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BRP ADVANCES MARINE STRATEGY BY FOCUSING ON BOATS AND NEW TECHNOLOGIES
May 27, 2020 at 5:00 PM EDT
Company discontinues the manufacturing of outboard engines and agrees with market leader Mercury Marine to support boat packages.
Valcourt, Quebec, May 27, 2020 – BRP (TSX: DOO; NASDAQ: DOOO) announced today it has re-oriented its marine business by focusing on the growth of its boat brands with new technology and innovative marine products. We will discontinue production of Evinrude E-TEC and E-TEC G2 outboard engines. Our Sturtevant, WI, facility, will be repurposed for new projects to pursue our plan to provide consumers with an unparalleled experience on the water.
We remain committed to our Buy, Build, Transform Marine strategy which has been underway since 2018 with the acquisition of Alumacraft and Manitou boat companies in the U.S., followed by the acquisition of Australian boat manufacturer Telwater in 2019.
“Our outboard engines business has been greatly impacted by COVID-19, obliging us to discontinue production of our outboard motors immediately. This business segment had already been facing some challenges and the impact from the current context has forced our hand,” said José Boisjoli, President and CEO of BRP. “We will concentrate our efforts on new and innovative technologies and on the development of our boat companies, where we continue to see a lot of potential to transform the on-water experience for consumers,” he added.
Discontinuing outboard engine business and signing an agreement with Mercury Marine
Following our decision to discontinue E-TEC and E-TEC G2 outboard engines, we have signed an agreement with market leader Mercury Marine to support boat packages and continue to supply outboard engines to our boat brands.
We will continue to supply customers and our dealer network service parts and will honour our manufacturer limited warranties, plus offer select programs to manage inventory. These decisions will impact 650 employees globally.
Pursuing new opportunities within Build and Transform phases of strategy
With this announcement, BRP will be positioned to expand its presence in the pontoon and aluminum fishing markets through technologically advanced solutions. We will leverage our track record of ingenuity through our R&D resources to enhance the boating experience with unique new marine products, such as the next generation of engine technology with Project Ghost and the next generation of pontoons with Project M, code names for new products we expect to transform the industry.
Maximizing operational and functional efficiencies
Lastly, we will consolidate Alumacraft operations from two sites to one. All Alumacraft operations will be transferred to St Peter, MN and our site in Arkadelphia, AR will be permanently closed. In addition, we want to upgrade the boat production facilities to reorganize manufacturing sites and apply the modularity model used elsewhere. This move is designed to enhance productivity and efficiency and to allow us to respond with even more agility to demand.
About BRP
We are a global leader in the world of powersports vehicles, propulsion systems and boats, built on over 75 years of ingenuity and intensive consumer focus. Our portfolio of industry-leading and distinctive products includes Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft, Can-Am on- and off-road vehicles, Alumacraft, Manitou, Quintrex, Stacer and Savage boats, Evinrude and Rotax marine propulsion systems as well as Rotax engines for karts, motorcycles and recreational aircraft. We complete our lines of products with a dedicated parts, accessories and apparel business to fully enhance the riding experience. With annual sales of CA$6.1 billion from over 120 countries, our global workforce is made up of approximately 12,600 driven, resourceful people.
Not to gloat, but I have been predicting this for several years. Aside from die hard 2-stroke fans, very very few boaters want one. It really made no sense to me to put all their bets on building heavy 2-strokes and then marketing them with tug-of-war competitions against other makes. Yeah - - tug-of-war boating has really been growing in popularity with boaters everywhere!!
If you have been reading the business news over several quarters you would have seen this develop as a Bombardier corporate issue. One of the many issues - failure of the airplane group, Bombardier Aerospace's development of the C Series/A220 passenger plane led to edge of bankruptcy.
Bombardier Recreational Products is taking the hit for a corporate pivot.
