Boating Industry: Marine Products Corp. is known for the conservative approach it takes to managing its finances. What does that translate into? How is that different than the average boat builder?
Jim Lane: First of all, this is not a new philosophy for us. From the very beginning, we’ve taken a rather conservative approach. Through the years, the company has never borrowed any money at all, and the company has never lost any money even in a month. We’ve been using our cash flow being generated to handle the expansion needed at the time of growth. Secondly, we’ve used the capital we’ve generated over the years to support our operations when business is not the way we want it to be.
Our thought always has been slow, conservative growth with exceptional new products on a consistent basis and to treat all of our customers as fair as possible. The slogan we’ve adopted is: success is based on relationships, not transactions. We’ve always been careful to use our financial resources to support our relationships.
Boating Industry: We’ve been writing a lot since the downturn began about what companies can do to adjust their businesses to fit current conditions. What are the factors that determine whether companies survive this downturn? What percentage comes down to the shape they were in when it started vs. what they’ve done since then to adjust?
Jim Lane: I think the key to surviving the downturn for a manufacturer is keeping the dealer network as healthy as possible. It’s the most critical thing we can do. As manufacturers, we depend on our dealer network to handle our distribution and ultimately sell to the customer. One of our key focuses during the ’09 model year has been to support our dealers in the best way possible because it has become very evident to us that the dealer support requirement was going to have to be increased from what it had normally been in the past.
Around boat show season, we increased our support to dealers, depending on location, by up to 300 percent. We all realize that if the boats don’t sell at the local level, the industry is gong to have a much more difficult time in recovery. That pertains to us and also to the finance companies. In every case, we talk about the difficulty of finance. And I understand the difficulty they are in at this particular time. It comes down to amount in inventory and aging of that inventory.
Our first focus has been to work the best we can with our dealers to reduce field inventory. Our financial condition has enabled us to do that in a very generous manner. Secondly, for all of us to survive in the marine industry going forward, that means all of us, including our vendors. We’re very supportive of our vendors. We’ve tried our best to support our vendors by working ahead with them as best we can for orders and making sure they’re always paid on time. It’s critical to keep cash flow to vendors. It’s the key to the future, making not only the dealer healthy but the vendor network as well.
Boating Industry: You spoke earlier about dealer support. Can you describe in more detail the form that the support is taking?
Jim Lane: We’ve maintained an inventory support program for our dealers throughout the ’09 model year. As we rounded the corner into the second quarter, we reviewed our outstanding inventory and looked at specific models that needed more assistance. We developed a program with almost each dealer to find out what it would take to eliminate the field inventory.
Boating Industry: How is that different from what you’ve done in the past?
Jim Lane: We had always looked at standard rebates as sufficient to move boats. As a result, that’s what we did. This year, in some cases we increased those rebates by 300 percent of what the boat show special was during the prior boat show season. Most of that help has been directed toward noncurrent models. Older inventory costs more to finance. What we’re trying to do is take the oldest inventory out first.
The key to this inventory is everyone in the finance business now, regardless of source, they need to see inventory go down to justify to their own companies the reason to stay in this business. Our goal is to support the lenders that finance our dealers’ inventory.
It’s difficult to keep floorplanning new product when there’s an overabundance of aged inventory. Our program, from what I’ve heard, is one of the most aggressive ones in the industry.