Nautical Enterprises Inc., one of the largest yacht dealers on the West Coast, has joined the list of marine businesses shuttered by a credit market that has made retail and wholesale financing either non-existent or too expensive.
NEI is the parent company of H&S Yacht Sales and Southwestern Yachts - with several locations in California. It was founded in 1989 by CEO Michael Berk and president Doug Ament, and was an authorized dealer for sail- and powerboats from such builders as Beneteau, Lagoon, Hunter, Jeanneau, Silverton, Navigator, Californian and Fairline. Praised by many as "upstanding guys" and "great people to work for," Berk and Ament grew the business by placing a priority on customer service and won numerous awards from the boatbuilders they represented.
In mid-June, they surprised many in the industry - along with their 75 employees - when they closed their sales locations and ceased operations. A statement posted on the company Web site states: "We are deeply disappointed that we didn't predict the depth of this downturn, but cannot continue to operate."
Attempts to contact Berk and Ament were unsuccessful, but former employees and others familiar with the company offer some insight into what led to NEI's closure. "They're just a fatality of the poor economy and business conditions," says Dave Geoffroy, executive director of the Southern California Marine Association.
"The biggest problem was floorplan financing and getting retail financing for customers," says Barrett Canfield, who was vice president of Southwestern Yachts when NEI shut down. "The pressure from GE and the banks in flooring put them out of business," he says, adding that GE's new floorplan policy tripled the interest rate NEI was paying on its inventory.
The company had operations in San Diego, Marina del Rey and Channel Island Harbor. But with its multiple locations and large stock of inventory, it simply couldn't keep up with the floorplan payments, says Canfield. And in this economy, inventory wasn't moving.
"Southern California is probably affected more [by the recession] than other places because of the housing market here," says Geoffroy.
Canfield says that even when the dealers were able to make a sale, customers often couldn't get financing, so the purchase would fall through. "It's definitely sad and a shocker to all of us," he says.
"It all happened really fast," says Sal Casalnuovo, who was marketing coordinator for NEI.
Berk and Ament downsized their operations and cut costs to offset the weak sales. NEI closed its Newport Beach location last fall and consolidated those operations into the Marina del Rey location. "They reduced overhead tremendously just by cutting down on expenditures," says Canfield. "I just don't think they were able to consolidate fast enough."
"It's a sad story," says Geoffroy. "It's one of the most professional businesses in the marine industry. These are good people. The owners are really reputable guys."
Geoffroy says this is indicative of the changing dealer landscape that has resulted from the recession and credit crisis. "I think we're going to see a lot of these companies with multiple lines and multiple locations replaced by smaller entrepreneurial businesses with two or three lines," he says.
NEI's inventory is being redistributed among other West Coast dealers. Hunter Marine, for example, says it has signed two new dealers - Cruising Yachts Inc. of San Diego and Sailboats Inc. of Marina del Rey - since NEI ceased operations.
"I have absolutely no complaints about working for them," says Casal-
nuovo, NEI's marketing coordinator. "They were great people. They did a lot of charity work and lots of work for the community."
This article originally appeared in the August 2009 issue.