Power Struggles - Trade Only Today

Power Struggles

Some manufacturers are having trouble meeting demand for larger outboards, creating frustration and opportunities
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Builders are having trouble getting outboards for new boats and repowers.

Builders are having trouble getting outboards for new boats and repowers.

John Tomlinson was in a bind. The co-owner of TNT Custom Marine in North Miami had a delivery date of July 4 for a 42-foot Marine Technology center console powered by quad 350-hp Mercury outboards. The $850,000 boat was ready, and the customer was making the payments.

As of June, TNT still didn’t have the engines. Tomlinson had been waiting for six months, and every time he called for an update, Mercury had pushed back the delivery date. To keep his customer happy, Tomlinson got four Mercury Racing Verado 400R outboards and split the $10,000 upcharge with the buyer to make the Independence Day deadline.

That wasn’t the only way that TNT has felt the supply-chain crunch for big outboards. “We’re always doing repowers,” Tomlinson says. “If I could get engines within two to four weeks, I’d be lining up the repowers. We usually do one per week, but it’s cut that business in half.”

Unprecedented demand

Multiple sources say Mercury and Yamaha are having problems meeting demand for outboards above 200 hp. In an email to Trade Only, Mercury Marine president John Pfeifer says, “Demand for the recently launched V-6 and V-8 engines has exceeded our expectations, and the product has been very well accepted in the marketplace.” He added that demand for Mercury’s high-horsepower outboards is up “well into double digits” and that shifts have been added at the Fond du Lac, Wis., plant to reduce lead times.

John Pfeifer

John Pfeifer

Mercury introduced a number of 4-cylinder V-6 and V-8 outboards this year, and there was speculation that the retooling of the assembly and production processes was partly to blame for the company’s inability to keep up with demand. Pfeifer says Mercury hasn’t lost business or market share, adding, “We realize customers are experiencing longer than normal lead times, and we understand and appreciate the patience our customers have shown for this new product.”

Mark Schwabero, chairman of Brunswick Corp., said in a second-quarter earnings call that Mercury production “will reach full run rates by the middle of the third quarter.” He added later that demand will outpace production into 2019. “We are aggressively working on plans to further increase capacity,” he said.

Mercury’s primary competitor, Yamaha, has had an equally challenging 2018. “Yamaha has been going on for about a year,” Wylie Nagler, president of Yellowfin, says about big-engine delays. “We didn’t feel it as much because we keep so much inventory, but Yamaha just about ran us out of our backup inventory.”

Yellowfin builds 220 boats per year at its headquarters in Sarasota, Fla., installing about 40 to 50 engines per month. In a given month, the company also has that amount of outboards in inventory. “We can’t have boats coming down the line and not have motors,” Nagler says.

Nagler TR.TwinDiscHeritageCenter.MV says he sells more 350-hp Mercury Verados than 350-hp Yamahas, but otherwise, he sells an equal split of outboards between the two companies. Yellowfin builds many boats powered with triples and quads, so it’s easy to go through engines quickly.

Southport Boats in South Gardiner, Maine, used to be exclusive with Yamaha for its center consoles. “Not anymore, because I can’t get Yamahas fast enough,” says George Menezes, chief operating officer at Southport, which builds about 40 boats a year. “Because we’re small, they’ve had an easier time keeping us from getting hammered by [the delay].”

Brunswick expects demand for V-6 and V-8 Mercury engines to outpace production          into 2019.

Brunswick expects demand for V-6 and V-8 Mercury engines to outpace production into 2019.

Southport already has orders for boats with Yamaha’s 425-hp XTO Offshore engine, which was announced in May. As a result of the shortage of big Yamaha outboards, however, Southport has built boats with engines from other manufacturers, including Suzuki and Evinrude. “It’s forcing builders to look more closely at other motors,” Menezes says.

Rossiter Boats, a Canadian manufacturer of powerboats up to 23 feet with 26 dealers in Canada and the United States, stopped production largely because of delivery delays for large outboards. Scott Hanson, former Rossiter president, says the company had $1.9 million in orders. “Our primary engine suppliers have been doing everything that they can,” he says. “But they’re dealing with unprecedented demand. They told us in March there would be limited supply, but that got pushed out to December.”

Like TNT, Yamaha dealers also have seen their repower business dwindle in the past 18 months. Steve Arnold, owner of Marina Holdings — which includes Yarmouth Boat Yard and Moose Landing Marina (a Freedom Boat Club franchise), both in Maine — says that between the two marinas, there were eight big repower jobs at the end of 2017. He ordered the engines early in the fall to avoid delays. “I told my guys early on this year, don’t expect any engines for repowers,” he says.

Marina Holdings just took on Cutwater Boats and carries Pursuit and Parker, as well as the Godfrey lines of pontoon and deckboats, all powered by Yamahas. “Godfrey is a strong partner with Yamaha, and I know early on, Yamaha went around to boat manufacturers and promised they would have enough engines,” Arnold says.

Moose Landing is one of the largest pontoon dealers in Maine, with demand for larger pontoons rising “dramatically” in the past couple of years, Arnold says. That demand for bigger engines has added to the strain on outboard manufacturers.

