Rough waters in the boating industry

Since 1973, Hunter Scott had made sailboats, powerboats and custom-made lobster boats.

But he decided to lay off half his staff and close his Pocasset, Mass., shop in December, switching to cabinetry work as orders for the $300,000 vessels all but dried up.

"I had a lot of fun in the marine industry," he said. "But the economy has taken its toll."

Across the country, the $40 billion boating industry is struggling to weather a season of gloomy news.

A triple threat of falling consumer confidence, rising gas prices and the nation's economic downturn has pummeled the industry, changing the boating habits of recreational skippers while forcing layoffs, plant closures and corporate reorganizations the likes of which haven't been seen in nearly two decades.

"It's a challenging time," said Bill McGill, chairman and president of Clearwater, Fla.-based MarineMax Inc. The nation's largest recreational boat and yacht retailer recently laid off 10 percent of its work force as profit fell nearly 50 percent during the last fiscal year.

Souring sales, which began with smaller and cheaper boats and progressed to 30-foot mid-sized models, are beginning to infiltrate the yacht market, where years-long waiting lists for the 50-foot-plus multimillion dollar vessels are evaporating, said Marisa Thompson, an analyst at Morningstar.

That's a sign that even the wealthy are beginning to watch their pennies.

"A lot of people are holding out hope that things will turn around, that in another six to eight months they'll get a glimmer of a turnaround," Thompson said. "But that's up in the air right now. I don't see the catalyst on the horizon."

Since the beginning of 2007, Lake Forest-based Brunswick Corp. -- which manufactures more than a dozen boat brands including Bayliner, Sea Ray and Hatteras -- closed or announced plans to mothball seven factories and laid off more than 1,300 workers as it realigns its business and cuts boat production by more than 10 percent.

The company's boat segment lost $81.4 million in 2007, weighed down by a hefty one-time charge and anemic sales.

"We're running our company as if 2008 is going to be down, and when we get to midyear we'll begin to look at 2009 and we'll do what we have to do," Chief Executive Dustan McCoy said.

The industry's downturn became particularly pronounced more than two years ago as the nation's housing sector began to falter and grew as each month progressed.

"We thought last fall that what was being experienced by the industry was as bad as it was going to get," said MarineMax's McGill. "(It) has actually gotten worse."

Until consumer confidence returns, industry executives said they're making an effort to reach out to shoppers, offering classes and excursions, focusing on overseas sales buoyed by the weak dollar, and developing fancy-featured new models.

"When a recession first hits, the boating industry -- like many of the other leisure industries -- is the first to get hit and the last to bounce back," said Scott, 57. "Until that happens, it's going to be a little slow around the marinas."

Alex Laidlaw, a corporate vice president of Encino, Calif.-based Westrec Marinas, said he expects to see fewer smaller boats out on the water and fewer medium-sized boats, which can cost between $75,000 to several hundred thousand dollars -- departing from his company's 26 marinas.

"We're clearly going to see a slower summer," he said. "They're going to the boat, but the boat is staying at the dock."

Al Ehrlich, a 67-year-old boater from Chicago is already scaling back what he spends on movies and other shows so he can afford to spend as much time as possible aboard his 45-foot boat "Adrenaline" when the waters on Lake Michigan warm.

"I'm almost thinking of putting a sail on my boat to let the wind help me along," he joked.

But like most die-harder boaters who've invested as much in their boats as some people have in their houses, Ehrlich says he has no plans to be landlocked.

"I have a large investment in mine, so I'm going to use it one way or another," he said. "I'm not going to let it sit."