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Location, Location, Location

The unlikely story of Cobalt Boats, whose secret ingredient to quality is...farmers?
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At the big-city winter boat shows, the crowds thicken near the 20- to 36-foot, $30,000 to $300,000 runabouts made by Cobalt Boats. They're beautiful crafts, recognizable from afar by their sleek lines and flowing power humps, and show visitors often ask where the boats are made. The answer can startle them.

Cobalt boats, widely admired as the Steinways of the runabout class -- roughly defined as trailerable craft with inboard motors -- are built about as far from a lapping tide as is geographically possible in America. Future owners who desire a peek at their boat under construction, as some do, drive through rolling prairie land dotted with cattle and blanketed with fields of milo, alfalfa, and wheat. It's all humming highway until you slow for the one-stoplight town of Neodesha (pronounced Nee- oh-de-shay), Kansas, population 2,800. This is Cobalt's home.

The town owes its name to the Osage Indian word for "the meeting of the waters," and the Cobalt website stresses this watery affinity. It's true that the Verdigris River and the Fall River meet in Neodesha, but both flow shallow and narrow -- no place for a Cobalt boat. The nearest decent lake lies a state away, nearly two hours' drive south in Oklahoma.

If building high-performance boats in the heart of the prairie seems unlikely, consider that most of the people making them are classic landlubbers, farmers to the core. These second- and third-generation farmers, some of them still working their land, many of them still stinging from their loss of it, are Cobalt's unique competitive advantage. Company founder Pack St. Clair doesn't remember exactly when, but at some point early in the company's history it dawned on him: Most of the employees he valued most came to work wearing cowboy boots and big belt buckles. "I didn't go looking for farmers," St. Clair recalls, "but I found out they were the ones who worked hardest."

A quick poll of the 550 workers attending last fall's annual associates meeting (Cobalt eschews the term "employee") fixed just how deeply the vein of farmers now runs through the company's ranks. Paxson St. Clair, Pack's son and the company president, asked, "How many of you were raised on a farm, currently live on a farm, or still work some land or care for some animals?" Easily three of every five men and women held up a hand.

The death of the American family farm has been much reported. The eulogies will continue, barring a reversal of two of the telling findings from a United States Department of Agriculture census. Nationwide, between 1992 and 1997, farmers and ranchers under the age of 25 declined by 25%; those aged 25 to 34 declined by 28%. "As...opportunities dim," write the authors of "Swept Away: Chronic Hardship and Fresh Promise on the Rural Great Plains," a report by the Center for Rural Affairs in Lyons, Nebr., "so do the lights in many rural agricultural communities."

The lights remain on in Neodesha largely because there's industry in town. Prestige Cabinets employs about 250. The Airosol Co., manufacturers of the first aerosol can, employs another 35. M-E-C, which makes industrial drying systems, has a payroll of about 125. But the biggest employer, and a cornerstone of the community, is Cobalt Boats, which took root in Neodesha in 1970, when the town enticed Pack St. Clair to move his two-year-old, still-struggling enterprise from his hometown in nearby Chanute into buildings on a sprawling refinery works just vacated by Standard Oil. It wasn't long before St. Clair understood that he'd tapped into a rich local resource: a core of workers with an unstinting, self-reliant work ethic, a can-do farmer's ingenuity, a bred-in-the-bones communal spirit, and perhaps most important of all, an owner's mindset.

The proof of those qualities is the company's lock on a JD Power award for customer satisfaction. Last year, as in the two previous years, Cobalt finished first, and far ahead of the runner-up, among builders of 20- to 29-foot runabouts. In a tough economy for big-ticket luxury items, Cobalt's production slipped last year to 1,940 boats, from a high of 2,501 in 2000. But 2004 will be much better. The company projects sales of 2,200 boats this year, and perhaps a run at the eagerly hoped for $100 million mark in sales. Market share is up nearly a percentage point, to nearly 5%, a decent gain in a fragmented industry in which the largest player, Sea Ray, commands only 12% of the family runabout market.

Those who contend that high labor costs make it nearly impossible to competitively manufacture world-class products in the United States and, likewise, those who see no solution for failing Midwest farm communities need only park with all the pickups in the Cobalt lot on the outskirts of town and pass beneath the big sign on the new factory: "Through these doors walk the finest boat builders in the world."

