Dumping case goes to the judges

WASHINGTON, D.C. – One day after arguing their respective cases to the U.S. government, Mercury Marine and Yamaha Motor Corp. U.S.A. made those arguments again, each restating its position in press releases issued after yesterday’s hearing.

In its release, Yamaha Motor Corp. U.S.A. President Phil Dyskow thanked the industry executives who testified on behalf of Japanese outboard engine manufacturers – including Irwin Jacobs (Genmar), Bob Deputy (Godfrey), Kris Carroll (Grady-White), Joan Maxwell (Regulator) and Scott Deal (Maverick) – and said they had helped Yamaha make its case that Brunswick’s anti-dumping position was “a sham.”

“Their testimony added weight to Yamaha’s claim that Brunswick’s petition is simply a sham intended to divert attention from Brunswick’s efforts to dominate the marine industry through the use of cheap foreign labor,” Dyskow said. “It is absurd that, with all of its achievements, Brunswick is attempting to cry poverty and distress to the ITC. Yet with the help of the American marine industry’s testimony, it is our hope that we will have successfully refuted Brunswick’s claims of injury and put an end to this dumping case once and for all.”

Mercury thanked the boat builders and dealers who testified on its behalf – including Earl Bentz (Triton), Lee Kimmell (American Marine), Ed Renken (Sea Fox) and Reggie Fountain (Fountain Powerboats) – and quoted Wisconsin Governor Jim Doyle and Representative Tom Petri, who also attended the hearing and spoke in favor of the imposition of duties on Japanese outboards.

“The domestic outboard engine industry is threatened by the aggressive pricing strategies used by Japanese manufacturers who are looking to unfairly gain market share by dumping their products in the U.S. market,” Doyle told the International Trade Commission panel that will rule on whether Mercury has been injured by Japanese engine dumping.

Mercury President Patrick C. Mackey said the domestic outboard engine industry has lost significant market share to the Japanese since 2000 due to engine dumping practices.

“Mercury Marine has an obligation to its shareholders, employees and customers not to sit back and allow itself to be damaged by such unfair competition,” Mackey said. “On a level playing field, I am very confident that we can compete successfully with any outboard engine producer in the world.”

Analyst offers perspective

Banc of America Securities also attended yesterday’s hearing, then published a research brief outlining its perspective on the engine dumping issue.

“The ITC’s final ruling in 1Q05 will be significant for Brunswick,” Banc of America wrote in its brief. “According to Brunswick’s own words, Mercury is caught “between a rock and a hard place” given its rising R&D costs and difficulty of increasing pricing due to competition. Unless the ITC rules in its favor, Brunswick faces the prospects of further margin deterioration and/or share declines for its external outboard engine sales (roughly 17 percent of total company sales).

“We maintain our neutral rating on Brunswick. Shares of Brunswick trade at 14.2x our FY05 EPS estimate of $3.40. Despite the potential for solid growth during the next several years, we believe that Brunswick is nearly fully valued due to the near-term risks associated with the anti-dumping suit and longer-term implications of the case (win or lose) for the company’s outboard sales to external customers.”

The ITC is expected to reveal its findings in the case by early February. If it determines that Japanese pricing practices have, in fact, damaged U.S. outboard companies, a duty to be determined by the Department of Commerce will be levied on all outboard engines imported into the U.S. from Japan.

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