Genmar reorganization a wake up call

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Genmar’s filing for Chapter 11 bankruptcy protection has shocked most of our industry. It shouldn’t have. Sure, most of us would probably have listed Genmar very low on our list of most-likely to go bankrupt. But, the shock comes more from its dramatization of how vulnerable our industry is, rather than over Genmar’s actual proceedings. Make no mistake -- Genmar and its indomitable leader, Irwin Jacobs, aren’t going anywhere. I’ve always thought of Jacobs as a businessman-on-steroids, figuratively speaking of course. Push him too far and his high energy nature is guaranteed to push back. Bankruptcy? – Now you’re playing on Jacobs’ home field! After all, bankruptcy is exactly where Minstar, Inc. (later Genmar Holdings) was born when Jacobs bought Larson Boats out of bankruptcy. In fact, one of Jacobs’ career strong suits has been buying distressed companies.

So it isn’t Genmar’s filing that is most interesting now, though it will be fascinating to watch the reorganization plan unfold. Rather, what grabs my attention is the observation by Jacobs that, in effect, the “cheese” has to be moved. Who’s “cheese”? The manufacturers.

Jacobs accurately observed this: “Factories cannot just produce all the boats they can produce. There's something that has to fundamentally change." Amen to that!

He goes on to point out that dealers cannot take on the risks that they’re taking (and will be too wise to ever be pushed into undue risks again – my words, not Jacobs’). Further, he asserts the same will be true for floorplan lenders. Amen to that, again!

Jacobs didn’t make any predictions about what the future industry is going to look like. But, his observation about the need for fundamental change is right on. Certainly there will be a major consolidation of manufacturing, less plants and fewer production lines because there will be fewer boat brands and fewer models within those brands. It’s likely we’ll see models for competing builders coming out of common manufacturing facilities, similar to what so many manufacturers of private label merchandise already do.

Let’s face it, for many years now, dealers’ showrooms have been literally choked with too many unnecessary models from most builders. Today, dealers are gagging on those very models and it’s not likely to repeat in the future. Good dealers will be in short supply when this industry turns around, and they will dictate acceptable inventory levels, just-in-timing delivery and even terms like warranty and parts reimbursement. And that will be just the start of the fundamental changes coming.

Jacobs said it best: “This is the most unprecedented time in the history of our industry, bar none!” I say, “unprecedented” will be the cornerstone of our industry recovery, too.

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