Marine Engines: Setting a Course for Profits
By John Carollo
There are hundreds of thousands of motorboats cruising the waterways and coasts of America. It's easy to think the market for rebuilding engines for all those crafts might be a niche ripe for the picking.
Some rebuilders estimate the size of the marine engine market to be fairly small, perhaps less than 130,000 engines per year. But that can include all types of inboard and outboard engines. According to experts, it's a profitable niche for some - but is it right for you?
We talked to a number of marine engine rebuilders, both big and small, about their markets, know-how and the particulars of building for boats.
Logic might dictate a marine business would need to be located near a body of water to be successful - but that may be Myth Number One. Location importance can go both ways for a marine business. Mark Wilson, of Wilson's Machine Shop, operates out of upstate Brant Lake, NY, in an area that sports five big lakes but his shop attracts engine business from all over the country. That might be because his business caters primarily to antique watercraft engines, often 60 to 80 years old. When asked if it is location or specialization, Mark laughs and says, "I don't know for sure." He obviously doesn't want to alienate his locals: customers from the local waters still frequent his shop.
Ray Mariash of Outboard Rebore in Winnipeg, Manitoba, has a number of large lakes in his area as well, and agrees that "local" is a relative term. "We service almost all of three and half provinces," he says, "covering Northwest Ontario, Manitoba, Saskatchewan and Alberta. That is a huge area geographically, but translates to a fairly small population." In comparison, it is a market that's twice the size of Texas but with almost four times fewer people.
From down near the Naval Ship Yards on the Delaware River in Philadelphia, PA, Recon's Vincent Mancini says, "We have our main remanufacturing plant here and we have another in Mexico, but most of the marine engines are built in Philadelphia. You can service customers from the warehouses, but from my viewpoint, I think we do a good job of taking care of them from here, too."
Located near the banks of Indiana's Patoka River, Jasper Engines and Transmissions offers several levels of marine performance. The key, says Jasper's Darren Ragsdale, is having the right product for the right customer at the right time. "I think as much as anything, location is key," he says, virtually echoing Outboard Rebore's Mariash.
"You don't have to be right on the water but you have to be where the business is. If you're dealing with clientele with bigger boats, it's going to be harder to transport. It really depends on who - and where - your customer is," Ragsdale says.
Bruce Hamann of Lakeland Auto and Marine in Port Clinton, OH, is on the water and says, "We're right on Lake Erie, but if our shop was 20 miles further south, it would be a totally different business."
Jim O'Connor of Billerica, MA, sees location in a different light, because he says it doesn't matter where his customers are - he goes to them. O'Connor's Mobile Marine, Snowmobile and ATV business goes to his customers for work - year round.
O'Connor says success isn't earned from where he is but what he is, and the key to it is advertising his expertise.
"As my name suggests, I'm mobile," he says, referring to his trips to sites such as marinas, homes, trailers and other locations to bring work back to shop. "I'm unique to the area with my on-site work, but it's my expertise that separates me from competitors. I have the technology to rebuild them, whereas most of my competitors just swap parts."
And expertise - important as it is in automotive rebuilding and remanufacturing - plays a role in the marine market as well. To what degree does specialization matter in order to profit from marine work?
Mark Wilson thinks the principles are the same for building and rebuilding engines no matter what type of engine it is. "It doesn't matter if you're working on a big block Chevy or an old Chrysler."
Ray Mariash's Outboard Rebore sells marine and engine hard parts and he says knowing the ropes is very important. "It's a very specialized field. Things are just a little bit different," he says.
Mancini stresses know-how. "I think it's very important. It is a different animal mostly because the engines have to be extra reliable and extra tough. You have to deal with the corrosion issue. All premium parts need to be put in. There's no downhill. The measurements have got to be tighter and the parts have to be upgraded to premium."
Billy Blomquist of PDQ Engine and Machine in Duluth, MN, explains one the most important keys to marine engines when he says, "It's just like building a race engine really, because it runs under full throttle or load." He does, however, make one adjustment for boat engines. He builds in more piston clearance in the bore due to a boat's intake of constantly cold water for cooling.
