Outboard engine dealers stranded by default

By DITA DE BONI

One of the world's biggest makers of outboard motors has filed for bankruptcy protection, leaving several dealers of its profitable New Zealand and Australian business without new product and parts or warranty protection at the busiest time of the year.

Chicago-based Outboard Marine Corporation, makers of Johnson and Evinrude outboard motors, has closed its North American plants and stopped shipments to its 6500 independent retailers around the world.

The company owes more than 1000 creditors at least $US250 million ($556 million), and said just before Christmas that it would file for protection under Chapter 11 of US bankruptcy laws.

OMC is now scouting for a buyer of its billion-dollar global business, and at least one market player is believed to be interested.

But in the meantime, the way dealer orders, warranty expenses and rebates will be handled has not been decided, leaving some dealers feeling stranded.

OMC Australia, which also covers New Zealand, has been taken over by voluntary administrators Ferrier Hodgson in Sydney, who are conducting an investigation into the company's affairs.

Neither Ferrier Hodgson nor OMC's New Zealand representatives returned calls yesterday.

The failure leaves the 30 or so OMC outboard motor dealers in this country responsible for the cost of warranty claims, as required under New Zealand law.

Many say they are not sure what will happen to their businesses unless efforts to find a buyer for OMC's boat and engine manufacturing divisions bear fruit soon.

One South Island dealer said he knew nothing until late December, when he was told that he could buy outboard motors from the company at a discount, but the motors were not covered by a warranty.

A fax, sent to dealers worldwide, provided few more details of the state of the parent company. It said OMC planned to sell its engine and boat business "as expeditiously as possible," and said debtor-in-possession financing of $US35 million would enable the company to run at a reduced level until a sale was finalised, and brands "should remain viable and vibrant."

But the dealer, who did not want to be named, said shipments had stopped, and a resolution scheduled for some time in February might be too late for owner-operated businesses like his. He was still putting parts into motors but having to cover any difficulties out of his own pocket.

"We have to do that, to look after our customer base. And yet we are told by the company that we won't know anything until mid-February. What are we supposed to do until then?

"In the US, it's the middle of winter so of course they don't care as much, but we have our busiest time now - we are open seven days a week."

Another dealer, who also did not want to be named, said dealers were scrambling to find suppliers of parts and engines, and were having to look outside their single franchise structure to keep themselves afloat.

"It's a really sad situation. Their motors are so good, and we have been doing a great trade through the season."

OMC has been prominent in the boating industry since Ole Evinrude invented the gasoline-powered outboard motor in 1909. The company has around a 30 per cent US market share.Here, its market share is unknown but thought to be about the same, with competitors Mercury and Yamaha also prominent.

OMC's troubles are thought to have started with a $100 million restructuring in the US in 1998. The company hived off some of its production to third-party suppliers, not all of whom could supply the company in good time.

The company's latest reports show it losing $US59.5 million on sales of $US565.7 million.

When it decided to shut down production late last year, dealers from around the world complained that instead of being notified by the company, they learned of the action through a daily boating internet newswire service.

Meanwhile, the company's larger dealers remain confident that OMC will find a buyer soon.

Tony Singe, manager of Family Boats and one of Auckland's largest OMC product dealers, said the company was "boxing on, and [wouldn't] be jumping ship to sign up other suppliers."

He believed OMC would give the concerns of dealers a high priority.

Peter Busfield, executive director of the Boating Industry Association, said he hoped his members would fulfil their guarantee obligations.

"I do have the utmost sympathy for the dealers but they have great brand goodwill which I'm sure they will want to maintain."

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