In true business fashion, drastic times call for executives to have the courage to make unpopular decisions to achieve long-term gains.
That is what Brunswick chairman and CEO Dustan McCoy did when he decided to cease production of several BlueWater Marine brands — Sea Pro, Sea Boss, Palmetto and Laguna — with the upcoming 2009 model year, which begins July 1.
As a result, Brunswick will close its production plant in Newberry, S.C., by the end of June.
The company estimates it will realize annualized pretax savings of nearly $9 million from these actions.
Sure, no one wants to see 175 jobs lost, especially in a distressed economy. But McCoy did what he had to do to get the company through the downturn and position it for recovery.
He knows he does business in an industry that is historically cyclical, and watched profits plunge 71 percent for his company’s first quarter, as boat buyers in many regions sat on their checkbooks to wait out the whims of the marketplace.
Profits were $13.3 million, or 15 cents a share, in the first quarter of 2008, compared to $45.6 million, or 38 cents a share, last year.
“The U.S. marine industry has been in a prolonged slowdown since late 2005, driven by an uncertain economy, high fuel prices, the housing slump and other economic factors that have affected consumers’ confidence and eroded their discretionary spending,” said McCoy.
As McCoy continues to balance cost against profits, his hands-on, aggressive approach may lead to reducing additional models and brands.
Other publicly held manufacturers and retailers alike are wary about the rest of the year.
Helen Johnson-Leipold, chairman and CEO of Johnson Outdoors says economic uncertainty in the U.S. is starting to have an effect on outdoor retailers. As a result, she says, they are keeping inventory below last year’s levels until they can “gauge consumer demand at [the] shelf in the next few months.”
William H. McGill Jr., president, chairman and CEO of MarineMax, calls today’s business environment the worst he has seen in 30 years. He estimates U.S. marine sales will finish the year with a 12 percent decline in dollars and about a 15 percent reduction in units. Year-to-date dollar sales in April were running 15 percent below 2007 levels, with unit declines approaching 20 percent year over year.
Even companies such as Marine Products Corp., which reported a 5.5 percent increase in profits to $4.1 million, from $3.9 million in the same quarter last year, say they remain cautious about the economy’s effect on boat sales.
So in coping with these grim prognoses, McCoy did what he had to do.
He sharpened his pencil and provided needed cost reductions, much to the applause of analysts who said Brunswick, in the long run, will meet the long-term objective of streamlining operations.
This article originally appeared in the June 2008 issue.