Edited by Phil T on 05/28/20 - 4:57 AM
1992 Outrage 17 I
2019 E-TEC 90, Viper 17 2+
2018 Load Rite Elite 18280096VT
If you have been reading the business news over several quarters you would have seen this develop as a Bombardier corporate issue. One of the many issues - failure of the airplane group, Bombardier Aerospace's development of the C Series/A220 passenger plane led to edge of bankruptcy.
Bombardier Recreational Products is taking the hit for a corporate pivot.
Phil, I don’t think this has anything to do with difficulties at Bombardier Aerospace. BRP is a completely separate company, having spun off 15-20 years ago as I recall. There is no corporate connection between them.
ETEC sales have declined year over year over year. Release of the G2 pretty much guaranteed that would be the case. Even before G2 there was little market interest in 2-strokes. But introducing heavier 2-strokes with the G2s was pretty much a death knell.
Evinrude made a massive blunder by going all-in on 2-strokes when the vast majority of consumers prefer 4-strokes. It’s hard to understand that decision - - just makes no sense in the face of all empirical evidence.
Yes, there are still die-hard 2-stroke fans out there. But that was also one of Evinrude’s problems. The “brand ambassadors” that most people encounter on the internet are so rabid and frothy at the mouth, it is a huge turn-off to prospective purchasers. Boating is supposed to be fun, but ETEC enthusiasts made it their personal mission to denigrate the competition and pick fights everywhere they go. Who wants to be associated with a very small vocal minority that constantly spews vinegar? It will be an interesting case study for future marketing majors.
Anyway, I’m not happy to hear that any American is losing a job over this. I sure hope they can find work with Mercury. But this is not an airline or corporate issue. This is just the simple fact that very few consumers saw any appeal to the product they were offering, and in my opinion for many good reasons.
Phil T wrote:
In doing some research, I see the distinction now.
I find it a bit interesting that they suffer 1 quarter and shut down.
See chart of Gross Profit below
BRP is a large diversified company, with a wide variety of recreational-oriented product offerings. Most of them are doing well enough, hence the decent returns you posted above. But the Evinrude division has been a drain on resources for many years. Corporate probably gave them more time than they should have to turn it around. Covid 19 had nothing to do with it, other than corporate probably re-focussing and realizing they could no longer indulge the Etec outboard experiment with so much uncertainty elsewhere in the market.
Edited by JRP on 05/28/20 - 6:03 AM
19 Outrage II (1992)
I just never heard great things about them other than Jimh. My Neighbor has been using them and blew a powerhead under warranty and I had a friend who had a 90hp on his Montauk. All my friends run Suzukis or Yamahas. I have been looking to repower my Outrage with a used engine. Most of the stuff I read about the V6's is OK at best with lower unit problems being really bad. Sad that we no longer will have any 2 strokes. Lastly I think the demise of the G2 was because it looked like an Edsel.
I have worked for years in the newspaper industry and have some idea of how budgets and decisions went. As the economic situation went downhill they used it as an excuse to get rid of things that were loosing money for years. They were too chicken to do this in past years. The China virus is giving them a perfect excuse now to get rid of the ETEC
It is very sad to see Evinrude once again go out of business. But I just can't imagine someone not picking up the name again in the future. Indian motorcycles come to mind. Evinrude brand name deserves better than this.
Archie
For years I have been telling boating friends that Evinrude was not going to make it unless they switched their business model over to 4-stroke engines. Since Evinrude was first acquired by BRP, which in turn is owned by Mitt Romney's Bain Capital, I could see that this type of ownership structure could not succeed. A 4-stroke switch-over would require MAJOR cash infusion, which Bain had no intention of doing.
Bain Capital is a private equity operation, which buys distressed companies, spruces them up and then flips them for a large profit in five years or so. These types of operations typically do not infuse major amounts of capital, which Evinrude badly needed after the OMC fiasco. Instead the approach is turning around sales with minimal expense. Evinrude was not important enough to BRP to ever receive the capital it needed. It really never had a chance to succeed in a market dominated by Mercury and Yamaha, and upstart Suzuki, all with big money and sales domination behind them.
