Chaparral and Robalo president Jim Lane does not want to come across as boastful when he talks about how the two brands have weathered the recession.
Still, he and vice president Ann Baldree are proud of what the publicly held and conservatively run company has been able to accomplish — from the development of its 1 million-plus square-foot production site to the successful launch of H2O. In 2011, the company’s 18-foot to 19-foot market share was about 1 percent in the second quarter. In the second quarter of 2012, it was 13.31 percent. Its share of the 19-foot sterndrive fiberglass market is even greater — 20.71 percent.
They speak affectionately about their employees, and even their competition, and their open-door work environment seems to foster a sense of inclusion. The company’s third-quarter profits were up 75.9 percent, and year-to-date profits are up 91.1 percent.
Q: I loved the stories about how you dipped into cash reserves to help support your dealer network when the recession hit. Can you talk about that?
Lane: As we came out of the downturn, not that we’re actually out of it, but as we started to see some improvement we thought of some other areas that deserved some attention. We had a plan, and we stuck with it. We didn’t go into debt. We just dipped into our cash reserves. We had significant cash reserves because we’re conservative in how we run our company. We had to commit a significant portion of our resources to make sure our distribution channels stayed constant. That’s just a sign of good management — that you have a sufficient amount of resources to do what’s necessary.
We took out $18 million to help support the dealers. We also committed a significant amount of resource dollars to R&D to keep a steady stream of new models coming into the marketplace. Just since 2008 or 2009, it’s rather spectacular the amount of new product we’ve developed, including boats like the 327, which won an NMMA Innovation Award. Chaparral and Robalo have introduced 29 new models since the 2008 model year.
Q: It’s really impressive to invest in that kind of commitment to your distribution channels. Not all builders did that.
Baldree: It was a very bold move. Jim and Buck [company founder William “Buck” Pegg] decided to dip into all that cash we had for the first time in the company’s history. It was the first time we … were not going to make money. We have shareholders to think of, and we had to tell them that after 450 consecutive months of profitability we were not going to make money.
Lane: I told them we have dealers out there who need our help. We turned the boardroom into the war room (laughing). We needed the right amount of assistance. It was a big commitment. And the interesting thing about the board of directors was it was never even a question. They said, ‘You guys do what you need to do to protect the business and protect the distribution channels.’
Baldree: We also maintained our commitment to education. We have awarded almost $200,000 in scholarships to children of our employees; that’s something we didn’t forfeit in the downturn. That’s one of the things our company probably doesn’t rattle its own saber about as much as we should, but it’s something we’re very proud of internally.
Q: Can you talk about some of the employee benefit programs you rolled out at a time when many builders were cutting back?
Lane: When you look on our website you can read the report issued to dealers called Strength and Stamina. It showed why during the downturn … we were the right company to do business with. Another thing people are amazed at: We have well over a million square feet of space. (There are 1,206,318, to be exact.) I have heard it said that we are one of the largest facilities in North American all in one place.
During the downturn we had our series of plant closures and days off. As we started to see light at the end of the tunnel our leadership team recommended some rather interesting proposals to make sure that all of our employees were on board as we were starting to hire back a large number of people.
In 2009, we dipped to an employee count of 270 and have now rebounded to 585. We realized during the downturn people struggled, so we wanted to improve benefits and make people more committed to our company. We did that by upgrading pay standards, benefits and vacations. Hourly workers, we let them have the opportunity to earn paid time off [by having exceptional attendance].
Q: You mentioned some great success with the H2O product line. Can you tell me about that?
Lane: It’s been a nice success story for us. We realized some product lines are not as successful in this marketplace as they were, such as cruisers, so we decided to introduce a market that we cut our teeth on when we first entered. Our dealers were a little skeptical initially because they were not accustomed to selling entry-level boats, but these boats allowed them to reach out to new customers.
Baldree: It brought completely new customers into boating.
Lane: The contribution those little boats brought back … allowed us to be more profitable on other boats, too. It was win-win for us.
Baldree: The dealers are very excited. They’re totally behind this project. It wouldn’t be successful without dealers being behind it. They have generated the excitement within the dealerships, and it’s brought in a lot of first-time boaters. We determine the best dealers in an area. We don’t automatically give Robalo to a Chaparral dealer. We do have some that carry both, but each one is vetted differently.
Lane: One of our philosophies is we feel success is based on relationships, not transactions, and that goes for our employees, our suppliers and our dealers. We put that in almost every presentation we do, and I think that’s true.
Baldree: We spend a great deal of time as a company and leadership team to define mission, vision and values. We’re very proud of those. We do it all with unyielding integrity and honesty. There’s nothing that describes our company better than the way we treat our employees — fairly and honestly. We have a lot of employees that have stayed on 15, or even 30 years. Most of our employees who have been here a long time help steer the company. Jim and Buck have a very open-door policy when it comes to opinions or recommendations. They always listen to us … and seek our opinions.
Q: How did the investment in your dealer network pay off for Chaparral and Robalo?
Lane: Back before the downturn, there were plenty of dealers and plenty of business for everyone. Today we have 30 or 40 percent fewer dealers. We have a comparable reduction in the number of customers, or even fewer. So competition is more dynamic than it’s ever been. I don’t like it nearly as well because you don’t like having to feel like you’re competing for every dealer and every deal.
Dealers are taking on many brands because their margins are so low, and they need something to help offset that. The business isn’t quite as fun as it was, but businesses that are operated in a fiscally conservative manner are still those who are going to be successful. I think we’ve proven our middle-management team and employees are capable of stepping up and competing, but it’s not as much fun anymore. It’s just a different world, and we’re all trying to find a way to be successful.
We don’t want to appear like we’re gloating. We don’t want to be arrogant or rub anything in people’s faces. I’ve got a lot of friends who are boatbuilders and I don’t want any of them to think we’re saying we’re better than them. We’re just proud of what we’ve done.
The real success story for us, too, is in the success of our dealers because we can build any boat that we want, but really, when it gets down to it, where the rubber meets the road is distribution. No matter how good the boat is or how conservative we are in operation, the dealer is the one who has to take the boat to the customer and convince the customer that we have a good product.
Baldree: And we listen to our dealers and seek their advice.
Lane: In real estate it’s location, location, location. In boatbuilding it’s distribution, distribution, distribution. That’s why we’ve worked so hard. As I mentioned, the competitive atmosphere is more tense than it’s ever been. Dealers might be looking at us and four or five other brands.
Q: Do you think there is enough market and distribution for all of the builders to stay competitive?
Lane: I think it’s an interesting question: Will there be fallout or consolidation, or will companies just operate at very low margins? Back in the old days we had very high margins and very high profits. I ask myself the same question: How do all these boatbuilders make a good living in this market? Some sold out, some got out and there aren’t enough distribution channels and customers for everyone to be successful.
I don’t know how the industry will get past that. There’s not enough business for all of us to be very successful. In the long run you would think there would be more consolidation.
The boat business is a very concise group of people that enjoy boating. That’s why I was telling you before it’s not as much fun as it was in the past because a lot of boatbuilders that I’m such good friends with — we are more competitive in the marketplace than we have been in the past. When things are super-competitive, feelings get hurt.
This article originally appeared in the December 2012 issue.
