Tiny Rhode Island is a big player

Posted on Written by David Shaw

ri1When J/Boats went shopping for a new domestic builder in 2008, times were tough and more than one company would have given just about anything to get the business.

Parting with its Rhode Island-based builder, in large part because of the worsening recession, J/Boats “had to start over in many ways with brand-new models and new building relationships,” says Jeff Johnstone, president of the Newport, R.I.-based company.

J/Boats licenses the manufacturing of its sailboats to a small group of builders worldwide. The boats are sold through an international network of 60 dealerships. A solid working relationship with builders and dealers represents the bedrock of the J/Boats way of doing business, Johnstone says, which made finding the right match with a new domestic builder absolutely essential.

“Our main goal was to find a really good boatbuilder that matched our philosophy,” he says. “We’re very hands-on and right there through the whole building process. Our boats are performance-oriented, and it takes more sophisticated boatbuilding techniques to build them than you find in average production boats.”

J/Boats chose two companies in Rhode Island for its domestic production: CCF Composites in Bristol and US Watercraft in Portsmouth. Johnstone says the decision was based on the availability of high-tech composites manufacturers, a highly skilled local work force, an abundance of local suppliers and craftsmen, and the convenience of having the boatbuilders less than an hour from his office.

“We could have gone anywhere, but we stayed in Rhode Island,” Johnstone says. “If we were strictly selling a boat on price, there would be a lot of pressure to build it elsewhere, but in our case performance and quality matter, and having the support network nearby is really important to us.”

In March 2012, J/Boats launched its new J/70, a 23-foot one-design speedster that has received plenty of attention in racing circles. More than 300 were ordered in less than a year, according to the company’s website. “Revenue was up in 2012 over 2011,” Johnstone says, adding that he expects to see strong sales this year as the economic recovery inches forward.

A boatbuilding hub

What kept the domestic production of J/Boats in Rhode Island is a relatively unique combination of incentives for boatbuilders that can’t be found in many other places. With 400 miles of coast and 300 harbors, Rhode Island is a premier boating center that offers a bonus: no sales or personal property tax on boats and no sales tax on marine services.

ri2As a destination, Newport is second to none on the East Coast, boasting numerous regattas, an annual boat show and a historic waterfront packed with shops, restaurants and bars. The facilities for megayachts in Newport and adjacent harbors draw the biggest and best every year.

The state’s long-standing stature as a boatbuilding hub continues in spite of the financial blitz of recent years. A vibrant marine educational network is one big reason. Newport’s International Yacht Restoration School provides a steady flow of new skilled labor through its wooden boat, composite and marine systems programs, as do the New England Institute of Technology in East Greenwich, R.I., and other technical schools in New England. Many marine craftsmen come from families that have been in the business for generations, keeping up a tradition of working with boats that goes back centuries.

Because the state is so small, all supporting businesses are within easy driving distance — a real boon for entrepreneurs who are considering Rhode Island as a potential candidate for business operations, says Wendy Mackie, CEO of the Rhode Island Marine Trades Association in Bristol. “You can come here and see everyone you need to meet with in a single day,” she says. “The close proximity of marine businesses here is a real plus.”

Many quality marine businesses are packed into a single town, such as Bristol with its wooden boat restoration, composite and spar companies, and scores of other marine businesses.

Creating an ‘incubator’

This past January RIMTA launched a redesigned website, and it’s working on an interactive Internet-based map to promote the manufacturing muscle Rhode Island can offer boatbuilders. The map will show website visitors where the various types of manufacturing facilities are so it will be easy to take advantage of companies that can build all of the components that go into a boat from the hull, to the deck, to the custom-finished hardware, Mackie says. She expects to launch the map by early next year.

“We’re essentially trying to create an entrepreneurial incubator for designers and builders interested in building high-end yachts in Rhode Island,” she says. “Entrepreneurs don’t have to own an entire boatbuilding company. They can incorporate the services of the different businesses existing in the marine manufacturing continuum into whatever project they have at hand.”

