AB Inflatables: A new home in the country next door

Posted on Written by Jim Flannery

26_abinflatables_01Moving from Venezuela to Colombia has the RIB builder poised for the economic recovery

Seats are filling up streetside at Barranquilla’s outdoor sports bars one evening earlier this year for a televised match between Colombia and Venezuela in a qualifying round of World Cup soccer. Boatbuilder Ivor Heyer jokes about the fans’ intensity, but remains studiously neutral himself. Venezuelan by birth, the 47-year-old just moved his company, AB Inflatables, from Venezuela to Barranquilla, an industrial city on Colombia’s Caribbean coast, in December 2007.

A second-generation boatbuilder, Heyer explains the move at a restaurant over plates of ceviche, a South American dish of citrus-marinated seafood. He says that Venezuelan President Hugo Chavez’s populist politics finally drove him out of the country where his father, Ulrich, started building boats nearly 40 years ago.

“Since Chavez came into power, every year it has gotten worse and worse [in Venezuela],” he says.

Security is worse. Kidnappings rose 52 percent – to 537 – in 2008, according to Interior Ministry statistics reported in the Venezuelan newspaper El Nacional. Caracas, Venezuela’s capital, has the highest murder rate of any city in the world, at 130 per 100,000 residents, according to Foreign Policy magazine. The business climate is worsening, as well, Heyer says. The Heritage Foundation, a conservative think tank, lists Venezuela 174th of 179 in its 2009 Index of Economic Freedom, a barometer of nations’ attitudes toward free enterprise. Colombia, by comparison, ranks 72nd, the United States sixth.

Heyer is frankly bullish about his new home. He says Colombians work hard. They are educated. They are teachable. The country is hospitable to business. And security there has improved dramatically despite the scourge of cocaine cultivation.

28_abinflatables_02President Alvaro Uribe has made good on promises to strike back against the crime, terrorism and guerrilla violence that has plagued Colombia. From 2002 to 2007, homicides were down 40 percent, kidnappings 82 percent, terrorist attacks 76 percent and infrastructure attacks 60 percent, according to a November 2008 U.S. State Department report. Some 31,000 right-wing paramilitaries have been demobilized, and leftist guerrillas – the Revolutionary Armed Forces of Colombia – have retreated into remote jungles, the report says.

“I feel 100 times safer here in Colombia than in my own country,” Heyer says.

Far from jumping from the frying pan into the fire, he says the move positions him to hit the ground running with better-built boats, more timely deliveries and greater production capacity when the recession eases and consumers buy again.

Heyer – a demanding taskmaster – says he can build boats again the way he thinks they ought to be built.

The Chavez business climate

Chavez’s Bolivarian Revolution, which the Venezuelan president hopes to export as a model for “21st century socialism,” aims to alleviate poverty and other social ills, but Heyer says the former army colonel’s economic policies made it well-nigh impossible for AB to manage the basics of a successful international manufacturing and export business – basics like building a good product, responding nimbly to orders and delivering on time.

28_abinflatables_04Currency controls and a fixed bolivar-dollar exchange rate have led to massive currency devaluations, contributed to inflation – more than 30 percent in 2008 – and created two different foreign exchange markets: the official one and a legal parallel market. Foreign exchange was hard to get, and completing foreign exchange transactions on a timely basis was almost impossible, Heyer says. Increasingly bureaucratic, costly and prohibitive customs regulations drove up costs, held up imports of parts and exports of boats for weeks and even months at a time, and discouraged use of imported parts to build the boats.

“It was difficult to import materials to Venezuela,” Heyer says. Imports were critical for his operation because locally made materials just weren’t as good.

Labor laws made it prohibitively expensive to fire workers, so worker discipline became more and more lax, and unions – encouraged by the Chavez government – imposed inflexible work rules that tied his hands. “I couldn’t fire anyone,” Heyer says. “People would just stand in front of me and say, ‘Fire me.’ I couldn’t fire them without giving them a big chunk of money. Our quality was going down. We were unable to deliver on time. We were delivering product three, four, five months late. And it’s worse today than when we left.”

On top of that, Chavez changed private property laws so the government can nationalize companies. And, in fact, it has done that to the Banco de Venezuela and parts of the oil, electrical power, telecommunications, concrete and steel industries, and to some producers of agricultural commodities like milk and meat.

Heyer says he saw the handwriting on the wall. It was only going to get worse. He had been debating a move for 10 years, ever since Chavez was elected. “The political situation was getting worse,” he says. “We were seeing more demand for our boats. We couldn’t meet it. Our dealers and distributors were getting frustrated. Quality was going down. Delivery time was going up. … The change had to be made.”

Heyer’s father, a German immigrant, started building riveted aluminum outboard runabouts in Venezuela in 1972 under the name Lanchas Venezolanos. U.S. builder Starcraft supplied the technology and parts, and the Venezuelan company assembled the boats and sold them under the trade names Lanven and Lancraft, Heyer says. Ten years later, import duties had risen so high that Starcraft let the Heyer family build the boats from scratch in Venezuela.

