Dour statistics and a ray of hope at ABC - Trade Only Today

Dour statistics and a ray of hope at ABC

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Industry tells lawmakers it's lost 135,000 jobs - Congressional economist sees turning point near

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At each American Boating Congress, industry leaders emphasize the importance of being active in Washington, D.C. This year it may be more crucial than ever, says Thom Dammrich, president of the National Marine Manufacturers Association.

"This is a unique and challenging time for the marine industry," he told ABC participants, citing a myriad of issues and the fact that Democrats control the White House and Congress. "We have to be more, not less, active in Washington, D.C."

Despite a streamlined agenda and lower turnout - 130 compared to 275 last year - Dammrich says the legislative conference was "extremely effective."

"Our industry brought our stories to lawmakers through more than 100 visits with members of Congress and their staffs," he says.

This interaction, he says, "sets a strong foundation for our advocacy efforts. Our Washington, D.C., staff is already aggressively following up on all the meetings on Capitol Hill."

Some of the key issues the NMMA encouraged members to discuss with their representatives centered on the economy, the credit crisis, Small Business Administration lending assistance, ethanol, net operating loss carryback, the Business Activity Tax Simplification Act, climate change, Wallop-Breaux reauthorization and the Employee Free Choice Act.

The hard facts

Most of the presentations leading up to the Hill visits focused on two of the biggest challenges facing the marine industry today - ethanol and the economy.

On the economy, the NMMA armed attendees with some grim statistics on the state of the marine industry:

  • As a result of credit illiquidity, low demand and negative economic conditions, roughly 135,000 (or nearly 50 percent) of all recreational marine industry jobs have been lost, according to the NMMA.
  • Of those 135,000 jobs, 17,600 were direct marine manufacturing jobs lost in the last 12 months. There were 180 plant closures in 2008.
  • Dollar sales of new boats and engines stood at $11.2 billion, down 22 percent from 2007.
  • All segments showed declines in unit sales, with the number of new boats sold down 16 percent.
  • The traditional powerboat segments of outboard, sterndrive and inboard ski/wakeboard and cruisers unit sales were down 24 percent, while dollars were down 20 percent compared to 2007
  • In 2008, aftermarket accessory sales decreased an estimated 8 percent to $2.4 billion vs. 2007.

"The financial crisis that began last fall has been the greatest economic slump in 50 years," said NMMA board chairman David Slikkers in his opening remarks. "None of us are sure when the bottom will occur."

Nearing bottom?

Guest speaker Jeffrey Wrase, Republican chief economist from Congress' Joint Economic Committee, addressed that uncertainty in his presentation.

"We're starting to see some signs of moving toward stability ... and it looks like we could be headed toward a recovery by the end of the year," he says.

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He pointed to tentative signs that housing sales are hitting bottom and that home prices, while still down, have shown some positive signs in recent months. He also pointed to improvements in consumer confidence in the first quarter, and said initial claims for unemployment insurance have declined in recent weeks.

Wrase says he expects the Gross Domestic Product to post a more modest decline in the second quarter - about 2 percent, compared to the 6.3 percent and 6.1 percent drops in the 2008 fourth quarter and 2009 first quarter, respectively.

An eye on recovery

Some of the congressional speakers who followed Wrase's presentation discussed their ideas on how to initiate and speed up recovery.

"The president must revitalize small business," says U.S. Rep. Steven Kagen, D-Wis., who offered some ideas on how that can be accomplished, including eliminating the loan origination fee for any small business. He also submitted a bill that would offer zero-percent interest on loans for small businesses.

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Kagen acknowledged, however, that before companies can invest in their businesses they must feel confident consumers will buy their products. To help invigorate consumer spending, he wants to put more discretionary money in people's pockets by offering 4 percent loans for Fannie Mae and Freddie Mac clients.

"They'll turn around and spend that savings to pump up the economy," says Kagen. "That increase in consumer spending will give businesses more confidence to invest, thereby adding jobs."

U.S. Rep. Joe Donnelly, D-Ind., keynote speaker during the ABC luncheon, has been working to fix the wholesale credit problem that is crippling marine businesses. He pushed to have TALF (Term Asset-Backed Securities Loan Facility) include marine dealer floorplan financing, and he is working to have floorplan and inventory financing available through SBA loans.

"We're trying to get the confidence back and the credit back so consumers will buy your product," he says. "We are hoping this will help crack the ice on the financing part."

Ethanol worries

On the issue of ethanol, Karl Simon from the U.S. Environmental Protection Agency says the NMMA's legislative conference was very timely because the Obama administration had just released the requirements for Renewable Fuel Standards 2.

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As part of the Energy Independence and Security Act of 2007, Congress mandated an increase in the amount of renewable fuel in the gasoline supply - called the Renewable Fuel Standard - to 36 billion gallons of renewable fuel by 2022.

The revised statutory requirements (RFS2) specify the volumes of cellulose biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that must be used in transportation fuel each year, with the volumes increasing over time.

"The requirements are very ambitious in terms of the volumes they want us to replace, and ethanol will certainly play a part in that," says Simon, director of the Compliance and Innovative Strategies Division of the EPA's Office of Transportation and Air Quality.

He also reminded attendees of the waiver request submitted by Growth Energy - an organization representing ethanol producers - that seeks an increase in ethanol blends to E15 from the current E10. He assured attendees it is the EPA's "sincere hope and desire" to work through some of the concerns of the marine industry and others opposed to mid-level ethanol blends - such as testing obligations for engines.

He also says that even if the waiver for mid-level blends is approved, that doesn't mean E15 will be mandated by the government.

"If the EPA grants the waiver, all that does is make the fuel legal," says Simon. "It doesn't require anyone to sell it."

However, U.S. Rep. John Shadegg, R-Ariz., doesn't think the issue is quite so benign. He believes the Obama administration will increase ethanol content to at least E12 through administrative action.

"Not only is the federal government not doing a great job in restarting the economy, but it is also making a frontal assault on the marine industry on the fuel issue," he says. "Pushing ethanol without studying its consequences has consequences itself.

"That is an issue that has affected me directly," Shadegg says, noting that the tank on his Bertram 28 was destroyed by ethanol. "I may bring a piece of it to the floor of the House if this issue heats up."

This article originally appeared in the June 2009 issue.

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