Genmar has been uncharacteristically quiet. The last official press release posted on the companyÕs website is dated April 19, 2004 about
moving the model-year change-over date. A week before, a release announced the appointment of Roger Cloutier II to President.

Until a few weeks ago, when Chairman Irwin Jacobs accused Mercury Marine of Òpredatory pricingÓ in their dealings with specific U.S. dealers and prior to that, his epistles to the industry during the Mercury-vs.-overseas outboard engine trade dispute, itÕs obvious that Genmar is following a quieter course, which coincidentally or not, appears to be in line with the retirement of one president and the promotion of Cloutier.

The sale of Lund, Crestliner
and Lowe aluminum boat lines to Brunswick in March of 2004, for $191 million in cash put Genmar in what the company says is a debt free status for the first time in their history. With the exception of Aquasports, which the company says temporarily ceased production,
the remaining 12 fiberglass boat companies are enjoying strong sales. 

So what is Genmar up to? 

A charming, boyish grin parses the lips of Roger Cloutier, as we launch an insightful conversation from his modest 29th floor office of the IDS center in Minneapolis. Positioned just a 10 second walk from Mr. JacobsÕ office, it becomes quickly obvious that Roger enjoys letting Irwin be Irwin. Roger keeps a much
lower profile, not uncommon
for someone with an accounting background. Neat, organized and unpretentious, you wonÕt find many clues about Roger by looking at his office.

A coffee cup collection, almost hidden from sight, occupies a window ledge close to the floor. Behind another column, youÕll find a few ball caps, bearing emblems from GenmarÕs successful entry into the professional bass fishing market through FLW Outdoors. 

On the wall, a publicity photo depicting a Bekins moving van
is a reminder of RogerÕs earlier assignments with Jacobs. There are a handful of awards; family photos including the newest addition to the family, his first granddaughter and a small bookshelf round out the office dŽcor.

Floor to ceiling windows offer
a captivating view of the Minneapolis skyline. The IDS center is the tallest building downtown and this particular floor, once occupied by American Express, has exceptionally high ceilings. Colorful oils by Giancallo Caponi of Fececchio, Italy decorate the boardroom. Throughout the executive wing youÕll find an equally impressive collection of paintings by JacobsÕ wife, Alexandra, an accomplished artist and worthy of a feature article herself. (www.alexart.com)

ÒWe are a little quieter than before,Ó Roger concedes, Òbut believe me, Irwin has not been asleep,Ó hinting that by Miami, we may see new initiatives that Genmar is developing. Some will be subtle, some are behind the scenes moves to take advantage of new technology, better manufacturing techniques and develop ways to take costs out of boats while improving quality. At the August Four Winns dealer
meeting, Jacobs told reporters the brand is ready to take
Sea Ray head on and that
Four Winns plans to Òbreak the
marketing moldÓ in the 2006 model year.

The changes actually began in 2002, two years before the planned retirement of long time president Grant Oppegaard. Genmar started a phased realignment of its manufacturing resources to consolidate production and take advantage of its VEC technology. When Cloutier took over, he spread out the management of the company, Òso that itÕs not just about Irwin or me in the background. There was more hierarchy in our business as is very typically in business, and we changed that last year.Ó

Now the respective presidents of Carver, Four Winns, Ranger and the Freshwater Group, along with the Saltwater Group, Triumph and the VEC unit, form the nucleus that has its collective eye on improving the bottom line while delivering better
quality.

ÒThe leaders of those business groups are right around the table with me on everything,Ó Roger states with conviction. ÒThey make up the management of Genmar. No one should think otherwise. ItÕs not me calling all the shots. This is a group of smart, sophisticated guys with more history and more years in the business than I have.Ó

Indeed, RogerÕs introduction to the boat side of JacobsÕ many interests didnÕt occur until 1996. He freely admits that his love for boating didnÕt blossom until the last ten years, even though he had access to a company boat. The evening before our interview Roger had been out on Lake Minnetonka with his wife Jan aboard a Larson Cabrio 370. 
 ÒI used a 37Õ Four Winns for the first half of summer and because IÕm Minnesota based, IÕm using a 37Õ Larson for the second half of summer. We encourage other corporate officers to use the boatÉthey usually get a driver, but I like to drive and I even know how to dock it. Although I still make all the dock people nervous,Ó he adds with a laugh. 

