Modernization

Johnson celebrated its 50th anniversary in 1972 and thus began major changes in top management. W. Clay Conover retired as manager of the Johnson division. He had worked for OMC for forty years. He was succeeded by Carl Reusch. Another of Johnson’s factory managers, Harold Bourdon, also retired after 48 years of service. Elmo Dosing took his position as the Gale Products manager. Charles D. Strang was elected president and general manager of OMC and former president, William Scott, was elected vice-chairman of the board. In 1976, Stephen Foster Briggs, one of the company’s founding fathers, passed away. He was 90 years old. A year later, William Scott, died in Milwaukee.

As the 1970s were drawing to a close, Johnson employment had reached 4,172. Business
was good but two new challenges appeared on the horizon – a pending nationwide energy policy
restricting the use of gasoline for recreational purposes and the entry of the Japanese into the
marine industry. OMC decided to focus its attentions on the Japanese and launch a price war. In
1978, OMC cut prices in Europe, its largest international marketplace, by 25% to compete with
Japanese brands like Yamaha, Honda, Kawasaki, and Suzuki. The Japanese then cut their prices
by an additional 5% and OMC followed suit, upping the ante with an expensive advertising and
marketing campaign. The Japanese did nothing and soon prices stabilized throughout the
industry. However, profits fell from $12 million in 1977 to only $5 million in 1978.
In 1978, OMC announced the most strategic reorganization in company history. The six
divisions that comprised OMC were eliminated and operations were merged under a single
factory concept. The reorganization was modeled after the Japanese auto industry and OMC
management felt it was the best way to maintain a competitive advantage in the expanding
marketplace. Leadership was placed in the hands of James C. Chapman. Chapman was a
mechanical engineer with a master’s degree in business who had worked for such companies as
Chrysler and Rockwell. After 42 years of internal competition, OMC employees were faced with
a shift in mindset.

Fuel shortages threatened the industry in the early 1980s and “economical” was the new
buzzword. Evinrude and Johnson both introduced 4 ½ hp and 7 ½ hp Worktwins. These small
work horses were designed for non-stop operation in even the harshest waters. Although the
economy remained weak, consumers rallied; driving sales of all OMC products up 39%. This
surge in interest in marine products led to the introduction of the Sea Drive Power System, an
outboard motor designed to replace inboards in larger boats. OMC had been working on the Sea
Drive for two years before its launch in 1981.

The Japanese finally entered the US market in 1983 when Yamaha began to sell
outboards similar in styling and price to OMC’s models. OMC sued the Japanese company for
patent infringement and Yamaha soon found themselves redesigning their engines. Despite the
new competition, OMC continued to thrive. Four new ultra-modern manufacturing plants were
opened in 1984 in Oxford, MS, Spruce Pines and Burnsville, NC, and Calhoun, GA. A year later
similar facilities opened in Lexington, TN and Andrews, NC. These new factories were equipped
with robots and lasers to make production more efficient. The unprecedented modernization cost
OMC nearly $100 million.

To substantiate its modernization efforts, OMC launched an impressive production
schedule that called for the release of six new outboard motors. The OMC Cobra stern-drive and
a series of new loop-charged V-4s and V-6s were launched from 1985 to 1986, along with the
world’s first V-8 outboard. The Cobra was considered durable, serviceable, and corrosionresistant.
Top of the line Cobras featured a 260-hp, 5.7 liter Chevrolet V-8 engine. The Cobra
was also designed with the same bolt and wiring patterns as the Mercury MerCruiser, a motor
commonly used by boat builders. This gave builders more choice in the type of motor they could
use in their assembly. In addition to their powerhouse motors, OMC later introduced a line of
basic outboards called the SPL series. These 28-, 48-, and 88-hp models were aimed at the entrylevel
or bargain boater. In 1986, OMC had a total of 94 models in its outboard line.

The success of the Cobra stern drive exceeded everyone’s expectations at OMC. Unit
sales in 1986 were up 30% while dollar sales had increased by 50%. The quality of the Cobra
expanded OMC’s horizons, with companies like Sea Ray and Bayliner soon wanting the Cobra
drive in their watercrafts. Charles Strang was able to negotiate a 3 year, $55 million-per-year
contract to supply drives to Bayliner and a one year contract to co-brand the Cobra for use at Sea
Ray. Discussions with Bayliner and Sea Ray led OMC to think about acquiring a boatbuilder.

When an agreement could not be reached with these companies, OMC looked elsewhere;
acquiring five boatbuilders between December 12, 1986 and February 13, 1987. The total cost of
these acquisitions was $120 million. However, annual sales from the combined businesses had
been nearly $200 million in 1986 and had been steadily growing at a rate of 40% since 1982.
This move to vertical integration helped OMC set a new earnings record of $1.2 billion in 1986
and placed the company in a strong leadership position going into the next decade. By 1988,
OMC had 14,000 employees in 28 US and 6 international plants.