Profits Ahoy!Lori Bongiorno
Profits Ahoy!Lori Bongiorno
Ken Fabry usually buys boats more often than most people buy cars--one every couple of years. But the candy distributor from South Florida has held on to the Timberline II since 1989--largely because Congress slapped a 10% excise tax on boats over $100,000 two years ago. Now, the tax is being repealed under President Clinton's new budget. And Fabry is loosening his purse strings: He just ordered a 70-foot Viking yacht for $2 million. "If I had to pay the tax, I wouldn't have bought it," he says. "I don't care how much you spend for a boat, $190,000 in taxes is ludicrous."
Boat manufacturers are shouting a hearty "Aye-aye." They blame the luxury tax for a devastating sales slump. But with big spenders such as Fabry returning, the industry expects a comeback. "We think there is going to be a gradual and continual growth in sales for the new-boat industry," says Robert T. Healey, co-owner of boatmaker Viking Yacht Co. in New Gretna, N.J.
AUTUMN GOLD. Indeed, for the first time in three years, big-ticket yacht sales are picking up. Dealers and manufacturers from Florida to Minnesota say sales are up. And they expect brisk business at an array of fall boat shows. "Maybe it's not like the old days, but I think there is an upward movement," says Alvin Wagner, owner of Jefferson Beach Marina in St. Clair Shores, Mich. Minnetonka Boat Works of Wayzata, Minn., sold six large boats last month, its first big-boat sales since late 1992.
The yacht industry knows, however, that it faces a long voyage back to prosperity. The winding down of the free-spending 1980s combined with recession and the luxury tax keelhauled the top end of the boat market--crafts costing more than $100,000. Almost no boat builder emerged unscathed. From a 1987 peak of 16,000, sales of high-end boats dropped to 9,100 in 1990. With the luxury tax adding to the headwind, sales plunged to just 4,200 last year.
The drop decimated the boat building industry. Since the industry's peak, employment has fallen a third, to 400,000 jobs, and boatmakers largely blame the tax. "The purpose [of the tax] was to tax the rich and their toys," says Republican Senator John H. Chafee of Rhode Island, a big boat building state. "What it really did was hurt the toymakers." Chafee's state recently repealed its 7% sales-and-use tax on boats.
Manufacturing is already bouncing back. Ocean Yachts Inc. in Weekstown, N.J., and Blackfin Yacht Corp. in Fort Lauderdale, Fla., both report increased orders in recent months. And Viking Yacht is rehiring: By January, it may have 600 on its payroll. That's up from only 65 in 1992--though way below the 1,500 it employed in two plants in 1990. If more Ken Fabrys decide to trade in their old yachts, the boat industry may soon be running with the wind again.