About three months ago, Genmar Holdings chairman and CEO Irwin Jacobs, along with two other individuals, put $40 million in cash into his business, a move he said would not have happened if he thought he would be filing for bankruptcy.
"That should tell you where I thought our business was," Jacobs said yesterday in a phone interview with Soundings Trade Only. "I didn't think two or three weeks ago that this was possible, but the banks just became unreasonable, and we just couldn't deal with it."
Genmar, the nation's second-largest boatbuilder, filed Monday for Chapter 11 reorganization in U.S. Bankruptcy Court in Minnesota.
Citing unprecedented economic conditions, Jacobs said the $75 million the company owes the bank is nothing compared to the millions it owed at one point in 1989 and was able to fully pay back.
"The banks pushed us to a level that we couldn't put up with," he said, adding that Genmar has assets of $237.5 million, compared to $216.5 million in liabilities, along with more than $400 million in intangible assets.
Despite the filing, Jacobs said it's "business as usual" at Genmar's 15 boat brands, adding that he's taking steps to help his network of more than 1,000 dealers worldwide.
"What we're trying to do is prevent [dealers from going out of business]. We're not trying to make people go out of business. We're trying to make them stay in business, and we'll be in a position to hopefully support them as good, if not better, than we were before this happened," he said.
Genmar will ask the court to allow it to pay appropriate dealer warranty and rebate claims, he noted.
Hoping to come out of Chapter 11 "sooner rather than later," Jacobs said this should serve as a wake-up call for the industry that change is needed.
"This is the most unprecedented time in the history of our industry, bar none. I can't sit here and make predictions as to what the business is going to be like, but I will say this to you: There has to be a fundamental change in this industry" he said.
"Dealers cannot take the risk that they're taking on, floorplanners cannot take the risk that they're taking on, and factories cannot just produce all the boats they can produce," Jacobs added. "There's something that has to fundamentally change."
Jacobs said he could not predict what Genmar will look like after reorganization and whether he will go forward with all 15 boat lines.
"We may need to do more consolidation of our manufacturing. We're not going to sit here and have factories running at 30 percent capacity," he said. "We'll come through this thing. We'll be a more stable and, I think, a stronger company when it's done."
— Beth Rosenberg