Debbie Meigs has the sort of prairie resume that typifies Cobalt employees. Her classroom education ended with high school. The oldest of five children of a Kansas farmer who grew corn, wheat, and alfalfa on 1,000 acres before he lost the farm, she drove a hay truck and tractor as early as age 10 and mowed and raked during haying season. "I learned to work hard early," Meigs says. She's been with the company 30 years.

Farm-toughened employees are unfazed by unforeseen problems. "Rural living is different from city living, you know," says one.

An honest day's work is only part of what Cobalt reaps from its prairie work force. Farm-toughened employees tend to work wiser, more persistently, and more frugally than run-of-the-mill employees; they are unfazed by unforeseen problems. "Rural living is different than city living, you know," says Jack Vestal, who grew up on 200 acres in Longston, Kansas, and is now an R&D associate at Cobalt. "You can't just jump up and run to town every time something happens. A farmer or rancher is pretty self-reliant. They'll have a cutting torch and a welder and learn to fix things." Paxson St. Clair uses the term "self-directed work force." He notes that Cobalt felt it necessary to hire only one or two additional supervisors among the 100 associates it added in the first quarter, even though two-thirds of the hundred were new to the company.

Farmer ingenuity flourishes at Cobalt behind a door on which an employee-made sign reads: "What-If Zone." The door leads to the engineering and R&D departments, home to 22 Cobalt associates, only three of whom have degrees beyond a high school diploma. One who does, boat designer Todd Borton, was most recently employed at a Florida mold-building company. He calls Cobalt's R&D crew the most talented group he's worked with. "Whatever I come up with," he says, "they can do."

By way of example, Borton praises brothers Roger and Rusty Jones, who grew up on a farm just west of Neodesha. "They tend to simplify things," Borton says. "I'll come up with an idea and they'll come back with some simpler ways of doing it -- and we keep going back and forth." One of Cobalt's recent designs, a sleek 34-footer marketed with the model number 343, called for a door in the curved, starboard-side dash leading down to the cabin and head. Cobalt had never fashioned any such door.

Roger Jones first tried bifold doors. On his initial attempt, the curved sections projected awkwardly into the cabin. Opening the doors the opposite way, he discovered, invited water leakage into the cabin from atop the dash. Finally, he hit upon an ingenious solution: an open-sesame pocket door that slid the thick, curved section of dash to the left on arcing tracks, making it disappear into the dash's midsection.

Niles Schurle, product manager for large boats, stands out at Cobalt because of his degree in mechanical engineering. But Schurle, too, grew up on a Kansas farm, where at age 13 he had to overhaul the engine on his father's 1949 Frazer. Otherwise, he couldn't have played freshman football: He needed the car to drive himself home from practice, which he could legally do when he turned 14.

Schurle returned to the farm in his mind not long ago to help solve a nagging boat-building concern. He was unhappy with the standard industry method for ruling out potentially dangerous cracks between the engine compartment and the cabin, cracks that could conceivably allow carbon monoxide to collect in the cabin. Shining a light in the customary fashion, he realized, would catch only a line-of-sight flaw. What if a gap involved a jog?

"We'd never had a problem, but I wasn't satisfied," he says. "I wanted a better way of testing." One day he remembered starting the old diesel tractor on the farm inside a metal shed. On cold mornings, the old warhorse would belch thick black smoke until it warmed up. That smoke, Schurle recalled, used to leak out of the shed through small gaps in the sheet metal and rise skyward. He developed a smoke-based testing system for Cobalt, surely the only boatmaker inspired to excellence by an old farm tractor.

For Paxson St. Clair, the real story here, more important even than the engineering breakthrough, was Shurle's junkyard-dog pursuit of a better testing method -- in advance of any problem. "How often," asks St. Clair, "do company owners lament, 'If only I could get my people to think like me, think like an owner.' Or, 'If only I could clone myself, then the job would get done right.'

"Farmers are owners of their own businesses," he says. "They understand that things have to get done and get done right or you'll pay for it later. They have this sense of ownership because they've been there."