Ragsdale provides still more technical insight. "You have to understand the basic castings are the same. The internal parts such as valves, cams, springs are different than automotive. It's the duty cycle that's different. The auto engine is going to maintain rpm at 2,000 or below. A marine will run 4,200 rpm, in open water. You've got to remember there is no transmission with multiple gears."
Hamann sees training as an important issue. "Some of the fellows may not be familiar with the fact that when the engine runs in the opposite direction, it affects the seals and other parts. A lot of marine engines still have distributors and you have to worry about (spark) advance. Those springs can rust away. I would say much of the technology in marine engines tends to be about 12 years behind the auto industry."
But Jim O'Connor agrees that while automotive rebuilding skills have increased along with the complexity of the engines, marine know-how seems have been slowly slipping away. "No one is being trained in the marine market," he says. "And there aren't many places around that will train you other than in Florida and New Jersey." He says he should know: his business does more marine than auto work.
So what is a typical customer base for a shop that does marine work? Apparently, there is no stock answer. Blomquist says his shop is "20 percent marine, 40 percent diesel and the rest is performance."
O'Connor says, "I would say that out of all my engine overhauls - 90 out of 100 - 90 percent are two cycle outboard motors" The salt water environment surrounding his market caters to affects the maintenance cycles of boats.
And Wilson, who does the antique work says, "I'm more non-local than local. If I had to rely on local cylinder head work, I'd starve to death."
But Mariash's is a different animal. "Our customer base is in retail business because we're a wholesaler. The majority of our work is for dealers."
As a production engine remanufacturer, Mancini explains that Recon's main customer is the retailer as well. "We sell to warehouse distributors and marinas and their needs and programs are different from our automotive market. Some stores do a better job at selling marine than others and we equate that to product knowledge and training. "
Mancini explains that identity is important and so Recon has created another brand name of its marine line of products. "One thing we've done is to create another brand name, Vesuvio, with a separate web site and catalog.
Ragsdale, too, says Jasper knows exactly where its customer base is: "It's independent marine facilities, dealers and mobile marine accounts. We have an independent sales force that makes calls, goes out face-to-face and we do some direct marketing - different promotions such as stern drive availability or engine availability."
Being local has its own matrix. Hamann says, "We do deal with a lot of the marinas that will bring in engines and pieces. We get them by advertising and through word-of-mouth."
Every business needs to be able to inform and attract its customer base and boats are no different. Wilson keeps his simple: "I just advertise. Plus I attend big boat shows where my engines and boats have won best of shows. I take some of my work that is done and show it off."
Blomquist advertises a little bit but says he's proud of his Web site. "Actually we've gotten a little more from the Web site."
O'Connor may have a Web advantage. "I'm in the yellow book under marine repair and snowmobile repair. I'm also on the Web." As a member of the Association of Marine Technicians (AMTECH), his extensive Web site includes about 30 links to him and offers plenty of useful info on his business as well as the care and feeding of those engines. The Web site even lists prices and contents of some rebuilds as well as proper break-in procedures.
Mariash lists his Web site and personal contact as the preferred methods. As a wholesaler, he says dealers and marinas are contacted and then, "the majority of our work is shipped to us."
In addition to allowing customers to find local retailers, Jasper's Web site shows pictures of the product and allows customers to compare rebuilt and remanufactured engines.
Stock or Performance?
Yet another aspect of marine rebuilding is the usual question of building a stock versus high performance product. How does that play out in the marine industry? O'Connor, the go-to-the-customer shop says, "Of my marine and snowmobile work, nearly everything is stock."
What he does in the high performance area actually includes very little in the way of changes. He says he might make a slight rise in compression via a different head gasket or go to a four-barrel carburetor to replace a two-barrel on bigger boat motors.
Blomquist's shop does a little more, he says. "We build everything. It's about even, stock vs. performance, maybe leaning a a little more toward the performance side."
On Wilson's antique market it's mostly restoration work, he says. "Out of the 90 percent of my business that is two-cycle outboards, 80 percent of those are pure restorations." He says his clients try to keep their historic boats original but when someone wants to make the move to more power, he tells him, "Get away from originality and get a 502 (big block Chevy)." But when asked if performance is one of the options he offers, Wilson says, "No, I try not to."
