Seven weeks ago, we reported on troubles in the boating industry, specifically Brunswick Corp., one of the largest manufacturers and distributors of consumer marine products, planned to cease production of its Bluewater Marine brands -- including Sea Pro, Sea Boss, Palmetto and Laguna boats.
This week, Brunswick announced it was expanding that action and plans to close 12 of its 29 boat plants by the end of next year, cutting costs by $300 million versus 2007 spending levels. It could also mean the layoff of up to 2,700 employees.
"For the past several years, we have been implementing initiatives to fundamentally change our cost structure by reducing our manufacturing footprint, and leveraging purchases of common components and materials across our brands and operations," explained Dustan E. McCoy, Brunswick's chairman and CEO. "In addition, we have addressed the prolonged downturn in the U.S. marine market by continually reducing production rates throughout our marine businesses, divesting under-utilized assets, exiting or divesting certain businesses, eliminating discretionary spending and reducing headcount. While these efforts have resulted in significant savings, the realities of the current U.S. marine market have caused us to step up the pace and magnitude of these efforts."
"Retail unit sales of power boats in the United States have been in decline since late 2005; however, the rate of decline has been accelerating," McCoy added. "Industry retail unit sales were down 13 percent in the fourth quarter of 2007 and down 21% in the first quarter of 2008 compared with the respective year-ago quarters. Further, these reductions were recorded off of an already low base. Total unit sales of power boats in the United States in 2007 were at their lowest in more than 40 years."
"An uncertain economy, high fuel and food prices, slumping home sales and values, rising unemployment and other factors continue to erode U.S. consumers' confidence and are reducing their ability and desire to purchase discretionary items such as boats, and billiards tables and fitness equipment for their homes," McCoy explained. "For our planning purposes, we are not assuming that these pressures will abate any time soon. As a result, we are planning for an environment in which the U.S. marine market will be smaller in the near term, and we will resize our company accordingly. Our objective is to thrive and prosper while the U.S. marine market remains under pressure and to outperform when we see a rebound in demand."
Brunswick now plans to close four plants in addition to eight plant closures already completed or announced. Brunswick will also continue to reduce the number of models and option packages, focusing on those that are popular and clearly resonate with consumers.
"Our immediate focus remains on managing pipeline inventories at our marine dealers, as well as enhancing our solid liquidity at Brunswick," McCoy said. "We will continue to produce at rates below retail demand to lower pipeline inventories. A reduction in production rates also results, unfortunately, in the need for fewer workers."
The company said that it had notified employees that it would be reducing its hourly and salaried work force at certain of its marine plants by 1,000. Further work force reductions of approximately 1,000 hourly and 700 salaried employees across the company's marine business units and staff functions are still be contemplated as additional plant closures and consolidations and other cost-cutting measures are completed.
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