Mercury responds to Jacobs’ charges

FOND DU LAC, Wis. – Mercury Marine this morning answered charges made by Genmar Holdings, Inc. chairman and CEO Irwin Jacobs who, in an open letter to the marine industry Tuesday, was very critical of both Mercury and the U.S. Department of Commerce. The DOC recently ruled in favor of Mercury’s engine-dumping complaint filed against Japanese outboard manufacturers.

In its two-page statement, Mercury reiterated Jacobs’ right to express his opinion, then took issue with several of the allegations he made, defending not only itself, but also the DOC and the motives of both organizations.

“The recent U.S. Department of Commerce’s decision was not determined on opinion, but based on facts considered during a lengthy, thorough and independent investigation,” Mercury wrote. “To assert that the DOC has ‘no interest in facts, but only in how they can protect a U.S. company’ does the agency, its experts and its expertise in such matters a grave disservice.

“According to the DOC’s decision, Japanese manufacturers have indeed been violating U.S. dumping law. This determination was not due to some esoteric mathematical error – as demonstrated by the magnitude of the dumping margins – nor was it a result of an inability by the U.S. Department of Commerce to winnow out any distribution differences. The Department of Commerce is extremely skilled and practiced at such investigations, and Mercury is confident the U.S. government has completed a thorough, legitimate and fair evaluation of the situation.”

Mercury said its objective in seeking the ruling was to ensure that the Japanese manufacturers follow U.S. laws and to promote competition and choice in the outboard engine market. Mercury Marine submitted a petition to the U.S. government in January 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.

“Mr. Jacobs contends that this is all about pricing,” Mercury wrote. “It is, rather, about redressing price manipulation already done by the Japanese industry with one goal in mind: to harm U.S. outboard makers. One can only ponder what an outboard market without strong American competition would ultimately be.”

Mercury closed its letter saying it awaits the final determinations of the DOC, which is expected to rule in December, and the International Trade Commission, which may issue its findings early next year.

Jacobs releases follow-up letter

Jacobs, meanwhile, issued another letter this morning in which he wrote he had “found out some very interesting and astonishing information regarding Mercury’s anti-dumping case against the Japanese outboard engine manufacturers.”

“First of all, neither Mercury nor Bombardier have told the marine industry (manufacturers and dealers) that they also will have to put up the same amount, approximately 22-1/2 percent, for a bond that all importers of Japan engines and power heads also must post,” Jacobs wrote. “Bombardier imports four-stroke engines to the U.S. from Japanese Suzuki under the Johnson brand. Mercury will also have to post a bond for any Tohatso engines and Yamaha four-stroke heads and engines that Mercury imports from Japan, the same as Yamaha.”

However in its Aug. 6 press release, Mercury did acknowledge its actions would impact the engines it imports, saying “Even though engines Mercury imports from Japan will be subject to the duty, we believed it was our responsibility to our shareholders and employees and the U.S. marine engine industry to follow this course.”

Jacobs said Yamaha had assured Genmar that it believed the necessary pricing adjustments both in Japan and the U.S. had already been made. Yamaha says that it has lowered engine prices in Japan and raised prices in the U.S. 3 to 4 percent at the beginning of the model year in July 2004 — including raising Mercury’s price on four-stroke engine heads over 90 percent.

“If Yamaha is able to split Mercury’s anti-dumping complaint into two categories: one for complete engines shipped to the U.S. and one for four-stroke heads shipped to Mercury, I am told that Yamaha’s cash bond would go down to approximately 15 percent on complete engines, and Mercury would then have to post a cash bond with the U.S. Government in excess of 100 percent of the value of the four-stroke heads,” Jacobs wrote. “In other words, Mercury could conceivably be at risk for even a higher percentage cash bond than Yamaha.”

Jacobs said the DOC will monitor the shipments and pricing of outboard engines from Japan to the U.S. annually, and that at the end of the first year, if the DOC believes there is no longer any monetary damages from anti-dumping, it frequently returns the cash bond deposits with interest at the end of one to two years.

Jacobs also reaffirmed his contention that Mercury will have a hard time proving it had been harmed by the dumping given its recent pronouncements of sound financial health.

“Finally, I believe that Mercury has caused a bigger problem potentially for themselves than for anyone else,” Jacobs wrote. “Things are going to get very interesting in the U.S. outboard engine business. Stay tuned.”

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