ShareThisStaying afloat is key in the boating industry but some manufacturers and dealers are close to being capsized by the stormy economy.
The problems at Genmar Holdings Inc. in Minneapolis, which owns 13 brands and is the nation's second largest boat manufacturer, is typical in the industry these days.
"It's analogous to the struggles in the auto industry right now," said Matt Gruhn, editor-in-chief of Boating Industry magazine. "This is an industry where product prices are similar to cars, and it's hurting just as much."
Except unlike cars, sailboats and yachts are generally not items that consumers need. That reality has boat manufacturers easing up on production, shutting down plants and laying off employees in record numbers in an attempt to simply break even.
Boat production and employment in the manufacturing side have both dropped 70 percent in the United States, according to Thom Dammrich, president of the National Marine Manufacturers Association.
Not even the biggest companies are immune.
"I've never seen anything even remotely resembling this situation," said Genmar CEO Irwin Jacobs, who has been in the business for 35 years. "It's humbling and humiliating."
Ironically, Genmar's business strategy had been to buy up bankrupt brands. Now, the company has closed plants in Florida and Oregon, and slashed its workforce 67 percent.
Genmar has stated that it is facing a cash operating loss of about $35 million.
Even before the recession hit, the company's sales had been losing speed. From July to December 2007, year-over-year sales were down 40 percent. But that was just a prelude to 2008, when sales from January to July -- the typical peak period -- dropped 80 percent.
Genmar is not alone in its plight. Many companies are on the "fringe of bankruptcy," Jacobs said.
Bad news is also coming out of Bombardier Recreational Products Inc. in Quebec, Canada, which owns the Sea-Doo brand of watercrafts and sport boats. The company announced a major restructuring in December, involving cutting employees, merging divisions and decreasing production by 30 percent to reduce inventory at the dealer level.
Industry wide, many attribute the problems to consumers' sagging confidence in the economy and the drop in home prices. People looking to save money are less likely to splurge on a boat.
The tight credit market is also a factor. With loans becoming harder to secure, consumers are having a hard time affording new boats bearing six-figure price tags.
Dealers, too, are looking for funds. Floor plan financing -- or the financing to buy products from manufacturers for showroom floors -- is "tighter than ever before in history," Dammrich said. "It's created a real pinch for dealers and their ability to order products from manufacturers."
That doesn't mean showrooms are empty. In fact, there's plenty of inventory. Because consumers aren't buying, products are more often gathering dust instead of being moved and replenished.
Unit sales of new powerboats declined 24 percent in 2008, and dollar sales declined 20 percent to $7.6 billion, according to statistics from the National Marine Manufacturers Association.
The troubled industry may be sighting land soon. In May, a survey by BoatUS, a national advocate for recreational boaters, found 96 percent of the 30,000 respondents said the economic downturn would not lead them to stop using their boats this summer.
But many said they would modify their boating habits by reducing cruising distances or selecting boating destinations closer to home (24 percent), reducing the number of boating trips or days (17 percent), spending more time anchored out (17 percent) or at their home marina (13 percent), running the motor less (13 percent) and sharing costs (10 percent).
BoatUS spokesman Scott Croft said many boaters will pinch their budgets to continue boating because "it's not just a sport or a hobby. It's a lifestyle choice."
E-mail Liyun Jin at ljin(at)post-gazette.com. For more stories visit scrippsnews.com.
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