SailNet Community - View Single Post - Tartan Being Sold?
View Single Post
  #6  
Old 11-18-2008
night0wl's Avatar
night0wl night0wl is offline
Senior Member
 
Join Date: Mar 2006
Location: Fort Lauderdale
Posts: 1,397
Thanks: 0
Thanked 15 Times in 15 Posts
Rep Power: 9
night0wl is on a distinguished road
Quote:
Originally Posted by T34C View Post
A great brand, with great designs, production facilities, at a bargain basement price. Might be a great time.
Boats are just capital intensive, low margin items. First off, from what I understand, dealers only have about 10% margin on new boats...probably higher on semi-production boats like Tartan.

Manufacturers have to back up or offer carry/trade financing on dealer inventory. Otherwise, what dealership has $1-$2MM to hold 3-4 boats at their paddock with all the associated maintenance that goes on top!

Add to that, the manufacturing process is incredibly commodity driven. Unless an order/deposit is placed, a manufacturer has to commit tremendous resources right up front to get all the materials to build a boat.

Add to that, the boat market is so tied to the overall economy...much more so than cars that eventually wear out. Nobody ever says "I need a new boat..my old one is falling apart" like they say "I need a new car...my old one is falling apart". So, inevitably...you get sales ONLY when times are good, and that just happens to be when your build costs (labor, materials) also tend to be the highest.

The final nail in the coffin of a lot of manufacturers. Nearly ever chain of the building/selling process involves leverage, except if you're public co. We're talking large lines of credit to get materials from manufacturing....large capital/finance agreements to keep your dealers in business....large loans to your customers to purchase new boats. And guess whats happened to leverage in the marketplace? So, unless you're 'big' already and can ride out this downturn, its likely we'll see many many smaller, non-public manufacturers go by the wayside. Call it the late 80s all over again.


Its a lose lose proposition. High up front capital, low margins relative to manufacturing capital...and heavily leverage driven.
Reply With Quote Share with Facebook