Mariash, too, says "We are strictly OEM. We don't want to do high performance work. I know there's a marketplace for it but it's not for us. We have large bodies of water and most people are looking for reliability." In other words, he says, the demand is simply not there.
"Besides," says Mariash, "people looking for high performance take more time."
Mancini, Ragsdale and Hamann are all in the agreement about the market, estimating that 95 to 98 percent of their engines are for stock replacement. Mancini breaks it down, "The reason that performance is so low is based on cost. A marine high performance engine could cost up to $15,000 where auto high performance could be enhanced for $2,000."
Sooner or later, profit margin (PM) factors in. Can a shop that does both marine and auto work expect to see a difference between the two? We asked our experts about their PM differences between marine and auto work. Wilson says, "I'd say it's less with automotive...but maybe we're not charging enough."
Mancini says, "There's definitely a higher margin with marine. There's more profit margin because there's more costs to all the special parts."
But Ragsdale doesn't see a difference. He says, "Not a whole lot, no. By the time you figure casting damage, warranty, obviously the engines cost more. If you look at profitability it's about the same numbers."
And O'Connor says his is the same, "because it's the same hourly rate." He swaps out reman engines for the bigger boats and rebuilds the smaller ones himself.
Blomquist says simply, "It's about the same."
Hamann equates it to the service life difference. "With the quality of today's car engines, it's not unusual to get 200,000 miles on one." He cites factors such as customer maintenance, how they operate the car and how the average marine engine operates harder than a car - and obviously doesn't last as long.
Like so many other sides of this business, the "wants" often seem to take precedent over the "needs," says Hamann. The marine customer often seems to more willing to put more money into his boat engine than a typical driver will want to spend on the car he drives every day, he says.
So before you dive head first into marine engine rebuilding, you may want to test the waters. You can start by re-thinking all the aspects of your existing business to see if they'll sink or swim in this highly specialized niche market.
When Water & Oil Mix
It was just one of those questions that bordered on being a dumb one. What kind of oil is used in marine engines? Do they have special needs or can you just dump in your usual 10W30? While we quizzed our experts on their business, we also took our own personal poll on oil and additives for boats from the guys on the waterfront.
Mark Wilson recommends 30 weight or heavier. "They just get pounded more than cars. Either they're idling at the pier or running flat out." He says he'll sometimes uses 15W40 for the cooler operating temps the engines run.
Not so for Billy Blomquist. "Normally it's 10W30 up here (Minnesota) because it's cold, so it's gotta be thin. I usually use the same stuff, but it's up to the customer," he says. O'Connor, too, says 10W30 is okay, especially for four strokes.
Ray Mariash has a slightly different angle to work with. "We are a large oil distributor and dealer site. Since the industry 'marinization' of mostly Chevy and some Fords into boat use, the recommended oil is heavy duty 30W while the same engine from Merc would use 40W." But Mariash says he sees a change, "It seems like most are switching over to a 25W50 but four stroke outboards use 10W30."
Okay, so there may be a difference in the use of oil, and there are "marine-specific" oils available. If you have questions about it you should discuss them with your oil dealer. But what about using additives? Because 90 percent of his motors are antiques, Wilson says he does not recommend the use of additives. "I build motors from the 1920's on up and can only buy chrome replacement piston rings, not moly coated. Plus, the old engines don't get much over 90 to 95 degrees running with cool lake water. The modern engines I see run with thermostats at 135, 140 degrees."
Mariash agrees with regard to the older engines. "A lot of those older engines can't tolerate additives. Around 1986, all the marine manufacturers started using alcohol-resistant parts in applications such as hoses, seals and inlet needles in carbs. Viton is used for such rubber pieces," says Mariash. "And to the mechanic, Viton means that is it alcohol resistant. Sure, we sell marine accessories, chemicals and oils. We recommend that they be added to the gas and oil. Fuel stabilizers, carbon removers - boaters might occasionally add an octane boost if there's any question about the gas."
O'Connor says, "For outboards, I recommend carbon-free fuel additives for dissolving existing carbon and preventing new deposits from forming. It's similar to carb/injection cleaner but just for two stroke outboard engines." He also warns two stroke users about the dangers of dry gas type additives on his Web site. The alcohol in them can separate the oil from the gas or even lean out the mixture, he says.