US boatbuilders scan sales horizon with some optimism
FOR SALE: 45.5-foot Bristol sailboat, complete with two TVs, VCRs, and air conditioning. Price: $325,000. FOR SALE: 54-foot Bertram powerboat with microwave, dishwasher, garbage compactor, refrigerator, two TVs, two stereos, and a washer-dryer. Price: $825,000, complete with electronics.
The yachting industry, gathered in New York this week for the National Boat Show, will soon find out what effect the change in the tax code will have on selling these big-ticket items. Will the lowering of tax rates mean consumers will reach into their pockets to buy new yachts? Or will the closing of the loopholes mean that big spenders don't have the income to support a rich aquatic life style?
Boatbuilders are confident the tax reform act will not ground them.
``The people who buy our boats are committed owners,'' says Pat Cunningham, chairman of Bertram Yacht of Miami. ``They will find a way to afford a boat.''
The tax bill, predicts Roger Hewson, president of Sabre Yachts of Casco, Maine, ``will be a wash,'' resulting in some lost sales and some new sales.
Some manufacturers, however, think they may have lost sales this year because consumers ordered boats in November or December to get the sales tax deduction. Scott Flick, national sales manager of Bayliner in Seattle, says a Seattle-area dealer held a ``tax savers sale'' last month. Mr. Flick says the result was an extra $2.5 million in unexpected sales. The week before Christmas, Bayliner shipped 1,050 boats, the hottest pace in company history. Sailboats may rebound
The biggest news in the boating industry may be a turnaround by the sailboat companies.
Over the past five years, much of the domestic sailboat business has been becalmed. Lower-priced imports have established a substantial beachhead with consumers. New boat owners have turned increasingly to powerboats, which they believe are easier to operate than sailboats.
``We call it the turn-and-burn mentality,'' one boat salesman says.
Sailboat manufacturers have not always been the most astute businessmen. Last year, C&C, a large Canadian builder, went into receivership. Robert Clark, district sales manager of the company, concedes it made some marketing and strategic errors during a slump in the market.
``We only talked to ourselves,'' Mr. Clark says. ``We didn't talk to the consumer.'' C&C, now owned by an individual investor, Brian Rose, hopes to recoup with a newly designed fleet of sailboats.
The consolidation in the industry has helped some companies. Bernard F. Gleason, senior vice-president of Starcraft, in Fall River, Mass., says sales for its O'Day sailboats will rise 20 percent this year. Part of this is because O'Day has introduced many new models with sleek European styling. Like many other manufacturers, O'Day has added a ``winged keel,'' much like the America's Cup contenders.
Belt tightening has helped some companies weather the storm. Ericson Yachts Inc. of Irvine, Calif., cut overhead and production capacity, ended a union contract, and cut prices on bigger boats by $10,000 to $12,000. Now, says David Pugsley, Eastern sales manager, Ericson has an order backlog to late spring.
Successful manufacturers continue to grow. Mr. Hewson of Sabre Yachts predicts a 20 percent rise - an annual event at his company. And Clinton J. Pearson, chairman of Bristol Yachts of Bristol, R.I., thinks Bristol will have a good year, though he says ``it won't be like the boom times.''
Over the longer term, sailing could continue rough. Starcraft is forecasting a 50 percent reduction in manufacturers in the next 10 years. Ranks of dealers will thin, and their showrooms will move inland.
``The value of their waterfront property will be so high they will sell it to developers for condos,'' Mr. Gleason of Starcraft says. Powerboat sales may level off
Powerboat companies, after three years of healthy sales, are expecting business to level off. ``I think we'll see a flat year,'' predicts Dave Parker, a consultant to the industry and former chairman of Hatteras Yachts Inc. of High Point, N.C.
``Flat sales will be just great. It will mean another great year for the industry,'' says Frank Scalpone, executive vice-president of the National Marine Manufacturers Association.
Mr. Cunningham of Bertram is optimistic about one area for his company: export sales to Europe, the Middle East, and Asia. He projects a 35 percent jump, with exports accounting for 15 to 18 percent of the powerboaters' sales.
In the United States, Cunningham is expecting only a 5 to 10 percent sales increase. ``The big questions out there are interest rates and inflation,'' he says.