A Year for the Record Books

Three stalwarts are retiring after a year that saw more M&A activity than any other time in the industry’s history. A look back at a dynamic 2018.

By Michael Verdon

November 27, 2018

This year was pivotal in many ways. The industry has seen more mergers and acquisitions than any time in its history; there have been the entry of companies such as Polaris, Winnebago and Patrick Industries; devastating hurricanes; red tide and green algae blooms; and tariffs from China, the European Union and Canada. At the same time, boat sales continue to grow, foreign-built yachts are being imported at record levels, new boatbuilders have entered, and a number of big companies have set up innovation centers.

Beyond the headlines, three personnel moves signal a sea change in the industry. NMMA’s Thom Dammrich and Brunswick’s Mark Schwabero are retiring, and MarineMax’s Bill McGill passed the CEO title to his son, Brett. Dammrich will retire next summer after the association finds a replacement, while Schwabero will exit Brunswick soon. Retirement is not in the vocabulary of McGill, who often started workdays at 5 a.m., slalom-skiing outside his lakefront home. Retaining his chairman position, McGill is actively involved in several “special projects.”

These three have helped shape the industry into what it is today while leaving their own companies in much stronger positions. We asked them to reflect on their time in the industry, in their own words.
— Michael Verdon

Bill McGill, MarineMax Chairman

Sometimes when you step out of the trees, you see the forest. I feel like that is happening now with my new position, where I’m involved with potential acquisitions but mostly Joi Scientific. In June, I moved out to Park City, Utah, with my family for this new chapter, and it’s been great. I’m still working with Brett, Mike and Chuck on our daily operations. But I’m able to do more strategizing and can now look at the industry and our business more clearly. I don’t know if I’m working more now, but I’m certainly traveling a lot more for business.

Joi Scientific is different from anything I’ve ever done. It’s a technology that extracts hydrogen directly from untreated seawater, something that, in theory, is impossible. What I was taught as an engineer was that electrolysis is the only way to make hydrogen and that you use more energy making it than what you get back. But our Hydrogen 2.0 is very different.

With ours, a boat is literally running in its fuel. This could be a game-changer for boating. You don’t need a
fuel tank with this system. Think of how that would fundamentally change boat design, both in opening up storage areas and saving weight. Or how about never having to go to a fuel dock again? How great would that be?

Outboards or sterndrives that run on gas can be converted to run on hydrogen with this system, and generators can also run on hydrogen. It could also power diesel engines and just about any type of marine engine.

It’s hard to get your arms around it, since it’s against everything we’ve ever been taught. Our Hydrogen 2.0 technology yields more energy than it takes to produce. We’ve had scientist after scientist say it was impossible, but they left believing in this technology. They scratch their heads but can’t refute it after they see it. Our board of directors at MarineMax has seen this technology in action, so they’re fully behind what we’re doing.

We’ve invested heavily and have the manufacturing rights for the new prototype. I’m traveling around the world, meeting with engine builders, and there is a lot of interest. We’ve established partnerships both inside and outside the boating industry for testing. We’re looking at the commercial marine industry and even industries like farm fishing. It really has the potential to be a world-changer that is much bigger than recreational boating.

We’re still a few years away from industrial usage, but we’ll get there. It’s 100 percent green. MarineMax has always focused on reducing pollution in oceans and lakes. We owe it to future generations to try to make it work.

I’m as passionate about this new technology as I am about boating. I’m a firm believer that you should do what you’re passionate about. I know at MarineMax we’ve changed many peoples’ lives for the better. I’ve had customers come up to me and thank me for making it possible to bring their families back together.

This new technology is fun and a tremendous opportunity. And I do believe we have an obligation to our environment. I mean, if you’re boating with it, you’re already in your fuel. All you need is access to water. What keeps me going at the end of the day is knowing we’re going to make a difference in the world.

Thom Dammrich, NMMA President

When I first came on as NMMA president, I felt like a transplanted organ that the body was trying to reject. I still think the industry doesn’t rapidly embrace people from outside, though it’s getting better. When I first joined, we had a movement called Uniting the Industry for Growth. The industry was anything but united, and NMMA was the association everyone loved to hate.

At one of my first board meetings, I said that we needed to stop wasting our time on the things we can’t agree upon. It didn’t mean that we couldn’t come back to them, but we needed to first focus on the things we agreed upon. My first staff meeting was about all the negative press NMMA was getting, most of it around Uniting the Industry for Growth.

The first thing I did was kill that program, and then I invited all the endemic press to Chicago for a meeting. I had a list called “Ten Myths About NMMA,” and I addressed each one head-on, giving them the facts to dispel those myths. I then spent a lot of time reaching out to all industry associations, trying to build bridges. I promoted the concept that the industry was an ecosystem.

As I said at our first “stop the bleeding” meeting in Chicago, we needed to find a way to work together to promote the boating lifestyle. We launched the Grow Boating initiative a few years later, and we brought out certification programs for dealers and manufacturers. We also launched an initiative on marina access. They’ve been the four pillars of Grow Boating. That brought people together to talk about substantive things.

We’re a big industry, but we’re a small industry, too. It took years of outreach and meeting with people, but we’re now at a point where most of the marine trade groups have come together. It’s all about using our joint resources to move the industry forward.

