Until recently, the primary challenge at Tecla Co. Inc. was to recruit enough workers and plant capacity to keep pace with marine production.
Now, the plastics processor has a new goal: to help boat-building customers find ways to lower prices or offer special features that help distinguish them in a tighter market.
"I believe sales numbers next year won't be equal to that of this year," said Richard Clark, president of Walled Lake, Mich.-based Tecla. "We've taken more of a marketing focus. We haven't seen a slowdown yet, but we have our crash helmets on."
The marine industry is bracing for a collision with an economic iceberg. So far, boat and personal watercraft production has not been drastically affected.
But there are warning signs: Fewer people seem to be purchasing lower-priced boats of all types and more frivolous items such as Jet Ski watercraft. In the past six months, an industry steaming full throttle has started to cut the engines.
The industry's main fact-gathering group, the Chicago-based National Marine Manufacturers Association, has yet to crunch its boat-buying numbers for 2000. But the industry expects its figures to come down from 1999, a year that saw the number of registered boats continue its steady, double-digit rise.
The drop in 2000 should be more slight than dramatic, said Jim Petru, the association's manager of market statistics. But that could change in 2001, he said.
"With the stock market down and interest rates higher, I would assume the [numbers will] be down," he said. "We're all just hoping for a soft landing."
Both boat builders and suppliers already have seen momentum wane.
Genmar Holdings Inc., the world's second-largest boat maker, expects to stay on budget for sales in 2000, said George Sullivan, senior vice president of the Little Falls, Minn.-based company. But while sales should remain consistent with previous numbers, profit margins are lagging, he said.
The company has started to offer price reductions and incentives to move boats off showroom floors. Customers are deferring purchases for discretionary items, he said.
"The problems started in July and August," said Sullivan, whose company's 12 boat lines include Larson and Carver. "More people are in a wait-and-see mode, and that translates to a stop for us. We're doing more planning and carefully watching our production schedules."
Genmar is not planning on a terrific year in 2001, Sullivan said. But what may help the company is that luxury boats — those costing $800,000 and higher — have not been affected by the new downturn.
For one thing, luxury boat sales lag compared with sales for less-expensive models. It can take 18 months between the time an order is placed and a boat arrives at dock.
For another thing, customers with money are not as maimed by the shake-and-jive of a vulnerable economy, Sullivan said.
"They might put their retirements off, but they still buy boats," he said.
Supplier King Plastic Corp., a film and sheet marine producer, has not heard of any panic for 2001, said Vice President Jeffrey King. But the Venice, Fla.-based firm does not expect to continue its growth rate of the past few years.
Boats 30 feet or less in length have been most affected, King said.
"Oil prices have taken hold of everything, and interest-rate hikes have worked their magic," King said. "The first thing people do is stop buying products they don't have to buy. That's Economics 101."
But a saving grace for many in the boating industry could be the continued switch from wood, especially teak and mahogany, to plastic for interior products. While the bulk of that conversion occurred in the mid-1990s, more shifts are taking place.
Those include a more recent move to plastic upholstery and to flooring substrate material that replaces plywood, King said. That trend started with fishing boats and runabouts and is wending its way into larger vessels, he said.
And companies such as Genmar are shifting to new, more environmentally friendly methods to make fiberglass hulls. Traditional methods use open molding, a laborious process that leads to airborne emissions of hazardous chemicals.
Genmar has patented a closed molding technology — using resin-transfer molding — that eliminates many emissions. The company believes federal and state environmental statutes will become more strict, limiting the amount of hulls plants can build, he said.
"There's more attention and activity with groups looking at fiberglass," Sullivan said. "It's prudent to look now at other ways to build hulls."
The company also has started to rotational mold fishing and family-sized boats, sometimes cross-linking fiberglass and styrene to reduce emissions. Other companies are evaluating thermoformed hulls for larger boats.
With a slowdown potentially looming, processors such as Tecla see a silver lining. A tougher market forces companies to help customers save money or add value to products, Clark said.
"If we offer customers something new and different, we should be able to grow business even if the economy is lousy," Clark said. "We just have to work a little harder at it."