Mercury Marine Group Business Information, Profile, and History

Company Perspectives:

The company's mission is to enhance the consumer's positive boating experience by providing the finest marine propulsion systems and services, integrated electronics and parts and accessories.

History of Mercury Marine Group

Mercury Marine Group is a leading global manufacturer of marine propulsion systems. Its products include the Mercury Outboard lineup of motors, which range from 2.5 to 300 horsepower; Mercury MerCruiser gas sterndrives and inboards; high-performance Mercury Racing engines; Mercury Precision Parts and Accessories; and Mercury Propellers. In addition to its world headquarters, manufacturing, and distribution base in Fond du Lac, Wisconsin, Mercury Marine operates manufacturing sites in Stillwater, Oklahoma; Juarez, Mexico; Petit-Rechain, Belgium; and Newton Abbot, United Kingdom. Mercury Marine also has U.S. distribution centers in Cranbury, New Jersey; Dallas, Texas; Hayward, California; and Suwanee, Georgia. The company is a division of Brunswick Corporation.

Birth of a Pioneer: 1906-39

Mercury Marine originated from the efforts of Elmer Carl (E.C.) Kiekhaefer. Born on June 4, 1906, in Mequon, Wisconsin, to Arnold and Clara Wessel Kiekhaefer, Carl Kiekhaefer became familiar with the workings of gas-powered engines at a very young age, while working on his family's farm.

After graduating from Cedarburg High School, Kiekhaefer spent one year attending the Milwaukee School of Engineering, and later took extension courses from the University of Wisconsin that prepared him for a career in electrical engineering. Kiekhaefer first worked as a draftsman for Nash Motors Body Division in Milwaukee in 1926, and later for Evinrude. In 1928, he was hired as a draftsman at Stearns Magnetic, a Milwaukee-based electrical products manufacturer. Within ten years, Kiekhaefer had been promoted to the position of chief engineer.

During his eventual career as a marine industry pioneer, Carl Kiekhaefer was often compared to legendary Green Bay Packers football coach Vince Lombardi because of his temper, an obsession with winning, and his ability to motivate others. For example, during the 1950s Kiekhaefer would host inspirational sales meetings in the woods outside of Fond du Lac, Wisconsin. In addition to providing food, drink, and entertainment from polka bands, the eccentric company leader would often hang a competitor's outboard motor from a tripod and set it on fire, with talk of "killing the enemy."

In the June 21, 1992, issue of the Milwaukee Journal, David I. Bednarek said: "Kiekhaefer hated his competitors. He spied on them. And, ever suspicious that they were doing the same things, he ran much of his company, as well as a secret testing lake and grounds in Florida, like a military installation, complete with armed guards and workers confined to base during tests."

In addition to his paranoid obsession with competitors, Kiekhaefer had a legendary temper. Beyond throwing a mechanic's tools from a factory window, other stories tell of him firing executives and then reprimanding them when they did not report back for work. On several occasions, he "fired" truck drivers and other non-employees for sitting around on company time, unwittingly giving them a final week's pay. Nevertheless, Kiekhaefer was fiercely devoted to his company, working Sundays, holidays, and even while his wife gave birth to his children.

A Difficult Start: 1939-44

In partnership with his father, Carl Kiekhaefer started what he intended to be an electrical products company in 1939. That year he founded the Kiekhaefer Corporation, using $25,000 to acquire the assets of Cedarburg Manufacturing Company, an outboard motor manufacturer that had declared bankruptcy. Cedarburg's facility contained leftover Thor outboard engines that the company had been manufacturing for Montgomery Ward. Of 500 total engines, 384 had been rejected for quality problems. To generate capital, Kiekhaefer convinced Montgomery Ward that he could improve the engines. This ultimately led to more orders from Montgomery Ward and Western Auto, and cemented Kiekhaefer's fate as an outboard motor manufacturer.

One year after establishing his enterprise, Kiekhaefer unveiled a new line of outboard motors that carried the Mercury name, inspired by the Roman god of speed. By the end of 1940, the company had produced 9,401 engines. The company's forthcoming "Mystery Motor," the Thunderbolt, was mentioned to dealers at the New York Motor Boat Show in 1941. Although things seemed to be progressing well, World War II quickly hampered progress. In February 1941, U.S. Government restrictions on the use of aluminum essentially brought all outboard motor production to a standstill.

Faced with this challenge, within a few months Kiekhaefer was working on a prototype for a two-man chainsaw engine. Although he was hopeful that wartime production efforts would save the company, by November Kiekhaefer Corporation had reduced its workforce from 110 workers to a mere 18. In March 1942, more bad news came in the form of an outright ban on the use of aluminum for recreational products.

