Malibu Boats said it entered into an engine supply agreement with General Motors for the supply of engine blocks, which Malibu will marinize for use in its Malibu and Axis-branded performance sports boats.
Malibu also said it acquired a 70,000-square-foot facility adjacent to its Loudon, Tenn., headquarters and plans to invest $18 million during the next three years to execute the plan.
The agreement with GM, running through 2023, provides Malibu with “the next significant opportunity for cohesive design and vertical integration” while allowing for customization, the company said.
Malibu expects to begin using the engines as early as its model year 2019 boats.
"This is an exciting time for Malibu Boats as we commence our next major vertical integration initiative, marinizing our own engines," Malibu Boats CEO Jack Springer said in a statement.
"With our track record of successful vertical integration efforts, producing our engines was the next logical step. Further, we are thrilled to have GM as our partner in this effort, with its high quality standards and deep history in supplying engine blocks.”
By integrating the marinization of its engines, the company will now control the design and performance of them, Springer said.
"This investment is consistent with our long-term strategy of identifying positive return vertical integration initiatives to better control our business and create attractive financial returns,” Springer said. “We are confident that the team we have built and the partnerships we have incubated over the past few years position us for great success on this project.”
The new agreement will help give Malibu the ability to control the design, performance and customization of future engine offerings.
“Once operational, we believe Malibu's inboard engine manufacturing business will be the largest in the industry, providing the company with immediate operational advantages of scale,” the company said. “Our scale, along with our engineering team, will provide Malibu with the ability to provide an affordable and unique offering to the company's dealers and retail customers.”
Malibu is targeting an approximate three-year payback on its investment.
“We expect our engine initiative to be accretive to adjusted EBITDA margin and earnings per share in its first fully operational year,” the company said.