With his flight delayed by wind and driving rain, Brunswick Corp. Chief Executive Dustan McCoy stood just inside a hangar at Waukegan Regional Airport and watched a tiny Cessna trying to land. The pilot finally touched down on his third try.
"I've got to give him credit," said McCoy, a former Army helicopter pilot familiar with distressing situations.
A lawyer by training, he has spent the past several years steering the world's largest maker of marine engines and pleasure boats — luxury items suited for boom times — through the worst economic decline since the Great Depression. McCoy jettisoned 44 percent of its employees in a major downsizing to keep the 166-year-old company afloat.
McCoy, an expansion-minded deal-maker, had spent pre-recession years adding boat companies to Brunswick's roster, only to be forced to reverse course and reduce boat brands from 24 to 16.
Lake Forest-based Brunswick, which also makes bowling, billiards and Life Fitness equipment, closed or mothballed 17 of its 28 plants and is consolidating its two U.S. marine engine plants. The workforce stands at 15,200. The moves cut about $450 million in costs and dramatically reduced boat-production levels.
"In late 2008 and early 2009, there were some who questioned whether the company was going to make it," said Joe Hovorka, leisure analyst at Raymond James & Associates Inc. "We weren't one of them, but it gives a backdrop of what Dusty was dealing with."
McCoy, 62, an asthma sufferer who rises before dawn to work out and is known throughout the industry by the nickname Dusty, is something of a worker bee on steroids. It's a trait he attributes to his upbringing on a dairy and tobacco farm in northeastern Kentucky where he was expected to milk cows, put up hay, cut tobacco and hoe corn.
"The way my mother used to describe it, 'It's not good enough to do your best, it's only good enough if you do it better than anyone else before you,'" McCoy said. "My parents never told me I was smart or good-looking. Nothing like that. It was, 'Get up and get the work done.' It has served me well."
In many ways, the boat business serves as a barometer of the economy. When people feel flush, they are more inclined to buy powerboats, which retail, on average, for more than $34,000. Brunswick's brands run the gamut from Bayliner runabouts for weekend pleasure boating, which start at $12,000, to SeaRay sport boats and yachts from $20,000 to $2.5 million. At the very high end, a Hatteras yacht can run $10 million.
At those prices, boat sales are highly sensitive to the availability of credit.
"It's how dealers finance inventory, it's how customers finance purchases — so in the credit meltdown … this industry was like ground zero," said Edward Aaron, an analyst with RBC Capital Markets LLC.
Brunswick sold dealers 25,000 boats last year, down from 37,000 in 2008. It's a staggering drop. Americans, on average, bought 400,000 powerboats a year from the 1960s to the early 1990s, when the level dropped to about 300,000. Since 2006, the figure plunged, falling to about 140,000 last year.
The sharp contraction forced an about-face for McCoy.
Before his rise to CEO in 2005, he headed Brunswick's Boat Group, where "he was the lead guy on virtually all the boat company acquisitions," said Pat Mackey, a senior Brunswick executive until his retirement in 2008. McCoy was a key part of the team that broadened Brunswick's portfolio, adding the luxury Hatteras Yachts at one end and re-establishing the aluminum-boat division on the other, Mackey said.
Today, the moves are easy to second-guess, particularly because the subsequent restructuring of the boat business cost the company more than $700 million.
But at the time, "it made a lot of sense," Mackey said. McCoy "was trying to make Brunswick's marine business into a really integrated, holistic powerhouse. … He was astute in trying to fill the holes in the product line."
Brunswick executives began to sense a slowdown in the economy as early as the fourth quarter of 2005 in the aftermath of five big hurricanes, including Katrina. Rising prices for crude oil threw up red flags as well.
"We began to feel a tightening," McCoy recalls.
So McCoy, new in his CEO role, and his team quickly moved to replace failed dealerships in its network so it could transfer inventory, rather than having to buy it all back, and keep sales going. McCoy also restructured Brunswick's debt, pushing back its next significant payment until 2016. Its net debt is now $173 million, down from $414 million at the end of 2008.
Dustan McCoy, CEO of boat-maker Brunswick Corp.