A blessing came in May 1942, when Kiekhaefer Corporation received a desperately needed order for 3,300 chainsaw engines. In 1943 Kiekhaefer Corporation shipped more than 10,000 engines to the military, in a total of six different configurations. That October, the company was recognized with the Army-Navy "E" Award for excellence in defense production. Military contracts totaled $4 million in 1944 and $5 million in 1945. In addition to chainsaws, the company produced engines for water pumps, generators, compressors, and target aircraft.

Marine Evolution: 1945-69

As the war neared its end, Kiekhaefer received an order for 15,000 outboard motors from Western Auto, to be labeled under the "Wizard" brand name. When government restrictions on the use of aluminum ceased, Western Auto upped its order to 33,000 engines. These were needed no later than January 1946. However, Kiekhaefer Corporation was still engaged in defense production and was in dire need of more production space.

The former Corium Farms in Fond du Lac, Wisconsin--acquired at a cost of only $25,000--became the company's new home in February 1946. Towering nearly five stories high, a massive 300-foot-long barn that once housed a dairy operation was converted into Kiekhaefer's new production plant. In addition to 38 acres of surrounding land, the farm included four silos that were converted into a variety of uses, from testing aircraft engines to spray-painting. Shortly after the move, the new production plant grew rapidly. A 25,000-square-foot addition came first, followed by a subsequent 40,000-square-foot expansion.

By September 1946, Kiekhaefer shipped more than $3.0 million worth of engines for chainsaws, generators, and other industrial equipment, along with $1.5 million in outboard engines. That year, an affiliate corporation named Kiekhaefer Aeromarine Motors was established.

More than 55,000 outboard engines were produced in 1947. Learning from his manufacturing experience during the war, Kiekhaefer began making outboards that were more durable and reliable. With the introduction of the 10 horsepower Mercury Lightning, he also gave his motors a new look. Finally, in 1948 Kiekhaefer Corporation unveiled the 25 horsepower Thunderbolt, its so-called "mystery motor." It was around this time that the company began underrating the true horsepower performance of its engines, in order to ensure they would outperform rivals in the same class.

After the war, a flood of outboard engine manufacturers entered the market, increasing competition. In addition, the Korean War resulted in another round of aluminum restrictions at Kiekhaefer. This disappointing news came around the same time that Arno C. Kiekhaefer, president of Kiekhaefer and chairman of Kiekhaefer Aeromarine Motors, died in October 1950. A contract valued at $3 million for chainsaw engines, as well as the prospect of more drone aircraft engine production for the military, were factors that prevented Carl Kiekhaefer from selling the company during the early 1950s.

Challenges and setbacks continued during the early part of the decade, including cash flow problems that endangered the company's ability to meet payroll on several occasions and hindered the ability to expand and invest in research and development. Despite revenues of $16 million in 1954, the company lost $200,000 that year. By the decade's end, Carl Kiekhaefer was considering potential mergers with two bowling industry players, Brunswick Corporation and American Machine and Foundry Company (AMF), as well as Chrysler.

In 1961 Kiekhaefer sold his company to Brunswick for approximately $34 million in stock, and the company became known as Kiekhaefer Mercury. Although the sale gave Mercury the capital it needed for expansion, Carl Kiekhaefer suffered a tremendous financial loss from the deal when Brunswick's stock price fell from $63 to $6. Kiekhaefer also was saddened by the loss of his own company, even though he remained in a leadership role.

Throughout the 1960s, tension increased between Carl Kiekhaefer and Brunswick management. In the June 21, 1992 issue of the Milwaukee Journal, writer David I. Bednarek explained that, according to Jeffrey Rodengen's book, The Legend of Mercury, Carl Kiekhaefer decided to leave Mercury Marine in 1970 upon the urging of company executives, namely Brunswick President Jack Hanigan. At the time of his departure on January 31, 1970, the company had annual sales of $175 million, and 5,000 employees. Mercury products were available in 118 countries through a network of 8,000 dealers.

New Beginnings: 1970-88

Following Kiekhaefer's departure, Brooks Abernathy was named as Kiekhaefer Mercury's president. Rather than retire, Kiekhaefer sold his stock in Brunswick and used the proceeds to fund Kiekhaefer Aeromarine Motors, a company that he still owned. After receiving permission to compete with Brunswick in September 1971, Kiekhaefer's new company began producing high-performance marine engines.

In November 1971, Brooks Abernathy changed Kiekhaefer Mercury's name to Mercury Marine. When Abernathy was elevated to president and chief operating officer of Brunswick the following year, Jack Reichert was named as Mercury's president.

