The future of serial yacht manufacturers?!

Following the news about different sailing and motor serial yacht manufacturers it seems that there is a desperate "all in" mentality prevalent accompanied by a big risk factor. As a yacht consultant and yacht surveyor I believe that there is no shipyard left that produces more than 100 boats a year and is still owned by its founders or at least kept in private hands. The boom years before 2008 had been the right years for shipyard owners to sell their businesses to investment companies. Of course it might that all came together at the right time: The shipyard founders were at a certain age to dream about their retirement, investment bankers started to set up their own business, clients were buying yachts and everyone took the signs as the beginning of the big boom. Serial shipyards were sold those days at ridiculous high prices, seemingly lacking any common sense of money value. Now a couple of years later the developments of those shipyards draw a picture of buyers who obviously didn’t understand the business. Irrespective whether they stepped in too fast without getting familiar with the business itself, or they just didn’t care enough as long as the figures were right, or they simply missed to adapt to the changed situation of the crisis. Unfortunately most of them still seem to not having enough understanding of the yachting industry. They had obviously been blinded by the shiny and luxurious yachting life and promising golden figures. There were companies that had been producing 2.000 serial sailing boats a year with building costs of 33% for each boat. Who would resist!? But on top you need further 33% for the shipyard’s own overhead and a dealer gets also 33%. And producing 2.000 boats a year isn’t per se equal to making profit. There are manufacturers who make less than 3.500 Euro profit on their smallest 9m model, and the only existence of the product is its value as a starter boat which allows for gaining clients with a smaller budget. Internally these low profit boats are used to fill up the production line and to build on stock in order to keep the staff busy during silly season in summer. There is a manufacturer with a 49ft motorboat that is sold for a price where it is clear that the company is making a loss with that model. However, the model is used to attract attention towards buyers. If a buyer is seriously interested he will be convinced by the sales people that the bigger model is the better option. If he sticks to the cheap one, he will anyway change the boat after some years for a bigger one.

Nowadays the boom is gone, but also is the crisis. Most mass production companies in the yachting industry are owned by investment companies, Chinese firms, fashion companies or any other sort of enterprises who believe it is easy to make money with yachts. But the news circulating in the press or being shared amongst people in the industry demonstrate clearly the contrary fact.

 

Comparing apples with apples

Serial yacht manufacturing is totally different from building and selling superyachts. If a client owns a Bentley, Rolls-Royce or any other high end customized luxury car that sets him apart from serial car owners, it doesn’t mean that he disposes of the sufficient financial means to also allow himself a superyacht. But most probably a serial yacht. But they are still worlds apart. In one area you play within the champions league, in the other you are premier league. You can’t compare the automotive with the yacht industry, least serial manufacturing with building superyachts.

But what happened to most serial yacht manufacturers? After the former founder of a company sold his firm to an investment company who stepped in, first a new CEO was hired and managerial structures were changed. But soon the new CEO got fired, the management changed again and a new CEO came in, money needed to be injected, followed by another CEO change and managers from other industries, and more money is burnt. More than a superyacht shipyard, a serial yacht manufacturer needs a face, a figure clients can identify the products with. And the brand itself needs someone who exactly considers himself being that. Too many changes unsettle the clients. No question that it is a hard job to replace a founder. Since the founder of a business is always someone who pushes his people because their salary comes out of his pockets. A founder always is a passionist of its business who pursues his own ideas with all his idealistic folly, experience and readiness to take risks and unpopular decisions. All ideas, decisions and results are of one head and hand, whether right or wrong, gain or loss. If a CEO takes over, the first problem is, that he is hired. He does his job, but never will he act or talk in a way to risk his job. Decision taking will be spread in order to split risk down the hierachy ladder. If the shipyard has to make a decision whether a certain design will be the new brand recognition for the next ten years you will most probably end up with an average product result: not too risky, not too fancy, not too stylish, not too modern. The designers are presenting it to the middle management, the middle management to the CEO or board and it is getting pushed back and forth. If finally the middle management agrees on, the CEO will follow and there you go with another indifferent banana.

Another interesting development is that changes in the middle management seem nowadays undertaken with people from other businesses. As a consultant in the yachting industry, I clearly understand that changing old structures is something that needs to be done and that quite aggressively. At many middle management teams you could mostly cut off 30%. Being asked, the middle management of course always claims to be overloaded with work. No one dares saying that work can be structured more efficiently or that some people might be surplus to cut costs, because the next chair can be yours. Following the middle management changes of some serial shipyards and accessing CVs, it seems that these shipyards are slowly to be turned into car manfacturers. There was a press release spreading the news that a new guy will support the shipyard by heading the engineering team. His employment is regarded by the shipyard a big success due to his great references that are namely BMW and Rolls Royce who he had been working before. No offence! These people are certainly highly skilled and specialized, they are most probably top engineers, but unfortunately within an industry that has very less in common with the yachting industry. Since 1992 I have been working in various positions (yacht consultant, owner's representative, project manager etc.) in the yachting industry and when it comes to developing new projects I would meanwhile claim that basically just people who use or own such boats will have the right experience to know how a boat is used and how it should be developed.

The serial shipyards need to be given back a face. A face that is represented by the products themselves the same way as by the head of the company. A CEO has to represent the personality that the company founder once did. The brand of a yacht has to be recognized by its design, not just by the logo. And there has to happen a differentiation of the single serial yacht brands within which the clients can identify themselves with the yacht they have.

www.jendrikodenwald.com