they only got two callbacks. We invited them up here and talked to them and then we went out to see them in Houston and listened to their concept. They wanted to buy some boats direct, which is easy to do in this business. But we're a dealer-driven company, so we said we're not going to do that. We'll come up with a plan involving dealers.

So we worked together on a sharing plan, how to run it through our dealers. A SailTime base can consist of anywhere from one or two boats up to 14 boats. They're all Hunters.

It's a pretty simple concept. An individual is the owner of the boat. He's got one-eighth of the time on the boat. The other seven individuals on the boat do not own anything, but they pay a set fee for the month. They get eight half-days. And you're always booked on the same boat. It's a set cost. It's a great training ground for that individual. We've sold numerous boats to people that got that itch and then decided they'd better get their own boat. That's why we look at it as an excellent demo platform.

There's 140-some boats out there. There's eight members per boat. So you have 1,200 people sailing on a Hunter. It's been a really, really good relationship from day one.

Another thing we've done, we're going into our 13th year now with the Colgate training schools. This is a relationship we've enjoyed throughout their bases in North America.

Q: Looking ahead, it's likely fuel prices will rise when the economy recovers. Will the sailing industry get a boost if and when this happens?

A: [The boost when fuel prices are higher] is not as big as most people would perceive it to be. Yes, we've had some trade-ins of powerboats. We even had a program that went out and did some direct marketing to some powerboat entities to try and warm that up a little bit. We did get some spin off it.

I think after [higher prices] settle in for a while [people get used to it]. The average boater's not going on the so-called long trip. They've scaled back a little bit. I don't think there's going to be a big run to sailing because of it.

Q: Hunter is part of Luhrs, which owns powerboat builders such as Mainship, Luhrs and Silverton. Has that diversity helped the company during these tough times?

A: We get [some] buying power for some of the common products we buy. In theory, it worked well until the last couple of years because Luhrs makes a fishing boat and fishing stays at a pretty good level. We have Mainship trawlers, and in some regards older sailors were trading their sailboats in to get a trawler. And then they have the Silverton motoryachts, which was a very competitive product with the Sea Rays and the Carvers of the world. You put them all together - when one industry was up, usually someone else was down.

Unfortunately in the last two years powerboats ... got hit pretty hard. We've closed some plants and consolidated the powerboat companies into one location now. It took us some pain to get there. But Hunter's been pretty steady. We're putting boats out every month. We haven't been closed down quarters or months, just normal vacation time periods.

Q: What do you see as the future of the marine industry?

A: There's been some trite statements thrown out there - this is the "new normal" - but you never say never. I think we've got to continue to work at it. I think there's always the love of the water and people love to sail - they always have. Whether there's going to be 20 major sailboat companies or three major sailboat companies, there's going to be a need and we plan to be there and try to get our fair share - more than our fair share, hopefully. But we have to be ready to maneuver and change ... listen to what the market wants.

Once again, I'll use my 50-story analogy. I don't think we'll get to the 40 stories in a long, long time. But that doesn't mean you can't be comfortable and figure out how to do it at 20 stories and make a living for all [your] employees.

When times get good, it might be a little better to stretch things out a little more than running after the quick buck. You've got to have a little bit longer outlook. I think [that mindset] is here, I think it's set in. I think there's been some lessons learned that people aren't going to forget for a while.

This article originally appeared in the December 2010 issue.

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