Dumping allegations polarizing the industry

WASHINGTON, D.C. – At an International Trade Commission hearing yesterday in Washington, D.C., the testimony of outboard engine manufacturers, boat builders and dealers illustrated the polarization that has occurred in the wake of Mercury Marine’s engine dumping allegations.

Just a few weeks ago, Mercury Marine submitted a petition to the U.S. government, asking for an investigation into the pricing strategies of Japanese engine manufacturers and alleging that the foreign engine builders were “dumping” product into the U.S. market.

Dumping occurs when a foreign company sells a product in the U.S. market at less than the price it charges in its own home market or below fully distributed costs and the dumping causes material injury to the domestic producers of the same product, Japanese outboard builder Yamaha reported.

The purpose of yesterday’s hearing was for each side to present to the ITC staff what they believe the case is about and give the staff the opportunity to ask questions, stated Mercury Marine General Counsel Joe Pomeroy in an interview today. These questions are intended to provide clarification where they need additional insight and to further refine and define what the issues are in which the staff might be interested, he added.

Yamaha points to Mercury quality

Of the Japanese outboard builders, Yamaha has been the most vocal in responding to Mercury’s allegations and this trend continued during the hearing.

Yamaha brought to the hearing four independent boat builders and four dealers to illustrate its position regarding the allegations, all of which have “arrived at the same conclusion, testifying that any problems Mercury has in the marketplace has more to do with product quality than with pricing,” the Japanese engine builder reported in a statement yesterday.

The “problems” that Yamaha referred to relate to the balance of market share in the outboard industry. Mercury remains the No. 1 producer of outboard engines in the U.S.; however, Japanese engine manufacturers, and specifically Yamaha, have seen gains in market share in recent years, which appear to have chipped away at Mercury’s lead.

The builders testifying at the hearing included Genmar, Godfrey Marine, Maverick and Grady White, according to Yamaha, and the dealers who testified represented Action Marine, Atwood Lake Boats, K&K Marine and Sea Witch Marine.

Pomeroy of Mercury said that while most companies accused of dumping tend to turn to American quality as the reason for any damage incurred, he was “quite surprised that the Japanese engine manufacturing industry made no response to the allegations of dumping.”

Instead, they relied on the testimony of “financially interested companies, a number of whom were exclusively dedicated to their products and had a financial interest in the outcome,” according to Pomeroy.

Yamaha supporters testify

During the hearing, Genmar Chairman Irwin Jacobs testified that the least expensive engines it purchased in 2003 were bought from a U.S. engine manufacturer, not a Japanese builder, according to Yamaha.

“To the contrary and belief of Mercury, we didn’t bring Yamaha in because they offered lower prices than Mercury, because in fact, they didn’t,” Jacobs stated. “During the time period for this investigation, the biggest discount, that is, the lowest price Genmar received from any engine supplier, was a discount from Mercury.”

Doug Gomes, VP of sales and marketing for Grady White Boats, told the commission that ultimately customer satisfaction, not price, was the factor it considered in selecting its engine supplier.

“Grady White has chosen Yamaha, not because Yamaha offers lower prices, because it does not, but because Yamaha offers the engines that have the best reputation in the market and that helps us sell our product,” Golmes commented.

Robert Deputy, president of Godfrey Marine, said that the company doesn’t understand Mercury’s decision to file the anti-dumping petition.

“Just as the market is recovering, Mercury is pursuing a strategy which, if successful, undoubtedly would increase prices in the market,” he stated. “Their problem is not that Japanese prices are underselling them, they are not. Their problem is that they are not making the product the consumer wants – reliable, clean, quiet and fuel-efficient four-stroke outboards.”

Yamaha Marine Group President Phil Dyskow weighed in, stating that he believes Mercury’s petition is without merit.

“I think they have an agenda that has more to do with raising prices in the U.S. than anything else,” he said. “If they are successful, which we don’t expect, the net result to the U.S. buyer would be increased prices. Increased prices on Japanese outboards would enable them to also raise their own prices.”

ITC to declare its intentions Feb. 23

Mercury’s Pomeroy explained that for the ITC to continue its investigation into the dumping allegations, it has to be satisfied that any gap in pricing between Japanese engines sold in Japan and those sold in the U.S. has caused injury to domestic manufacturers.

Pomeroy said he doesn’t believe the presentations made yesterday by Yamaha and its supporters will ultimately determine the outcome of the investigation. He called the testimony by the company and its supporters “largely anecdotal” and predicted that the statistics and data submitted by Mercury in its petition “will lead to a conclusion that [Japanese engine builders] can’t escape.”

The industry will get some insight into how influential that testimony was on February 23, when the ITC will give a preliminary determination as to whether their investigation appears to substantiate Mercury’s claims.

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— Liz Walz