(ot) Polaris Ceases Production Of Watercraft
Gary C
Of Profit As Top Cause For Decision
Snowmobile News
Thursday September 2, 2004
Slightly more than a month after Polaris' marine division displayed
several new 2005 personal watercraft and sport boats at the company's 50th
anniversary celebration in St. Paul, Minnesota, it was announced that
Polaris was exiting the marine industry.
Effective September 2, Polaris CEO Tom Tiller said Polaris would no
longer manufacture personal watercraft or boats. Polaris' announcement comes
nearly five years after Arctic Cat ceased production of its Tigershark
personal watercraft. With Polaris ceasing its marine operations, it leaves
four personal watercraft manufacturers: Sea- Doo, Yamaha, Kawasaki and
Honda.
"This was a decision that the senior management and our board of
directors spent many months contemplating and it's been a difficult
decision," Tiller said in a telephone conference to shareholders.
Tiller cited that the company's marine division had been unprofitable
since it entered the personal watercraft market in 1992, which led to the
decision to cease its marine manufacturing operations. Since 1992, the
division has lost more than $120 million. He said several factors kept the
division from being more successful. Some of those factors include the
decline in industry sales since its peak in the mid-1990s, the ongoing
emissions regulations and associated rising costs with those regulations.
"Polaris' personal watercraft business has not been immune from these
events," Tiller said.
Another factor includes the decline in Polaris dealers carrying its
marine products. Tiller said that less than 500 dealers carry Polaris marine
products, which is a decline from more than 1,000 in the mid-1990s. In
addition, during the past few years about $7 million per year has been
pumped into new product tooling and product development. Tiller said that
money will now be used in other divisions.
As of early September, about 5,000 personal watercraft and boats are
in dealer inventory worldwide. Polaris will continue to provide support to
its dealers for selling the remaining inventory. Tiller said several
programs, which include financing incentives, discounts and additional
warranty periods, will be put in place to help liquidate the remaining
units. Also, the company will provide replacement parts, service and
warranty to its dealers and customers for several years, Tiller said.
Polaris' personal watercraft business peaked in 1996 when sales topped
$171 million. Since then, it has steadily declined. By 2003, the marine
division generated $53.5 million in sales, and had a pretax loss of $13.2
million. Overall, Tiller said the Polaris marine division accounted for 3
percent of Polaris' total sales. Of the 105 employees in the marine
division, "fewer than 20 are expected to leave the company," he said.
The Spirit Lake, Iowa, manufacturing plant, which shared personal
watercraft and ATV assembly lines, will be converted to assemble ATVs full
time.
'The Core Problem'
Tiller said executives began discussing the potential of ceasing its
marine division operations a few years ago.
"Really the last thing that we thought might provide some opportunity
was the conversion to four-stroke," Tiller said. "The core problem that we
faced is the market is half the size of what it was at its peak. There's
just not room in the market for enough people to make money.
"We did everything we know how to do to try to make that business
successful," he continued. "The reality was that once we got through the MSX
launch, the market continued to shrink. Honda came into the business, which
didn't help things. We're facing emissions regulations and the costs go up,
and there was no sign even when the introduction of not just our
four-strokes but competitive four-strokes that things were going to get
better in terms of overall market growth."
It also affects Polaris' line of sport boats. "We were hopeful that we
could take the sport boats, which was a source product not something that we
invested in, and that we could expand our distribution into marine dealers.
That wasn't as successful as we had hoped."
After the announcement, the Personal Watercraft Industry Association
(PWIA), which represents the personal watercraft manufacturers, said it is
disappointing to see Polaris leave the industry.
"We are sorry to see Polaris go, and we wish them well," said Elinore
Boeke, public relations manager. "There are many internal business factors
that go into what must have been a difficult decision for Polaris, and we do
not anticipate that any other PWC manufacturer will follow suit. The
personal watercraft market is strong, with sales seeing their first annual
increase since they peaked in 1995; current annual sales are over 80,000."
Deke
"Gary C" <Clem_Kadi...@CrazyGooginhiemer.com> wrote in message news:<Tih_c.13764$Y94....@newssvr33.news.prodigy.com>...