CORRECT: Brunswick CEO Sees Reduction In US Power Boat Sales
March 10 2009 - 5:53PM
Dow Jones News
Sales of recreational power boats in the U.S. may decline by
more than 20% this year, as consumers continue to avoid purchases
of luxury items in a weak economy, Brunswick Corp. (BC) Chief
Executive Dustan McCoy said Tuesday.
McCoy said power boat sales volume may fall below 150,000 units
from 196,000 boats in 2008. Brunswick, the world's largest producer
of recreational boats, has been aggressively paring back its
production in response to the falling demand.
The Lake Forest, Ill.-based company has eliminated seven boat
brands and reduced its roster of manufacturing plants to 14 from
28. The size of the company's marine workforce fell by 50% last
year.
The reductions are expected to lower the company's fixed costs
by $365 million this year, McCoy said.
And he said the company is prepared to throttle back its
operations further to avoid a glut of unsold boats from developing
at its dealers.
"We're choking off the new boats going into the pipeline, so the
dealers can get rid of the old product," McCoy said during a
presentation at a Raymond James institutional investor conference
in Florida. "When the economy comes back both the dealer network
and we will be a lot more healthy."
McCoy said the aggressive destocking comes at the expense of
sales and profit growth for Brunswick as its boat plants mostly
remain idle.
The company lost $788 million in 2008 as sales plunged 17% from
2007 to $4.7 billion. Brunswick also makes fitness equipment,
bowling equipment and billiards tables.
Brunswick's boating business has been weighed down in recent
years by soaring fuel prices and more recently by the downturn in
the economy that's prompted consumers to eliminate discretionary
purchases.
McCoy said Brunswick will be able to ride out the slump. He said
the company is reviewing its boat brands for additional reductions
and is conserving cash and avoiding debt.
When orders do return, McCoy predicted the company will be able
to ramp up production quickly, even after reducing the company's
manufacturing capacity.
"We think we can double production in the footprint we have
today," he said.
He said the company is moving ahead with new product
introductions, including a new Boston Whaler brand fishing
boat.
Brunswick's stock Tuesday closed up 16.6%, or 38 cents, at
$2.66.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com