Mr. Wizard Looks into OMC's Future P2

What's Next for OMC?

Part 2

by Mr. Wizard

Return to the main Mr. Wizard page.       We moved several items over here to reduce bandwith on the main site.


News Coverage Prior to Feb 2nd

Feb 1: Boating Industry International article, OMC will be billed for January floorplan financing, covers the continuing saga of who to make floorplan payments to. The article says Transamerica is going to try to stick OMC for the January interest payments (estimated in low seven figures), but it is unlikely they will be able to collect.

Feb 1: The Daily Herald filed a story, Gloom, hope on economic front, on the ex-OMC employee job fair in Waukegan yesterday (Jan 31). Local economic news was even bleaker with the announcement of the closing of a major mall the day of the job fair.

Jan 30: Boating Industry International article, OMC letter on floorplan financing incorrect reports Transamerica Distribution Finance (OMC floorplan finance provider) say the recent letter from OMC telling dealers to make floorplan payments direct to OMC is in ERROR. These payments are to be sent to Transamerica and any failure of dealers to make those payments is in direct violation of their contract.
Mr. Wizard is sorry he did not come up with this idea earlier - telling everybody to send all their payments to his house.

Jan 29: Another round of interesting filings have appeared in the court docket.

Looks like everybody is getting into the fray. Volvo Penta entered as a creditor, The United States and the State of Illinois both came in to represent their respective Environmental Protection Agencies, The National Highway Safety Transportation Administration objects to any sale of OMC that does not require completion of the safety recall campaigns, and even 7-UP and Doctor Pepper jumped on the band wagon. Seems as if they had a promotional agreement with OMC to provide prizes for several contests. They are stuck with the contract, 14 winners of boats and motors with no prizes and their reputation damaged.

OMC filed to block the creation of a committe to represent past and present employees and retirees at the Bankruptcy hearing.

Then they filed some really nasty language against the City of Waukegan and North Shore Gas for attempting to block sale of the Waukegan facility on environmental and other issues.

More info on the each of these docket items is provided on Bankruptcy Proceedings Page

Jan 26: OMC Press Release informs consumers units being sold with no warranties. Parts are being sold to dealers from existing inventories. Consumers can only obtain parts from dealers.

Jan 26: For those used to living without warranties, the OMC situation offers new opportunities. Mr. Wizard received an email today from a group in Russia wishing to buy dealer inventories. It also indicates the worldwide impact of this situation.

Date: Fri, 26 Jan 2001
From: Sergey Sapojkov

We are looking for OMC dealer (former or active), who may be interested
in his stock clearance - we need to purchase Johnson outboards and spare parts.
May be you will find possibility to help us with small portion of your wizardry.

Jan 26: Boating Industry International article, OMC discounting motors 20 percent, reports they are now selling motors with no warranty for 20 percent off for cash in advance basis, but only to dealers with no balance owed to OMC (including floorplans).

Jan 26, Boating Industry International article, CIty of Waukegan to sit in on OMC case follows a long with our earlier reports of the City trying to block the sale based on environmental issues and possible lake front development opportunities.

Jan 25 BII article says Brunswick closing 4 boat plants in effort to decrease inventories.
Mr. Wizard said this might be move to shake the confidence of those preparing to place bids in the OMC auction..

Jan 25: Boat Building International article, OMC engine operations have no "credible bidders" reflects comments from a conference call with George Buckley, Brunswick CEO, with investors. He thinks some, but not all of the boat companies will survive, but sees no bidders for the engines. He says the tradenames (Evinrude and Johnson) may be sold to a Japanese builder.
RBBI Comment: Sounds like he agrees with Mr. Wizards post earlier this morning.

Jan 23: Several interesting items appeared recently in the court docket.

More info on the docket provided on Bankruptcy Proceedings Page

Jan 23, Boating Industry International article, OMC Europe official moves to VW reports their former sales manager for Germany and GM of Ficht Gmbh & Co. KG, moved to VW. OMC's European president says the individual is still an OMC employee. The same article reports OMC's booth space at Dusseldorf was converted to the Dusseldorf Internet Cafe.

