The builder stopped production and delayed introductions to help dealers clear existing inventory
When Everglades Boats extended its annual two-week shutdown in December 2008 to four weeks, the manufacturer anticipated resuming production the first week of January.
Then Textron exited marine floorplan financing in late December, leaving the boatbuilder with about $6 million in finished-goods inventory that its dealers could not get floorplan financing for. (The bulk of the dealer network had Textron floorplanning.) With a substantial amount of working capital tied up in finished inventory and facing a stagnant retail market, the builder's plans obviously had to change. Everglades decided to further extend its production shutdown until its dealers could sell their existing inventory.
Located in Edgewater, Fla., Everglades attended the crucial winter boat shows with two new models along with the rest of its line - and orders began coming in. Following the Atlanta, Atlantic City and Miami shows, the company and its dealer network had pulled in more than $3 million in retail sales (approximately 25 percent being finished-goods inventory from the plant). Those sales enabled it to restart production in early March. As of early April, the manufacturer estimated its finished-goods inventory was down 30 percent from January.
The actions taken by Everglades are an example of the tough decisions and strategies that builders across the industry are adopting to weather this "perfect" economic storm.
"I think every single solitary boat manufacturer that's out there laid off people, went to shorter workweeks, asked people to take reductions in their salaries, just all of the things they had to do to keep going," says marketing director David Glenn. "So we were in that situation, too. So we did those things, and they were tough decisions. But we made them, and we're still here today in business and trying to push forward for '09 and 2010."
Everglades was fortunate, Glenn notes, to start the year with a string of good shows. "We got good boat sales in several areas of the country from the Northeast to the Southeast," he says. "Miami returned good retail sales, and it returned enough retail sales that we needed to bring some production back online and bring some people back in."
At the end of March, about 50 employees were back at Everglades, which was founded in 1999 by Bob and Stephen Dougherty. The company, known for its patented RAMCAP construction process, had about 250 employees before December.
"As those inventories come down, that should give us some more orders at retail to be able to manufacture some boats," says company president Stephen Dougherty. "We're thinking over the next couple of months that we're going to be able to increase production. At least we're able to have a small crew working and keep the lights on at the factory and keep things going as we reduce our inventories in the field."
Helping out the dealers
To assist dealers, Everglades is delaying the introduction of specific 2010 models from June or July until September 2009 - one of the first manufacturers to take that step. "Due to extreme pressure on inventories, higher carrying costs and [the] tough economic climate, we felt it was a prudent decision to delay the delivery of specific 2010 models to our dealers," says Greg Allen, vice president of sales.
The 350 Express and 320 Express will debut in June as scheduled, as inventory levels of that size and style are low. But the introduction of other models will be pushed back. "We're going to allow our dealers to reduce their inventory," Dougherty says. "We don't want to bring out a model year that's going to compete with the boats they have in stock."
Everglades, which has 35 to 40 dealers throughout the country and a handful abroad, builds 13 models ranging from 21 to 35 feet. The company, which upgraded its facility three years ago - expanding from 45,000 square feet to 110,000 square feet - is asking other manufacturers that can't afford to maintain their own plants to consider building boats at Everglades' modern site, Dougherty says. Any and all options to take advantage of the manufacturing facilities and labor base will be explored, he says.
The problems with dealer floorplan financing - from Textron's exit to rate increases by GE - are not making business any easier for an industry already deeply affected by the global recession, Dougherty says.
"During normal times we would be rocking and rolling at this point, but the floorplan issue has reared its ugly head, and we're not able to replace anything that the dealers are selling out of their inventories," the company president says. "At a time when the dealers need all their cash and operating capital and, frankly, motivation to stay in business, they're getting kicked in the face. They're being forced to pay curtailments, which they've never been asked to pay before. They're also being hit with increased interest, which they really didn't expect."
As a result, Dougherty predicts dealers won't be able to carry as many different models from the manufacturer. "If they're being charged upwards of 10 percent in a market where dealers are making 15 to 20 percent on a boat if they're lucky, that's taking a lot of their profits away," he says. "And it makes it hard to pay any interest and to stock boats and to run their businesses."
Dougherty says he expects these difficult times will shrink the number of Everglades dealers. Those who make it through, he notes, should be stronger and better able to remain profitable. (He also expects to see fewer manufacturers in the future.)
Allen, the vice president of sales, says the company is letting its dealer network know which dealers have excess inventory, and what models are available. That way, boats can be moved to where they're needed.
The typical buyer of an Everglades sportfishing boat, which runs from about $60,000 to $400,000, is a fairly affluent individual. But Dougherty says it has become difficult for some of those would-be buyers to get financing, even with high credit scores, a decent down payment, and an unblemished credit record.
"Our customers are very salty customers," Dougherty says. "They've been boating all their lives, and it's something they have to do. He may trade in his BMW for a Chevrolet to be able to buy a new boat, because that's more important to him."
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This article originally appeared in the May 2009 issue.