Prior to the Great Recession, few other locales had such a high concentration of custom and production yacht builders, high-tech composite companies, wooden boat builders and restorers, spar makers, custom composite and stainless-steel parts manufacturers, sailmakers, canvas and upholstery experts, riggers, woodworkers, painters, mechanics, electricians, boat dealerships, marinas and marine suppliers. The recession hit hard across the board in the state, with dramatic declines between 2007 and 2012 of 76 percent in suppliers, 72 percent in yacht charter companies and 47 percent in boatbuilders, according to a survey of RIMTA members released in March last year.

ri3A RIMTA skills gap analysis released in February 2008 indicated that in 2007 there were 2,300 marine businesses operating in the state, providing 6,600 jobs and generating $1.6 billion in sales. The state was home to 73 boatbuilders. In 2012, that number had dropped to 39. RIMTA is working with the Rhode Island Manufacturing Partnership to survey boatbuilders to update the numbers. That data should be out in early summer, Mackie says.

In addition, RIMTA will begin a comprehensive new skills-gap study, starting in August. About 700 marine businesses in the state are expected to participate. “The reality is we just don’t know right now exactly where we stand in terms of the number of marine-related businesses there are in Rhode Island,” Mackie says. “The purpose of the study is to find out.”

Clearly, boatbuilders in the state suffered a severe blow. Eric Goetz Custom Sailboats, known for its production of America’s Cup boats and other high-tech racing yachts, was one. The firm was humming along with about 85 employees when it moved into a new 42,000-square-foot manufacturing plant in September 2007, and then the ax fell. “We got hammered in the recession. We had some financial difficulties after the market crashed that led us to go out of business,” Goetz says.

Goetz founded the company in 1975 and is regarded as one of the pioneers of high-tech boatbuilding. It was difficult for him to let his company go, but he moved on. In 2010 he got involved with Composite Energy Technologies in Bristol, R.I., which then bought the name Goetz Boats and does business under that name. He was hired as chief technology officer. “I’m an employee, which means I get to build things and let someone else handle the business side,” Goetz says.

At present, 30 to 40 percent of the company’s business focuses on composites for marine applications. The lion’s share is in making components for architectural use. The new iteration of Goetz Boats is indicative of how many marine companies in Rhode Island have diversified since 2008. Hall Spars & Rigging is another example, a high-tech manufacturer of carbon fiber spars. This past January the company launched Hall Composites, a new division geared up for projects in the aerospace, defense and architectural industries. “We’re developing these new markets so that we can augment our core business,” says Ben Hall, the company’s co-owner and vice president.

“Few businesses still exist that only build boats or boat components,” Mackie says. “More commonly now, you see businesses that have used their skills to innovate new applications for their technologies and have branched off to serve other industries, including everything from defense to robotics.”

Anecdotal evidence of growth

According to 2010 statistics from the U.S. Department of Commerce, the latest available data, Rhode Island ranked ninth in the United States in the number of boatbuilders with 28, as opposed to 198 in Florida, which ranked first that year. Although the data sources no doubt differ, comparing apples with oranges to a certain extent, RIMTA’s findings in 2012 that there were 39 boatbuilders in Rhode Island indicate that some new ones may have emerged since the depths of the recession.

In 2012, signs were good that some hint of a recovery was under way. RIMTA data as of June last year indicated that 172 jobs would be added or likely would have been added to marine businesses since July 2011. A RIMTA survey of 250 marine businesses in Rhode Island this past January indicated that the 52 firms that responded to the survey added 110 new jobs between January 2011 and January 2012 and that the companies planned to add 84 new positions during the next 12 months. Obviously, 52 companies don’t represent Rhode Island’s marine industry, but Mackie says the “results are promising and show growth for the industry.”

Anecdotal evidence also suggests that hiring is on the rise, at least in some Rhode Island marine companies. Between 2011 and June 2013 Bristol-based Hall Spars & Rigging hired about 10 new employees, says Ben Hall.

