Mercury wins decision in trade dispute

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Mercury wins decision in trade dispute

Japanese competitors face tariffs for selling engines too cheaply
By RICK BARRETT
[email protected]
Posted: Dec. 28, 2004
Mercury Marine Inc. won a major decision in an international trade dispute that could spare it from paying tariffs on products imported from Japan, while slapping a tariff on the Fond du Lac company’s Japanese competitors.

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The decision, announced Tuesday by the U.S. Department of Commerce, could result in a nearly 19% import duty on popular Japanese-made outboards from companies such as Honda, Yamaha and Suzuki.

Whether the duty would result in higher outboard engine prices for consumers remains to be seen. But it could help Mercury remain competitive as the last American-owned outboard engine company.

“We are extremely satisfied with the decision,” said Steve Fleming, Mercury spokesman.

Earlier this year, Mercury asked the government to levy an import duty, which is a tax, on Japanese-made outboards. Mercury alleged that its Japanese competitors had engaged in predatory business practices by selling engines in the United States at prices well below what they sell for in Japan.

The practice, called “dumping,” would be a violation of international trade laws, and the allegations are under investigation by federal officials.

In August, the government proposed a 22% duty on Japanese-made outboards. That was reduced to 18.98%, Commerce officials announced Tuesday, which is still a significant victory for Mercury.

As part of the decision, Mercury officials said, the company would not have to pay the duty on unassembled engines it imports from Yamaha Motor Co. in Japan. Those products, called powerheads, are a major part of Mercury’s engine lineup.

“This is a pretty big win,” Fleming said, about having powerheads excluded from the proposed duty.

Department of Commerce officials didn’t offer much explanation for Tuesday’s announcement.

“The Department found that Japanese producers/exporters have sold outboard engines in the U.S. market at less than fair value, with a margin of 18.98%,” was all they said in a written statement.

‘Still too high’
The proposed duty could be tossed out when another government agency, the U.S. International Trade Commission, rules on the trade dispute in late January.

The commission’s task is to determine whether Mercury has been harmed by Japanese trading practices. If so, the duties could go forward. If not, the money collected so far in import bonds and cash deposits would be returned to the companies that paid it.

“The ultimate test will be before the International Trade Commission,” said Irwin Jacobs, president of Genmar Holdings Inc., a Minneapolis boat builder that has sided with Yamaha in the dispute.

Yamaha was glad to hear that the alleged dumping margin was lowered to 18.9% from 22.5%, but it’s still too high, said Russell Jura, general counsel for Yamaha Motor Corp. USA, based in Cypress, Calif.

“Had the Department of Commerce calculated the margins correctly, the margins would have been zero,” he said. “Yamaha feels that the Department’s method of calculating these margins has fundamental flaws and does not meet the standards of the World Trade Organization.”

No final dumping duties will be imposed until the government’s investigation is complete, according to Jura. Meanwhile, Yamaha and Mercury are fighting on several legal fronts, including the dumping complaint and a dispute over the price that Mercury pays for powerheads it buys from Yamaha.

Package deals
The trade dispute is important to boat builders that buy tens of thousands of outboard engines. Ultimately, the dispute could affect the cost of boating.

Some of the biggest outboard engines cost more than $10,000, and an import duty could raise prices significantly. But consumers shopping at this winter’s boat shows should not worry too much, said Charles Plueddeman, editor of Boating Magazine.

That’s because most outboard engines, especially the larger ones, are sold as part of package deals that include a boat and additional items such as a trailer.

“Most people don’t see the true retail cost of the engine,” Plueddeman said.

I used to like Mercury. No more.

But most people PAY the retail price of an engine, even if included in a package.

All it means to me is that I can’t get the best value in an outboard motor. If I want selection or competition, I have to pay extra for Merc’s inability to compete.

Gianni – I understand your position, but I disagree with your position. The US is one of the only countries that does little to protect its US based companies; whereas, the rest of the world shelters its businesses in an attempt to keep economies strong, people employed, and maintain national ownership of its companies. The organization I work for pays duties on most of its products being sold into other countries, forcing us to compete against local businesses that do not have the tariffs… difficult, but possible. Or, for many companies, including the one that employees me, is why they expand the organization INTO those countries by establishing manufacturing/assembly plants there. Hmmm… that generates good jobs
locally, pays local taxes, and stimulates other economic activity. You see, when “tariffs” are managed properly and understood can generate positive
effects for those trying to compete in there own country. The mass exodus of US jobs oversees can be tied to the US’ “open” economy. While my political beliefs are juxtaposed to some of what I write here, I do believe we need to “help,” not “shelter,” US businesses compete within our borders.