Jan 22 George Soros appeared on National Public Radio, Talk of the Nation show. You can find it in the NPR archives Under Jan 22nd, 2001. The topic was Campaign Finance Reform. He appeared in the second hour of the call in show. One of our readers reports Soros fielded an e-mail question on the OMC bankruptcy near the end of his hour and responded, "There were problems with the engines which could not be fixed." Ouch !

Jan 20: In a move bound to raise an emotional response, OMC has petitioned the bankruptcy court to allow it to spit over $3 million in bonuses among 157 of its remaining employees. The court allowed approximately $2.5 million for this purpose. A section near the end of the document filed by OMC requesting the funds said, "Accordingly, the Debtors believe that granting the relief requested in this Motion is in the best interest of the Debtor's estates, their creditors and other interested parties." Mr. Wizard suspects some ex-employees may not agree. The amounts requested before the total requested (before being reduced about being reduced about 15 percent) showed $400,000 to Romano and $200,000 to Martinez.

Jan 20: Boating Industry International article, OMC to pay "key employees" $2.5 million in bonuses discusses the bonuses recently allow by the bankruptcy court.

Jan 19 Boating Industry International article, OMC bankrupted by legislation claim includes comments of small European engine manufacturers expounding on George Buckleys comments a few days ago attributing part of the demise of OMC to the US governments rush to created tough emmission standards. The small Euopean firms are saying the strong noise and emmission regulations in place or being discussed in parts of Europe could have the same effect on them and are asking for relief from the EC (European Community).

Jan 18 Boating Industry International article, U.S. bank says marine industry will survive OMC problems reports comments by Deutsche Financial Services (DFS) a dealer floor plan financing company feels the OMC problem is a "short term market disruption" and they will continue their marine financing efforts.

Jan 17th: Boat Building Industry International article, Brunswick's Buckley speaks out on OMC bankruptcy tells of Buckley sending a letter worldwide to Brunswick dealers to shore up dealer and supplier confidence in the industry with the demise of OMC He points out it is business as usual (which is still pretty good) at Brunswick and they will be courting OMC dealers as long as it does not interfere with Brunswick responsibilities to its existing dealers.

He identified 5 external forces contributing to the demise of OMC

  1. Legislation (specifically in emissions area)
  2. New or reborn competition
  3. Power of large suppliers
  4. Power of distribution channels brought by consolidation and the net
  5. Threat of substitute products
He also pointed to the size of the foreign competitors, higher interest rates and fuel prices, the stronger dollar (reduced exports), economies of scale of the Japanese engine companies (able to distribute development of new technologies over a larger base) and the pre-learning the Japanese did with motorcycles engines before the recreational marine engine emissions issue was raised by the EPA contributing to the demise of OMC.

Jan 16: Boat Building Industry International article, U.S. Volvo ends ties with OMC, reports Volvo pulled their remaining tooling equipment from an OMC plant last week used by OMC to manufacture some gas stern drive and inboard parts for Volvo.

Jan 12: Major article in todays Wall Street Journal, "Capsizing of Outboard Marine Shows How Soros Took Bath in Private Equity." Exerpts and brief rewordings are below. We suggest you read the full length article.

When Greenway Partners did not have enough money to take over OMC in 1997 they turned to Soros. Irwin Jacobs said, "Don't do it," Now, Mr. Soros's firm is scrambling to salvage something from the $320 million investment. Another $130 million was put in last year. People close to the situation say Mr. Soros's group had gains of about 4% last year from private equity, even while writing off almost all of the Outboard Marine investment.

Mr. Soros's organization jumped in, initially committing about $200 million to the deal, while Greenway Partners chipped in about $77 million. (The rest of the buyout price came from bridge loans and bank financing.)

... the low-margin boat business got more difficult, while increased competition from Japanese engine makers also hurt sales.

Parts shortages in peak selling season last year greatly reduced the volume of high margin engines they were able to produce.

Kirk Brewer, OMC spokesman, said "The company is focused on trying to sell its brands so that the brands do not lose additional market share."

Soros group assumed full control of the company at the end of 1999, and invested $65 million in early 2000.

Now, the Soros and Greenway groups are working hard to sell parts of Outboard Marine, to salvage something from their investment. But people close to the matter say the economy's weakness means they may not get more than 20 cents on the dollar,

One person not interested in acquiring Outboard Marine's assets: Mr. Jacobs of Genmar Holdings, one of the country's largest boat makers. Says Mr. Jacobs: "I have never seen a situation handled so badly in my entire business career."