First they had to salvage what they could of Ficht, using all of the old Evinrude components, including old lower units, mids. transom brackets, powerheads, etc. Sales were dismal, and the engines earned a so-so reputation. Then the E-tec upgrades came along, really only an improved Ficht technology, and reasonably good from what I an tell, but still all of the old Evinrude components, barely re-designed, and new snazzy looking cowls. All of this done without any major infusion of capital needed to produce truly new engines, which they needed to compete with Mercury and Yamaha's new offerings.
For years, where I boat at least, in WI in summer months, and SE Florida Gold Coast from Stuart FL to Key West, considered the outboard capital of the world, I was not seeing Evinrudes, neither G-1's or G-2's. Considering WI is Evinrude's manufacturing state, the engines are barely seen, with Mercurys and Yamahas everywhere. In SE FL, Evinrudes are on maybe one out of every 200 boats, many of which are high end with twins, trips, quads and even quins. You just don't see E-tecs, G-1 or G-2. Suzuki is also coming on strong in FL, and now widely seen on the water - another strong competitor and more trouble for Evinrude. I have said many times, if you make outboards and you're not in SE Florida, you're nowhere. This has now proven to be true.
As many have already said, the new G-2's are just plain a visual monstrosity to most, and definitely represent the beginning of the end. They just look like they don't belong on most transoms, and indicate that Evinrude had serious design miscalculations. Nor is Evinrude in the smaller engine business from 3HP to 150 HP. Four strokes completely own this market now.
But another thing has been missed, and that is the introduction of Mercury's new V-6 and V-8 four strokes, 175-300 HP, incredibly well designed and instantly hugely popular. It takes six months to get one. These engines weigh less, look really sharp and outperform the E-tec G-2s. After seeing these, it became apparent these new Mercs could quickly finish off Evinrude. At the same time Mercury dropped the Optimax PRO-XS 2-stoke engines, as did Tohatsu with their mid-range TLDI's, leaving Evinrude as the only manufacturer of now unwanted 2-strokes. When 96% of the outboard market is 4-stroke, the market is telling you something. Finally, with only a 300 horse engine maximum, Mercury and Yamaha have the 350-450 market all to themselves. This is where the big money is in outboard production, and a large market. Just look at the big new Whalers.
You put all of this together, and it's quite apparent why they pulled the plug - minimal sales and nothing new in the pipeline, including higher HP. They could no longer see any future for the line.
FYI pertaining to Suzuki being an "upstart" company ...Suzuki has been in the United states since the 1970's, mainly in smaller engines. They were the first to use oil injection in outboards. With the introduction of larger outboards in the late 70's they started to get more attention. I bought a 140hp in 1981. By the mid 80's they were starting to get traction and look where they are today. They also make a 350hp with duo prop lower unit.
BRP had a 4 stroke lineup until they ended it after the 2007 models. Suzuki made an entire lineup from 4-225hp for them but BRP thought it was in their best interest to focus on the E-tec and kick Suzuki out of bed after the 2005 model year offering only kickers in the 4 strokes as the e-tec at that time started at 30 or 40hp so that filled the void.
Edited by biggiefl on 06/01/20 - 7:57 AM
24 Whalers so far....
The link below is to another classic boating site I sometimes follow, "Woody Boater". I consider it well written and with good content.
The reason for the post is this article, written by the moderator, on the demise of Evinrude, from a more classical perspective, with Whalers also mentioned. The posted comments are also of informative interest.
Don't give up just yet. I had an interesting chat with an industry insider the other day who's opinion was that BRP is tossing the e-tec/2 cycle and using this opportunity to "shut down" and retool. The Evinrude brand may yet be reborn/"reimagined" with 4-cycle technology. Just conjecture, but an interesting thought. I hope he's right.
1970 Sakonnet w/ 2019 Evinrude E-TEC 90 HP -- "Makai"
Tow Vehicle: 2014 Ford E-350 Quigley 4x4
They have been making Rotax engines for decades. They could have started 4 strokes with the Johnson brand 15yrs ago with that technology. If this was on Snopes, my guess would be FALSE.
