Boating industry hits economic shoals
The boating industry has run aground. High-priced yachts and low-priced skiffs are both sitting in showrooms as consumers remain landlubbers this year.
The effect of the consumer pullback on the industry has been jarring. For example, in Waterbury, Conn., 92 percent of the 162 workers at AMF Inc.'s Alcort Division have been given "extended vacations."
Likewise, at Outboard Marine in Waukegan, Ill., about 25 percent of the company's 13,700 work force has been laid off. At almost all the other recreational boat companies the story is pretty much the same: Inventories are piled up, consumers aren't buying, and workers are being laid off.
Frank Scalpone, executive vice-president of the National Marine Manufacturers Association, a trade association, notes: "The industry is really taking it on the chin. . . . This year is pretty much beyond redemption for most of the companies. It will probably be one of the worst years ever."
The Department of Energy presented the first shoal for the industry when it said in February that it was considering banning weekend boating to save gasoline. Then, interest rates started to soar, dampening demand from both the consumer and the dealer. Finally, the recession set in and consumers headed for safer ports.
So far, Mr. Scalpone estimates that sales of small and mid-range boats have shrunk 40 percent. Sailboats, which had perked up when the energy scare materialized, are off 20 percent, and large yachts, which some thought were recession-resistant, are off 20 to 25 percent. Only the very smallest boats which require no financing are selling, Mr. Scalpone says.
The industry, for its part, has not taken the bad news stoically. For example, when the Department of Energy threatened to ban weekend boating the industry mounted a large write-in campaign. Richard Rath, executive editor in Yachting magazine, says some 30,000 individuals wrote the Energy Department protesting the ban. To encourage people to write in, the magazine ran emergency editorials, including form letters to be mailed. Local groups showed up at regional meetings and saltily told the agency what it thought of its proposal. The result was that the department backed off, but according to Mr. Rath the damage was already done: Millions of dollars in sales had been eliminated.
In White Plains, N.Y., a spokesman for AMF says the company hopes to start calling back its workers as the summer moves on. "We hope to have 75 percent of the workers in Waterbury back working by Labor Day," he says. AMF is basing its hopes on an expected economic recovery next year as well as the introduction of some new models later this year.
Other companies have started rebates. In Fond du Lac, Wis., Lynn Mellenthien , director of advertising services for Mercury Marine, a division of Brunswick Corporation, reports that a rebate program is going well. Mercury is offering a maximum of $100 per motor, and Mr. Mellenthien reports the results have been "gratifying." Mercury also mounted a major advertising campaign on radio and television in its largest markets in an effort to lure first-time buyers into the showrooms. Mr. Mellenthien says that so far the results appear to be good.
According to Mr. Scalpone, the bad year has resulted in a lot of red ink but no major bankruptcies so far. Some companies, in fact, through diversification moves, have staved off a permanent grounding. Chris-Craft Industries, for example, has a 20 percent investment in Twentieth Century-Fox. If Chris-Craft were to sell its share of Fox at this point, Stuart A. Lippe, of Value Line Investment Companies, estimated the company would net $15 million. On the other hand, he figures that Chris-Craft's boating business has moved heavily into the red despite its hiring a new president to run the division.
Outboard Marine, which sells OMC inboard-outboard motors, has cut back its capital spending program this year by $3 million to $5 million. This should help the company get through the hard times, analysts figure, although there is some concern on Wall Street over whether the company's dividend is safe.
A spokesman at AMF says the company is confident in the "long term" attractiveness of its business. Hatteras Yachts has been a very profitable division, he says, and Alcort has been periodically profitable.