Jan 10th: AP reports Ford and Yamaha teaming up to produce boat motors in US. This may have significant impact on OMC situation.

Jan 10: Waukegan Sun article, Kirk to OMC: Get information to laid off workers Representative Kirk scolds OMC for leaving employees in the dark about their pensions and health insurance. In a meeting with Fix and Romano (an OMC attorney) he urged them to "put all things necessary to sign up for COBRA on their web site and hot line."

The company has not decided if pension funds will continue to be managed by Northern Trust Bank or turned over to the feds (the Pension Benefits Guarantee Program), Kirk said.

The article went on to list Brunswick, Yamaha, Bombardier, Suzuki, Nissan and Toyota as potential bidders.

Jan 10th: AP article, Several bidders express interest in Four Winns says OMC will be accepting bids for its assetts up to Jan 26th. The bids will be opened Jan 31 in the Bankruptcy Court and a hearing by the court will be held Feb 8 to review the sale or sales.

Jan 10th: Yamaha announces joint effort with Ford to build stern drive engines. The deal may have impact/implications to the OMC situation.

Jan 8th: Crains article, Taking Charge of Wards and OMC bankruptcies focuses on David S. Kurtz, the lead bankruptcy attounery for both firms. Over the next year, ee will be overseeing the liquidations and negotiating with creditors over distribution of the proceeds.

Jan 5th: Boating Industry International article, , Fix says OMC division may be running again in February is notes of an interview with Fix. He predicts closing of sale on some or all divisions shortly after the 8 Feb Bankruptcy Court review.

Over 100 companies had been identified as potential bidders for the divisions, some of them from outside the marine industry. Some have already placed bids.

He said a toll free phone number has been setup to communicate with the dealers providing recorded messages to frequently asked questions and allowing the caller to record a message and OMC will respond directly to them. Other communications will be in a fax to dealers next week explaining how to order parts. Fix said messages from OMC would be more frequent in the future (responding to the current lack of communications).

Jan 4th Waukegan News Sun article, Finn urges city to intervene at OMC reports an independent candidate for Mayor has his eyes on the lakefront property and Waukegan and does not want it auctioned off to the highest bidder. Possible uses of the property as a 4-year college or other residential or commercial use. The current mayor says, "Its going to be years before they do anything down there, We'll wait and see - let it take its course."

RBBI Comment: Suggest those considering developing this property read our Plant Site EPA Ground Pollution Problems section discussing the two EPA Superfund sites on the property.

Jan 4th Waukegan News Sun article, OMC late with list of workers reports OMC has yet to supply a list of laid off employees to the state of Illinois Rapid Response unit or to the Workforce Development Unit after stating a list would be available at OMC's Waukegan offices in the WARN filing. This is making it very difficult for govenment agencies trying to spring into action and help the employees with job search assistance, help with unemployment benefits, job skill and resume workshops and individualized career counseling. Efforts of these agencies are being stymied by OMC's failure to provide a list of displaced employees. OMC reported Wednesday they were working on a list.

Wisconsin and Michigan officials are reporting similar problems in their states (OMC failed to produce a list of employees).

RBBI Comment: This is a strong indicator of Mr. Wizards's premise, OMC may be trying to delay relocation of ex-employees in an effort to increase revenue from the sale of the various divisions developed in his Why Doesn't OMC provide job placement assistance? article.

Jan 4th: Waukegan News Sun article, Kirk in Charge in 10th reports a newly elected U.S. Representative in the Wuakegan area:
"expressed concern about the apparent shutdown of the Outboard Marine Corp. Waukegan plant and the layoff of 1,200 workers. He said he had been trying to reach OMC officials."

RBBI Comment: OMC's failure to visit with a U.S. Representative is another indicator of Mr. Wizard's premise, OMC is trying to delay all attempts to assist their ex-employees in an effort to maximize the value of the divisions when they are sold.

Jan 4th Boating Industry International article, OMC: payments due dealers will wait says fax OMC sent to US and European boat and motor dealers, said payments for warranty repair work and rebates to dealers for earlier purchases and coop advertising will either be decided by the bankruptcy court or by the new owners of its various divisions. The fax also included a FAQ (list of questions and answers).

