Q&A with Paul Johnson, general manager of Nordic Tugs - Trade Only Today

Q&A with Paul Johnson, general manager of Nordic Tugs

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Paul Johnson is the general manager of Burlington, Wash.-based Nordic Tugs, which builds tug-style yachts from 28 to 54 feet. Johnson, 57, has been with the company since 2004, beginning his career as a production planner before being promoted three months later to production manager. He was named vice president of manufacturing in 2006, vice president/chief operating officer in 2009, and given his current title in November 2010.

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Prior to joining Nordic Tugs, Johnson worked at Brunswick Boat Group's U.S. marine division. He began his career there in 1986 as an industrial engineer. In his eight years with the company, he served as production planner, manager of the industrial engineering department, startup team member of U.S. Marine de Mexico and, lastly, as project manager. Before joining Brunswick, Johnson worked at Eveleth Mines, then co-owned by Ford Motor Co. and Oglebay Norton Mining Co., followed by a brief career in the medical equipment business.

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Johnson graduated from the University of Minnesota at Duluth in 1976 with a double major in industrial technology and education. He has had continual project-related post-graduate training to support specific projects or new responsibilities.

Johnson and his wife of 36 years, Laurie, live in Burlington. They have three grown sons and five grandchildren. Johnson, who grew up boating on the lakes of Minnesota, enjoys boating with his family, skiing, photography and woodworking. During the last year, he combined two of his hobbies and built a wooden boat for his grandchildren.

Q: Nordic Tugs recently resumed production following a three-month shutdown. What changed in the market to allow you to restart production?

A: The short answer is sales. We've now banked a few orders, but the back story there is that boats we've had sitting at the dock at our dealerships have been selling. In the past few months we've taken eight boats out of inventory and, in our world, that's a significant number. So now, as people are starting to look at new boats again, they have fewer completed boats to look at, which is driving orders back into the factory.

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Q: Has it been difficult to ramp up production again? Were you able to rehire employees that had been furloughed?

A: Parts of it have been challenging. What's been refreshing is that virtually all of my senior production employees are poised to come back - they're either back or they've called and they want to come back. One of my biggest fears was that we would lose good people during the shutdown.

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We kept administrative staff on [during the shutdown] to ensure our customers and dealers had what they needed. We have a very large and loyal customer base and we needed them to know we were here to help them.

There were a few people who did find jobs elsewhere. In fact, we actually helped some of them find jobs because we didn't know how long they were going to be off, and even some of those people have said they would come back. So, from that standpoint, that's been easy.

We are being very cautious in our ramp-up and are only recalling personnel as the process dictates to avoid having to run this exercise again. Everyone is anxious to get back to work. Nordic has a reputation for being a great place to work so, once word got out, we have had a steady stream of people through the door wanting to be part of the team again. It is this family, this core group of people, that build and sell these boats that makes this place great.

By the end of December, about half of the people that were furloughed [were expected to be] back online.

The other part is, we've drastically downsized. We've shaped our company to fit the new market. What that means is there are fewer people in the back office, wearing many hats. That's challenging. Some of us are stretching a little bit. From that standpoint, it's a little bit challenging. We've got a great team here and we're confident we're going to work through it.

Q: With production restarted, how easy or difficult has it been to get the parts and supplies you need from vendors?

A: For the most part, our vendors are happy to see us back in business. There's fewer of us to sell to, so anybody that can add something to their bottom line helps them as well. There have been a couple of small vendors that we deal with that have gone out of business, so we've had to resource some of those things.

Other [vendors] are carrying less inventory regionally, so extended lead times can provide some planning and scheduling challenges. Everyone is being more cautious and terms are less generous, but we are getting what we need. We have also seen prices continue to creep up on key items, which is troubling for small manufacturers trying to hold costs down.

All of these things are creating an odd side effect in that we have found ourselves in a position to share materials and equipment with other boatbuilders in the region, even some that you might consider competitors. I think we may see more of that kind of activity as the market swings back to whatever is going to be our new normal.

Q: When you announced the shutdown back in August, when did you think you'd be able to restart production?

A: When the word came down from our board of directors that we were going to have to pull the pin, everything happened so quickly that we really didn't know. On a personal level, at my home, I said let's give this thing 60 days. I was one of the few fortunate enough to stay on to kind of nurse this thing along during the furlough. Once we got past that initial shock and we could see that things really weren't that bleak, we just started putting all the pieces in place, building a foundation, so that when the time was right we could turn this machine back on again. That happened on the 29th of November.

A business runs on sales and we were lacking in this area. It puts you into a dangerous "Catch-22" situation in that it's hard to get a potential customer to step up and place an order if you aren't producing product, but you can't continue to produce product without orders.

One thing we have done to help facilitate our restart - actually started before the temporary shutdown - we are doing contract manufacturing for another boat company. Nordic Tugs has been manufacturing the [fiber-reinforced polymer] FRP parts for Aspen Power Catamarans. It helps keep our skilled technicians employed, actively contributing to the bottom line.

