A boat show hints of upturn in sagging sales

The boating industry is hoping that Ronald Reagan's election will bring a fresh breeze to its sagging sales. In what may be the first indication of such a shift in consumer sentiment after the election of Mr. Reagan as president, dealers, lenders, and manufacturers report that sales and consumer interest in buying boats was relatively strong during the New York Boat Show, which ran Jan. 17-25.

"People are buying," says Theodore P. Treppin, manager of marine financing at the Rockville Centre, N.Y., office of General Electric Credit Corporation, noting, "They have adjusted to higher interest rates," including the 20 percent rate offered by GE Credit. Frank Scalpone, managing director of International Marine Expositions Inc., the sponsor of the show, says the New York event follows good shows in Houston and Toronto, two areas with strong economies.

"We can't judge for the whole country," Mr. Scalpone said in an interview, "but it's almost like old times."

Based on an informal survey of dealers and manufacturers, his group reports that sales during the show came to $99.3 million, compared with $96.6 million last year and $81.6 million in 1979. Officials estimate that 700 to 800 boats were sold. Attendance this year was the best since 1973.

The industry needs a rebound. Last year, sales dipped between 20 and 25 percent, to $7.3 billion, says Jeff Napier, president of the National Marine Manufacturers Association. For some, sales actually fell 60 percent, and a number of companies declared bankruptcy. Others came to the show on their last dime, industry sources say.

Behind the decline last year were soaring interest rates, a recession in the industrial heartland of the country, and a Department of Energy announcement that it was considering banning weekend boating to save fuel.

Now, Mr. Scalpone said, "the average guy on the street thinks that rates are coming down and he has more confidence in the economy."

Moreover, there have been some major changes in the industry as a result of the higher prices of fuel and of financing a boat.

For example, the manufacturers of inboard engines for power boats are producing mainly 6-cylinder models that get better fuel mileage than their 8 -cylinder counterparts. And diesel engines have continued to be popular, because they, too, get good fuel mileage. In fact, in one of the largest orders of the show, Johnson & Towers, an engine manufacturer, sold $2 million worth of 8.2-liter, 8-cylinder diesel engines to a manufacturer of power boats.

In another trend that may not augur well for the industry, the Japanese outboard manufacturers have continued to capture a larger share of the market. Berkeley Ellis, district sales manager for Suzuki International (USA) Inc., says the company's sales have been growing 50 percent a year over the past three years.

"When the outboard industry dropped 22 percent of its sales last year, we were up 55 percent," Mr. Ellis says. He attributes this gain to the motors' better fuel efficiency and higher horsepower rating. Furthermore, he notes, US consumers now have a certain degree of brand recognition of Japanese-made products. The company gave away 40,000 brochures on its engines.

J. J. Burck, however, an Evinrude dealer based in City Island, N.Y., says the Japanese have captured only 15 percent of the market. Another Us dealer notes that Suzuki has been advertising heavily and is starting from a small base. Mr. Burck bristles at the suggestion the Japanese motors are better, firing back, "Their quality doesn't come up to ours."

For the sailboat manufacturers, the boat show apparently was not as productive as they would have liked. Harry Norwalk of Long Island Yacht Sales, based in Bay Shore, N.Y., says the sailboat buyers are more active during the "in the water" shows held in the spring and fall. But Chuck Wagenseil of Willis Marine, in Huntington, N.Y., says he is confident "it's gonna be a good year," even though most people looking at his 30-foot Seidelmann weren't buying.

And at Pearson Yachts, the company faced a different sort of problem: its identification with its parent company, Grumman. One woman noted as she walked by a 30-foot Pearson sloop, "It's owned by Grumman, the same company that made the buses." Grumman's Flexible division has had repeated difficulties with its buses.

At least one sailboat company, Lancer Yachts, solved the high cost of financing the yachts by nailing down a large line of credit at a fixed rate when interest rates were lower. Thus, when rates went up, it could sell its line of yachts with only a 12.5 percent (annual percentage rate) interest cost over a 15 - year period. The result, points out Donald C. Haskell, executive vice-president, is a saving of slightly over 30 percent in the total cost of the boat over the life of the loan, compared with a 16 percent interest rate.

He says this low-cost financing is important because dealers often report that they have sold a boat at the show, only to find out that their customer has been turned down by a lending institution because interest costs and credit criteria have changed. Lancer reported that it sold five yachts at the show, at a cost of $550,000.

Probably the two most popular booths at the show were the Hobie catamarans and the Wind Surfer exhibits. One company, Sailrider Inc., reported selling 500 boards worth $442,000. And Hobie said it wrote $400,000 worth of orders.