ANTIESTABLISHMENTARIAN

Long time readers are well aware of my disdain for the marine industry’s wild enthusiasm for anything high tech which has no greater advocacy than  Professional Boatbuilder Magazine. Oddly enough, the latest issues of that publication reveal a marked reversal of course as illustrated by the cover story in the latest issue which depicts a 1950’s era sloop loaded up with lots of wood. Smells of modernism reversed to me.

My complaint was that high tech added economically unsustainable cost and complexity to boat building. This was proved by the fact that boat sales had been in a long 15 year decline as the cost of ownership went up and up. Instead of simplifying to make boats more affordable, the industry went in the opposite direction. I suppose not being able to buck the tech trend had a lot to do with it, and I’m somewhat sympathetic to that. But mirabile dictu! It is precisely those few small builders who did buck the trend that will ultimately be the survivors, while the purveyors of “inter-galatic space vehicles” bite the dust. The later is my view of the styling of the modern power boat.

Most of us are now aware of what would happen if the auto industry is allowed to fail. A century’s worth of build up of supporting parts and materials manufacturing and distribution will disappear overnight, causing the unemployment of millions. The loss will be irreplaceable since it took 100 years of capital accumulation to create it. If and when the economy ever turns around, it will NOT automatically spring back, for the knowledge, systems, equipment and capital will be gone, probably forever.

The boating industry is one that has been steadfastly ignoring what has been happening to it for a decade-and-a-half, due in large part to a tunnel vision that saw no further than next year’s profits. The middle class was shrinking, yet a tiny fraction of the very rich was growing, so many builders foolishly shifted their focus to this tiny market, apparently believing that it could grow forever. Sound familiar? That was the story of Hatteras. I had also been writing for many years that the industry should be very wary of bubbles since it suffers the firstest and worstest effects of bubbles. Take advantage of bubbles, I said, but plan for the devastation that inevitably follows them. No one did, and now here we are with an entire industry almost completely wiped out.

To illustrate my theory I repeatedly pointed to the history of Chris Craft, once the greatest boat builder of all time, but ultimately reduced to ashes by mind-boggling stupidity of ownership and management. They perfected the art of self-destruction by increasing production into recessions. Such stupidity leaves me speachless.

Contrary to all economic data, boat builders, like the automakers, continued to add product into a declining market. Now there is gross over production and the auto industry will shrink by half, but the boating industry will shrink by 80% or more.

Just think of all the components that go into a boat. Then consider that profit margins on this manufacturing is extremely low due to very low production levels. The reduction of sales by just a little wipes out a lot. From hardware to heads to composites, a wipe out of these manufacturers is underway. All of the fancy new high technology gobbledygook in composites will soon be gone. Not some of it but all of it. What will be left will be the equivalent of the boat building materials of thirty years ago, if that. Paints, finishes, fabrics, cores, resins, adhesives, electronics, over-priced parts, systems and tools, all gone. All the computerized stuff will also go, such as computer controlled hull and parts mold shaping, along with the very complex designs that these costly machines make possible. One of the lessons to be relearned is that making things rounded and curved is vastly more costly than square.

For powerboats there is yet another insurmountable problem, engines. For engine manufacturers it will no longer be profitable to produce marine versions of their automotive engines and so they will be dropped, leaving the powerboat industry powerless.

One can gauge the loss of dozens, if not hundreds of vendor products just by taking note of the disappearance of vendor advertising from magazines like PBB. A cursory estimate is that it is down by 2/3rds and almost no full page ads. Bye-bye magazines and boat shows, of which there are also far too many.

Banks are recalling dealer floor plan loans by the dozen as well. And whereas when US boat sales dried up, most builders quickly turned to foreign markets. Now, those too, have dried up. None of them seem to have seen this coming, nor made adjustments by closing down excess production early-on, as they should have done. As usual, they crossed their fingers and went on with business as usual, and like the bankers who showered them with money, refused to consider the hard and cold economic data. Instead, they harbored dreams of shifting production to China. A few actually did.

What about the now low fuel prices, won’t that help the industry? A reasonable question to which the answer is. NO! For one thing, it is far too late. For another, fuel prices will not stay low. Nothing has changed about the fundamentals of oil supply and production is now falling faster than demand. Yet another shortage induced crisis and huge price spike is on the horizon, probably by next summer.

For those few boat owners who do manage to weather the storm, there is some good news in that those $75/hr and higher boat yard labor rates are history. Ownership costs across the board are plummeting, from insurance and dockage to maintenance. However, they can also look forward to serious replacement parts shortages in the near future as one manufacturer after another bites the dust. It will also be interesting to see what happens to the huge glut of rack-n-stack marinas when small boat owners can no longer afford to pay high rents. Most of these operations are financed to the hilt and will default as owners pull their boats out and marina revenues crash. When I drive by the two local marinas on a weekday, these places look closed down there is so little activity.

The Aug/Sept issue of PBB features a nine page spread on the glories of Cruisers, Inc., outlining all the wonderful things they do and plan to be doing in the future. Problem is, this company has no future, and like all good boating media, they choose to maintain the illusion right up to the very bitter end.

Only two months later the magazine shifts its focus to sail boats, but those aren’t selling either.

How about inexpensive, insulated fiberglass tents to meet the needs of dispossessed and homeless foreclosed homeowners? Now there is an industry with a future!