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Genmar reorganization a wake up call

Genmar’s filing for Chapter 11 bankruptcy protection has shocked most of our industry. It shouldn’t have. Sure, most of us would probably have listed Genmar very low on our list of most-likely to go bankrupt. But, the shock comes more from its dramatization of how vulnerable our industry is, rather than over Genmar’s actual proceedings. Make no mistake — Genmar and its indomitable leader, Irwin Jacobs, aren’t going anywhere. I’ve always thought of Jacobs as a businessman-on-steroids, figuratively speaking of course. Push him too far and his high energy nature is guaranteed to push back. Bankruptcy? – Now you’re playing on Jacobs’ home field! After all, bankruptcy is exactly where Minstar, Inc. (later Genmar Holdings) was born when Jacobs bought Larson Boats out of bankruptcy. In fact, one of Jacobs’ career strong suits has been buying distressed companies.

So it isn’t Genmar’s filing that is most interesting now, though it will be fascinating to watch the reorganization plan unfold. Rather, what grabs my attention is the observation by Jacobs that, in effect, the “cheese” has to be moved. Who’s “cheese”? The manufacturers.

Jacobs accurately observed this: “Factories cannot just produce all the boats they can produce. There’s something that has to fundamentally change.” Amen to that!

He goes on to point out that dealers cannot take on the risks that they’re taking (and will be too wise to ever be pushed into undue risks again – my words, not Jacobs’). Further, he asserts the same will be true for floorplan lenders. Amen to that, again!

Jacobs didn’t make any predictions about what the future industry is going to look like. But, his observation about the need for fundamental change is right on. Certainly there will be a major consolidation of manufacturing, less plants and fewer production lines because there will be fewer boat brands and fewer models within those brands. It’s likely we’ll see models for competing builders coming out of common manufacturing facilities, similar to what so many manufacturers of private label merchandise already do.

Let’s face it, for many years now, dealers’ showrooms have been literally choked with too many unnecessary models from most builders. Today, dealers are gagging on those very models and it’s not likely to repeat in the future. Good dealers will be in short supply when this industry turns around, and they will dictate acceptable inventory levels, just-in-timing delivery and even terms like warranty and parts reimbursement. And that will be just the start of the fundamental changes coming.

Jacobs said it best: “This is the most unprecedented time in the history of our industry, bar none!” I say, “unprecedented” will be the cornerstone of our industry recovery, too.


5 comments on “Genmar reorganization a wake up call

  1. Phil Friedman

    This latest Ch. 11 filing by Genmar is, I believe, the harbinger in the recreational marine industry of an upcoming period of crisis management by means of Ch.11 Reorganization and Protection from Creditors. Soundings Trade Only would do its readers and the industry in general a service by running a series on the nature of Chapter 11 Bankruptcy, and in particular the “Debtor in Possession” variety, which is actually a tool that enables businesses beleagured by panicked or otherwise unreasonable lenders and creditors to fight back and potentially survive.

    The widespread expressions of horror concerning the Ch. 11 bankruptcies announced in recent weeks and months nationwide in all industries, lead me to conclude that in general there is very little understanding of the process. My contacts, even among fellow travelers in the recreational marine industry, also lead me believe that even many marine industry businessmen lack a perspicuous understanding of the mechanics of Ch. 11 bankruptcy.

    Why not assemble a panel of businessmen, lawyers, and journalists experienced in these matters to explain and discuss the process. Everyone in our industry could benefit, as it might bring some needed calm to the ambient environment.

  2. Carl M

    I just returned from visiting our European customer, partner & distributor (30% of our boat business)
    I observed how he & his customers (dealers, resellers) throughout Europe look at & do business reselling big ticket items. Their primary concerns were with the state of the US economy, as we are tethered very closely.
    What I observed from them that were missing was the added pressure from the market caused by the calendar. Their market, unlike ours, accepts the premise that new boats are new boats no matter when the boat was built. I now understand why Mercury & Yamaha moved to built dates rather than the archaic model year system used here. It is not only boats in Europe that are sold by model but also autos, trucks, motorcycles, RV’s & anything of high value. Some folks may panic reject the concept for fear of how do you value used boats if you don’t know what year it is? That’s an easy answer – tamper proof hour meters for one. Floor plan companies especially would get paid the same as long as the boat was not sold. But at least this system would stop the Nonsensical & uncalled for curtailment on high ticket items just because the item is over 12 months old. IT IS STILL NEW!!!
    Do you think Genmar would have had to file if its dealers were not forced into closure because the “NEW” inventory is 12 months old and they were penalized by large curtailment or being told by the floorplaner that these older units go before you floor anymore??? I’m not saying it’s the only straw that broke the camel’s back but it was a heavy wet one that assisted in putting even Genmar on its knees.

    This was the One thing I saw that I agreed with about how the European economic system operates. Overall they have too much government in their businesses like we are now seeing sweeping over the USA landscape.

  3. Jim

    We have seen this before and the manufacturers didn’t learn. The build, build, build approach to our industry must stop and if it takes Chapter 11 to make it happen, then so be it. Dealers were pushed for years to take more inventory or lose the product line and now we see where that philosophy has gotten all of us.
    Indeed a new day, and a new approach, resultant, is upon us. What we all do with it will be interesting to see.

  4. Terry

    “Jacobs accurately observed this: “Factories cannot just produce all the boats they can produce. There’s something that has to fundamentally change.”

    Am I the only person that finds irony in this quote?

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