As we shared boating stories and RogerÕs desire to one day cruise in South Florida, the conversation got serious for a moment. Roger is concerned that dealers and even fellow manufacturers may be so consumed with the pressures of running the business, that theyÕve lost the love for boating simply because they wonÕt take the time to go boating.
ÒEven before Ô96 I always had
the benefits of using the boat, but I never did. But now I love it. Every Saturday morning, I like
to get a little exercise in, so I go for a run but then around 10 or 11 oÕclock in the morning, before the traffic shows up, we (get out on the lake). ItÕs outstanding.Ó

Roger says his two daughters particularly fell in love with boating, often bringing friends on board with them. ÒWe entertain on it. Great family fun.Ó

The official transition to president occurred in April of 2004, yet CloutierÕs resume traces a connection to Irwin Jacobs from RogerÕs first assignment at Arthur Anderson & Company in 1976. The University of North Dakota grad, class of Õ75, worked on developing a system to help
collect receivables from the W.T. Grant Company that Jacobs had just purchased. For the next few years, there would be similar jobs and special projects until the well-publicized take-over attempt of Kaiser Steel. ÒThis is the
project that brought me close
to Irwin,Ó recalls Roger as if it was yesterday. ÒMyself and another auditor camped out in California for six months while the deal was pending. We worked on creating plans for what to do with the company once we owned it.Ó

Jacobs was on his way to earning the less than flattering title of ÒIrv the LiquidatorÓ while RogerÕs acumen for organizing and finance earned him visibility as he puts it, Òfor who this guy Roger was.Ó

The offer to leave Arthur Anderson and work for Jacobs personally followed. ÒI told him no. I was having too good of a time. Minneapolis is home to some pretty big companies and I had big clients like Carl Pohlad, owner of the Minnesota Twins and Curt Carlson, who at the time was developing name brands like TGI FridayÕs and Radisson Hotel to name a few. Every month, every week, something big was happening and it was very challenging. I got very involved and I liked what I was doing.Ó

Jacobs convinced Roger that he wasnÕt going to end up as Òone of those financial personsÓ to work in one of JacobsÕ many businesses. ÒTo a lot of people, that would have been the catÕs meow,Ó Roger figures, adding, Òbut I was having too much fun at what I thought was a better relationship.Ó

Eventually the salesman in Jacobs won out. ÒHeÕs very compelling,Ó Roger allows. That was in 1984 and the grooming was underway, first taking a senior role in what at that time was the forerunner to the QVC Network. 

ÒIrwin had this business that bought and sold close-out goods.Ó

ItÕs about this point in the story that you begin to see why Roger and Irwin have worked so well together for more than a quarter century, and perhaps gives you some insight into how theyÕre reinventing Genmar. 

ÒI remember this just like it
was yesterday,Ó Roger smiles as he rapidly recalls a pivotal roundtable meeting. ÒI got Irwin in the right frame of mind and brought him into this meeting to explain the TV concept, and this is how quickly he gets things. He figured out that the TV shopping would need cable to work.Ó

Roger says that within five minutes, out of the blue, Irwin had the Òfather of cable TVÓ, John Malone, on the phone and in ten days a transaction together to get them on the air. The company literally went from zero to a billion dollars in sales in two and a half years.

ÒThatÕs how quickly these things were happening and it was just a kick.Ó 

Now if youÕre thinking, Ôwait a minute, I thought Home Shopping invented the concept,Õ Roger is quick to offer Roy Spear and his Florida company credit for being first, but, Òwe were testing something similar here in Minneapolis on local TV and they were buying all their goods from us.Ó 

In 1986, Roger was promoted to Senior Vice President and CFO of the CVN Companies before they merged with QVC in 1989, at which time he was named President and Chief Operating Officer.

Heading into the 90Õs, Roger was still not working the boat side of JacobsÕ vast holdings. Probably a good thing given the less than stellar performance that began in 1977 when Jacobs paid $575,000 for bankrupt Larson Industries, and then over the next two and a half years lost
$5 million dollars. Undaunted, Jacobs bought Aegis in 1981, doubling the size of the company and adding cruisers, runabouts and fishing boats to the portfolio. By 1985 the target was AMF. In the early 90Õs Ranger bass boats and Carver yachts came into the fold through a defaulted junk bond deal that Jacobs and Minnesota Twins owner and Genmar Board
member Carl Pohlad cobbled together. 