Missed predictions

Yamaha Marine president Ben Speciale says that contrary to rumors, the shortages for his company’s engines have nothing to do with manufacturing defects or mechanical issues. “At the center, we underestimated the growth of the economy, which led to the demand for our premium products being much stronger than expected,” he says in an email to Trade Only. “We are seeing the demand we expected in 2019-20 showing up in 2018.”

Ben Speciale

Ben Speciale

Speciale says the addition of the 425-hp XTO Offshore to Yamaha’s production facility contributed to delivery delays. “When consumers are buying new, they are buying up, demanding more premium products across all outboard segments,” Speciale says. “This is Yamaha Marine’s core value position in the market. It is also why our demand is growing faster than expected.”

Smaller boatbuilders and dealers say they are experiencing more delays than Yamaha’s manufacturer partners. Speciale says his company’s goal “has been to stabilize those who have committed to Yamaha exclusively, as they do not have an option.”

Yamaha is working to reallocate production from other markets. “We have pulled forward capital improvements planned in 2019-20 for the plant to better match the demand trend,” Speciale says. “Finally, we are moving our warehouse location in the U.S. closer to the seaport to improve our supply chain efficiency.”

Like Mercury’s Pfeifer, Speciale says Yamaha hasn’t lost market share. “We are thankful for that loyalty, and we understand our responsibility to deliver, which supports our current core market position,” Speciale says. “We have learned from this current situation, and we are taking steps to improve stability and rebuild that trust with our customers on supply timing.”

Demand for Mercury’s high-horsepower outboards is up, “well into double digits,” 
says company president  

Demand for Mercury’s high-horsepower outboards is up, “well into double digits,” says company president  

The beneficiaries

Of course, when two brands struggle, others see opportunity. The introduction of Suzuki’s DF350A was serendipitous. “In all honesty, it’s probably a once-in-a-lifetime opportunity, and we’ve been trying to take advantage of it the best we can,” says Gus Blakely, vice president of sales and division head at Suzuki Marine.

Blakely says the company has had double-digit sales gains, with interest from new dealers and boatbuilders in the first half of 2018. Blakely adds that in Florida, Suzuki has a 25 percent market share in some categories.

The DF350A, a big engine for big boats, is not the only outboard where Suzuki has seen increased demand. “The other thing that’s really surprising is that we’ve seen no downturn in our 250- and 200-hp business,” Blakely says.

Even as Mercury and Yamaha return to normal delivery times, Blakely is confident that Suzuki will retain some of the customers it picked up. Suzuki’s largest repower shop is Outboard Specialties in Pompano Beach, Fla., which sold 642 engines for the 2018 model year.

The company stocks 100 to 150 outboards, but because of the increased demand, president Mike Lund says, the summer of 2018 was “tight” at times. “We’re feeling it a lot because Suzuki’s OEM business is exploding,” he says.

Outboard Specialties’ most popular Suzuki outboards are the 200-, 300- and 350-hp models, and Lund says he doesn’t look at Yamaha or Mercury as competition. “From a features standpoint, the Suzuki just makes more sense,” he says. “When it comes time to repower, the customer has the option.”

Yamaha underestimated the growth of the economy, which fueled demand for engines.

Yamaha underestimated the growth of the economy, which fueled demand for engines.

After introducing updated BF200, BF225 and BF250 engines at the Miami International Boat Show in February, Honda has kept up with demand. Honda has six warehouses throughout the United States, and the company says it can deliver an outboard in three to five days.

Mike Rickey, senior manager for Honda Marine, says the company’s outboard sales have grown “at a rate of more than twice that of the rest of the industry in virtually all product segments.”

Evinrude parent company BRP recently created the BRP Marine Group and purchased Alumacraft boats. Tracy Crocker, president of the BRP Marine Group, says the company has had challenging times in the past six months meeting demand for larger outboards. Typically, he says, delivery time ranges from 30 to 90 days. Much like Suzuki, he says, Evinrude has picked up market share, particularly in Canada.

As for the manufacturer of the industry’s biggest outboard, Seven Marine, vice president Brian Davis says customers who might have been on the fence about deciding to invest in the engines are now taking a closer look. “Their challenges to meet demand have resulted in a lot of good customer conversations, and in the right applications, they have resulted in sales,” Davis says.

The Seven Marine engine, which has a GM LS V-8 block and can tip the scales in excess of 1,000 pounds, just isn’t the right fit for some applications. “If somebody calls because they can’t get Yamahas on a 40- or 42-foot offshore fishing catamaran, we do the business,” Davis says. “It’s a measurable impact of our business this year, and the nice thing is, I don’t see it decreasing.”

Worth the wait

Some customers remain willing to wait for their favorite brands. Mark Samples, a U.S. Customs agent in Miami who is restoring a 26-foot Osprey pilothouse boat that he plans to use for diving in the Bahamas, went to TNT to order a pair of Mercury 200-hp V-6 outboards. In June, he was told the engines were out 19 weeks. Since then, he has been told the order has been pushed back until December.

“I’m not very happy, but I’m doing a total refit on a boat I’ve wanted for a long time, and I want to do it right,” Samples says. “You really don’t have much choice if what you want is what you want.”

This article originally appeared in the September 2018 issue.

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