Let’s Get the Story Straight on Dumping

I am writing this column after reading and hearing a lot of confusion about the recent International Trade Commission ruling on the dumping claim, which was filed last year by Mercury Marine. Many people have the wrong impression that the ITC ruling means that the Japanese outboard engine manufacturers are not guilty of dumping. One industry trade publication even made the following comment in an announcement on the subject: “the federal decision earlier this month (February 2005) that the Japanese outboard manufacturers were not guilty of price dumping.”
This is simply not the case. The Department of Commerce, after a year of extensive investigation and research following Mercury’s claim that the Japanese were dumping in the U.S. market, found that, indeed, they were guilty with a final margin determined to be 18.98 percent. This ruling came despite testimony from several boat builders and dealers and what appeared to many to be an emotional media and letter writing campaign — not to mention a special press conference on the subject after the decision had been made — by Irwin Jacobs of Genmar. (It is very curious to me why several boat manufacturers would be so upset and emotional over Mercury filing the dumping action, especially after it was determined that the Japanese were guilty.)
In a close vote of 4 to 2 the ITC board decided that although there had been dumping, American manufacturers had not been injured. This decision surprised and amazed me and many others.
My opinion, based on my many years in the outboard business, including several years when the Japanese were making their big push to enter this market in the early 80s, is that since their entry, no one has been making reasonable margins in outboard manufacturing. Brunswick’s recent financial reports noted that their profits were generated by the boat companies, Mercruiser, P&A and their non-marine lines, and not by outboard motors. Mercury claims that they don’t make much, if any, margin in the outboard motor business.
I feel that some of the lack of decent margins in the outboard business is due to the fact that the number of units sold in the U.S. has shrunk from well over 500,000 per year to around 300,000 annually. While the unit volume was declining the number of major outboard manufacturers increased from three to eight after five import brands entered the U.S. market. That means there are now eight outboard brands fighting for market share in a market that is almost half the size of what it was when there were just three domestic brands selling engines in the U.S.
In the early 1980s OMC management made the disastrous decision to move much of its manufacturing to several southern plants in a failed attempt to lower manufacturing costs to be competitive with the Japanese. OMC management also told key employees in the early 1980s that they had filed dumping charges against the Japanese in another country and won. They said it was done as sort of a “warning shot across the bows” of the Japanese manufacturers as they were entering this market.
Mercury, at this point, isn’t re-filing the dumping action against the Japanese but is apparently keeping its options open. I feel that it is time for the industry to close the books on this issue and move forward. I just hope that all outboard manufacturers, domestic or foreign, will now compete on a totally level playing field. That means no dumping, no side deals under the table, no paving dealer parking lots to get more business, no selling to dealer buying groups at prices lower than other dealers can get, etc. And I’ve said this before, outboard boat builders should stop selling loose outboards to dealers. This just messes up the market. I hear that some outboard manufacturers close their eyes to the fact that many of their boat builder customers sell their loose outboards to dealers.
My last point is that there has been so much discounting in the pricing of outboard motors to boat builders that engine manufacturers potential for profit has been even further reduced. Why should this matter to dealers and boat builders? It should matter because the engine manufacturers are investing more money than ever before to provide clean outboards that meet government emissions standards and to help attract more people to boating. If they can’t make any money in the business then what is the point? That is what we are all in business for isn’t it?