Jan 4th Boating Industry International article, OMC branding removed from London show reports the Evinrude and Johnson engines stand at the London International Boat Show at Earls Court has no visible OMC branding. The labels were removed on orders from OMC.

The article also reports sealed bids for Four Winns are to be received by 28 January and will be opened on 1 February. They say the business will not necessarily go to the highest bidder.

Jan 4 The U.S. Bankruptcy Court approved on an interim basis OMCs request for $10 million in DIP (debtor-in-possession) from a group led by Bank of America N.A. A January 22nd hearing is scheduled to consider granting final approval.

Jan 2 Chicago Tribune article, "Outboard Navigating Rough Seas" reports:

"One of OMC's biggest engine customers already has made up its mind. Closely held boatmaker Genmar Holdings, after considering Outboard Marine's "enormous problems," is "already moving out of OMC," Chief Executive Irwin Jacobs said in an interview. In the future, he said, his Minneapolis company would rely instead on OMC engine rivals such as Brunswick Corp.'s Mercury engine group and Yamaha of Japan.

The outspoken former corporate raider, asked about widespread speculation that Genmar will be a bidder for Outboard Marine's assets, said flatly that "we have no interest in the engines" and voiced little interest in the boat operation, either."

The same article quotes a note from a dealer posting feedback on Mr. Wizard's page!

"At a Web site where OMC employees and dealers have been venting their frustration, the mood was dour. "My guess is I'm not the only dealer contemplating what to do next," fretted one anonymous dealer in a posting. "We are sitting on product that for all practical purposes has no company backing."

Jan 2 Boating Industry International reports OMC dealers "scared to death"

Dec 31 Boating Industry International reports, Genmar head "livid" over OMC actions.

Dec 30: Crains Dealers Head for Lifeboats Discusses situation from dealer viewpoint and approaching boat show schedules.

Dec 26: Dow Jones News Service Reported:

Outboard Marine Corp is moving quickly to sell its operating divisions one at time, and plans to file court papers for the sales in a few weeks.

Bill Brandt of Development Specialists Inc. in Chicago said they have already seen considerable interest in the divisions, even before the bankruptcy, but nobody wanted the whole company.

Development Specialists and investment bankers Houlihan Lokey Howard & Zukin are helping stabilize operations and sell OMC.

"Most of Outboard Marine's assets will probably be spoken for by the end of February," Brandt said. "The DIP financing we put together envisions a very rapid response to the significant amount of market interest we have seen for the various constituent parts of the business."

Brandt said he expects there'll be very competitive bidding at the court-supervised auctions. They need to start rapidly to be ready for the New York Boat Show in two weeks.

Outboard Marine wants to maintain its dealer network through the asset sale prices, but once sold, its up to the buyers.

They are finding the engine division harder to sell than the builders.

They make two strokes in Waukegan, and assembly plants in Calhoun, Ga., Chicago, Hong Kong and Mexico. They also provide Kawasaki and Polaris Industries Inc. with PWC engines, making them likely bidders.

OMC is trying to get a $35 million debtor-in-possession loan approved by the court to allow continued operation during the restructuring. They are also asking to be able to continue paying their remaining approximately 1,000 employees in order to maintain customer sales, support and service activities and suppliers in order to keep their doors open during the restructuring.

Dec 28 Boatbiz reports confusion over OMC in Europe. OMC's European operation says they are not automatically included in U.S. Chapter 11 proceedings. A major dealer in the U.K says they are a completely different company and will not be effected by this liquidation. Others point out they will be running out of stock as their inventory is depleted.

Dec 25 Detroit Free Press OMC Files Bankruptcy article specifically discusses plan to sell Four Winns.

Dec 25 Waukegan Sun Times, OMC Workers Left Out in the Cold

Dec 25 Waukegan Sun Times, OMC all but shutdown

Dec 23 Chicago Tribune article says OMC owes creditors more than $768 MILLION !!!

