"Whoever's got cash is ultimately going to be the winner." That's the first rule for surviving these troubled times, and it has been the principal focus of Brunswick Corp.'s strategy for coming out of this recession whole, said Dustan E. McCoy, Brunswick chairman and CEO in his keynote address Monday at the National Marine Bankers Association's annual conference in Hilton Head, S.C.
McCoy said Brunswick's cash balance at the end of fiscal 2007 was $328 million versus $343 million in 2008 and $624 million this year.
"We are quite confident where we are," he said.
Brunswick's cash reserves, however, haven't come easily.
"We've closed half our factories," McCoy said. "They are closed forever. We shed a third of our brands [across all segments, not just marine]. We stopped building a third of our models."
Brunswick has reduced fixed annual costs by $420 million, McCoy said. The nation's largest boatbuilder still builds 16 boat brands.
The two other legs of its strategy to retain its dominant position are to keep its dealership network intact and to come out of the recession stronger than it was going into the downturn.
McCoy says Brunswick has tried to protect its dealers by paring production so it doesn't have to pressure them to buy boats they can't sell.
Brunswick's dealer network started 2008 with 37,000 units in inventory, McCoy said. The company sold 37,000 units to its dealers that year, and dealers sold 45,000, leaving them with 29,000 at year's end.
In 2009, dealers started out with 29,000 units. Brunswick sold them 15,000 units, and they sold 30,000, ending the year with 14,000. This year, dealers started with 14,000 units. Brunswick expects to double production and sell 30,000 units to its dealers and, if it's a flat year, its dealers probably will sell 30,000 and end the year with 14,000 again.
"We've never seen that number that low at Brunswick," McCoy said. Inventory control is the new watchword for getting through lean times ahead.
McCoy said builders have to adjust to a new reality. In 1965, he said, the industry was selling around 300,000 powerboats. In 1988, that number topped out at more than 500,000, dropped to about 300,000 in 1992, and climbed back to 311,000 in 2004, according to industry figures. McCoy estimates that number will be about 135,000 this year.
"We've got to be profitable at 150,000 units," he said. "We want to be more profitable at 200,000 than we were before at 300,000."
He suspects that 200,000 units - down a third from prerecession levels - may be the "new normal" post-recession.
"Can we get back to 300,000?" he asked. That's the $64,000 question.
McCoy said there will have to be some dramatic changes in the industry because consumers have less money to buy boats now and will for the foreseeable future.
Meanwhile, the cost of boat ownership is rising - and has been rising - faster than consumer income. He said the biggest "affordability gap" is in $50,000 to $300,000, 24- to 40-foot cruisers and offshore fishing boats. The industry is in danger of pricing itself out of business, he said.
- Jim Flannery