During this ramp up in the boat business, Cloutier held positions with Jacobs Management Corporation, and later the IMR Fund, which included three years as Executive Vice President of the moving van company Bekins and Chairman of Accent Software International, Ltd., which designed and developed multilingual word processing and intelligent agent software products.
Finally in 1996, Roger moved over to Genmar, sharing the operational duties with Grant Oppegaard and Jacobs. ÒWe anticipated GrantÕs retirement and no disrespect to Grant but,
9 times out of 10, I was articulating and directing the strategic movement forward. I ran the board meetings and I still run the board meetings. We had a close, but different type of partnership. If I saw that company XYZ was being challenged, Grant would zero right in on that and likewise if he felt I needed to get involved in the number side or something,
IÕd go do that.

ÒI donÕt feel that my role here is any different that it was since 1989Ð90 when we sold the TV business and Irwin brought me onto his payroll.Ó

What was changing though in the past two years has been the focus towards manufacturing techniques and quality. And Roger is clearly the catalyst
driving the change, spending time talking with customers here and abroad, meeting with dealers, his management team, even the workers on the line.

ÒOur manufacturing guy had
a little contest,Ó relates Rogers. ÒThe company that accomplished this concept about lowering our manufacturing costs got me for the prize. And I went and worked in the factory for a week.Ó

Roger, dressed in the Òmoon suits,Ó spent hours building boats, learning the steps to check for consistency, quality and processes necessary in assembly, all tasks he had not previously been exposed to at such close range. 

ÒThe best day of that process
was when the people in that
factory finally figured out that this president is an okay person, heÕs kind of like the rest of us, and likewise I needed to convince them that I just wanted to learn what they did.Ó

He adds the real gratification came Òwhen the people on the floor can start giving the president a lot of grief about what his capabilities are or arenÕt (relating to building) and you can trade back the other way and everybody can have a good time. Plus, they really taught me a lot about the boat building experience. The folks here at Genmar really need to touch and know what we build. That was a pretty
significant day.Ó

Hatteras & Aluminum Boat Group Sale

Another insight into Genmar and what may happen in the years ahead is to look at three key events in the companyÕs recent history, beginning with the sale of Hatteras to Brunswick in the late 90Õs.
And to do that, itÕs important to understand that Cloutier and Jacobs manage far more than Genmar, including an investment fund called IMR.

ÒIrwin has always had a lot of people who have followed him in the marketplace,Ó notes Roger, recalling his early days with Jacobs. ÒBack then it wasnÕt fashionable, but IMR became a collection of capital for very sophisticated businesses or investment companies, where
we would take their capital
and go and buy companies
and sell them.

IMR really stands for what you have to do in business all the time: Invest, Manage and Realize. Those are the sorts of things that I do bring to the table here.Ó

Roger emphatically states the mission Ð give shareholders a payday. 

ÒGenmar has operated most of its life as a leveraged company. Irwin is never afraid of being leveraged,Ó notes Roger who was assigned to work with Hatteras in hiring Bill Naumann. 

ÒHatteras was so far different from the rest of our companies at the time.Ó Roger says that to modernize and develop a new look was going to require a ton more capital investment, Òwhich I wasnÕt sure was going to give us a whole lot of return.Ó

The new management team under Naumann had expressed an interest in buying out the company, says Roger Òbut Brunswick wanted it worse than anybody. Irwin and I sat back and looked at what is the growth opportunity from a shareholder standpoint and obviously it made sense to sell and pay down some of our loans and invest in VEC and other technologies that held more promise. This is not an industry where you should have a lot of leverage for exactly the reasons we are kind of wondering about and concerned about right now.Ó

More about those concerns, including skyrocketing fuel prices in just a moment. Next, consider the 2004 sale of the aluminum boat division to Brunswick.

ÒThe aluminum side had, I donÕt want to say peaked out, but it was at the high end of what we thought we could do with it in terms of growing shareholder value. And Brunswick was incredibly aggressive with their checkbook. And that eliminated all of GenmarÕs debt. Now weÕre in a position our company has never been, full of cash, great
liquidity, earnings strong and Irwin has never run the business under those conditions. So weÕre very confident of where weÕre going just from a pure financial market. Great products, an incredibly healthy balance sheet. Brunswick does too, and for the two leaders in the industry thatÕs what you want for an exciting time.Ó

But unlike the dozens of other company sales Cloutier and Jacobs have worked on as a team, this one has been
bittersweet.

