Home » News » Malibu signs engine deal with GM

Malibu signs engine deal with GM

By Malibu Boats, Inc.

Malibu Boats, Inc. (NASDAQ: MBUU) announced it has entered into an engine supply agreement with General Motors for the supply of engine blocks, which Malibu will marinize for use in its Malibu and Axis branded performance sports boats.

The agreement, running through 2023, provides Malibu with the next significant opportunity for cohesive design and vertical integration allowing for superior quality, customization and performance in its Malibu and Axis branded boats. Malibu expects to begin using the engines as early as in its model year 2019 boats.

"This is an exciting time for Malibu Boats as we commence our next major vertical integration initiative, marinizing our own engines," said Jack Springer, Malibu Boats chief executive officer. "With our track record of successful vertical integration efforts, producing our engines was the next logical step. Further, we are thrilled to have GM as our partner in this effort, with its high quality standards and deep history in supplying engine blocks. Our goal, as always, is to deliver the ultimate on-the-water lifestyle for our customers, and by integrating the marinization of our engines, we will now control the design and performance of our engines, making them unique to Malibu and Axis boats.

"This investment is consistent with our long-term strategy of identifying positive return vertical integration initiatives to better control our business and create attractive financial returns,” he added. “We are confident that the team we have built and the partnerships we have incubated over the past few years position us for great success on this project. Our plan currently calls for us to invest up to $18 million over the next three years to provide the most reliable and best performing inboard engines in the industry."

To facilitate the marinization of engines, Malibu recently closed on the acquisition of a 70,000 square foot facility adjacent to its boat manufacturing operations in Loudon, Tenn.

This initiative provides Malibu with the ability to control the design, performance and customization of its future engine offerings, providing the company with direct access to the engine block manufacturer that has been supplying the industry for decades.

“Malibu is partnering with one of the most respected names in the industry in GM and we believe we have one of the best engineering teams in the industry for engine development,” the company said in a press release. “Once operational, we believe Malibu's inboard engine manufacturing business will be the largest in the industry, providing the Company with immediate operational advantages of scale. Our scale, along with our engineering team, will provide Malibu with the ability to provide an affordable and unique offering to the Company's dealers and retail customers.”

The company is targeting an approximate three-year payback on its investment. Malibu expects this engine initiative to be accretive to Adjusted EBITDA margin and earnings per share in its first fully operational year.

Leave a Reply

Your email address will not be published. Required fields are marked *

*