New England Boatworks, in Portsmouth, R.I., builds custom sail- and powerboats from high-tech composites, including prepreg carbon fiber, and it also operates a marina and boat service business at its 21-acre facility. In the past two years, the company added 20 new employees, bringing the total number of workers to 110, says Tom Rich, treasurer and co-owner. He says most of the new hires were in the boatbuilding branch of the business and that at the height of the recession the company had been reduced from 135 employees in 2007 to 80.

ri4Rich says the percentage of his business that comes from boatbuilding varies from year to year, depending on the projects he’s working on. Some are more profitable than others, which accounts for the year-to-year variance. He attributes this, in part, to winning contracts to build two large high-tech racing yachts, each of which took about a year to construct. “The process of building these boats is very high-tech,” he says. “You’ve got prepreg carbon fiber [and] high-tech cores. It’s the highest-tech boatbuilding that’s being done anywhere. As far as I know, it’s as high-tech as any builder in the world.”

Prior to the recession, Hunt Yachts, a builder of high-end powerboats in Portsmouth, employed 60 people and produced about 50 units a year. During the worst of the downturn, the company produced fewer than 20 a year. It added larger boats to its product line despite the tough times, and in 2012 it sold about 35 of its smaller models, plus a handful of its larger yachts, says Peter Van Lancker, Hunt’s president.

“The business has grown,” he says, noting that offering larger boats boosted revenue in 2012. In fact, revenue jumped more than 94 percent last year from 2011 because of the introduction of a new 44-footer, the delivery of larger yachts, and strong sales of smaller boats in late 2011 and early 2012, Van Lancker says.

The company employs about 55 at its Portsmouth facility, up from about 40 last year. Hunt Yachts includes a full-service marina, a service business and a 15,000-square-foot manufacturing area for boats as large as 36 feet. Unlike traditional boatbuilding businesses, which require large capital investments in a factory and equipment, Hunt farms out all of the major manufacturing and much of it goes to “vendor partners” in Rhode Island.

In a sense, Hunt Yachts is a “virtual” boatbuilder, relying on a supporting network of manufacturers to make all of the pieces of a boat, which are then assembled at the plant in Portsmouth. For example, Bristol-based CCF Composites makes the hulls. “The molding of the hulls gets done in another plant. All the stainless steel, canvas and upholstery work is done outside. A portion of the woodwork is outsourced and some is done in-house, and the rest of the components are brought in from all over the country,” Van Lancker says.

“The truck comes with the hull, and the rest of the parts show up, too. Then we get to work assembling the boat,” he continues. “It’s a little like conducting an orchestra, bringing everything together, and the boats are never the same because of the nature of our process with customers.”

East Passage Boatwrights, primarily a wooden boat restoration company that operates out of a 4,000-square-foot facility in Bristol, was founded in 2006. The owners, Seth Hagen and Carter Richardson, graduated from the International Yacht Restoration School. They started the company because they love restoring classic wooden sailboats to their original beauty, which often means taking the entire boat apart and rebuilding it from the keel up, Hagen says. The business started with three people, but it began growing in 2007, employing as many as 10 during the peak restoration season between October and June.

ri5“We’ve been able to keep 10 employees throughout the recession,” Hagen says. “We definitely felt the downturn, but we got some of our biggest and best projects after 2008 that created a real buffer for us.” Two of those projects involved restoration work on Sonny, a classic Sparkman & Stephens sloop built in 1935, and Skylark, an S&S yawl built in 1937.

Hagen and Richardson reflect the newer wave of boatbuilding talent in Rhode Island, a regeneration of talent to replace the old that keeps the marine work force from aging out and ultimately disappearing.

“The fact that IYRS and New England Tech are here means the state is constantly injected with a steady flow of young, passionate and skilled workers into existing companies, as well as startups,” Hagen says. “It allows this state to be a hub for boats of all shapes, sizes and varieties because the work force is highly trained, skilled and local.”

This article originally appeared in the July 2013 issue.

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