BRP: Pleased with position, cautious of economy
December 1, 2008
Filed under Uncategorized
By Karin Gelschus
Prepared for an unstable economy, BRP expects to make production reductions as needed in some of its segments. The company, however, does have some segments exceeding expectations, including the Spyder.
There was higher than anticipated demand for the three-wheel vehicle in 2008, CEO José Boisjoli told Powersports Business. The company is also in a good position for the snowmobile season and is hoping for a strong year.
The marine season wasn’t as fortunate last summer due to heightened fuel prices. Since that segment decreased, BRP has adjusted its production rate for next season. The company also cut ATV production this fall by 20 percent to match the declining U.S. market.
Originally planning to roll the Spyder out in three-four years, the vehicle’s delivery time moved much quicker, says Boisjoli. After about a year and a half, it’s in 49 states and nine provinces. Hawaii, Nova Scotia and the Canadian Northwest Territory are the remaining areas the Spyder has yet to be released.
To compensate for the higher than expected demand, BRP made some manufacturing adjustments. “We’re a bit tight on the capacity of the engine of Rotax,” Boisjoli said. “We invested in some new equipment, and we’ll be OK for 2009.”
Despite the increased demand, Boisjoli says there is no need to move the production of the Spyder from Valcourt. “One of the advantages of being in Valcourt, you’re close to R&D,” he said, also noting Valcourt’s ability to handle volume fluctuation.
“The Spyder is in Valcourt to stay,” he said.
Since Valcourt can handle increased production, dealers who already carry the Spyder will be able to order more units this year.
Boisjoli says BRP’s goal was to have about half its dealer network carry the Spyder.
“We’re on track with that goal,” he said. “We are at 400 right now in North America, and we’ll continue to increase that in the next few years. Obviously we’re trying to have the right dealer. In some cases, dealers have to enlarge their showrooms or improve service.”
The dealers can expect a 35-50-year-old demographic for the Spyder buyer, which is about what BRP had predicted. Boisjoli says the ratio from male to female is similar to the motorcycle industry.
“About 15 percent are female,” he noted. “I think the youngest customer is 21 years old, and the oldest customer is 81 years old.”
Last year’s successful snowmobile season plus this year’s product lineup and falling fuel prices have Boisjoli hopeful about the current selling season.
“We’ll have a very strong lineup with the model year ’09,” he said, noting the E-TECH, two-stroke engine with the new XR platform and the 1.2-liter four-stroke engine.
“The originality is there,” he noted. “We have to lineup the season following good snowfall. The fuel prices are going down. On the other hand, there is the economy right now and that will affect negatively for sure. We hope for a decent snowmobile season, but it’s very difficult to predict at this point.”
Even with the uncertainty over the snow season and the economy, Boisjoli says BRP has set itself up well during the past five years by revamping all its factories.
“We invested in new tools to push innovation to the next level, including the advanced technology center in Sherbrook, the design and innovation center in Valcourt, and we’re working on an original innovation center in Austria,” he said. “I am very pleased for everything we’ve managed. We’ve progressed extremely well in the last five years.
“On the other hand, we cannot ignore the overall economic situation, which is extremely volatile. The customer confidence is low in North America. There is a level of uncertainty. We are managing our expenses very cautiously.”
One area BRP cut back was ATVs. To align with the U.S. ATV market, BRP reduced its production by about 20 percent. “We readjusted our production this fall to make sure we’re managing the dealer inventory as good as we can,” he said. “We’re following cautiously the retail, and we’ll look at that accordingly.”
The company also has adjusted its production for PWC. Boisjoli says they’re going to be cautious for the seasonal line next spring.
“At the beginning of June (last year) was when fuel prices were skyrocketing. The marine season was difficult, no doubt about that,” he said. “That’s why we’re managing right now cautiously our expenses because we don’t know what to expect this winter with snowmobiles and ATVs.”
Plans to go public
BRP’s goal of going public was put on hold when the economy weakened, but Boisjoli notes that’s still the company’s long-term intention.
“Obviously, with the economy turmoil, it’s not the time to go public,” he noted. “Now will it be two years, three years or five years? I cannot say. First, we need to make sure the economy and global situation gets better and to have a discussion with the shareholders.”
In the meantime, Boisjoli says the company has set itself up the best it can to be successful in the shaky economy.
“We’re planning a lower volume for next year because we don’t know how long this uncertainty and volatility will last,” he said. “As a whole, we are very pleased with our position in the industry. We have a very strong product lineup in every product that we are in, and that’s a very enjoyable position.”