ÒGiving up Lund and Crestliner was one of the toughest decisions IrwinÕs had to make. Those people are right here in Minnesota and itÕs been tough to watch,Ó referring to layoffs and shutting down production for a time. ÒBrunswick did not execute these things very well. They blame too much inventory, and that was just never an issue under our ownership.Ó 

The differences between Brunswick and Genmar have always proved interesting, if not entertaining at times. Brunswick is expanding globally, creating distribution channels, filling product niches and acquiring technology companies. Genmar is taking a different approach.

ÒGenmarÕs position is similar
to the engine side,Ó Roger explains. ÒLet those who are really good at it and those who are investing heavily in the new technologies, let them come to us with the best ideas. We are the best customer for all of those people because of our size.Ó

He points to the success of partnering Four Winns and Volvo with the engine companyÕs revolutionary IPS propulsion system that captured the Best of Show display at the Miami Boat Show. Sales were exceptional.

ÒBrunswick is locked into their investment in those companies they are acquiring,Ó lectures Cloutier adding, ÒThey most likely will be successful. TheyÕre smart people. But they will be locked into that direction. And we will be able to look at two or three better alternatives, you know the next day, which is a position we want to be in for our brands and for our customers and our dealers.
ÒIf Verado is the best engine, our dealers are going to tell us that. And we are going to buy a ton of them. But theyÕre not telling us that. They are telling us that the Yamahas and the Evinrude E-TECs are better engines that they as dealers and their customer base would like to have. So if we had a long term supply agreement to just buy Verado engines, weÕd be stuck. And thatÕs what Genmar is all aboutÉthat opportunity to get the best.Ó

So instead of acquisitions, Genmar appears to be extremely manufacturing focused, creating an executive level manufacturing position, instituting best practices across all brand lines and focusing how best to get each brand into the marketplace. 

VEC (Virtual-Engineered-Composites) technology will continue to expand but the company admits economic forces will have to change for VEC to really pay off.
ÒIt still works,Ó Roger quickly points out, Òoutstanding technology. We just came out with this a little bit too soon. We didnÕt quite understand some of the economics related to it. The factory is still state of art. There is not a factory around that is as efficient and state of the art as that one is.Ó
 
Indeed the factory has tremendous room for additional expansion and VEC cells. Genmar is manufacturing a number of closed-molding parts for other industries.

ÒPart of the problem we have, and other manufacturers in this industry have is that when you build 300 of a model, youÕre really happy. For VEC to work, you need 600, 700 or 800 of a model. We donÕt have that many of a model, except for the entry level boats like the Glastrons and Larsons and for boat building the economics really require more volume,Ó Roger concludes. 
Rising Gas Prices

Our interview with Roger was conducted three days before Hurricane Katrina slammed into the Gulf Coast sending Labor Day fuel prices in some marinas well over the $4 dollar a gallon mark. As we went to press fuel supplies and prices were still very much in flux, however between now and next summerÕs boating season, industry leaders believe theyÕll drop back below $3 a gallon. Still thatÕs a concern that Genmar and the boating industry at large are facing.

ÒItÕs going to affect boating, it definitely affects the cost of our materials, it steps up the challenges in the industry,Ó says Roger drawing on his CFO
background. ÒAs manufacturers we have to get better. I think the consumer who enjoys boating is going to continue to enjoy boating. He is using discretionary income on discretionary spending already. I donÕt think weÕre going to lose too many of the real advocates. The challenge will be with attracting the entry-level person.

And thatÕs always been our challenge as an industry. IÕm encouraged that if we had to go through the gas price increase that itÕs happening now with the launch of the Grow Boating Initiative  giving consumers the impression that this would be a pretty good way to spend some time. Better we have that going for the industry. I donÕt believe itÕs going to kill the industry. Is it possible it might cause another cycle slowdown? Possibly, but IÕm not sure itÕs going to whack our industry by 10 to 15%. The bigger concern is inflationary pressure on the whole of the economy. That starts getting into the
consumers pocketbook, not just the cost of owning a boat.Ó

