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.
He believes he and his team maneuvered Brunswick into position to benefit from any economic upturn.
"We've baked this wonderful cherry pie," McCoy said. But the rewards will only be tasted as the economy improves and as boat sales pick up, he added, "so it's sort of sitting in the refrigerator."
McCoy is projecting revenue growth of more than 10 percent from last year's $3.4 billion, even if the nation's marine market remains flat. The marine engine and boat businesses represented about 75 percent of Brunswick's revenue last year, with engines making up 50 percent.
The company expects to be back in the black this year, this spring forecasting earnings per share 30 cents to 50 cents compared with net losses of $110.6 million, or $1.25 per share, last year and $586.2 million, or $6.63 per share, in 2009.
The projections, of course, depend on things going right, and that means that employees who have seen the workforce slashed by the thousands need to be on board. Firing them up was one reason McCoy and his executive team recently traveled to some of Brunswick's key manufacturing plants, unionized facilities that sacrificed wages and benefits to survive.
By about 7:45 a.m. on the recent rain-swept morning at Waukegan airport, McCoy and his executive team were aboard the company's last remaining jet, a six-seat Hawker Beechcraft. The company sold its four other jets during the economic downturn and put this one back in use this spring.
The team's destination was Fond du Lac, Wis., a city that fought a tough and ultimately successful battle to remain the manufacturing base of Mercury Marine, a boat-engine maker that is by far the largest of Brunswick's businesses and one that employs 2,300. Fond du Lac beat out Stillwater, Okla., but only after the workers agreed to concessions and government entities agreed to provide up to $120 million in financial incentives.
Mercury is moving its Stillwater operations into the underused plants in Fond du Lac, about 60 miles northwest of Milwaukee. McCoy and his team were to tour the manufacturing facilities as well as to strategize on how to stay competitive against rivals such as Yamaha and to meet with the workforce.
A portion of the day involved presenting a safety-record award to employees of Mercury Racing in neighboring Taycheedah, Wis.
When an employee's young son threw a toy just as McCoy began to speak, he turned the situation to his advantage with a bit of humor.
"Hey, now, he started throwing stuff," McCoy said. "It's only my first time in the room and I've had enough."
The employees, sitting in rows of folding chairs, erupted in laughter.
The moment was classic McCoy, according to those who have worked with him extensively.
"He can be very tough, but he can break the tension with some humor," said E. Gary Cook, who, in a former role as CEO of Witco Chemical, hired McCoy as general counsel and later pushed him into operations, where he began to learn how to run a company.
Cook recalls asking McCoy to move into the office next to him and McCoy responding, "What are you trying to tell me? We all refer to that as the 'office of death.' Everyone in there, you end up firing."
After a merger in 1999, McCoy exited with a golden parachute, and he and his wife, Becki, were within two weeks of moving to Montana, where McCoy planned to teach at Montana State University and possibly work as a fly-fishing guide. On a Saturday morning, he received a call from Peter Hamilton, chief financial officer of Brunswick, which was searching for a general counsel.
McCoy thought he would enjoy going back to being a general counsel.
"I love practicing law," he said.
He promised his wife it would be a two-year stint; he has been there now for 12, rising to head the boat group and, later, the company.
"Our business is fun, if you look at what we make and sell," he said, expressing admiration for customers, who tend to be active, educated people, and for the dealers, who he described as having "wonderful rat cunning," meaning they find ways to thrive in the tough circumstances.
Obviously, the past few years would not fit most people's idea of a good time, but McCoy said his course of action was clear. The only stress came from having to cut jobs, he said.
Former Brunswick executive Mackey said it was "extremely traumatic for the workforce. … There were no happy stories that came out of it, other than that Dusty and his senior team focused on what the prize was at the end," namely keeping the company going.
With his close-cropped hair, wire-rimmed glasses and crisp check-print shirts, McCoy represents the buttoned-down side of the marine business, which has its share of flashy entrepreneurs. His manner is genial and self-effacing, in a folksy way.
His predecessor, George Buckley, describes him as calm, disciplined, thorough and "the right man for a particular time."
"Dusty is probably better than I am at cost control," said the British-born Buckley, an engineer by training who went on to head 3M Co., a much larger company. "I give Dusty full credit for what he has done, which, I think, ultimately will guarantee the survival and future growth of Brunswick."
The company plans to grow organically, rather than by acquisition. It is hoping such innovations as its joystick docking system, which makes it easy to park boats, and its quieter engine models will help the company gain market share from smaller rivals.
