How the Recession Is Changing Boat Building

There has been much in the news about
what is happening in Detroit, in housing, on Wall Street, and elsewhere – but what
exactly is the current recession doing to the industry that builds the boats that
we love? Everyone knows that sales are down, but what exactly is going on among
the companies that dream up, design and build our boats? Will some positive changes
come out of this economic trauma?

Boat building the old fashioned way – one at a time.

Not surprisingly, boat building has been hit harder than virtually any other industry
in America. As in virtually all economic downturns it is the first to take the economic
hit, and the current trouble is no exception. Here are some of the changes we see sweeping across the boat building companies…



1. Company Presidents are Getting Hands-On. Most company presidents
will now take phone calls from customers. While some presidents always did this
(usually among family-owned enterprises), now the practice is fairly widespread.
If you are seriously in the market for a new boat and a company president won’t
take your call, you may have learned all you need to know about his brand. (We are
firm believers that corporate culture – and attitude -- starts at the top and rolls
down hill.)


2. Naysayers are Disappearing. Just as in many industries, middle
management and lower levels of top management at most boat companies have thinned
considerably or are gone altogether. One result has been that there are fewer people
to say no to customer requests and there is faster response time to many questions
and requests. At the same time what management is left will generally work hard
to overcome impediments to a sale, whether that be helping to find financing, making
a building change order, or in some other way eliminating objections or problems
involved with a sale or customer service.



3. Engineering and Design Staffs Sharply Reduced. This sounds like a bad thing, but it probably is not for the consumer in the short run. Historically, the boating industry has had very small engineering staffs and much of the work
was farmed out. During good times staffs naturally grow, but now they are back to
square one. Likewise other infrastructure support staffs have been cut to the bone.


4. Where’s the Fat? With white and blue collar staffs cut to the
bone, U.S. boat building is as efficient and as low-cost now as we have ever seen
it. Take a look at the nation’s boating magazines and you will note that this year
they have turned into little more than pamphlets. Boat show glitz, fancy brochures,
in-house sales magazines, new generations of ever more complicated websites have
all been put on hold. These days “overhead” means little more than keeping the lights
on “overhead.” When a company president now says he needs to get a certain price
for a boat, he isn’t kidding.  He will not risk losing a sale for some extra
margin.

5. A New Way of Building – the Old Way. Building boats for stock
has been virtually eliminated at most companies. Factory workers have been laid
off until only skeleton crews are left. That means consumers may not be able to
walk in to a dealership and find exactly the boat they wanted in the current model
year, or get it shipped from the factory the next day. Builders want consumers to
buy non-current stock at dealerships, so they can get back to planned production
when business improves.



If you have very specific ideas as to how you want your new boat equipped for this
summer, you had better order now, because chances are your boat will be special
ordered.



Many boat companies are manufacturing only one week a month, or are closed until
May. Some are building only when they have several orders accumulated and others are building continuously but with a staff significantly smaller than before, and
are therefore producing only a few units each week.


6. Hibernation in a Bear Market. Many builders are going into one
form or another of “hibernation.” That is to say, many are experiencing a “sales
winter” so they are conserving their resources and staying alive. When the sun once
again comes out they will be able to wake up and ramp up production. The fact that
you may find that a factory has shut its doors does not mean it is out of business
– it could be in hibernation. We do not expect many companies to go out of business.
The fact is that over the last four years business has been getting more difficult
each year, and most of the weakest builders have already bitten the dust.


7. Boat Prices are Being Reset. At least four things are happening
at the same time: consumers are able to buy new boats at lower prices than last
year because everyone is discounting, overhead expense has been sharply cut back,
and raw material costs have been dropping because of the global downturn. Consumers
are trending to down-sizing both the boat and the equipment and frills going into
the boat and are looking for lower operating costs. Builders are reexamining what
they are putting into their base pricing and many brands will likely build in less
in the future.



During the last 40 years the boating industry has survived fuel shortages, 20% interest
rates, a 10% luxury tax, and other calamities and each time has come back with a
bounce. We expect the same will occur this time around, but certainly things will
be different.