2002: Business - Cautious clubmakers OK with decision

By Dave Seanor

Golf equipment companies that had erred on the side of caution – or simply were unwilling or unprepared to leap into the high-COR marketplace – were pleasantly surprised by the Aug. 6 announcement regarding spring-like effect.

Their reactions ranged from glee – with a touch of gloating – to pure relief.

“I think they did the right thing,” said John Solheim, president of Ping, which has never marketed a high-COR driver and had no plans to do so, even if the May 9 proposed compromise between the U.S. Golf Association and the Royal & Ancient Golf Club of St. Andrews had been approved. “It renews my faith in the USGA. Still, the whole thing is a mess. I feel sorry for these companies that jumped into it; they did it a little rapidly.”

Nike Golf had elected not to immediately pursue the high-COR market and would have found itself at a distinct competitive disadvantage under the May 9 proposal. Naturally, Nike Golf president Bob Wood was elated by the announcement.

“The best decision (the USGA) could have made is the decision they actually made. That is, essentially to have one rule,” Wood said.

“They came out with as much clarity as you can have. It’s definitely a ruling that takes into account the retailers, the manufacturers and the people who are involved in the business of golf.”

In prepared statements, Zevo Golf and Mizuno Golf supported the USGA ruling. Zevo, however, offered a backhanded compliment.

Zevo’s news release said the company “believes the USGA has made the responsible choice in rescinding what was an ill-conceived rule proposal.”

“While I applaud the USGA’s circumspect and palpable decision, I hope this is the last of a series of irrational proposals,” said Michael Hoffee, president of Zevo.

Mizuno acknowledged that it has canceled a planned October release in the United States of a high-COR version of its Blue Fire driver. “Despite global product offerings which exceed a COR of .830, Mizuno will always maintain the integrity of the game by only offering products in the U.S. which conform to the standards of the USGA,” the statement read.

Orlimar Golf had no plans to market a high-COR driver in the United States. Orlimar vice president and chief designer Jesse Ortiz applauded the USGA for taking a definitive stand.

“I really believe that they’ve got the right to uphold the integrity of the game,” Ortiz said. “Sometimes I don’t agree with their decisions, but we all have to realize that they did say this was a proposal. They didn’t hide the fact that this was a proposal. Some people jumped the gun.”

Wally Uihlein, CEO of Acushnet Co., had voiced his objections to the May 9 proposal early and often. His company makes Titleist products, which are aimed at more highly skilled players in the consumer pyramid – those less likely to purchase high-COR products because their use would have been prohibited in most competitions.

While he wasn’t as strident as Hoffee, who called such companies unethical, Uihlein made no effort to mask his disdain for rivals that behaved as if the proposal was a done deal.

“We’re delighted that the process has worked,” Uihlein said of the ruling bodies’ consideration of a two-month period of commentary on the proposed compromise. “To stay at .830 we think is the most logical, and is free of chaos and confusion for the industry at large.”

Since the proposal was first announced, Uihlein had frequently cautioned that it was just that – a proposal.

“If there’s been any confusion,” he said, “it’s been brought on by people who were either taking a fly and felt the confusion was going to benefit somebody, or by those who weren’t interested in any notice-and-comment period or due process, and felt that at the end of the day they were bigger than the regulatory bodies.”

The golf industry, Uihlein said, “is made up of more than just one or two companies.”

Uihlein and Solheim said their companies’ history in the golf business was a factor in their cautious approach.

“We’ve dealt with golf ball regulatory control for the better part of 50 years,” Uihlein said. “Maybe we’re a little more sensitive to the way things work.”

Solheim noted Ping’s mid-1980s battle with the USGA over square grooves, which resulted in an out-of-court settlement. The resolution, which grandfathered Ping’s square grooved clubs onto the USGA’s conforming list for six years, was not dissimilar to the COR outcome.

“We had a unique perspective, having been in the legal battle with them (USGA),” said Solheim. “We probably know a lot more about them than anybody else.”

Uihlein said he hoped the COR episode would restore “civility and coexistence between the manufacturers and the regulators.” References to the proposed compromise in advertising by Callaway Golf and TaylorMade-Adidas Golf had set a disconcerting precedent, he said.

“In the past there was some industry protocol and some rules of order, if you will, that prevailed,” Uihlein said. “This was the first time in the history of the commercialization of golf equipment that I can remember companies referencing the USGA. Quote, they gave us an inch, we gave you 15 yards, unquote. The ‘banned to blessed,’ and all that stuff.”

If any company stood to lose – at least in the short term – had the compromise been approved, it was Nike. From the beginning, Nike’s only request to the USGA was to have one COR limit to avoid marketplace confusion. Furthermore, during the commentary period, Nike officials recommended that the USGA postpone implementing any rule change for at least one year so manufacturers could make production adjustments and protect sales of existing products.

Nike’s biggest criticism was the timing of the proposed USGA-R&A compromise, which was announced at the peak of the selling season for equipment – including Nike’s new forged titanium driver. Confusion over the proposal, publicity about “hotter” new drivers and cost-cutting by competitors all had undermined Nike’s first foray into the driver market.

“This allows us to get back to business now,” said Mike Kelly, who oversees Nike Golf’s club business. “There are no hurdles. There is no apprehension. Retailers can go freely and book the product that they want to. It’s a great sense of relief. . .

“And from the standpoint of dealing with the USGA, or any governing body, it certainly restores faith that there is a process at hand. That’s probably the biggest thing to come out of this – a proposal is a debate; it’s a discussion. It’s not an action. I think some companies jumped the gun on this, and they’re not happy, but their pain is self-inflicted.”

Though pleased with the USGA decision, Solheim said he was concerned about the global picture, since high-COR drivers will remain conforming in R&A jurisdictions until 2008.

“Now I’m looking at what’s going to happen to our overseas market,” said Solheim. He said TaylorMade and other companies that had ramped up production of high-COR clubs to be sold in the United States likely will flood the European and Asian markets with the oversupply.

“Most of that stuff is going to end up over there,” he said. “The next five years in Europe and Asia are going to be interesting.”

That’s one reason why Ping is focusing on technologies other than high COR.

“I told (Ping COO) Doug Hawken even before the announcement that we’re not going to make an .860 golf club,” said Solheim. “I don’t want a Ping club that’s going to be nonconforming sometime in the future. We have some things (drivers) in development that are as long as anything that’s out there.”

There was speculation within the industry that Ping would have challenged the USGA in court had the May 9 proposal been approved. “I think there would have been a lot of legal action without us jumping into the fray,” Solheim said. “We hadn’t made any decision (about legal action).”

Solheim said there’s an easy way to avoid conflict over equipment standards in the future. The USGA, he said, simply needs to word its proposals in generalities, and then engage the commentary period.

“They need to put a proposal in the air, but the proposal needs not to have any specifications,” Solheim said. “Take the volume issue (a December 2001 USGA proposal on limitations of clubhead size, which is still being considered). I told them, ‘You need to make an announcement without any specifications or any dimensions. Then it’s an open topic for discussion, and it doesn’t have such a drastic effect on anybody.’ ”

If the USGA determines the technical specifications only after weighing input from a commentary period, then allows five years for implementation, Solheim said, “it gives everybody a fair playing field.”

– James Achenbach and Gene Yasuda contributed to this report.

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