In addition to European expansion, 1972 also saw the formation of a relationship with Yamaha in which Brunswick and Yamaha jointly owned Sanshin Kogyo Co., a Yamaha subsidiary that made outboard motors. By 1974, the Yamaha arrangement allowed Mercury to introduce a second line of engines under the Mariner brand name.

In 1975, Mercury Marine was realigned under four divisions: the Mercury Division (outboard motors), the MercCruiser Division (stern drives and inboard motors), the Quicksilver Division (parts and accessories), and the Mariner Division that stemmed from the company's venture with Yamaha. Other noteworthy developments at Mercury during the mid-1970s included the opening of a plant in Stillwater, Oklahoma, to produce MercCruiser stern drives, as well as a seven-week strike involving 3,200 workers who were at odds with management over incentive pay.

Charlie Alexander was named Mercury Marine's president in 1977, replacing Jack Reichert, who was promoted to president and COO of Brunswick. However, before Reichert left he mended relations between Brunswick and Kiekhaefer, and would stay in contact with Mercury's founder until his death.

Following efforts to consolidate and decentralize operations, Mercury Marine's net earnings skyrocketed to $192 million in 1992, up from $24 million in 1980. One example was the trimming of management staff from 500 to 240, which resulted in savings of $25 million. Mercury suffered a setback in 1983, when the Federal Trade Commission halted Mercury's joint venture with Yamaha, leaving the Japanese manufacturer with a significant presence in the North American market.

In 1983, the marine industry mourned the loss of a legend and pioneer when Carl Kiekhaefer died at the age of 77. In the October 5, 1983, issue of the Reporter (Fond du Lac), Brunswick President Jack Reichert paid tribute to Kiekhaefer, remarking: "Carl Kiekhaefer was described many times as an engineering genius. Clearly he was that, but he was a great deal more. He had the imagination and the courage to try new ideas, and he was constantly searching for a better way to do things. Consequently, more than any individual of his generation, he was responsible for building the recreational boating industry into what it is today. He will be missed by his friends at Brunswick and by the entire marine industry."

In 1984 Mercury Marine announced it would devote $100 million to a five-year manufacturing efficiency initiative that included $23 million to upgrade the skill base of the company's workforce. The following year, Richard Jordan was named as Mercury's president. In an effort to increase the company's responsiveness and efficiency, Mercury's divisions were consolidated to form the Marine Power Group.

By 1985 Mercury Marine had estimated annual sales of $790.8 million, accounting for about half of Brunswick's total sales, along with net income of $126.5 million. The following year, Brunswick made waves throughout the marine industry by purchasing Bayliner Marine Corporation and Ray Industries (Sea Ray), the world's two largest boat companies, giving it the ability to market complete packages of trailers, boats, and motors. Bayliner was acquired for about $425 million, including $375 million in cash, while Ray Industries was obtained for $350 million, $300 million of which was cash.

In 1986, Mercury contributed $949 million to Brunswick's total $1.7 billion in sales, and achieved net income of $153 million. The following year, Mercury Marine's sales increased 24 percent. At that time, the company agreed to acquire BMW Marine, the marine engine operation of German automobile manufacturer BMW AG.

In mid-1987, progress continued as Mercury announced record contracts for 1988 model year MerCruiser stern drives and inboard engines. This record pace continued for the 1989 model year, as orders for MerCruiser stern drives and inboards climbed 8 percent, reaching $1.3 billion. Another key development during the late 1980s was Mercury's 1988 agreement with General Motors to manufacture high-performance V8 engines for certain 1989 Corvettes at the company's plant in Stillwater, Oklahoma. In November 1988, Mercury President Richard Jordan announced his retirement. Replacing him was Thomas R. Weigt, president of the Brunswick division who had previously spent 21 years working at Mercury Marine.

Troubled Times in the Late 1980s

Mercury Marine ended the 1980s on a sour note. In January 1989, concerns were raised by the Wisconsin State Department of Natural Resources concerning carbon monoxide emission problems at Mercury's Fox River engine testing facility. This led the company to install a $250,000 exhaust control system to rectify the problem. Then, a recession that resulted in falling sales and rising retail inventories led to massive layoffs that would continue into the early 1990s. The first layoffs came in April 1989, when more than 200 of Mercury's 3,500 workers were laid off. Amidst these difficult times, Mercury Marine named David Jones as its new president.

In 1990, Kiekhaefer Aeromarine Motors was acquired by Brunswick and named as its high-performance division. In addition, Mercury Powerboats was reorganized as Brunswick Fishing Boats that year. In addition to recessionary conditions, Mercury faced other difficulties, including resistance from boat builders to buy motors from Mercury Marine, which had become a competitor. The layoffs of the late 1980s also continued. Some 1,000 employees had been laid off by January 1990. Overall, Brunswick laid off more than 8,000 workers in 1991, as sales for its Marine Group registered a 60 percent decline.