Not every company has the good sense to leverage the uncommon skills of a work force. Keith Launchbury, a consultant on manufacturing systems to scores of Fortune 500 companies, has spent three or four days a month at the Neodesha plant in the past two years. He's also consulted at companies that function much differently.

"A farmer," Launchbury says, "has to be an entrepreneur, a jack-of-all-trades, and a master of all trades as well: an engineer, a mechanic, a veterinarian, a biologist, an economist, a meteorologist." Too many companies in rural America and Canada, he believes, when fortunate enough to possess such workers, treat them like robots. "They ask them to check their brains when they come to work and pick them up when they go home. I worked with one company that hired farmland people as machine operators and said, 'Don't touch that dial, don't touch that switch' -- to a person who on the weekend is rebuilding an eight-year-old John Deere tractor engine. I think what Cobalt has done most successfully is harness the creativity and ingenuity of the people in that part of Kansas."

Jeff Wright heads Cobalt's metal shop and supervises 19 employees. He lives in an 1870 farmhouse, previously owned by his grandfather, on three acres of land -- an island, if you will, on several hundred acres of prairie he once farmed with his father, land now owned and farmed by someone else.

At Cobalt Wright has found a replacement for the creative problem solving of farm work. He tells of his father instructing him as a teenager to come up with a bale spear for a front-end loader and then disappearing. "That's like my job here in the metal shop," Wright says. "They want a set of bow rails for the new 343 model, say, they don't give me no drawings. Very seldom do I get an actual blueprint. They brought me the boat. I started bending the tubes, cutting the standoffs. There are some good challenges on the new boats -- but that's when it gets fun."

Driving home from the Cobalt metal shop, Jeff Wright often looks wistfully at a tractor plowing fields he used to plant and harvest.

Still, driving home after a day's work in the Cobalt metal shop, nearing his house, Wright often looks wistfully at a tractor plowing fields he used to plant and harvest. "It's especially hard in the spring when everyone is starting to work their ground, and again in July, harvest time for wheat. I get real homesick for it," he says. "I loved being outside, being my own boss, loved working the ground, smelling the dirt, loved the livestock."

Prairie farmers help each other. They all know what it is to battle unpredictable weather, contrary bankers, and malfunctioning machinery, and they think nothing of arriving unsolicited en masse to help get in the harvest should a neighbor take ill or suffer a debilitating accident. Help comes just as naturally on the factory floor. At Cobalt, observes hull designer Sean Callan, an extra pair of hands or point of view in problem solving is as close as the nearest co-worker. "We do very little team building training at Cobalt," Callan says. "It's not something we need to create."

Recently, Callan happened upon two workers arguing so vehemently he assumed one of them had stolen the other's wife or girlfriend. The dustup, however, proved entirely work-related. One assembler, a farmer, was making it clear he wasn't happy with some component. The other assembler, also a farmer, was a bit slow in seeing the light. But eventually the second assembler said, "You know what, that's not right. Give it back to me, I'll do it again."

"It amazes me how often I hear that: 'It's not right, I'm going to do it again," says Callan, who left a boat builder in Michigan to join Cobalt. "It's one thing to come to Kansas knowing Cobalt is a good company, another thing to actually see how much people really care."

They care so much that 200 or 300 of them drive down to the Tulsa boat show each year to stand proudly by the boats they fashion. "I like to see what everybody else's boats look like," says vinyl worker Joyce West, a 23-year Cobalt veteran. "You can see where the others leave jagged screw heads, and the paint lines aren't so good, and the caulking -- when we caulk it has to be a perfect bead. I know. I caulked."

West grew up on an 80-acre farm, helping with the chickens and hogs and the milking of 50 cows. "Our chores had to be done before we could do anything else," she says. "The livestock ate before you did, that was the rule. Some nights it was 10:30 before we had dinner. I had to grow up young and be responsible."

A person with a prairie resume can be a little tough on new workers. "You need to work a little faster," West will tell fresh hires, or "You need to make sure it's what you'd want to buy yourself." Just recalling such moments riles her up a bit. "I worked a lot of years to help get this built up and I don't want somebody coming in here and messing it up," she says. "We work hard every day to keep that. I feel like I do." I

John Grossmann is a regular Inc. contributor.

Last updated: Aug 1, 2004




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