I personally would rather own a Merc anyway… solid equipment, US engineered, manufactured, and a reputable company based right here in Wisconsin, paying WI taxes to offset my tax burden.

Gianni, please also remember Japanese business proactices… The Japanese government actually subsidizes production costs to keep their economy rolling and the balance of trade in their favor. And, US unions have contributed substantailly to increasing the average wage paid our workers in the US (a good thing for the working man); however, has placed companies like Mercury in a diffiuclt poistion and affords companies like Honda and Yamaha the ability to offer lower cost products based upon labor costs. Is the tradeoff, which costs a whole lot more to manufacture products in this country than in Japan worth it? I believe most working people believe it is, as we enjoy our standard of living. If we want to preserve that – tariffs need to be.

My daily job is to manage an organization that supports the sale of a highly engineered, commercial/industrial product… engineered and built right here in Wisconsin, too. We also manufacture the same product in China, for obvious reasons.

Bottom line, the decision is not yet final, but looks promising in my opinion.

THE BEST BUY MAY “INITIALLY” BE FOREIGN, BUT, LAST AUGUST I WAS REARENDED WHILE ON MY TO A WEEK OF FISHING ON POOL 4. MY YAMAHA T8 TOOK THE BRUNT OF THE IMPACT. $1250 IN DAMAGE. THE LADIES (IT’S ALWAYS A WOMAN DRIVER)INSURANCE CO. HAD A CHECK IN MY HANDS WITHIN 10 DAYS. THE MARINA HAD MY T8 OVER 3 MONTHS WAITING ON PARTS. MY NEXT KICKER MOTOR WILL BE U.S. MADE.

When this dispute came out it reminded me of something a good friend of mine told me when he first came to this country from Japan. He could no believe how cheap Japanese products were here. He was aware of the standard Japanese practice of charging more for products in Japan so the companies could sell cheaply abroad but he didn’t know it was so significant.

He said everyone knew it happend but the Japanese citizens tolerated it because it was a common belief that it held together the economy of Japan, kind of necessary evil I guess. The other part is Japan is basically a closed society. They import almost nothing compared to their outports so they can control the internal market and force the high prices.

This practise is illegal according to our fair trade laws and Mercury did the right thing.

Think of this another way, Gianni. Suppose, for whatever reason, you are only allowed to buy spinnerbaits from me and because I know this, I charge you $7 each and it costs me only $2 to make them. You buy them because you want to fish and have no other choice. Because I have all this profit from you I decide I want to break into a new market so I got to Slop Bass and offer to sell to him for only $2.10 which is way under the average price of $3 that he pays elsewhere. I get his business but unfortunately the other companies can’t compete with this low price and their businesses fail. Now I’ve eliminated the competition and I don’t have to sell so low. So I inform Slop Bass that he must now pay $4 and he has no where else to go.

Who is the winner now? Slop thought he was winning and did for a bit but then he got screwed in the end. The only winner was me but it was achieved unethically.

Mercury can compete and will if Yamaha plays by the rules. I don’t think Mercury is even allowed to sell in Japan so they can’t use the same plan, besides we would not stand for the higher prices at home as the Japanese are forced to do.

You might all have reasons why you’d buy a Merc, and that’s fine, you have nobody to convince but yourself. If you have a buddy that works there, know someone who’s had a bad experience getting parts for a foreign outboard, want to root for the home team, etc, that’s great – for you.

Unfortunately, that’s not what this is about. This is about someone like me, who now doesn’t have a choice but to root for the home team… with my wallet… not by my decision, not because I know someone who works there, not because I have had a bad experience with a foreign outboard, but because it’s settled case law and my “Merc’s can’t compete” tax gets tacked on before I even get a chance to buy.

All the nonsense about how it’s helping someone out, sure. Maybe I don’t think I’m being paid sufficiently by my employer – I’ll send y’all PM’s with my home address and you can mail me a check. Better yet, I’ll lobby for a law that forces you to mail me a check. After all, your choice in the matter is somehow strangely secondary to what’s in my best interest here on topsy-turvy thread.