“Ninety-eight percent of the aluminum boats on our rivers in Venezuela were made by us,” he says.

Aluminum and inflatables

When Heyer, an accounting graduate of Hillsdale College in Hillsdale, Mich., became factory manager in 1985, he joined forces with the Italian inflatable builder Artigiana Battelli and began producing inflatables for that company, along with the aluminum runabouts.

Lanchas and Battelli merged in 1996 as AB Marine Group, a Heyer-owned company, and stopped building aluminum runabouts in 2007. Today, AB builds 35 rigid-hull inflatables from 8 to 28 feet – with hand-laid fiberglass or welded aluminum hulls and Hypalon tubes – for recreational, commercial and military use.

28_abinflatables_03Heyer investigated moves to Costa Rica, Panama and the Dominican Republic, but an opportunity to move into a 100,000-square-foot facility in Barranquilla’s free trade zone shifted his attention closer to home. The new plant is 200 yards from Barranquilla’s commercial port, so he can import parts and materials from the United States and Europe duty-free, bring them in at the port next door, move them to the plant, build the boats, pack them in containers, do the obligatory customs inspections and drug container searches at the plant, close and seal the containers, and truck them back to the port for shipment.

The time- and cost-savings of being in a free trade zone adjacent to the port were compelling, Heyer says. The plant lies along a basin, an offshoot of the Magdalena River. Heyer has applied for permits to launch boats into the basin, which would enable him to sea-trial new designs right there at the plant.

“Things here work better,” he says. “And we have room now to think of new projects, develop new things.” And he has more production capacity.

Heyer brought with him from Venezuela three employees with 18 to 20 years experience – Jose Placeres, his production coordinator; Carlos Aquino, his production supervisor for aluminum and larger hulls; and Jose Parna, production supervisor for the tubes. Drawing from the region’s pool of skilled craftsmen – welders, engineers, maintenance workers and electricians – he trained a new work force of 200 in aluminum and fiberglass boatbuilding, though their number was down to about half that in June because of the economic slowdown. Fiberglass workers and mold builders were trained from scratch. Shoemakers and tailors turned out to have the skills to become excellent tube makers.

“It has been a long path of training – and patience,” he says. He aims to try to retain workers with health and retirement benefits, and certification in their trades.

The move – shipping the molds, remodeling the facility, training the workers, buying new equipment – took nine months, required a plant shutdown of four months, and cost more than $1 million, Heyer says. The first container of AB inflatables shipped from Barranquilla in March 2008. As demand grows again, AB now has a plant that can gear up to employ 300 and ship up to 400 units a month.

Pride in workmanship

Heyer’s Colombian operations manager, Hermes Garcia, an energetic 31-year-old who he describes as “young, proactive, intelligent with new ideas and a new vision,” is university-trained and experienced in setting up and overseeing manufacturing processes. He has worked with Heyer to develop quality controls that include a quality-control team, inspections at every step in the manufacturing process, complete documentation for every boat that records every person who worked on it and inspection results, and daily meetings of inspectors, workers and Garcia to discuss problems with specific boats and how to correct them.

Heyer is a “perfectionist,” Garcia says, “a pain in the ass.”

Garcia’s job, among many, is to build a culture of pride in workmanship. “We have developed a team of people who are very quality conscious,” he says. “Everyone’s concerned about details, about the reliability of our product.”

Heyer agrees. “We have never built a boat even in our best years in Venezuela with the quality we’re doing today,” Heyer says. AB meets standards of the American Boat and Yacht Council and various European certification bodies. By July, it expects to be certified to the international ISO 9000 standard.

Now that AB is back on track, Heyer says his goals are to expand its line to meet the demands of the European, luxury, larger-boat and commercial/military markets. He has started “adding value” to the boats by prerigging them at the plant with steering, navigation gear, bilge pumps, water pumps, water tanks, console panels, switches and battery charging features. In the past, his distributors have done that. “That is a big savings to the distributor and to the customer,” he says. “Labor-wise, it’s much less expensive to do all that here.”

He’s also making inroads in the high-performance market, having just built a 28-foot inflatable powered by twin 300-hp XS Mercury engines. The 80-mph boat will compete in the Orinoco Rally, a 500-nautical-mile race scheduled for July 25 to Aug. 1 that runs along the Venezuelan coast and up the Orinoco River.

Heyer also foresees selling more boats in Colombia, in resort communities on interior lakes, and to growing numbers of cruising sailors who are bypassing Venezuela for the tourist city of Cartagena on Colombia’s Caribbean coast.

AB inflatables are popular in the Caribbean among both cruisers and in the charter fleets. Heyer has just developed a kind of hybrid RIB/personal watercraft that seats two on a jockey-style console. He already is filling two orders of 16 for tourist resorts in St. Martin. He is looking forward to orders across the board to pick up by the Fort Lauderdale International Boat Show in October.

Resettled, the refugee from the Bolivarian Revolution is confident AB will be ready to rock when the world economy turns. “We’ll get through this,” he says.

He’s been through worse.

This article originally appeared in the September 2009 issue.

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