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Innovation, resolve have builder rising in the East

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How does a small niche builder of high-end, performance cruising catamarans compete in today’s global market? How does it even survive, given the lousy economy of the last three years?

The story of Gunboat is as much the story of its founder, Peter Johnstone, as it is a story of the large, fast custom sailing cats his company builds. A passionate sailor and restless entrepreneur, Johnstone, 45, founded his latest boat company almost by accident.

About 12 years ago he built a 62-foot carbon fiber cat named Tribe in South Africa and went on an extended cruise with his family. The interest that Tribe generated during that voyage provided the impetus for Johnstone to pioneer what essentially would become the luxury performance cruising cat market.

One sailing commenter wrote that a Gunboat “is so cool it creates a new category of cool.” Hyperbole notwithstanding, you get the idea.

“Our sabbatical cruise aboard the first Gunboat really proved the concept,” says Johnstone, who had built and sold five boat companies before Gunboat, including successfully resuscitating Sunfish/Laser from bankruptcy. “With no other similar offerings in the marketplace it seemed a natural business for the rest of my life. Before, I could not sit still in one job for more than three or four years. Gunboat has been my passion for every waking moment for 12 years now. And I feel like we are only just getting going.”

To build the large carbon-fiber cats, Johnstone set up a yard in Cape Town, South Africa, and he once employed 180 workers there. He closed it in 2011, having established a boatbuilding operation in China a year earlier.

Johnstone made news recently when he purchased the old Buddy Davis yard in Wanchese, N.C., where he intends to hire about 70 workers and invest $1.8 million over three years to build his 55 Series of catamarans. Gunboat has contracts for three of the $1.58 million yachts. The 60 Series will continue to be built in China, giving the builder a manufacturing footprint on both sides of the world. The headquarters will remain in Bristol, R.I.

Regarding his search for a U.S. building base, Johnstone had nothing but praise for North Carolina and its business-friendly climate.

“No other state came close to their support and can-do attitude,” says Johnstone, whose uncle Rod and father, Bob, founded J/Boats (Johnstone notes that his family elders told him he had too many ideas to work in the family business, and therefore had to make it on his own). “We felt warmly welcomed and appreciated from Day One. It felt like Rhode Island drove us away from our home state. After experiencing the business-friendly climate of North Carolina we will not be looking back.”

I asked Johnstone how a low-volume luxury builder remains competitive in a global market.

“Maybe the simplest way to stay ahead is to simply ask how can we do this better and keep asking that question,” says Johnstone, whose company can produce catamarans from 48 to 90 feet. The current focus is on boats from 55 to 78 feet. “You can never rest on your laurels, or even rest to enjoy your accomplishments.”

Illustrating that point, the company recently revamped its entire model lineup. “Our designs, while revered, looked dated,” says Johnstone, who assembled a new design team to rework the exterior and interior naval architecture. To reduce labor hours, the company has made production engineering a priority.

Large company or small, value boat or $1 million-plus yacht, a global player or a regional one, the lessons of the past three-plus years are similar across the industry, with everyone wearing more hats and a laser focus on expense control.

“We have dramatically cut our non-essential overhead costs,” Johnstone says. “On marketing, we only spent if we have an objective for the expense. Before the recession we simply built the absolute best boats with a ‘cost is no object’ mentality. Over the last four years we have focused on how to deliver the same performance and benefits for a more market-based price.”

Although the final few projects that came out of the company’s Cape Town yard were, in Johnstone’s words, “gorgeous,” he says the organization there had grown complacent and was not focused enough on the end user. “That was not acceptable,” he says. “I am now personally involved with every customer and project. I feel so strongly about this, I am moving to North Carolina to be on site full time in our new yard.”

I asked Johnstone about the general state of boatbuilding in China today and why he believed it made sense to build high-tech boats there.

When costs continued to rise in Cape Town, he knew the company had to seek production elsewhere. “The unions would not back away from 30 percent annual wage increases and the laws prevented any flexibility in staffing levels,” says Johnstone, who visits the yard in China every few weeks. Asia, he noted, seemed like the logical choice.

“Our first three years in China have been a steep learning curve,” he says. “The labor has a great work ethic, but very little experience. Training up local team leaders is critical. For the overall management, experienced Westerners are required, and most effective if they speak Mandarin.”

The Gunboat 60 series is built in China by subcontractor Hudson Yachts with epoxy infusion into carbon and foam core. “The laminate is all drystacked, which allows the quality-assurance managers to double- and triple-check laminates before infusing the epoxy,” he notes. Here’s the takeaway. “Infusion,” Johnstone continues, “minimizes the risk of building high-tech boats in a lower-cost labor market.”

China is going through massive wage inflation, with labor rates up 300 percent since Gunboat started there, Johnstone says. Although labor is still a third of what it is in this country, the trend is upward, he adds.

“Regardless,” Johnstone continues, “Asia is producing more wealth each year than any other region. A Gunboat is a luxury item with brand appeal. Right now, Asia looks like a nice replacement for the weaker European market. Sixty percent of our Gunboat 60 series is being sold in Asia.”

Gunboat is clearly revving up.

“Our goal,” Johnstone says, “is to make our mark on our second decade.”

This article originally appeared in the March 2012 issue.



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