Sunday, December 19, 2004

Boating industry divided in outboard engines trade dispute

By Brian Tumulty / Gannett News Service
WASHINGTON -- Outboard engines used by recreational boaters are the latest example of the continuing consumers' dilemma of choosing between cheaper prices or keeping American manufacturing jobs.

Mercury Marine, the No. 1 U.S. maker of outboard engines, says 4,000 jobs at its Fond du Lac, Wis., factory hang in the balance.

The International Trade Commission is expected to decide by late January whether to make permanent a 22.5 percent import duty that has been charged on Japanese-made outboard engines since August.

That's when the federal government issued a preliminary finding that Yamaha, Honda and Suzuki were dumping their outboard engines in the U.S. market at prices lower than what they charge in Japan.

The price competition had been spurred by a drive to produce low-emission engines that will comply with new Environmental Protection Agency standards that take effect in 2006.

The Japanese manufacturers argue that they have been more nimble in the development of low-emission four-stroke engines.

Mercury Marine, on the other hand, put much of its research and development into complying with emission standards by producing a direct-injection version of the standard two-stroke engines that have been used by boaters for decades.

In fact, Mercury Marine has relied on Yamaha for parts of some of its four-stroke engines.

The trade dispute has created a rift among executives at independent American boat manufacturers and owners of boat dealerships. Nearly two dozen of them -- from California to Florida -- testified Tuesday before the International Trade Commission.

Those in the U.S. boating industry siding with Yamaha and the other imports fear that permanent duties will hurt the entire industry by increasing the price of a new boat, which is typically sold as a package with the engine already installed.

Mercury Marine officials made clear at the hearing that they will raise prices on their products to cover the higher costs of making a cleaner engine if they win their request for permanent duties on Japanese imports.

So whether it's a Japanese or a U.S. outboard engine, buyers would have to pay more.

Most of the independent boat builders that already use Mercury Marine engines in their boats sided with the American manufacturer at the trade commission hearing.

"It is not technology or quality issues driving the market today," said Ed Renken, executive vice president of Sea Fox Boat Company in Moncks Corner, S.C., which puts Mercury engines on 95 percent of its boats when they are shipped with factory-installed outboards. "In our opinion, price has more effect on the consumers' decision than any other factor."

Although the vast majority of boats are built so that they can be equipped with different brands of outboard engines, the manufacturers said it's increasingly rare for the customer to choose the engine.

That means that engine pricing is critical on the wholesale level where the manufacturer and boat builder strike their supply deals.

Regardless of whether it wins the import duty case, Mercury Marine will be shifting production of its 40-, 50- and 60-horsepower outboard engines to Suzhou, China, in the spring of 2005.

Should Mercury Marine lose the case, future plans for production in China could be accelerated, costing U.S. jobs.

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