The last few years haven’t exactly been smooth sailing for Chris-Craft, the boat-building company founded more than a century ago and long revered for its quality and craftmanship. In 2000, its parent company, Outboard Marine Corporation, filed for bankruptcy. The following year, private-equity group Stellican bought Chris-Craft and hired CFO Mark Poncin to help grow it to its previous glory.
“When I first got here we had 10 employees,” Poncin says. “We started from nothing. We had no workers in the factory, and no human resources systems or accounting systems. We had ideas for what our boats were going to look like and a business plan, and that’s it. My role was to build an organization, and we did.”
Chris-Craft met with success, growing to nearly 500 employees. Then the recession hit. Revenue plummeted 80 percent, and the company dropped to about 25 employees. It was also forced to repay a chunk of money to the state of North Carolina, which had given the boat-builder the funding as an incentive to create new jobs.
“We had to start again,” Poncin says. “And this time I took everything I learned [after the bankruptcy] and I said ‘okay, not too often in life do you get a chance to do it twice, but we can do it better.’”
Chris-Craft had some help in that task. Its regional bank, Regions Bank, worked with the company to change the terms of its loan package, and the boat-builder’s remaining employees worked extra hours to keep the company from shutting down. CFO recently spoke with Poncin about how the company navigated the recession — and how it is looking to grow going forward.
How is the company doing, post-recession?
Chris-Craft isn’t the company it used to be. The recession just about wiped us off the map. When we hit bottom, we started building from there. We were very fortunate that our bank cooperated with us. We’d been up front and honest with them from the beginning. They restructured our loan package so we wouldn’t go into default. We held onto a core group of employees, and we brought back many of the same people. But we hired very slowly, because we wanted to make sure that anybody we brought on board knew they had job security. Since we hired slowly, sometimes when people ordered boats in the spring, we told them they couldn’t have them until August or September. Orders got canceled. But we didn’t ever want to get into a situation where people were worried about getting laid off. Today we only have about 180 employees, but we have two-thirds of the revenue that we used to have. We do a lot more with fewer people.
How did you keep employees engaged throughout that kind of turmoil?
I like to think we care about people, and it’s hard to say that when you lay all these people off. But I think people felt fortunate to get back to work, and they got involved in the challenge of rebuilding the company. Also, most of the management team took twenty-to-fifty-percent salary cuts. So they knew that we were hurting too. And they saw us working 80-hour weeks. We told them what was going on and got them involved. When we brought them back, they knew what we went through, they worked really hard, and they were open to doing things new ways.
How did the company stay afloat financially?
Our bank really stuck by us. And we had a lot of warranty claims, so people thought we were working. We kept close to our customer base and our dealers. We just kept servicing things. We worked longer hours. And we clawed our way back. The other thing we did to recover is we became really streamlined. We figured out better ways to do things. We actually bought a computer system right before the recession, we worked on installing that, and that made us more efficient. Now, we don’t have many of the sales we had, but we’re making the money close to what we were making pre-recession.
Why do you think the bank was willing to work so closely with you?
Part of the reason, I think, was that at least we had a path, they saw it, and they believed in the company. When we were in trouble, we told them that we might have a covenant violation in about eight months. How many people tell them that? So that gave us plenty of time to restructure the loan and the covenants. They gave us enough flexibility. They knew that we cut our own salaries, and they knew the type of people we were. Instead of hiding from the banks, we talked to them. We knew their president; we knew their people. And I think because of that, they had a working relationship with us.
Do you expect revenue or headcount to return to pre-recession levels?
I’m hoping that revenue levels will be back up to those levels in the next 24 months. Staffing is going to take longer than that. I expect our staff to stay about two-thirds of what it used to be to achieve the same revenues. We’re looking at every aspect of every part of our operation. We have a really aggressive management team. We look at all our costs. I can tell you the cost of every boat, how many hours went into it, and where the hours were put in. I sit there and look at some companies that are so complicated in how they do things. The important thing is understanding what’s going on with every product.