Keeping the faith: Dammrich keynote at METS
By IBI Magazine
Flu may have claimed a victim in the form of original keynote speaker managing director of Hanse Yachts, Michael Schmidt, but it was the economic chill the industry was suffering from that was the subject for his replacement, ICOMIA and NMMA president Thom Dammrich, when he addressed delegates at the Marine Equipment Trade Show (METS) on Tuesday in the show's customary Breakfast Briefing. With the strap line 'Keeping Things in Perspective' Dammrich gave a brief account of where the US marine market currently finds itself and why there are reasons for optimism.
Recognising the symptoms that plunged the US marine market into crisis ― the drying up of credit at retail and wholesale levels, a slump in house prices, rising new boat costs and unemployment ― the ICOMIA president claimed that there was now evidence that consumer confidence was beginning to return on the back of US GDP growth in the third and fourth quarters of the year. US marine retail sales hit $33.6bn in 2008, though Dammrich admitted that was likely to drop below $30bn for 2009.
"Over the last 40 years we've experienced six peaks and five valleys [in consumer confidence], with the timescale from peak to valley being on average 30 months. In October we were in the 27th month of declining consumer confidence. We predict that in three, four or five months we'll see consumer confidence turn around."
Dammrich told the packed auditorium that the first signs of recovery in the US housing market as well as an increase in new car sales and an upturn in the Recreational Vehicle (RV) market ― traditionally a sound barometer for future new boat sales — were all helping the marine market gain traction.
"We're starting to see light at the end of the tunnel. Manufacturers are building new boats and ordering product from suppliers," said the NMMA president.
According to Dammrich, the US market sold 208,000 new boats in 2008 compared to highs in the 1970s and 1980s of approximately 400,000 units a year. For 2009 boat production will slump to 135,000 units, a figure Dammrich predicts will be remain similar for 2010. However there is a silver lining: "In 2009 the industry only produced 52,000 boats despite selling 135,000. Therefore for 2010 we're expecting production to more closely match retail sales. That will feel very good for a lot of people," he added.
Other positives for the US marine industry included seeing an 11-fold increase in exports to the Middle East and a 13-fold increase in exports to East Europe over the past six years.
For the future, Dammrich warned that new business models would have to be adopted if the industry was to flourish: "We will have to learn how to build to supply the market through March to September… we'll have to build to order, but in volume… dealers will have to carry smaller inventories and have more equity in their businesses," he said, adding that financing would remain an issue for the foreseeable future, and that there would inevitably be fewer boat shows in the US going forward, but those that remained would be healthier and stronger.
Dammrich warned however that new boats would inevitably cost more as manufacturers were required to continuously upgrade product in a bid to meet ever-stringent 'green' targets. He noted that catalytic converters now required on new boat models could push prices up by as much as $3,000 per boat, a fact that would inevitably dampen consumer demand. Boatbuilders needed to seek paths to producing more affordable boats: "We may see boats being built that don't have add on features," he told the audience, "basic boats that people can add features to. Do we really need three flat screens onboard for instance?"
The NMMA president also noted that despite increasingly tough environmental legislation that the industry needed to shout louder about its 'green' credentials, stating that boating was already a "fairly green" activity with boaters some of the most environmentally conscious of all consumers.
In summing up Dammrich alluded to novelist Mark Twain, saying that news of the untimely demise of the marine industry had been "greatly exaggerated" and though it would be a challenging year ahead, the industry had a very bright long-term future.
(18 November 2009)
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