Number One on the Water 1990s and Beyond

Conditions finally started to improve at Mercury in 1992. As demand increased from boat dealers, the company recalled 200 workers, increasing total employment to approximately 2,700. From this point forward, the company worked diligently to strengthen its leadership position within the industry. By 1992, Mercury Marine accounted for an estimated 35-40 percent of Brunswick's sales, according to industry analysts. This amounted to between $800 million and $900 million in revenues. At this time, Mercury was organized into five business units: Outboards, MerCruiser, Quicksilver, Hi-Performance, and International.

Mercury President David Jones was responsible for improving the company's performance during the 1990s. His efforts included initiatives to boost morale, including training and development programs and a family medical center for Mercury employees. More specifically, an article in the June 26, 1994 Milwaukee Journal explained that Jones led a Brunswick management team that "established a five-point strategy for the company: Satisfy customers, inside and outside the company; improve quality; motivate employees; cut engine emissions; and diversify into non-marine businesses to cushion the ups and downs of the highly cyclical boating business."

By 1993 Mercury's employee base had grown to 3,230, up from a low of 2,600 in 1991 and just shy of a record 3,500 during the 1980s. This improvement came in the wake of a contract to offer engines to Tracker Marine, a fishing boat builder than formerly worked with Mercury competitor OMC. In addition, Mercury introduced a 225-horsepower outboard engine to boaters.

After an eight-year tenure as president of Mercury Marine, David Jones was succeeded by George Buckley, a marine industry newcomer who previously worked for Emerson Electric Co. Buckley remained at the head of Mercury until June 2000, when he was named CEO of Brunswick. Buckley increased Mercury's sales 14 percent during his three years as president.

In fall of 2000, Pat Mackey was named as Mercury's president. Late that year, the company received a boost when competitor OMC declared bankruptcy. OMC was later sold to Bombardier. Despite this, Mercury announced the elimination of 166 jobs in July 2001, citing restructuring efforts and slack demand for boats.

In 2003, Mercury Marine acquired a minor interest in New Zealand-based Rayglass Sales and Marketing Limited, a manufacturer of fiberglass and inflatable boats. In early 2004, Mercury benefited when Brunswick acquired three aluminum boat companies--Lowe, Crestliner, and Lund--from Genmar Holdings of Minneapolis. With combined 2003 sales of $311 million, the addition of the three companies made Brunswick the world's largest recreational boat company, and provided Mercury with new sales opportunities.

In response to a petition filed by Mercury that accused Japanese marine companies of "price dumping," or selling engines at below market prices in the United States, the International Trade Commission upheld a ruling by the Commerce Department supporting a 22.52 percent antidumping tax on motors made by the likes of Yamaha Motor Co., Honda, and Suzuki.

In addition to the price dumping situation, Mercury filed a lawsuit over the pricing of engine components, alleging that Yamaha was in violation of an agreement the two companies had made. According to the September 28, 2004, Milwaukee Journal Sentinel, Yamaha raised prices of the components it supplied to Mercury by 92 percent, even though the companies had previously agreed to other terms. Yamaha claimed the move was necessary in light of anti-dumping measures. Although the competition within the marine industry remained tough, Mercury was positioned as a strong competitor--a point that would have made Carl Kiekhaefer proud.

Principal Competitors: Yamaha Motor Company.

Chronology

• Key Dates:
• 1939: Carl Kiekhaefer establishes the Kiekhaefer Corporation.
• 1940: Kiekhaefer unveils outboard motors carrying the Mercury name.
• 1941: War production includes engines for chainsaws, water pumps, generators, compressors, and target aircraft.
• 1946: Kiekhaefer relocates to Fond du Lac, Wisconsin.
• 1950: The Korean War results in another challenging round of aluminum restrictions.
• 1961: Kiekhaefer sells his company to Brunswick and it becomes known as Kiekhaefer Mercury.
• 1970: Mercury products are available in 118 countries through a network of 8,000 dealers.
• 1971: Kiekhaefer Mercury's name is changed to Mercury Marine.
• 1982: Efforts to consolidate and decentralize operations improve bottom line.
• 1983: Carl Kiekhaefer dies at age 77.
• 1991: Brunswick lays off more than 8,000 workers, as sales for its Marine Group register a 60 percent decline following economic recession.
• 1992: As demand increases from boat dealers, Mercury begins recalling workers.
• 2004: Mercury benefits when Brunswick acquires three aluminum boat companies--Lowe, Crestliner, and Lund--from Genmar Holdings of Minneapolis.
• 2004: Mercury closes its legendary Lake X testing facility in central Florida, replacing it with Watson Bayou, a larger test lake in Panama City, Florida.