Water marque

Monday, July 17th 2000, 12:00 am
By: News On 6

LEWISVILLE – One big ski boat on Phil Dill's showroom here can stop shoppers with its name alone.

On the side of the 22-foot craft is "Toyota," a landlubber marque that is almost jarring in this lakeside setting.

But when sales manager Delinda Davis opens the engine bay to display the boat's all-aluminum motor – the same basic 300-horsepower V8 that powers the Lexus GS 400 high-performance sedan – "customers just kind of step back in awe."

"The name is just huge," Ms. Davis said.

Toyota Motor Corp., Japan's biggest automaker and the third-largest car manufacturer in the world, is banking on it. Four years ago, in an effort to diversify, Toyota formed a Marine Sports division, which began selling boats in August 1998.

Toyota Marine is building and selling four models of 21- or 22-foot Epic ski boats. Two of them will be on display at the Dallas Summer Boat Show that opened Friday at Dallas Market Hall. The boats cost from $32,000 to $40,000.

Toyota, which had sales last year of $1.9 billion, wants 10 percent of its revenue this fiscal year to come from its various businesses outside the notoriously cyclical auto industry. Besides boats, the businesses include an aviation facility in Long Beach, Calif., a forklift company that is now the second-largest in the United States, telecommunications in Japan and financial services worldwide.

In Japan, some people park their Toyota cars in front of their Toyota houses.

Other automakers have long had diverse holdings. And many have had marine divisions that have manufactured boats or engines, including Ford, General Motors, Volvo and Honda.

But Toyota is the only automaker that is currently putting its name on a boat that it has designed and manufactured, said Scott Preniczny, national sales manager of Toyota Marine Sports. The boat is built in Groveland, north of Orlando, Fla.

Toyota hopes that distinction will provide it with some marketing and manufacturing opportunities that other automakers don't have.

For example, most boats are towed to lakes by trucks or sport-utility vehicles. Toyota boat buyers could become Toyota or Lexus truck customers if they are sufficiently impressed with the boat, Mr. Preniczny noted.

In addition, he said, "there is a body of people out there who own Toyota vehicles and might be interested in owning a Toyota boat."

And if the boats' sales volume increases as expected, Toyota would be able to spread the cost of its Lexus-based V8 engines – one of the most costly motors in the industry to manufacture – over a greater number of units. The engines are smooth, sophisticated units that produce generous amounts of power but also have decent fuel economy.

Looking ahead

Moreover, the boat customers have the sort of demographics that Toyota likes. Most are between 40 and 54, male, well-educated and married. Their median household income is $75,000-plus, Mr. Preniczny said.

Although the company has about 20 dealers nationwide – including Phil Dill, its only outlet in Texas – and has been selling boats for two years, its numbers are still miniscule. Last year, the division sold "fewer than 500" boats, Mr. Preniczny said.

"Basically, we're not making any money now, but that's by design," he said. "We've got a budget and we're where we expected to be in our long-term plans."

Toyota chose to enter the ski-boat segment because it is one of the smallest niches in the boat industry. The company wants to learn the boat business thoroughly and thought that would be easier to accomplish in a small segment, he said.

Toyota has no intention of building just four boat models over the long term, Mr. Preniczny said.

"First we want to become successful in the ski-boat segment we're in," he said.

Boats are "a tough business," Mr. Preniczny said. They are discretionary purchases, so if the economy slows, sales tend to drop.

"The boat business kind of follows the car business economic cycle, probably by a half year," he said. "Also, revenue isn't being generated 12 months a year even when sales are strong because people tend to buy in the spring and summer.

"But we still see lots of opportunity," he said. "And D-FW is a huge market for us."

Demand is there

"We thought if anyone could make it in this business, they could," said Phil Dill Jr., general manager of the boat dealership that his father founded in 1953.

Mr. Dill said he sees similarities between what Toyota is trying to do with its marine division now and what it did with Lexus a decade ago.

"They will grow out of the inboard market, and I really think they could become a volume manufacturer," Mr. Dill said. "Their commitment to quality is well-known, and this is really the first time that a major automobile company has gotten behind a boat.

"You know, the original Lexus dealers that took on that product 10 years ago were laughed at by other dealers," he said. "They're smiling all the way to the bank now."

Mr. Dill, whose dealership is privately held, declined to divulge any sales information. But he said demand for the Toyota boats is greater than supply.

Phil Dill was one of a half-dozen or so dealers locally who sought the Toyota franchise, he said.

"The only complaint I have is we can't get enough product," he said. "But we're willing to work with them as long as it takes."

Ms. Davis, the dealership's sales manager, noted that the dealership sells other makes of boats that offer far more models than Toyota. But she said she has noticed a tendency with Toyota boat buyers that is "pretty unusual."

"They'll call and say, 'We'll talk to anyone who's thinking about buying one of the [Toyota] boats,'" she said. "It happens a lot. I think these owners really like their boats."