Bruce Van Wagoner is managing director and president of the Commercial Distribution Finance marine group at GE Capital, the marine industry’s major wholesale lender. He leads a team of employees focused specifically on the marine industry, funding thousands of dealers in support of the sales of virtually all of the major manufacturers. Van Wagoner says that support continues even after GE announced it would sell off its CDF business to simplify operations.
General Electric is hoping to reduce the size of GE Capital with the sale of most of its assets over the next two years so it can focus on investment and growth in its industrial and manufacturing businesses. Van Wagoner points to the extension of programs with companies such as Brunswick Corp. and Bass Pro Shops as examples of GE’s commitment to the industry throughout the sale process.
Van Wagoner, 61, has more than 30 years of financial services experience at companies that include Westinghouse Credit, Chrysler First Wholesale Credit, ITT Commercial Finance and Deutsche Financial Services. He has served on many committees dedicated to marine industry improvement, including dealer and manufacturer councils and Grow Boating. He was recognized with the Industry Service Award from the National Marine Bankers Association in 2008.
He is a member of the National Marine Manufacturers Association and the Leadership Alliance, which participates in Boating Industry magazine’s annual selection of the Top 100 dealers in America. He earned a degree in finance from Michigan State University and is a Six Sigma Green Belt.
Van Wagoner splits his time working from Chicago and Gulfport, Fla. He and his wife, Peggy, have been married for 35 years and have two sons: Phillip, 33, a producer, writer and children’s book author in Los Angeles, and Patrick, 25, a music industry promoter with Schuba’s and Lincoln Hall in Chicago.
We sat down with Van Wagoner to get his sense of where the industry stands today, lessons learned from the Great Recession, and the proposed sale of his company.
Q: Boat sales seem to have turned a corner this summer. What have you seen from your perspective?
A: We wouldn’t categorize boat sales as “turning a corner,” rather that we see 2015 continuing the fifth straight year of retail growth coming out of the downturn. That being said, we see a few of the following trends, both in the market and within our marine inventory finance portfolio.
In our portfolio, 2015 is reaching another new high-water mark on field inventory turns. We are also seeing aged inventory in the field carving another new low. In the retail marketplace we see growth generally in line with last year — mid-single-digit unit growth — with notable strength in the Southeast and a bit slower in the Northeast. In addition, we see consumers asking for more content, more horsepower and larger units.
Q: Can you compare aging inventory to last year, and maybe to pre-recession levels?
A: Aging as a percent of the total is down 2 percent versus the prior year, and down 5 percent, compared to pre-crisis levels.
Q: Do you think those regional trends are weather-related? What are you seeing in other parts of the country?
A: The Upper Midwest had some cold weather in the spring, and the Northeast had adverse and wet weather, which we believe impacted or deferred sales. Aside from the weather, macroeconomic conditions are not equally dispersed across the country, so those variances would also impact the national sales average in some way.
Q: Are the requests for content increasing the price of boats sold? Can you speak to that at all? Are larger units selling? Smaller units? Both? Is there a market recovery in the middle yet?
A: Based on the Statistical Surveys data, it appears that in each of the last four years manufacturers have shipped boats with higher average selling prices. In 2014 this was most pronounced in the fiberglass outboard, sterndrive and cruiser categories.
Q: Has floorplan lending changed much in the last four or five years, post-recession? If so, how? If not, where do we stand today?
A: Both CDF and our manufacturer customers learned some great lessons from the recession. We both learned the importance of business intelligence and how critical it is to manage the health of the distribution network. We have invested time, energy and financial resources into systems and people to better equip decision-makers. A healthy distribution network is vitally important to the success of any manufacturer. Our floorplan lending is focused on keeping the business healthy for the manufacturer and the dealer. It’s like a three-legged stool — CDF, the manufacturer and the dealer need to work together to keep the stool standing. I’m extremely proud of the professionalism of our manufacturer partners and their desire to keep their dealers healthy.
Q: What are you seeing in terms of inventory levels? Are they continuing to be at record lows? Are dealers feeling a bit more confident as boat sales rebound to carry a bit more?
A: Since 2010, CDF floorplanned field inventory has dropped to five less weeks of inventory on hand. Today there is roughly 160 days of inventory overall, compared to 195 days in 2010. Each year has gotten better since 2010. This is a very healthy dynamic and it has surprised us a bit on the upside.