A revenue tarrif can be established such that competition is not stifled. A Laffer curve exists by which a rate can be established wherein competition exists, minimizing price, while maximizing quality and revenue production. Any rate in excess is protectionist in nature and serves to stifle competition in favor of domestic production.

Large numbers of the most ardent Smithian free-traders accept protectionism for infant industries and as a matter of National defense. Mercury does not fit either of those models, and any notion that subsidy will improve thier market share long-term will be difficult to defend, but you’re welcome to try.

The notion that other countries do it, so turnabout is fair play is a bit backward, as a tarrif is paid by the domestic consumers. This isn’t an unenforcible tax being levied on foreign companies, it’s being paid by you and me. The notion that they’re hurting their internal consumers is not adequate to allow a small company in Wisconsin to put the same harm on millions of American outboard purchases. The Heaven’s Gate people drank the kool-aid, so I should to?? C’mon… you guys are smarter than that. How many of Japan’s 127 million people have an outboard on a stand in their crackerbox apartments? Think it’s as high as 0.001%? My guess is it’s not much above that. So a handful of Japanese elites are killing Mercury?

First the world was full of psychos, then Randy Moss was a cancer, now it’s bad to allow purchase of cheap, high quality outboards…

Can’t we all just get along?

BTW, did everyone forget about this:

Quote:

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In a stock-boosting pitch to securities analysts Feb. 12, reports The Boating News, Brunswick (Mercury Marine) CEO George Buckley predicted that Bombardier won’t build outboard motors for at least a year and that it would take an act of God for the Canadian company to succeed in the competitive outboard motor market.
—
—
June, 2001

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Apparently, Buckley thought Bombarier needed an act of God, while Mercury can get by with an act of Congress.

Here’s my $.02 –

I think Mercury has done an excellent job of controlling the communication and the messaging around the issues. As an engineer by degree I like to work with facts and data because it makes things easier when presented in black and white. Here are a few examples:

1. Mercury is complaining that the (dumping/low) pricing from Yamaha will put them out of business yet announced at the Crestliner dealer meeting that Brunswick is fiscally as strong as they ever have been.
2. They need this lawsuit to protect American jobs… while they are building a new plant in China. Going to build it, staff it, and run it with American employees???
3. Yamaha’s pricing is higher in Japan than the US – this is true when you compare retail pricing in Japan with OEM pricing in the US. Pretty simple logic here, when you compare the price of buying one outboard vs. 10 / 50 / 100 at a time the cost should be less in the US and more in Japan – buying in volume almost always reduces the cost. For example, go price the cost of a Ranger without the engines and then price the engines separately and compare the cost of a package deal.
4. When calculating the dumping margin – initially Mercury did not care that power heads (sold by Yamaha to Mercury) were included in the calculation numbers. Now that Yamaha has countered that power heads are significant portion of the margin, Mercury doesn’t want them included. To resolve the majority of the margin of difference, Yamaha attempted to raise the price of the Power heads to Mercury. This was rejected by both Mercury and the court they filed the lawsuit in.
5. A high level employee at Mercury made a comment that the increase in price would not be seen because engines are bought as part of a combo or package. Do you know a boat builder who isn’t planning on passing through the cost increase? Also, they usually mark up components by a percentage – now with a higher initial engine cost you will be paying more for the engine and a larger mark-up cost.
6. Mercury has announced it is raising its prices – does this make sense?

Now I don’t want to sound completely negative on Mercury. The Verado is an impressive piece of engineering, a supercharged four-stroke – really cool! I commend them on driving changes to the outboard market. It appears they still have some work left to address the weight and fuel economy though…

The point I want to make is that as I have sat back and watched this unfold one thing has become clear to me – Mercury could care less about the consumer. They are trying for the American pride sympathy vote but yet if they win this lawsuit once it’s all said and done, pricing for the competition will go up and Mercury will raise their prices once again. Maybe this was their master plan to fund the cost of R&D, and marketing expenses for the Verado while helping cover their legal expenses for the Optimax Class Action Lawsuit and this pending litigation.

In early December I was at a Ranger sale that featured a 620 DVS with a 225 Verado, 9.9 4-stoke remote, 36V MinnKota, and two Lowrance sonars (~x97 or something similar) with a price tag of just under $49K and that was good for only 3 days because pricing was going up… gulp!