Dec 23 Lebanon Daily Record covers Lowe Boat shutdown

December 22 PARIS (AP) -- A Parisian investigating magistrate has ordered U.S. financier George Soros and three others to stand trial for their alleged roles in a 1988 insider trading scheme.
Le Monde newspaper reported in its Saturday-dated edition that American billionaire and philanthropist Soros was one of those suspected of benefiting from privileged information during an operation to try to buy part up of the capital of French bank Societe Generale, which was privatized in 1987.

Dec 22 OMC files bankruptcy in Chicago

Dec 22: You can follow the actual case dockets, etc for OMC Aluminum Boat Group, OMC Fishing Boat Group, OMC Latin American Carribbean Inc, OMC Nevada Inc, OMC Recreation Boat Group, Inc. on the U.S. Ilinois Nothern Bankruptcy Court web site. Note: the first case in the list is an old one.

Dec 22 Chicago Tribune reports OMC bankruptcy filing to be handled by David S. Kurtz of Skadden, Arps, Slate Meagher & Flom (Chicago Office of NY based law firm) as early as today (Friday).

Dec 22 The Herald Tribune has a story up on the situation at Chris Craft today.

Dec 20th the Waukegan News Sun reports 700 hourly OMC workers in Waukegan, earlier laid off till mid January are now being told the company has yet to determine if they will be called back at all.

Dec. 21st we heard the Waukegan staff had been permanently sent home.

Dec. 21st Newspaper (Rome News-Tribune in Rome,Ga) wants to talk to OMC employees, especially those in Calhoun, Ga., area. Call 706 290-5259 or email

Dec 21st Newspaper (Daily Tribune News in Cartersville, Ga.): If there are any employees of the Calhoun, Ga. plant that wish to discuss the situation, especially if they're from Cartersville/Bartow County, please call Matt DiFebo at 770-382-4545. I can also be e-mailed at

Dec 21st Dow Jones Newswires confirms closing of OMC and possible Chapter 11 bankruptcy filing Friday.

Dec 22 The entire Dow Jones Newswire above was published in today's Crain's Chicago Business News. We were interviewed by Crain's a few days ago for a possible upcoming feature article.

Copy of closing notice issued to employees.

Dealer Legal Action

Many have asked us about possible legal action from the dealers. Today (Jan 6th) we received a note of such an effort. A Texas dealer sent us the note below.

"We have been referred to Mr. Paul Harris who is an attorney with Gadsby & Hannah LLP in Boston. We were sent this direction by Boating Trades Association of Texas after they contacted Phil Keeter, president of the MRAA. According to Mr. Harris the more dealers that are involved the more say so they will have in the court proceedings. Mr. Harris says they are working out the details and should have an information packet available early next week. Mr. Harris can be contacted at 617-345-7042."

We sent a note to Mr. Harris last night and received a reply from him today (Jan 9) saying OMC is attempting to sell the businesses free and clear of any debts/liens, etc. A committee of unsecured creditors is being formed. He feels the dealers need to get on the list now or they will be left out. Even if they do participate, dealers will be unsecured and may still receive nothing (no money left over after the secured creditors are paid) or fail to obtain funds from the sale of the "old OMC". But if they do not try, they will have no chance. Although the proceeding are in the early stages, dealers need to get on the list by joining his group or filing similar claims with another law firm to assure they are represented. He also notes, the more dealers that participate, the larger and louder their voice will be heard and points out those joining his group will benefit from economies of scale.

We (RBBI, Gary & Mr. Wizard) are NOT qualified to offer any legal advice in this situation, but suggest those wishing more information contact your own legal professionals or Gadsby & Hannah LLP in Boston. Mr. Harris can be reached by email at Please tell him Mr. Wizard sent you.

If you contact another firm, we suggest you point them to our OMC bankruptcy page.

Jan 17th Boating Industry International published an article titled, U.S. Dealers get legal help in OMC bankruptcy case on the effort with Mr. Harris.

WARN Act 60 Day Notice Required for Plant Closing

Many have asked about the WARN (Worker Adjustment and Restraining Notification) Act, 29 USC 2101, the federal law requiring employees to give 60 day notice prior to plant closings and massive layoffs.

The state of Illinois has a web site devoted to the WARN Act which also discusses a RAPID RESPONSE unit for mass layoffs that may be of help to those of you in that state.

