Pensky / OMC Fortune Magazine Article 4 August 1997

Pensky / OMC Fortune Magazine Article

Fortune Magazine
4 August 1997
by Alex Taylor III


If there were an award for clueless corporate strategy, it would go to Outboard Marine Corp. The maker of Evinrude and Johnson motors and Chris-Craft boats has zigged where it should have zagged throughout the past decade, and this year it was headed for the rocks. Sales of outboards were declining, and its boat manufacturing was already losing money. In April, the company effectively put itself up for sale by hiring Salomon Brothers to find a major investor.

Altogether, some two dozen companies are said to have taken a look at Outboard Marine. Industry savants figured it was due to be acquired by another big player in recreational boating, like Volvo or Yamaha. But the surprising buyer who emerged in mid-July was racecar driver turned industrialist Roger Penske. Penske (PEN-skee) said he plans to fold the company into his truck- and boat-engine builder, Detroit Diesel, so it can add revenues and expand its marine presence. The bidding for Outboard Marine was clearly less than feverish--Penske is paying $16 per share, more than $3 per share below the price OMC was trading at when the deal was announced. Such is Penske's reputation on Wall Street that the deal boosted Detroit Diesel's stock nearly 9% that day.

A legendary workaholic, Penske has built an unusual collection of companies that range from truck leasing to auto-service centers and car dealerships. Total revenues are about $6 billion. Among contemporary CEOs, the silver-haired Penske exudes a unique star quality. Besides owning several superspeedway racetracks, he manages his own racing teams and is often seen in the pits issuing orders. He adds to his glamour by ducking publicity, but that hasn't kept him from hobnobbing at the highest business levels. He was recruited to succeed Lee Iacocca at Chrysler, sits on the boards of General Electric and Philip Morris, and belongs to CEO-rich Augusta National Golf Club.

So what, exactly, does Penske see in tiny, troubled Outboard Marine? Recreational boating went into a swoon in the late 1980s and never recovered. Potential boaters found the sport too expensive and time-consuming, and turned their attention to golf or other leisure pursuits. The industry's one hot growth sector has been "personal watercraft"--jet skis, to you--but it has been dominated by motorcycle and snowmobile manufacturers. Despite its strong brands, Outboard Marine is hobbled by weak marketing, poor inventory management, and a disorganized boat-building operation. Sales have been stuck around $1 billion for a decade.

To be sure, Penske is a master at turning around troubled companies, having driven Detroit Diesel from a money-losing industry laggard into a profitable market leader. It's the consumer and marketing side of Outboard Marine that doesn't seem to fit Penske's resume. The motor maker is just beginning to understand consumer behavior. Selling isn't Penske's strength either. He flopped when he took over a Cadillac dealership in New York, and sold out several years later. Penske has been more successful running other auto outlets, but boats-and-motors is different. Unlike cars, nobody really has to buy a boat.

Then again, maybe Penske, age 60, is thinking about retirement. "I like to be out on the water, diving, water skiing," he told the Los Angeles Times not long ago. "Someday I'd like to live on a boat." Instead of buying a boat, he simply bought a boat company.

Copyright 1997 Time Inc.

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