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330 lose jobs at Chris-Craft as debt sinks parent firm
posted 12/22/00

By Rich Shopes

The parent company of Chris-Craft Boats laid off about 330 workers Thursday in Manatee County and announced it will sell the 126-year-old manufacturer.

Outboard Marine Corp. reduced Chris-Craft's work force to about 25 -- enough only to maintain the business while it's shopped around.

"It's a dark chapter," said John Anderson, an Outboard Marine executive who's overseeing Chris-Craft's sale. "Sometimes it has to get worse before it gets better."

Last week, the Waukegan, Ill.,-based Outboard Marine laid off 290 of Chris-Craft's 354 workers in Manatee County in a move it called temporary at the time.

But now Outboard Marine is cutting most of its work force through its nine divisions and is aiming to eventually dismantle and sell the company.

Outboard Marine executives linked the earlier cuts to a seasonal decline in demand and an increase in fuel prices and interest rates.

Historically, economic slowdowns exact damage from the boating and recreational vehicle industries first. Consumers worrying about losing disposable income often forgo big-ticket purchases.

Last week, Outboard Marine laid off 1,000 of its 7,200 workers corporatewide. The layoffs, originally planned to last only a month, started last Friday.

Now, after Outboard Marine's latest round of cuts, only skeleton crews of administrative workers remain at its plants. Their key role is keep the companies open long enough to show them to potential buyers.

Letters were sent to prospective buyers last week, said Anderson, who is president of another Outboard Marine subsidiary, Four Winns, a boat maker in Cadillac, Mich.

Anderson said the cuts are particularly disheartening, not only because of their timing before the holidays but also because of Chris-Craft's and Four Winns' recent performances. The two became profitable after a lean decade.

"That's the tough part," Anderson said. "It's not a Chris-Craft problem. It was viable and had returned to profitability.

"It's, quite frankly, the most bizarre situation I've ever been in my 29 years in the business," said Anderson, who has managed Four Winns for three years.

The local boat maker emerged from the red last year after a 10-year downturn. Then-company President Kim Bors, who matched production to dealers' orders, introduced new boat lines that played on 1950s styling and appealed to well-heeled baby boomers. The formula seemed to work.

Then, in September, inventories backed up. Industry watchers pointed to a seasonal slowdown coupled with worries about interest rates and the fluctuating stock market.

The episode, worrisome to some, wasn't anything new to boat makers. And although 2000 exhibited none of last year's exuberance -- when the industry grew by 6 percent -- the year looked profitable for most boat makers.

"These companies are working under a number of complicating factors present across the marketplace," said Greg Proteau, a spokesman for the National Marine Manufacturers Association, a Chicago-based trade association. "They're used to dealing with the cyclical nature of the demand for their product."

Outboard Marine, meanwhile, struggled.

Many, including Outboard Marine executives, publicly attributed last week's layoffs to the season downtime and slowing economy, but, as Anderson noted, the corporation was "losing cash."

"OMC as a corporation in the past year, year and a half, has had very serious financial problems. It finally reached the point in its financial performance where the viability of the company was seriously threatened," he said.

In the end, after Outboard Marine continued to sink deeper into the red, "there was only enough money for minimal staffs," Anderson said.

The company lost $27.4 million during the third quarter. Particularly acute were problems at Outboard Marine's Evinrude and Johnson engine divisions in Waukegan, he said.

"They basically ran out of money," said Anderson, who theorized that a major investor might have withdrawn funding.

A call to Outboard Marine's owner, the New York investment firm Greenway Partners, was not returned on Thursday. Other Outboard Marine executives also could not be reached for comment.

Anderson said "if there's bright spot in any of this," it's that Chris-Craft is well-regarded among consumers and the boat making industry.

"It should sell pretty fast," he said.

Until that happens, the layoffs are indefinite.

Founded 126 years ago, Chris-Craft fashioned a reputation among boat buyers for its sleek hulls and barrel-shaped sterns.

The company pioneered mass boat production in the 1920s and remained a family enterprise until the 1960s, when it was sold to Shields & Company and National Automotive Fibers Inc. In 1980, Chris-Craft sold its boatworks division to Murray Industries.

Outboard Marine acquired the company in 1989.

In September 1997, New York investors Greenway Partners paid $364 million for the private company. Greenway won a takeover battle with Detroit Diesel, a Michigan maker of heavy-duty engines.

Alfred Kingsley, Greenway Partners senior managing director, told the Herald-Tribune

in 1997 that Detroit Diesel's $323 million bid was too low for his partners who already owned 10 percent of Outboard Marine.

The world's second-largest maker of outboard marine engines and the nation's second-biggest boat builder, Outboard Marine became private with Greenway's acquisition.

The company no longer discloses publicly its sales and profits. Four years ago, while still public, it reported $1.1 billion in sales, but no profits.

After acquiring Outboard Marine, Greenway restructured the company. Kingsley and his partners forced out its executives and hired David D. Jones Jr. as president.

Jones, known as "Captain Chaos" for his restructuring methods, headed the Mercury Marine Division of Illinois' Brunswick Corp. and worked in the marine industry for 20 years.

A month into his arrival, Chris-Craft cut one-third of its 300 workers, partly because of a seasonal sales decline but also because of Jones' aim to cut overhead and boost profits.

Over the years, the company added workers as its brands caught consumers' attention.

Bors, Chris-Craft's president after December 1998, introduced retro-looking lines reminiscent of Chris-Craft's 1950s heyday.

The boats produced a backlog of orders.

Last summer, Bors added a night shift and looked to expand the company's plant at 8161 Old Bradenton Road.

Referring to 1999, she said, "We're having one of our best years ever."

No boats are being made there now. Anderson said only clerical and administrative workers remain.

"Our hopes are it won't take long to find a buyer," he said.

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