Q: When you announced the shutdown, there were some who thought it was the end of Nordic Tugs. How do you come back from that?

A: That was most unfortunate. So many of the domestic boat manufacturers have had these rolling shutdowns and it's a little more than a blurb in Trade Only and that's it. But because we've been around so long and we're a regional icon, if you want to call it that, we ended up on the TV news and in the newspaper, and the word temporary seemed to be glossed over.

We had owners calling. We had vendors calling. We had bankers calling. We had people at East Coast boat shows telling consumers that not only were we out of business, but we were being evicted. We've had to do a little damage control, but we didn't want to get into any kind of a "he said, she said" mudslinging kind of a thing. I think the best response to everyone was just opening up the doors and building Nordic Tugs again.

We just focused on getting things back in order, and when we knew we were going to get things rolling again we put out the note to reassure everybody that we were, in fact, taking orders for spring delivery and then two weeks later we opened the doors.

We maintained staff [during the shutdown] to answer the phones, maintained our customer service and warranty staff, and worked through our regional partners and service providers to handle some end-of-the-season activities for our customers while our dealers continued to promote the product at shows and events across the country. David McLeod and Bob Shamek have been instrumental in keeping the business up and running, working with bankers, vendors, dealers and customers. It has truly been a joint effort.

Q: How is your dealer network, domestic and international? Did you lose any dealers during the shutdown?

A: We have retained our entire dealer network. They've been tremendous to work with. I can't say enough good things about them.

During our darkest hours, one of our brightest spots was the Okazaki dealerships [in Japan], and when we thought our European market was drying up we had a conversation with our Nordic U.K. dealer and there are people beginning to show up at the dealership again. Right now the hottest dealer, in terms of new boat orders, seems to be our Northeast dealer in Connecticut [Wilde Yacht Sales in Essex]. We're also seeing some good activity in the Midwest, which has been very quiet for a very long time.

One thing that kind of buoyed our hopes up three or four months ago was that brokerage boats started to move at our dealerships. We figured, OK, people are still wanting a boat. Sooner or later someone's going to want to trade up to a new boat.

Q: Have you been able to participate in all the boat shows you normally do?

A: Most of them. We've hit most of the major shows. One of the offshoots of the temporary shutdown announcement was at the fall Lake Union show. One of the local news crews actually announced it was the first Lake Union boat show that Nordic Tugs hadn't been in in years and they were, in fact, standing in front of one of our boats. We called that to their attention and they promptly corrected it. We weren't at Fort Lauderdale, but we're making arrangements to get a boat into Miami.

Q: What are you hearing from your customers in terms of their ability to buy Nordic Tugs? Are they more optimistic now than they were, say, six months or a year ago?

A: The buying decision for a Nordic Tug is based upon a lot of things. First and foremost, I believe it is a lifestyle decision. Many of our owners have worked hard and saved a long time to follow the dream. It also helps that banks are more willing to lend money on a Nordic Tug because of our reputation for high quality, durability and resale value.

[In terms of optimism among customers] I asked that question of my dealers, and I received a very mixed response. I think there's optimism out there, but it's a very cautious optimism. The people buying our boats ... our demographic are people who have worked hard and have been successful in their own right. They've saved up for this retire-on-your-boat kind of lifestyle dream, and I think those people have gotten to the point where they are realizing we are probably looking at the worst being behind us and realize they are not getting any younger. They want to do this. They've got the money. Why not use it while they're able to enjoy it?

Q: There seems to be some thaw in the industry. Strong attendance has been reported at many boat shows and IBEX was better than it's been in a few years. Do you think the boating business has turned the corner?

A: We're certainly hoping so. But as one of your [Soundings Trade Only] editorials, by William Sisson, started out with, "Hope is not a strategy," and we know we need to do more than hope and wait. We've restructured ourselves to succeed with a fewer number of boats going out the door for the near term. We're anticipating that we are probably not going to see a steady upswing yet and we may bump along the bottom for a little bit, but the fact that we've got some forward motion now is a good indicator. We're being optimistic.

The economy is still in a fragile state and, while we may think that everybody needs a boat, the truth is that boats remain a discretionary purchase and I believe that our market will reflect the overall fluidity of the greater market recovery for the foreseeable future.

Q: What's your outlook for 2011?

A: Up until just recently we've been in this survival mode - what can we do to open our doors? And now that we've got this momentum going, we're looking forward to 2011 with a fresh outlook. We will be taking a conservative approach to business in the coming months. We are watching our expenditures and listening to our dealers. Our small size, the skills of our craftsmen and women, and our willingness to work with our customers to make their Nordic their own gives us an advantage.

In years past, the mantra was always "If you aren't growing, you're dying." However, in today's market, just being here and having some forward motion is a victory. We've restructured our organization to better match the market, we are continuing to look at ways to add value to our products by listening to our dealers and our customers, and we are operating our business like we want to see another 31 years of Nordic Tugs history unfold.

Boat show attendance is up, people are starting to buy boats again, so I'm looking forward to 2011.

This article originally appeared in the February 2011 issue.

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