It plans to extend its reach into developing markets such as Argentina and Brazil, and expects to see continued growth in parts and accessories and in its very profitable Life Fitness equipment business.
Still, a good many risks remain for Brunswick, whose debt is rated as speculative by Moody's Investors Service. The biggest questions continue to be whether consumers will return to the new-boat market and whether they will be able to obtain financing for purchases.
"The measures the firm has taken to shrink its manufacturing footprint, together with the market share it may be able to grab from struggling competitors, could put Brunswick in a strong position to exploit growth opportunities when the boating industry eventually rebounds," Jeremy Cohen, an analyst at Morningstar Inc., wrote in a report this spring. Still, he said, the outlook remains shaky.
Cohen also wrote that McCoy's 2010 compensation package seemed high, given that the company was still producing net losses that year and that it continues to struggle. McCoy's package totaled $6.6 million, including $4 million worth of stock and options.
The company defended the package, saying it reflected progress in generating cash as a foundation for growth, and noted the company's stock produced a 47 percent return last year.
Brunswick stock closed at $19.82 Friday, down from about $27 in mid-April, when optimism about the economy was stronger, but significantly better than early 2009, when it fell as low as $2.18 on the New York Stock Exchange. Before the recession, in the first half of 2007, it was trading just above $34.
Analysts credit McCoy for candor, something they say they don't always observe in other chief executives.
"Dusty never dodged an issue; he never sugarcoats anything," said Aaron of RBC Capital Markets. "So when he comes out and says the market is turning, people will believe him."
McCoy not only internalized that high bar instilled in him by his parents, but also holds it up for employees, as he did on the recent visit to Wisconsin. He exhorted Mercury Marine Racing employees to do more, just moments after congratulating them on their stellar safety record.
Noting that the economy was not improving as quickly as anyone would like, he challenged the plant employees to come forward with growth ideas the company could invest in.
"We won't be happy just sitting here the way we are," he told the employees at the award ceremony. "You certainly have the capacity to do much, much more. And I have the expectation that you are going to bring forward lots of growth opportunities, and it's going to be important for the company going forward."
The plant's safety award came with a $10,000 donation from Brunswick, which employees could put toward charities of their choice. The employees opted to support a battle very close to home.
They gave $7,000 of the total to the St. Baldrick's Foundation, which funds research into childhood cancers. The donation was made in honor of a manufacturing employee's 20-month-old son who is fighting leukemia.
The child, Hayden Dins, is in remission but is only about halfway through a chemotherapy regimen that will run 104 weeks.
He was understandably squirmy after the 40-minute event and not keen on getting his picture taken as his parents chatted with McCoy and others.
"He's just out of the hospital yesterday," McCoy said to the group, "and now he's thinking, 'You guys expect me to smile?'"
Later, on his flight back to Waukegan airport, McCoy reflected on the eloquence and strength of Hayden's dad, David, who, during the award ceremony, had recounted his son's struggles to survive.
"It's difficult not to get teary-eyed," McCoy said as he and his team headed back home.
Dustan E. McCoy
Title: Chairman and CEO, Brunswick Corp.
Home: One-bedroom apartment in Vernon Hills during the week; family farm in Bardstown, Ky., on weekends.
Making his way: Bachelor's degree, political science, Eastern Kentucky University.
"Anybody could get there, you didn't have to be smart, and it was affordable," he said. Worked as cabbie, bartender and oil refinery maintenance man to pay his way, and married his wife, Becki, while in college. The eldest of their two sons was born during McCoy's senior year. He has four grandchildren.
Four years of Army service, as a helicopter pilot.
Law degree, Salmon P. Chase College of Law, Northern Kentucky University.
"The funny part of our life is, my wife was very insistent … you've got to make something of yourself," he said. "She said: 'You can be a doctor or a lawyer.' And I said: 'I'm not smart enough to be a doctor.' She actually did all my law school applications. I did have to go take my LSAT."
His start as a lifelong boater: At age 10, he and his father built a boat of marine plywood and cedar, painted it with bright-blue swimming pool paint and used it to fish on a little river running through the family farm in Grayson, Ky.
A fish story: Former Brunswick CEO George Buckley has a tale about fly-fishing with McCoy in a New Zealand river: "Dusty caught one fish, I caught six … so we switched positions, and immediately I began to catch fish in his spot. He said: 'You catch one more fish and I'm going to drown you.' In fact, he didn't drown me. And by the way, he's a great fisherman."Copyright © 2014, Los Angeles Times