Q: Why has it surprised you?
A: The industry had been fairly consistent pre-crisis, and we had a long history of data to consider.
Over the past several years, retail unit growth has eclipsed shipment unit growth. This has the effect of pulling down inventories on a relative basis, thereby reducing the number of weeks of inventory on hand. Field inventories on an absolute basis have grown, but not in a one-to-one relationship with retail demand. We are in a great place as an industry, but the upward trend is not sustainable without producing widespread product shortages in the field.
Q: Have lower levels already cost dealers sales? And do you think the industry is working to address the issues you mentioned here, or do you see a potential problem down the road?
A: We believe it does cost some sales, but it is a balancing act. The question is not losing sales or gaining sales, but how many. In three of the last four years, retail unit growth has eclipsed wholesale unit shipments. It’s not really a macro issue for the industry, but a regional or segment issue for the impacted manufacturers and dealers to solve. We do expect that a percentage of more aggressive dealers will increase stocking levels further to be prepared for more growth, depending on the segment and the geography they serve.
Q: What will happen to the less aggressive dealers?
A: As I mentioned earlier, this may cost sales, but it’s up to each individual dealer to determine how to balance the business.
Q: Last time we spoke, you mentioned several large players extending their credit lines so they could keep more boats in stock. How has that played out in the peak selling months?
A: In most cases, dealers have proposed increased credit lines to expand the brands, the segments or the geography they’re serving. If the business plan makes sense, we’ve agreed to those increased lines and, overall, I believe it has worked extremely well.
Q: I know there’s not much you can say about GE’s plan to sell the Commercial Distribution Finance business, but how do you address dealers regarding the potential sale? Do they seem concerned?
A: We are approaching our day-to day work with the concept of business as usual. We feel the business has a bright future and we expect to continue to grow our relationships with a buyer who is fully committed to and invested in the financial services industry and can offer a good environment for growth. Throughout CDF’s history, we have experienced numerous changes in ownership and acquisitions, not to mention some of the most challenging economic cycles of our generation. And, through those challenges, we have always emerged a stronger, more customer-focused company committed to providing the marine industry with premier customer service and custom solutions that help keep this industry strong.
Our customers have been extremely understanding and supportive. In fact, we have recently announced a number of program extensions, including Brunswick, Bass Pro, ABA and others.
Q: Do you see anything different in this peak selling season, versus the past five or six? If so, what?
A: We anticipate an acceleration of the richer mix at retail. Consumers like new technology, and the industry is doing a nice job of addressing that desire. Plants are beginning to add capacity to meet demand, however at a relatively conservative pace, which is reflective of lessons learned from the recession.
Q: What kinds of boats do you see selling?
A: The continued strength in retail growth with expensive ski boats is amazing. The consumer demand for saltwater boats — both inland and with large LOAs — is promising, as are the recoveries of the yacht and large day boat sectors.
Q: Do you see any interest stirring in the sterndrive segment?
A: The category is down in terms of unit sales, but up in dollar terms due to higher average selling prices. There are quite a few very good builders in the sector for which we have a great deal of respect, and we have confidence they will build products that attract today’s consumer.
Q: I’m guessing the financial health of dealers has improved greatly over the past six years. Can you speak to that?
A: We have seen strong top-line sales growth since 2010, along with stable margins, better expense absorption and improvements in overall earnings. Given the strong health of the channel and the positive retail results overall, we expect 2015 will be a good year for dealers financially.
Q: Where do you think things are headed for the boat show season and the year ahead?
A: In 2014 unit retail growth, excluding PWC, was up approximately 5.6 percent, with a richer mix driving total dollar volume retail growth into the low double digits. In 2015 we see things shaping up to be largely in line with what we saw in 2014. We have several internal models that tell us to expect growth to continue in 2016 into the mid-single digits for unit retail growth and high single to low double digits for dollar volume growth [as] a richer mix continues.
Q: Can you speak to a couple of the macro trends — issues of affordability, for example? Are boat prices changing, and is that reflected in how dealers are borrowing?
A: We see yacht dealers having a greater appetite to stock boats, given the uptick in that segment, especially with new and popular models. With lengthy build times, often the next production slot is a year away, so it’s important to ensure dealers have the right credit availability to make these important stocking decisions and not miss sales today.
This article originally appeared in the October 2015 issue.