An excellent review of the WARN Act is in the Lectric Law Library. The exception for faltering companies is discussed about midway through the article in the NOTIFICATION PERIOD section. Mr. Wizard is obviously not qualified to provide official legal opinions, but he suspects that route will be take by OMC to avoid the severe penalties of the WARN Act. The Act does say the circumstances have to be not reasonably foreseeable, Their could certainly be some disagreement on foreseeability, but its hard to squeeze blood out of a turnip.

The text of the WARN Act can be viewed on-line in the federal code.

Mr. Wizard also points out several states have additional plant closing laws of their own. These would have to be locally interpreted based on the situation in that state. If you want to try to find info on your state, the site for your state can be found on the WashLaw State Laws Page.

Why Doesn't OMC provide job placement assistance?

by Mr. Wizard
3 Jan. 2001
Many wonder why OMC is providing no assistance in helping their employees find new jobs. Several state and local agencies work on-site with firms involved in massive layoffs providing job relocation assistance, help in filing for unemployment, employment counseling and other forms of assistance to the displaced workers at basically no cost to the employer, but OMC has refused their assistance. Why is that?

RBBI have been approached by at least 8 firms wishing to hire large numbers of ex-OMC employees. Imagine what an organized OMC effort with some assistance from state and local agencies could accomplish!

Some think OMC is not making the effort because they are money grubbing low-lifes afraid to meet the employees eye to eye or have anything to do with them. It is an easy way out for them, just bar the doors and go home, they don't have to deal with it. However it may be deeper than that.

Many have said a firm's employees are its greatest asset. OMC is trying to sell the firm and the more employees around for potential re-employment by the new owner(s) at the time of sale, the higher the value of OMC. This could actually work partially in the favor of ex-OMC employees. If the sale takes place soon and many ex-employees are available for re-employment, the buyer(s) may have to pay more for the firm because part of what they are buying is the expertise and knowledge of any ex-employees left around they can re-employ. High bids for OMC will rule out liquidators or other firms without enough capital to help whats left of OMC make it over the hump to profitability. Doing anything in their ex-employees long term interest at this time may not be in the forefront of OMCs mind right now, but what is being viewed as greed may actually work in favor of their ex-employees from this point forward (it certainly has not up to this point).

I am not saying all ex-employees will be re-hired by new owners, but I suspect hundreds if not thousands will. Anybody taking over an ongoing concern(s) needs many people who know their way around the operation, where everything is and how it works. This would not be true in the case of a liquidator (someone who bought OMC just to sell the equipment and land at auction) or by someone just buying it for the future use of the tradenames.

Percent Employees Available for Re-Hire

As this chart shows, if OMC can delay access to re-employment services, most of the ex-employees will still be available for some period of time (Time A) for possible re-hire by the new owners. Then as time goes on more ex-employees begin to give up on the possibility of OMC being rapidly sold to new owners and being re-employed by them (Time B), they begin to find their own new jobs. As time moves on further (Time C) most will have worked their way back into the employment system, retired, died or somehow been removed from the work force, leaving only a small percentage (near the local unemployment rate) still unemployed.

The value of the ex-employees to OMC right now, is proportional to the number of them available for re-hiring by the new owner(s). This means the curve representing the value of the ex-employees to OMC looks just like the curve above (higher value right now decreasing to almost no value over time). This means two things.

  1. OMC is worth more the faster they can sell it
  2. It is in OMC's best financial interest to delay their ex-employees from finding new jobs
The situation is amplified further, by the fact the most valuable employees will be the first ones hired by others. Those still left around after many months will be well picked over by other employers.

Percent Employees Available for Re-Hire
With Assistance

This chart compares the number of ex-employees available for re-hire with and without job relocation assistance from OMC. It shows that if OMC just opened its doors to some of the relocation assistance provided by others, the ex-employees would be finding work much more rapidly than when they are. More ex-employees would be relocated at each point in time (Time A, Time B, Time C) reducing the number of ex-employees that would be still around for re-hiring by a new owner(s), thus reducing the amount of money potential new owners would be willing to pay for OMC.

These graphs were hand sketched to provide an aid in the discussion of this topic and in no way represent factual data. We have NO confirmation OMC is taking this route for this purpose, it just being advanced here for discussion. However; I think most will agree with the basic premise, the more ex-employees available for potential hiring by the new owner(s) at the time of sale, the more money OMC will bring on the open market.