When I started buying my own boats and approaching companies for sponsorship, I only represent companies whose products I believe in. For the record, I am sponsored by Yamaha but paid full price for several sets of engines (main engine and kicker) before I received my sponsorship because I believe that they build a superior product and provide me with a competitive edge when fishing.

Ted Merdan

PS – Gianni, your last sentence brings a smile to my face…

Thanks for the additional facts Ted.

I wonder how separate Brunswick keeps their business segments… I would think a development like the Verado could easily be offset by their bread-n-butter businesses that receive little IRAD funding.

Personally for me this stinks. Merc continues to give me reasons not to buy from them. I love my yammies and will now have to pay a higher price because Merc can’t compete with a superior product. Feels more like a “we can’t beat you with our product line, so we will sue you out of business.” Aaaahhhhh, thank god for the american justice system. To heck with Merc and Bruswick!!!

#164869 – 01/06/05 09:39 PM – posted by Dave C.

(copied here in the interest of not having two threads on the same topic)

Quote:

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I read the post that you linked to and it is disturbing to read [I.D.A members]that if merk can’t compete they should go by-by.
This is all about the cost of labor,in the U.S we beleive everyone has the right to a far wage,this is not the case over seas.
This is not about getting the best deal this is about Merk fighting for the right to compete,pay workers a far wage and keeping Merk in U.S.A.
As people always look for the best deal,please look at the manufacture tag and think about the conditions the workers are in,the way they are treated,there wage.Think about working in a place where there are no rights.

Now inmagen,it is your child or neice or nephew.
Now how much did you save on your import.
Always support U.S. products to best of your abiality.

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Caution is always advised when using the terms “we” and “fair.”

The Japanese will be shocked to learn that they have no rights and their standard of living is so bad.

I have to side with the Merc on this purely for the sole purpose of flying old glory.

There is absolutely no reason to let a foreign country profit by dumping on an American company. I don’t care if the American company is selling camel dung at a premium price and the foreign company gives it away….. There is no justifiable reason to let a foreign country prevail in ours.

If you think it is ok for a foreign company to dump, then tell that to the people that loose their job.

This country is surviving because “we” can make a buck. It isn’t going to thrive if some other foreign company makes a buck.

Yep, it is wrong too what Merc is doing, but I would rather have Merc in the wrong and lining their pocket (and giving America jobs and taxes) then some Jap owner on an island cashing in on our goods.

It is all about policies and laws put into place to protect you and me. Merc found that Japan was breaking trade law and stopped them. If you don’t like it, you need to write your congressman.

Lastly, it was complained this was done because the American company can’t compete. WHO can compete with the wages that this country demands??? When our wages are in the 6 digit for a household and it barely makes a 5 digit for household in foreign countries????

No, Merc can’t compete when it pays its employees $25/hr and Yam pays their employees $25/day.

I had my beginning-of-year performance review today.

Under “goals for FY05” I put “wrap mediocrity in the stars and stripes and demand a large raise because anything else would be unpatriotic.”

I’ll be sure to tell you how it goes.

Gianni – what a hoot – I am wiping the coffee off my computer screen as I type.

Gary – keep in mind that Mercury has announced they are building a plant in China – that doesn’t sound like plans to keep the American worker in business but rather line their pockets from both sides.

ted

Ted…you’ll come to know that when Gianni gets into a discussion…you need to keep a towel handy…

This thread reminds me of the late ’70’s when all the American made cars were rusting out within a few years of purchace…unless you bought Japanese. Crystler filed bankrupcy (I owned a Cordoba and they should have gone under for that car alone). Our government bailed out Crystler which then came out with their K car.
When this happened the whole automotive industry in America changed and you and I benifited from it. To compete the auto makers had to completly “make over” their designs, construction and assembly of a car….or buy motors ect from Japan auto makers and put them in Fords ect. Remember the Chev Love pickup…assembled in America was the best that could be said.

Yes this did cause many layoffs in Detroit, but the nation benifited…..(I’m sure the people that were layed off were’nt real pleased about this). Once a company “retools”, so do the workers.

Gianni, I don’t think we should bring Randy…my overpaid role model into this…he has his own problems, he just doesn’t know it yet.

The last post I made to this was well before I updated my signature, so the board must fetch it each time the page is loaded and attach whatever is current on there.

Crediting the bailout for Chrysler’s turnaround is taking credit away from the man who really made it happen. Extra credit to anyone who can remember the man who put American-made cars back on the map.

eye – ah – cokacola

Lee!