The recession of the late 1980s clobbered many industries, but it hit the boat business particularly hard. The federal luxury tax only made matters worse. Sales of outboard motors and boats large and small fell by as much as 50% from 1988-92.
Now the boating industry has reached safe harbor. Consumer demand for pleasure craft jumped 7% last year, the first increase in four years. And it looks like 1994 could be even better: Industry leaders Brunswick, Outboard Marine, and Genmar should all be in the black in 1994--the first such sweep in years.
So much for the good news.
During the past two months, the heirs apparent for chief executive posts at Outboard Marine Corp. and Brunswick Corp. have jumped ship, leaving the boatmakers without successors--less than 18 months before their skippers retire. In June, Brunswick President John P. Reilly left after nine months because of disagreements with Chairman Jack F. Reichert. On Aug. 3, OMC Executive Vice-President Robert D. Randolph sailed when the board of directors announced it was looking for an outsider to replace CEO James C. Chapman.
What went wrong? Says OMC board member and Harley-Davidson Inc. CEO Richard F. Teerlink: "We decided we needed someone with a different set of skills than Bob." Despite successive restructurings, OMC lost money in three of the past four years through 1993. A recovery in the first nine months of its 1994 fiscal year--it earned $37.8 million--failed to convince the board the company was sailing straight. Rather than elevate Randolph, an engineer, it decided to seek a savvy marketer to combat Brunswick.
Reilly's departure is more complicated. By all accounts, the hard-charging former president of Tenneco Inc.'s automotive unit had helped sharpen the company's edge. In an effort to drive down costs, for instance, he had begun to combine the purchasing of Brunswick's disparate boatmakers. But he may have bumped up against a cadre of strong-willed insiders.
FRICTION. The biggest problem: friction between Reilly and Reichert and his chief aide, Vice-President and Corporate Secretary Dianne M. Yaconetti. Yaconetti exercises influence over such key issues as hiring and strategic planning. Sources close to the company say repeated clashes between Reilly and Yaconetti eventually drove him from the company. Yaconetti declined to comment.
Brunswick denies Yaconetti had anything to do with Reilly's departure, and to say she did "is inaccurate," says Reichert. "Philosophically and culturally, there were differences between his views and ours," Reichert adds. Reilly declines to be quoted. The Brunswick board has begun the search for another successor.
Brunswick's executive-suite problems come just as industry analysts predict that the company's net income could hit $115 million this year--up from $23 million last year--on sales of $2.6 billion. But the company's rebound has gone hand in hand with complaints by competitors that it is monopolizing the market for boats and engines. Indeed, the Federal Trade Commission has launched its own investigation of Brunswick's business practices. Reichert calls rivals' claims "without merit," and says he expects the FTC probe to end without action being taken.
Genmar Holdings Inc. is about the only industry player sailing in untroubled waters. Chairman Irwin L. Jacobs says Genmar's profits should hit $20 million this year, reversing a 1993 loss; he may even take Genmar public next year. Best of all, perhaps, for Jacobs: The 53-year-old financier likely has years before he has to worry about his successor. His rivals should be so lucky.