I remember exactly where I was when I heard the luxury tax had passed. It was September 1990, and I was in Connecticut for the Norwalk boat show. We knew it spelled doomsday.
I was a pretty young guy at the time. I was getting married in two months and planned to start a family. The luxury tax — a 10 percent tax on the portion of a boat’s price that exceeded $100,000 — threatened to derail my professional career and my family’s business just as I was embracing the work, hitting my stride and starting my own family. It was an eye-opening experience that showed life’s unpredictability.
The luxury tax was so unfair and unreasonable that no one could have prepared for it. Our plan was to forgo profits and pay the tax for customers to keep the doors open and employees working. It wasn’t enough. Those who could afford luxury items felt targeted by the tax and responded through silent protest, opting to withhold their purchases.
In 1990, Viking had just surpassed $100 million in sales for the first time in our 26-year history, and we had just opened a new facility in Florida, Gulfstar Yachts in St. Petersburg. We sold 90 boats that year. In 1991, after the luxury tax landed, we sold 32 boats, and in 1992, only 12 boats moved.
Layoffs were inevitable, and we were forced to shut down the Florida plant. The bond between Viking and its employees doesn’t stop at the end of the plant’s parking lot; it extends into every employee’s home. My father and uncle couldn’t sleep at night, knowing how people’s families were being affected. We were devastated.
Once the shock began to wear off, we went into action mode. For the next two years, my father ran the New Gretna plant, holding the business together. My Uncle Bob took care of the legislative and financial sides. He was a dog with a bone, personally meeting with congressmen and senators.
I concentrated on sales. My first order of business was to sell as many boats as possible before Jan. 1, 1991, when the tax would take effect. We sold boats everywhere and anywhere — the East Coast, West Coast, Great Lakes, Europe, South America — trying to keep Viking’s cash flow positive. In early 1992, we had three yachts in production that were headed to Italy, Spain and Greece. We had to turn over every stone, work every phone call. Chasing every lead with dogged determination became part of our business philosophy, which we still follow.
We also began doing a lot of customization to the boats — to promote sales and keep as many people working as possible. In fact, customizing boats helped us develop some of the standard features on Viking’s future fleet. We became highly adaptable to each customer’s individual needs.
I did my share of lobbying, too. I would plan my schedule to be available to meet Uncle Bob in Washington, D.C. We walked the halls of Congress, and I would talk to staffers as Bob spoke with senators and congressmen.
Through local boat show promoters, we brought manufacturers and dealers up to speed about the tax. These industry allies would then meet with their congressional representatives and start lobbying.
We held about 25 luxury tax meetings around the country, including one in 1992 with Jeb Bush, whose father was the U.S. president. We rounded up about 20 boatbuilders and went to the Fort Lauderdale International Airport to meet Bush. After the meeting, we were revved up! We went back to the Fort Lauderdale boat show and sold some boats. It was real turning point; we started having more hope.
Ring of Keys
I remember when the bank threatened to put Viking into bankruptcy, as we had no cash flow. There was a big meeting, and my Uncle Bob had anticipated that the bank was going to hold its ground. He was prepared.
Bob told the bankers: “Look, I will save you the trouble and expense of the legal proceeding — you can have it!” He reached in his pocket and threw a huge ring of keys on the table. “If you can do any better than we have after building Viking Yachts successfully for over 20 years, you’re welcome to do it. We have not squandered our money or the assets of Viking. We were caught in an economic disaster beyond our control.”
The bank wound up suspending our loan payments and agreed to work with us. That set of keys was one of the strongest weapons we used on the financial side of this fight, and they weren’t even my uncle’s keys. He had borrowed them from someone in the Viking group because they were much bigger than his were.
We continued with research and development, which paid off when the luxury tax was repealed in 1993. We developed new products so we’d be ready to meet the demand. The tax drove us to build a better boat every day, which remains our mantra. We worked hard through the toughest period of Viking’s history to build a stronger company foundation.
Viking still stands because we fought hard once the tax went into effect. It put the entire marine industry to the test. It was an epic battle in which the U.S. boating business took on Congress. It seemed like an impossible undertaking, but we did it. We won. The entire industry won.
Patrick Healey is president and CEO of Viking Yacht Co. His father, Bill, and Uncle Bob founded the company on the banks of the Bass River in New Gretna, N.J., in 1964. Family owned and operated, Viking is celebrating its 55th year of building a better boat every day.
This article originally appeared in the June 2019 issue.