The world’s two leading makers of golf carts like to refer to their slow-moving, four-wheeled vehicles as cars.
“Carts are what you push around a grocery store,” said Gary Michel, 46, president of Ingersoll-Rand Co’s Club Car Inc. Michel’s company and its chief rival, Textron Inc’s E-Z Go, make almost 90 per cent of the world’s golf carts from factories in Augusta, Georgia, the site of this week’s Masters Tournament. Just like the carmakers in Detroit, they are struggling through what’s likely to become the longest recession since 1933.
A total of 67 employees from a combined workforce of about 1,800 have been laid off at the two plants over the past four months as fewer golf-cart orders come in.
To compensate for the drop in new sales, both companies have ramped up refurbishing programs for clubs trying to get golfers around the course while dealing with their own tight finances. “In the past, our salespeople didn’t bring it up a lot because there wasn’t that much demand for it,” Robert McElreath, Club Car’s vice president of global marketing, said in an interview. “Now, more people are asking for it.”
Laurie Adams, general manager and head professional of the Golf Club at Cedar Creek in Aiken, South Carolina, said she saved 20 per cent in monthly lease payments by ordering a mix of 35 new and 35 refurbished golf carts this year from E-Z Go.“We were looking to save some money,” Adams, 35, said in a telephone interview. “And you can hardly tell the difference between the new ones and refurbished ones.”
Lease terms
The average price for a fleet golf cart is $4,300, with location and accessories dictating the final figure, according to Kathy Searle, a spokeswoman for E-Z Go. Courses typically lease fleets for four years and begin to replace carts after 36 months. That time is being stretched and some clubs are choosing to replace the seats, batteries and body parts, said Mike Packer, Club Car’s vice president of American sales.
For the past three years, more golf courses in the US have closed than opened, according to an October 2008 study by the National Golf Foundation, which tracks the industry. The 2008 projection of 80 new courses was the lowest in more than 20 years. “I can’t imagine that the trend will reverse itself,” Kevin Holleran, 41, president of E-Z Go, said in an interview.
Demand drop
With fewer courses, the need for new carts has dropped. At existing clubs, where NGF studies found memberships and rounds played have declined, more miles are being stretched out of their current fleets, both companies said.
At Club Car, which produces about 100,000 vehicles every year, orders for new carts have fallen by as much as 20 per cent, Michel said in an April 1 interview. A day earlier, the company fired 50 employees, including 40 in Augusta. Ingersoll-Rand, a Bermuda-based maker of refrigeration equipment, projected first-quarter sales of about $2.9 billion, a decrease of as much as 27 per cent.
It announced this week that it had reduced its quarterly dividend to 7 cents a share from 18 cents to save $140 million a year.
Holleran declined to discuss how many carts his company will manufacture this year. E-Z Go cut 17 employees in December, 11 in Augusta. Among other industrial units at Providence, Rhode Island-based Textron, Cessna aircraft revised its production plan to 375 aircraft this year from 476 last year and the original 2009 target of 535. Textron shares were down 40 percent this year on April 6.
Government help
Golf carts are not cars, according to the US government, and didn’t receive any of the $17.4 billion in bailout funds provided to Detroit automakers. Still, they might benefit from federal financial aid.
Both E-Z Go and Club Car said they are hoping to boost sales through increased purchases of utility vehicles under the 2009 American Recovery & Reinvestment Act. Under the plan, buyers of low-speed, battery-electric vehicles will be eligible for a tax credit of 10 per cent of the cost, up to $2,500.
Michel and Holleran said the law may appeal to municipalities or universities using fleets of gas-powered vehicles, which account for less than one percent of the market, to switch. Both companies make battery-powered carts, with top speeds of about 15 miles (24 km) an hour. “It’s a growth opportunity for sure,” Holleran said.
Hootie’s legacy
While Augusta National Golf Club primarily relies on caddies to carry golfers’ clubs, many of its older members use carts made by E-Z Go, a connection that comes from company founder Bev Dolan, an Augusta National member and childhood friend of former club chairman William “Hootie” Johnson.
Club Car’s customers include courses and resorts owned by Walt Disney Co and Orlando’s Isleworth Country Club, where top-ranked Tiger Woods lives.