The global financial crisis was another huge challenge. Industry retail sales dropped 50 percent, while boat production was down 80 percent. NMMA revenues were down by half, so we were forced to reduce staff from 149 to 81. Discover Boating was cut from $12 million to $1 million for a few years after 2010. Everyone started doing two jobs, and we continued with advocacy and our other core missions. Ten years later, we’re back to where we were in terms of income, but we’re able to do more now with our staff of 90. I think every marine business that survived the recession learned a lot. They’re now better businesses because of it.

Our biggest challenge at NMMA was moving the Miami International Boat Show to Virginia Key. We literally bet the ranch on it. After we found out that the Miami Beach Convention Center only wanted trade shows and that we had to move, I laid out the choices to our board in May 2015. The village of Key Biscayne already had five lawsuits against us in place. But the show was critical for our industry. It generates more than $300 million worth of sales and has an $850 million economic impact on South Florida. We also employ 9,000 people to put it together. It’s a show that can make or break the year for some builders. We could’ve thrown in the towel and limited our losses to a few million, but the board voted to move ahead with the show.

Think of the show as a $20 million construction project. Designing and staging a 1 million-square-foot event in eight months was a monumental undertaking that required significant financial commitments. Basically you’re putting 20,000 square feet of tents, food operations, restrooms and other infrastructure on a parking lot, then creating a web of floating docks beside it. It’s the largest temporary structure of its kind in the world.

I don’t think I slept much that year. The lawsuits went down to the wire. We didn’t get our final permit following their final challenge until Jan. 2, 2016, about six weeks before the show started. By that point, we were in it for $20 million. Had they prevailed, we’d have lost $20 million, and that’s all we had. It was a very brave decision by our board to push ahead. As a result, the show has been highly successful.

Over the years, we got everyone in our industry working together, and we united with the fishing industry. We also have good relationships through ICOMIA, with 34 countries that have marine industries. I’ve done a lot of speeches over the years and still travel 45 weeks a year to different events and shows. I think all that outreach has helped unite the industry.

I must add that nothing could’ve been accomplished without the effort of people across many organizations. These all represented a team effort by a lot of smart and hard-working people. I want to make that clear. Everything was a team effort.

Mark Schwabero, Brunswick Chairman and CEO

When people look back at 2018, they’ll see it as a year that redefined Brunswick. In February, Mercury introduced a new V-6 4-stroke outboard lineup that was followed in May by launches of other V-8 and V-6 models. Those 19 outboards were arguably the largest engine launch in marine history. We also introduced Nautic-On, our new connectivity platform, at the Miami boat show.

In March, we announced plans to spin off our fitness business. In April, Mercury broke ground on another expansion. In June, we announced that we would keep our Sea Ray business but discontinue the sport yacht and yacht division. Just a few days later, we announced the biggest acquisition in Brunswick’s history: a deal to acquire Power Products for $910 million.

We also closed a deal on retail financing for $185 million on 30-year notes. That’s great news for the company because it says a lot about how we’re viewed by agencies like Moody’s, S&P and Fitch. It means we’re back as investment-grade and that much of the heavy lifting we did earlier is now coming to the fore. It’s a significant accomplishment. We also had a great third quarter that beat consensus, and we raised our outlook for the year.

With the pending separation of the Fitness division, we’ve changed the corporation so it’s now pure-play marine. That allows us to focus on marine while eliminating a lot of the distractions. Our business is now about one third boats, one third engine propulsion and one third parts and accessories.

Before I became CEO, the prior period was more about survival and stabilizing the company. We’ve been able to focus on growth scenarios, growing organically inside the company and also inorganically with mergers and acquisitions. We hadn’t done acquisitions for some years, and recently, we’ve done 10. It’s been a period of remarkable growth and change for the corporation.

I think we’ve changed the company in deeper ways. Historically, it’s been about the boats and engines. Now it’s more about the entire marine ecosystem. We’re providing solutions about how to integrate new technology into our products to make for a fuller customer experience on a boat. Our Power Products companies, for instance, will let us create an electronic backbone on a vessel that is integrated into the propulsion and other systems.

Looking back over my career, I think the biggest challenge was bringing Mercury through the Great Recession. There were a lot of tough decisions that had to be made. After I was named president in the fall of 2008, it was clear we had to go through a significant manufacturing consolidation, since boatbuilding fell from 300,000 units to 130,000.

At the same time, we wanted to protect our product-development capabilities and compete more strongly coming into the changed market after the downturn. Being a farm boy, I knew we had to have some seed corn. During the most difficult times, we continued to invest in our 150-hp 4-stroke engine platform, which has been a homerun for the company. We also took all of Brunswick’s P&A business and made it a single entity within Mercury. That has made the company a bit more recession-proof.

I’m very happy with the way Mercury evolved. When I joined the company in 2004, 40- to 60-hp outboard engines were among our biggest sellers. Over time, we moved from sterndrives to outboards, 2-stroke to 4-stroke technology, with an average size of 250 hp today. It involved a complete redevelopment of our design and manufacturing capabilities. But it was a hell of an evolution for an iconic brand.

Back then, Forbes identified Mercury as one of the top companies to work for in America. This year, the magazine gave Brunswick that designation. I’m very happy to see that recognition. I love the product side of the business, but I also have a lot of time for our employees, customers and others in the boating industry. It’s a phenomenal industry made up of a lot of great people.

I feel like I’m retiring at a good time, with an orderly transition. David Foulkes can continue to execute on our growth strategy, and he has a good eye for the future. In 2019, he will lay out our next three-year plan. For me, this seems like a natural time to make the change.