Breaking News – Crestliner, Lund stop production temporarily

KNOXVILLE, Tenn. – Brunswick Boat Group’s aluminum division has been forced to make “production adjustments,” closing down the Lund and Crestliner manufacturing facilities for nearly two weeks each.

BBG Aluminum Group President Fred Brightbill confirmed rumors today that the two brands had a large surplus of inventory and were forced to shut down production.

“There have been a number of days taken down at both of those facilities,” Brightbill says. “We’ve kind of seen the phenomenon this year, so far, of a slow start at the shows.”

For the last several weeks, industry insiders have suggested to Boating Industry that the aluminum boat group plants were closed due to a number of factors. Chief among them was an alleged “stuffing the pipeline” by Genmar prior to its sale of the lines to Brunswick.

Surprisingly, Brightbill says the blame is not to be put on Genmar. Around the time of the acquisition, he says, Brunswick made a large buy from Yamaha and Genmar. In Brightbill’s words, it was not necessarily the mix they’d like to have.

“I wouldn’t blame it on Genmar,” he says. “I would say that, jointly, through that transition, there were some one-time buys made and those buys then found their way into inventory, and so we were a participant with them, unfortunately, in jamming the pipeline.

“In hindsight, we probably would have done it a little bit differently, but at the time, we had the withdrawal of Yamaha and the opportunity to make a one-time buy. We had a window there that said, ‘Look, you can take this inventory if you want it: last chance.’ And so we went ahead and took a big slug of it.”

Compounding the situation

The slow start to 2005 may be reminiscent of last year when Brunswick first acquired the brands. The Upper Midwest – the largest market for Lund and Crestliner – experienced a good deal of inclement weather that stretched into mid July last summer.

By the end of the third quarter of 2004, the compounding of the high inventories and the bad weather seemed to have taken its effect on the aluminum group. Data from Statistical Surveys suggested that the Lowe, Crestliner and Lund brands suffered retail unit sales declines of 7.5, 9.5 and 16.6 percent, respectively, in the quarter. Furthering the problem for the manufacturer was its dealers’ need to retail current stock before ordering new.

Brightbill adds that the inventories also added up as dealers transitioned away from Yamaha, which stopped supplying the boat brands its engines last year, to other engine suppliers. “And any time you have that kind of movement, you tend to get some jam up of inventory that you’ve got to get through the pipeline.”

In the meantime, industry insiders have suggested that some Brunswick dealers have felt the need to add or focus on other aluminum lines that would give them access to Yamaha engines. The debate calls into question the issue of loyalty: are dealers loyal to the boats or the engines?

In the Upper Midwest, where Lund and Crestliner dealers are most prevalent, oftentimes the only difference from one dealer to the next has been the engines offered. With Brunswick’s expected move to all-Mercury transoms, dealers may find themselves unable to offer such a competitive advantage over their neighbors.

While Brightbill acknowledges that some dealers picked up other brands, he says that there’s too much being made of the fact that Mercury is a sister company to the aluminum brands.

“We are certainly going to be very supportive of them, but all of our other engine partners are in there and we view them as valued partners also,” he says, mentioning Honda, Suzuki, and BRP. “There are a lot of different niches and a lot of exact product nuances. It’s hard to cover it all with one brand.”

Keeping “assets in line”

Sources also speculated that high commodity prices may have contributed to the downturn in retail sales. While Brightbill acknowledges the rising costs, he says that “we absorbed the lion’s share of that last spring” and that he doesn’t believe that costs will continue to rise.

In fact, Brightbill says it should be a decent year for the aluminum group. And to attempt to ensure that it is, the brands are launching “some pretty aggressive promotions.”

“Economically, there really isn’t anything happening that says consumers should be withdrawing,” he says. “I think maybe it will just be a little bit later (in the season), and then we’ll be running like crazy trying to catch up.

“But these guys, in our environment, don’t run out and build up inventory. If we can take days out (of the production cycle) and keep our assets in line with our financial targets, as it picks up, we’ll be ready to go.” – Matt Gruhn

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