Impact of economy on CC and the industry?

[gride300]

i agree with teleman. i saw arthur laffer(laffer curve) on tv the other day and he didn't even have anything to say except the next two years will most likely be bumpy. nobody really knows...

[SkiTundra]

Some interesting updates (rumors) from conversations at the Mpls Boat Show and a couple of VC's.

There is a significant increase in used boats on the market over prior years as well as unsold previous year boats.

CC is in relatively good shape. Rather than a several week or month shutdown they've cut production to 2 days per week. No significant (known) cash problems. No plans to go down market or reduce prices as this would require lowering of quality. They'd rather make fewer high quality boats than chase the low quality market.

Both MC and Malibu are facing cash problems that may impact their future. MC dealers still have significant unsold inventory of 2008 and even 2007 boats. Significant credit offered to credit risky buyers is producing a larger percentage of used MC's on the market in proportion to other brands putting further pressure on the entire market, but MC in particular.

Fineline (Centurion & Gekko) is believed to be OK financially and will likely survive.

There is nothing substantial regarding Tige. Some think that there is no way they'll survive while financial types believe their structure will allow them to survive and then take significant marketshare after any industry shakeouts are done.

Expect to see some dealer shifting as stable dealers catering more specifically to serious water sports enthusiasts move to Fineline while MC & Malibu begin some limited migration to more general dealerships.

[j2nh]

2 days per week is pretty slim if that is your paycheck. CC was 4 days when I was there in early November. 09 is going to be a rough ride.

[BKinSoCal]

Very interesting. Good insite. Thank you for sharing, SkiTundra.

[NautiqueJeff]

They may have cut production to two days (I don't know), but remember the last press release that came out. CC is doing some pretty heavy-duty training right now, and that might take up the rest of the work week. I don't know the specifics, but from the press release, that's what it sounds like to me.

http://planetnautique.com/index.php?...rticle&sid=267

Also check out what Bill Yeargin himself said about this in his blog.

http://www.nautiques.com/blog

[MARK-S]

I heard but cant confirm that the 196 sales so far for 09 have out paced the 07 and 08 196 sales. Fluke or maybe just that people cannot afford any of the bigger boats. Zero Off may also be a reason.

[GoBig]

To add to the rumormill, I was at Cope and McPhetres (MC and 'Bu dealer in CA) a few days before they shut their doors. From what they were saying, MC now has 38 months worth of inventory on-hand! Assuming that their target pipeline is less than 6 months of inventory under normal economic conditions (and that seems high), they won't have to build another boat for over 2 and half years and they will still have excess inventory! Tough times ahead for MC.

[SkiTundra]

If that's even remotely true (MC having 38 months of inventory) I can't imagine them staying afloat very long.

Mark, how much of CC's overall sales are 196's? I'd guess fairly low so even a minor annual change (and this year could be one with ZO) would look big within just that model.

Jeff, it sounds like they are doing the training on the others days which is pretty cool of them to do for their employee's (and could increase quality and efficiency, reduce OJ injuries, and allow them to move people around to other jobs when needed.) It does feel good to do business with a company like CC.

[MARK-S]

Tundra,
I think it is a fluke, but in this economy, I found that strange. My guess is that the 196 is under 10% but I do not know.

[35th_197]

First of all I have no interest in defending MC...I am now a Cobalt owner....with that said......

38 month inventory seems to be a pretty large stretch......Do the math.

MC has been documented to produce 3K boats per YEAR.....3k times 3 years (36 months)= 9,000 boats that have been produced and either on dealer lots or MC back field....I find that pretty suspect.

For Correct Craft to be producing on a 2 day per week schedule is stating production has been theoretically reduce by 50%, that is a pretty big deal in it's own rite.

The ENTIRE marine industy is in SERIOUS trouble. Look at the big market segment the I/O market.....Sea Ray has closed/mothballed multiple plants as well as Crownline and others.

The BIG issue is the withdrawl of Textron from Marine Financing (dealer floor plans). This was announced about 2-3 weeks ago, after 90 days they will no longer issue new flooring....PERIOD. That means the dealers will go to local banks, GE or reach into their own capital to purchase the boats from manufactures. I find it doubtful dealers have that amount of capital.

In this time period, there is no benefit to feed the rumor mill with unsubstantiated facts.....God knows the facts that are known are BAD enough. I wish CC and all other manufactures/dealers the best is these trying times. We need them to innovate product and service our recreation.

[j2nh]

I think all of the manufacturers are in pretty much the same spot. Along with Textron getting out of floor planing, Key Bank got out of marine loans for consumers.
According to Boating Industry News MasterCraft has laid off around 100 since last fall and production has gone from 19 to 10 boats per day.

Fasten your seatbelts this is going to be a bumpy ride.

[GoBig]

Well a better way to look at months of supply is to base it on actual sales, not historical production volumes. If MC was building and selling 3,000 boats/year and continued to produce 3,000/yr but sales drop 50%, they now have 12 months excess. If sales drop 75%, they now have 36 months, ect. In this example, 2250 boats on-hand would be 36 months of supply. So that rumor may not be all that far fetched.

This thread had gone the way of the rumormill for the most part. I was pretty clear that this was only a rumor and was hoping someone could either deny it or substantiate it. I agree that the best thing for all of us is a healthy recovery all major boat manufacturers --- competition breeds innovation.

[SkiTundra]

Talked to financial advisor and tax atty this past week. Both said that almost every one of their clients is significantly cutting back on non essential expenses until the stock market recovers. Over 95% of everyone's options are completely worthless at current prices and for most that comprises half or more of their annual income. With their income cut in half most are focusing on just keeping their houses with some downsizing because they know they won't be able to keep up their mortgage payments.

[gride300]

if you purchase an mc full out you get 25,000 off.

[AuMDLST]

SkiTundra - 95% of whose options? His clients or just speculation across the board? Did the advisor consider that those that are not clients of his/hers may have hedged their options? Pigs get fat and hogs get slaughtered - guess those 95% should have considered buying some puts - any advisor worth the BS fees they charge saw this wreck coming many, many many months ago.