2002: Business - TaylorMade, Callaway take the biggest hit

Carlsbad, Calif.

Two industry giants, TaylorMade-Adidas Golf and Callaway Golf, stand to be affected the most by the Aug. 6 ruling on spring-like effect. Both companies were manufacturing and promoting “hot” drivers in the United States without formal approval from golf’s rulemaking bodies.

When that approval did not come, Callaway officials talked at length about the adverse ruling. TaylorMade officials, however, declined to comment and issued only a short news release.

Both companies had anticipated the adoption of a May 9 proposal by the U.S. Golf Association and Royal & Ancient Golf Club of St. Andrews. Under the terms of that proposal, drivers with a high COR (coefficient of restitution, or spring-like effect) would have been approved throughout the world for five years.

Now, after a drastic alteration of the proposal, the drivers will be nonconforming in the United States, Mexico and Canada, although the rest of the world is fair territory until Jan. 1, 2008. At that time, hot drivers will become nonconforming everywhere in the world.

Ron Drapeau, chairman and CEO of Callaway Golf, had fire in his eyes and a new driver in his hand.

“This is the second time in a period of nine months where a proposal has come out and been changed quickly,” said Drapeau, who was referring in the first instance to a proposal to limit driver head size to 385 cubic centimeters. The proposed limit was later changed to 470cc.

“This time the deception is particularly disturbing,” Drapeau said. “Golfers have been led to believe that average players would be allowed to play high-COR golf clubs and turn their scores in for handicap purposes.

“The sad part for me is this: I just have trouble understanding how the rulemakers, who are all smart people, can allow themselves to use intuition to set the rules rather than data. As a businessman, that just blows my mind. We have data that we submitted to the USGA and R&A, tracking driving distances on the European Tour while high-COR drivers were in play. The data shows no threat to the game of golf. How the hell is golf going to grow if we have a leadership that is unwilling to look at data?”

The new driver in Drapeau’s hand was the long-awaited Great Big Bertha II. Callaway sold almost 2 million of the original Great Big Bertha.

“That was $430 million worth, drivers alone,” Drapeau said. “We have been waiting to bring back the name, and we feel this is the first driver, conforming in the U.S., that is worthy of once again carrying the Great Big Bertha name.”

The GBB II is part of Callaway’s contingency plan, drafted in the event of an unfavorable ruling from the USGA and R&A. The driver is made of titanium, like the original, but is larger at 380cc. It is expected to be in golf shops and retail outlets during the fourth quarter of 2002. It will co-exist in the United States with Callaway’s C4 graphite composite driver, while the ERC II driver will continue to be sold in other countries.

Callaway also will produce a high-COR version of the driver, the GBB II Plus, which originally was planned to be sold worldwide. Now, it will be marketed in countries under R&A jurisdiction.

“I said we would not sell another nonconforming driver in the U.S., and we won’t,” Drapeau said. “We will stick to our word.”

In its news release, TaylorMade also referred to a contingency plan. The company said it quickly switched production from its high-COR R500 series of drivers to its sister series of conforming drivers, which will adopt the R500 name.

The difference between the nonconforming and conforming drivers, which look identical, will be indicated by a permanent stamp on the clubface and a removable sticker somewhere on the club. The nonconforming clubs will be sold outside the United States and other countries that follow USGA rules.

A quote in the TaylorMade release was attributed to John Steinbach, director of public relations: “We believe that the ruling will have no adverse effect on the momentum that our product has enjoyed to date.”

TaylorMade is the most-used driver on the PGA Tour, and Ernie Els carried a new TaylorMade 500 series driver in his recent British Open triumph. TaylorMade has not been shy about advertising the popularity of its drivers, and the R500 name has been seen on everything from magazine ads to shirts, hats and umbrellas.

Drapeau indicated that Callaway would not fight the USGA in court, and TaylorMade made no mention of the subject.

“A handful of manufacturers did jump the gun,” said USGA executive director David Fay. “I hesitate to put it this way, but they rolled the dice and they lost.”

In addition to TaylorMade and Callaway, other manufacturers such as Adams and Tour Edge had announced that high-COR drivers would be sold in the United States. Other companies, including Wilson and Titleist, were ready to introduce similar drivers. Now these drivers will be sold only in countries outside USGA jurisdiction.

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