THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, May 8, 1995 TAG: 9505060387
SECTION: BUSINESS WEEKLY PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY LON WAGNER, Business Weekly
DATELINE: CHESAPEAKE LENGTH: Long : 139 lines
You're a company that designs and makes boat engines, a product many consumers associate with fast boats blasting across the water at 70 or 80 mph - or faster.
But your parent company makes cars, Volvos, almost universally known as safe, reliable, family cars - not sleek, not fast, not the things associated with speedboats.
Therein lies the problem for Volvo Penta of the Americas, the Chesapeake-based boat engine manufacturer, in trying to bolster its market share in North America.
Should Volvo Penta distance itself from the longstanding conservative image of its better known automobile operations? Or should it figure a way to use the brand identity of Volvo cars as a springboard for its own reputation?
Volvo Penta has decided to latch onto the brand identity of its corporate parent, AB Volvo. Volvo Penta plans to embrace its corporate identity as it pushes throughout 1995 to sell boat manufacturers, boat dealers and boaters on the idea that it is more than just an offspring of the better-known Swedish car maker.
``The cornerstones are Volvo-wide,'' says Lennart Hammarstrom, president and CEO of Volvo Penta. ``We have the same platform for the marine side and cars - quality, reliability, safety, the environment.''
The trick for Volvo Penta will be to use the reputation for safety and reliability fostered by Volvo Car Corp. and blend it with the marine engine division's recognition for well-engineered products.
Volvo Penta has to find a subtle way to add sportiness to that platform.
``Customers want speed and acceleration and things like that.'' said Hans Tall, chief financial officer of Volvo Penta, ``But they also want endurance and reliability and safety at the same time - that is what our cars are known for.''
The competition for customers buying gasoline-powered boat engines and transmissions in North America is a two-company battle between Volvo Penta and Brunswick Corp.
Brunswick's MerCruiser sterndrives dominate the market for inboard/outboard engines, with about a 70 percent share. Its boats and engines are among the best-known in the business: Bayliner, Sea Ray, Maxum, Cobra, Mercury outboards.
Volvo Penta, which specializes in inboard/outboard engines - along with its partner, Outboard Marine Corp. - control the other 30 percent of the marine engine market in the United States. OMC, which makes Johnson and Evinrude outboard engines, became partners with Volvo Penta in September 1992. Volvo owns 60 percent of the company called Volvo Penta Marine Products LP - to better battle Brunswick.
That's when Volvo Penta moved its engine manufacturing plant out of Chesapeake and folded it into OMC's plant in Lexington, Tenn. The Lexington plant employs 260 workers and makes about 30,000 engines each year, which gives Volvo Penta and OMC 30 percent of the 100,000 commercial and recreational boat engines sold in the U.S.
Volvo Penta employs 152 people in Hampton Roads - at its headquarters and engineering facilities in Chesapeake and at its marine test facility in Suffolk.
In an effort to grab more market share from Brunswick, Volvo Penta has moved its marketing operations from Sweden and New Jersey and consolidated them in Chesapeake.
The shift of the marketing departments placed a renewed responsibility on Volvo Penta's Cheapeake-based executives to gain ground on MerCruiser in North America.
The idea of latching onto Volvo's brand name to invigorate boat engine sales dovetails with the Volvo Group's recent corporate philosophy to shed almost every business not related to transportation. In July, Volvo GM Heavy Truck Corp. will begin branding all trucks with the Volvo nameplate - rather than WhiteGMC logo.
``The more Volvo you get out there in the marketplace, whether in a car or a truck, helps us get more brand recognition with the boats,'' Hammarstrom said. ``It's a huge task in North America to get your name out - you don't do that just by putting an ad in the paper.''
To sell its engines, Volvo Penta has to target more than just its end customers, commercial and recreational boat users. The company breaks down the 100,000-engine marketplace into two components: captive and independent buyers.
The company can write-off the captives, which is an industry name for boat builders that are owned by the same companies that make boat engines. Brunswick, for instance, would pair one of its Bayliner boats with a MerCruiser engine, but not a Volvo Penta engine. Brunswick and OMC both own boat companies, guaranteeing them a market, but Volvo Penta does not.
Still, 55 percent of the boat engines sold in North America are channeled through independent boat dealers, and those 55,000 engines are the sales Volvo Penta is going after. The independents are brands such as Grady White, Regal and Wellcraft.
Volvo Penta has about 25 percent of the independent market, but would like to double that market share.
Its new weapon is called a DPX drive, a stern drive aimed at sport-performance - but not racing - boats. With the DPX added to its longtime engineering patent the DuoProp - one prop turns the water one way, a second turns it back the other way - Volvo Penta thinks it can grab market share from Brunswick. Brunswick has a counter-rotating drive, but it is not available on as many products as the DuoProp.
Volvo Penta has paired its DPX DuoProp engine with a sport-performance boat, called the B-28. The prototype boat, dubbed the ``Bat Boat'' by almost everyone within the company, is Volvo Penta's showpiece to demonstrate that its engines can help a boat cut a sporty profile. Volvo Penta wants to team with an American boat maker to mass produce the B-28 and fit it with DPX-driven engines.
This year, the Bat Boat is one tool Volvo Penta plans to use to boost its brand awareness, said company spokesman Scott Watkins, and to showcase the DPX drive. It seems to be working - Texas billionaire Ross Perot called the company two weeks ago to see if he could get a test drive.
But at 80 mph the B-28 maufacturer has to tread lightly.
``We always have a couple of cornerstones we're working with,'' Hammarstrom said. ``One is to get high performance, but performance is not just high speed - it's good acceleration, it's easy to handle.
``It's not just the men in the family who can maneuver the boat; we want the women in the family to be able to dock the boat.''
Not that Volvo Penta objects to speed on the water - the company just wants to add a qualifier.
``I still believe one of the only places in the world that you are still allowed to go out and use some speed is out on the water,'' Hammarstrom said. ``We are selling products that go up to 70 or 80 miles per hour, but we are selling products that are safe at that speed.'' ILLUSTRATION: [Color cover photo, no cutline information]
Color staff photo by Richard L. Dunston
Dick Bocock works in Volvo Penta's boat testing facility in
Suffolk.
Color Staff photo by Lawrence Jackson
Wally Olkowski is a design engineer for marine engine maker Volvo
Penta in Chesapeake.
Color photo
Lennart Hammarstrom, president and CEO of Volvo Penta.
by CNB