If you have any comments on this topic, please drop us a line. We will remove your name and any company affiliation information before posting them. If you request your comments not be posted at all, we will honor your request.

Until next time!

Mr. Wizard

Plant Site EPA Ground Pollution Problems

by Gary Polson, RBBI
5 Jan 2001
Besides having to comply with the many current engine emission regulations, plant air emission regulations covering painting and styrene emissions, new owners will inherit existing ground pollution levels.

Many OMC sites have been identified as having major toxic waste problems in the soils. These problems will make selling the facilities more complicated as the new buyers will not want to acquire any future liabilities (fines or remediation costs) associated with these problems The Waukegan location is an EPA superfund site, creating another level of difficulty in selling the already hard to sell engine and drive portion of the business. New owners might opt to just take the name and equipment and run, not assuming ownership of the property and leaving it with the current OMC owners. Some have already mentioned the development potential of this choice land around the lake. Developers might be able to avoid the pollution problems or obtain government assistance in reclaiming the land?

The EPA has a special page covering the restoration of the Waukegan site and another page page devoted to it as part of their list of National Priority sites.

A 23 February 1999 EPA press release discusses attempts for cleanup of another OMC EPA superfund site called the Coke Plant which is a subpart of the other superfund site. From 1893 to 1972, a number of industrial companies operated at the site, including a creosote wood treater and a manufactured gas plant. From 1972 to 1989, Outboard Marine used the property for fire training, snowmobile testing, and other activities.

A 15 Dec 1997 EPA press release discusses a 5 year review of the OMC superfund site and says another one will be scheduled in 2001 (not exactly what a prospective buyer wants to hear!)

An 8 page Adobe Acrobat (.pdf) EPA document Proposed Plan for Cleanup at the Outboard Marine Co./Waukegan Coke Plant Superfund Site discusses the alternatives proposed for remediation. Each alternative costs many millions of dollars.

RBBI Boater Warranty Comments

We have fielded several end user warranty questions and will respond here to all of them.

First we are not qualified to offer any professional advice in this area, but here are our thoughts.

Our understanding is OMC has told dealers they will no longer accept any warranty claims.

Warranty issues remain to be sorted out by the courts, dealers, suppliers and any new OMC division owners.

I suspect warranty is kaput unless courts force those involved in sale of OLD OMC to somehow put money in a fund for NEW OMC warranty coverage OR new owners of the specific division over your product decide to go ahead and include future warranty costs as part of their basic package in deciding to purchase the company . If they are willing to pay $50 million for the specific division building your product, they only bid $42 million and sit the other $8 million aside for covering warranty of existing units after their purchase. These may not be the correct numbers, but they illustrate the concept. Some statements have been made, the divisions of OMC may not go to the highest bidder. Some concern will be given to the best interests of others involved. This might encourage the warranty bidding practice discussed above, or at least bidding it as an option.

It is possible some warranties or extended warranties were actually purchased through a third party and might still be alive. I assume this would not be true of the major/main drive and boat warranties, but might apply to some special items.

When the dust settles, different types of warranty may be handled differently (the basic warranty package vs any special extra or extended warranty you bought at time of purchase.

Actual coverage provided in the future might be fractional:

  1. Dealers or new owners may give some break on labor or parts
  2. Warranty time length might be shortened
  3. Warranty may only cover very major items and not smaller failures
  4. Your boat might be warrantied, but not the drive or vice versa
  5. Some components and subsystems may still be warrantied by the supplier
Or every single warranty may be void and worthless.

I am not sure how this has been handled in similar situations in the past and not had time to check up on it yet.

Dealers are currently very concerned about possibly not being re-imbursed for warranty expenses already incurred by them.

Some have suggested creating a new warranty (sort of insurance policy) and letting existing customers buy a new one, perhaps with a little assistance from dealers. This would allow boaters to share their risk, so the one guy with the major failure does not loose his shirt. Perhaps a very high deductable type warranty could accomplish this purpose?

Bottom line, it all remains to yet be sorted out.