Grow Boating

Roger is serving on the Grow Boating Funding Task Force and believes the benefits are far more reaching than a consumer advertising campaign. Dealer certification, the focus NNMA and J.D. Power has placed on CSI, and efforts throughout the industry to truly build better boats is helping to eliminate what he calls Òthis cloud of frustrations of boating.Ó
ÒOur industry needs it. The
collective working together is helping and we really need to take a hard stance against those manufacturers and retail dealers who arenÕt going to play by the rules and standards. We all need to build better boats, our suppliers need to give us better products and our dealers need to do a better job with the consumers. The only way itÕs going to get fixed is if the right leadership says weÕre going to fix it.Ó

To that end, Genmar is encouraged with the trend toward offering dealers a three-year agreement. Yet there was a tone of firmness in his voice while explaining that the dealers need to become better at running their businesses, writing a three to five year business plan and readily adopting marketing initiatives that Genmar develops to help expand market share.

Speaking as if to a dealer, Roger put it bluntly, ÒYou may not always like them (marketing). WeÕre going to evaluate you at the 
end of the first year to see if you supported them and give us good honest feedback on the programs on what worked and what didnÕt É maybe it was a stupid idea from Minnesota. WeÕll keep moving forward with our 3-year agreement because you at least tried to market the programs and weÕll respect that. But at the end of that first year, if you didnÕt follow up, didnÕt ask for any of the PoP kits, didnÕt try anything, IÕm not sure I want you at the end of that 3 year deal.Ó

In addition to marketing, the new agreements focus heavily on CSI with the ultimate goal of getting a customer rating of 94% by the end of the third year. ItÕs also tied to boosting sales. ÒAnd I really can appreciate that a dealer took his CSI from 85 to 95, but you know what? There is a full package here. You can have great CSI if you only sold 10 boats and only had 10 customers. The point is to sell 100 boats. It canÕt be just about this yearÕs sales. ItÕs where the dealer thinks heÕs going to be in three to five years.Ó

Genmar is taking an active leadership position with Grow Boating initiatives and encouraging its dealer network to join the
campaign. 

ÒShame on us if we let it fail,Ó Roger scolds. ÒItÕs all been laid
out for us.Ó

Manufacturers have a compelling interest in helping their dealer base become stronger, better at service and at marketing. Consolidation on the retail side, once feared by manufacturers,
and still carefully watched, is
actually helping to raise the
collective bar for dealers.

ÒThereÕs going to be other MarineMaxes. Look at Skipper BudÕs and Crystal-Pierz. There
are some sophisticated people out there. And how are you going to feel as a dealer, you have terrific CSI, might have the best brands in the market, but how are you going to feel if MarineMax pulls into town and outsells you?

ÒItÕs the Wal-Mart story all over again.Ó

WhatÕs Next?

ÒRight now we are very focused on boating. The capital that we do have is going to make our manufacturing processes that we now have better. And we have an opportunistic leadership group here. If we see things that are going to make a better position for our shareholders weÕre going to take advantage of it. Likewise I donÕt see Genmar making a bunch of acquisitions short term. But I do see us investing in things that make the manufacturing capabilities better.

ÒItÕs nice also that we have the financial wherewithal to continually try new marketing things. And we will. YouÕll see that in the very near future, that we think will be pretty good for our brand.
I grew up playing hockey and now once again, we have a pro team here in Minneapolis. There are a lot of things in that sport that developed me, like teamwork. You sit back and look at what role do I play in this big machine called Genmar, and it really is about the player personnel. Like a general manager of a sports franchise, thatÕs probably one of the principal roles IÕm involved in is player development, personnel development, because I canÕt do it by myself. This company is not just Irwin. Irwin is a significant driving force, but Genmar has a collection of a lot of really great people. And there are five thousand of them and we need to challenge them to get better, just like a sports team has to. You want to move up a couple of notches in the standings from last year just like a sports team does and how you measure that is in market share, CSI or profitability. Ultimately what you have to look at is all of your end players and how they execute your strategies.

ÒIÕve had two really great days
in the last year,Ó Roger notes, including the week building boats at the plant. ÒOne was at one of our companies where I had a chance to have all of management really talk about what they did for this brand, and their enthusiasm, and just where they are taking it, and it was one of the best days of the year. Because basically everyone in this company was so tuned in. When you see a company where everyone is on the same page and they are all going in the right direction and there is not a thing you can say that needs to change, itÕs a great feeling.Ó