Some Archived thoughts from Mr. Wizard

Jan 31: Anyone involved in the bidding process might want to take a look at the latest issue of Competitive Intelligence magazine. Jan-Feb 2001. It is a special issue dealing with Merger and Acquisition intelligence.Covers how to anticipate who might be in the play, reviews several recent ones and describes the tools used in performing due diligence for a Merger and Acquisition, including how to know when you have done enough research. The magazine is printed by SCIP, the Society of Competitive Intelligence Professionals.

Jan 25 AM: Tommorrow is the day to have the first round bids in. We suspect Waukegan will NOT sell at this time. Also suspect problems with sale of the outboards. Too many loose ends to wrap up in the time allowed (not enough lawyers to go around) to cover the EPA superfund site issues, City of Waukegan wants to block sale for back taxes and water bills, North Shore Gas wants to block for EPA superfund site issues, Orbital wants to block sale of Ficht technology, Lot of intellectual property issues concerning patents still in process, warranty issues, trying to price out the place considering many of the choice employees are already long gone, etc. Will take a lot of time to sort through those issues. If sale does occur at this time we predict it will NOT STICK. This tie up will also prevent current sale of Evinrude and Johnson tradenames (will save them for possibly going with the outboards). Will be much different with the boat companies. They can be sold like commodities and some already have natural owners.

Jan 17/18: An interesting point raised by one of our viewers - If the OMC outboard lines die or have major problems in restarting, Mercury will probably need extra capacity to keep up with demand (provided the whole economy does not go in the toilet). Earlier we dismissed Brunswick as a bidder due to anti-trust problems. Although they would probably not be allowed to purchase the boat companies, they might purchase some of the drive manufacturing operations (less the tradenames and existing designs) for capacity. Also would be interesting to see how the courts would treat purchase of the Johnson and Evinrude tradenames? They FTC (Federal Trade Commission) would obviously prevent purchase of the Engine and drive operation as on ongoing concern selling under the existing names, but the names alone might be allowed?? Not aware of prior case law in this area.

If Brunswick were to purchase the drive manufacturing facilities (but much is not farmed out) and close them, they could eliminate a potential new competitor or an existing one adding U.S. capacity. Not too sure how the courts would look on this one either.

Jan 10: The Yamaha Ford stern drive engine team up announced today really puts some new dynamics in the situation.

Jan 6th: Bankruptcy is like musical chairs. All those in the game: investors, banks, creditors, suppliers, employees, retirees, dealers, boat owners (warranty) keep walking and hope to find a chair when the music stops (money runs out). Now the music stopped and there aren't enough chairs to go around. In the children's game their were enough chairs for all but one person, but in this game there is only one chair and the major investor is trying to take it for themselves.

Dec 30th: we are hearing things are starting to happen in the background. Some of the boat companies are getting ready to fire up either on the temporary funds or under new ownership. Several of the companies have found logical new owners pending the bankruptcy situation.

Sounds like OMC is going to be broken into a lot of pieces. Most feel Bombardier or possible Suzuki will get the outboards, Genmar will get several of the boat companies (but Genmar now says they are not interested), Earl Bentz may get Stratos and Javelin, some feel PrinceCraft may be cut out for another buyer. Even the test and engineering facilities may be cut off seperately. Obviously all of this is pure speculation.

Looks like they will be able to get a lot more for the pieces than the whole company. As discussed in the Mr. Wizard article, price for the whole firm might only be $100 to $200 million as it seems like that is all you might be able to justify based on the previous selling price and current business failure and future outlook. But, some of the individual pieces are pretty shiny, especially some of the companies that still have their original owners in the game (repurchase). Seems much easier to justify some decent money for each piece that adds up to a lot more than $200 million.

Wild idea: Why not consider putting the pieces on ebay? The whole world knows they are for sale anyway. Just put the pieces up for an auction and sell them "where is as is", because that is the way they are going to be anyway. Several multi-million dollar firms have already been sold there. Will also save a lot of middle man money as ebay only takes a 1.25 percent cut. Would get the whole process over in a few days after bankruptcy was declared.

Recent news reports indicate this may not be so wild at all. Sounds like the courts may be auctioning off any companies OMC cant sell off.

We have been visiting with state government offices in Illinois and North Carolina assisting those trying to find new jobs, trying to get our year end finances in order (yes, Wizards pay taxes) and trying to keep this site updated.

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