Surviving today’s recession could poise boatbuilders to grab market share and grow during tomorrow’s downturn — as long as they remember and apply the lessons learned and, above all, value their workers.
That’s according to Viking Yachts president and CEO Pat Healey, who talked Wednesday with Chris Ruisi, host of “Step Up and Play Big” on the VoiceAmerica Business Channel, on his program. Healey was discussing the company, now in its second generation, and its 50th anniversary next month.
Avoiding being overleveraged and not having commitments outside the company’s reach were lessons that carried over from the 1990s recession, which coincided with the luxury tax, to help the company flourish despite the 2008 downturn, Healey said, responding to a question submitted by Trade Only Today.
“We didn’t have the debt we had in 1991,” Healey said. “From 1988 to 1991, we bought a company, Gulfstar, a luxury motoryacht builder, and we wanted to provide our dealers with both sportfishing and motor yachts. It was successful, but it took capital.”
“That was much more severe for us,” Healey explained, because the luxury tax slapped a 10 percent tax on boats that cost more than $100,000 — essentially everything Viking sold. “We were in a depression in 1990 and 1991. That was true for all of the boatbuilders building boats $100,000 and above. We went from 1,300 employees down to 80, from two plants down to one.”
During the recent downturn, Viking kept its original plant in New Gretna, N.J., and another in Florida, but went from about 1,300 employees to about 550, Healey said. “So it was nowhere near as severe as the luxury tax, but it was just as scary — meaning that when you were watching Lehman Brothers and Wall Street crumbling, and heck, a lot of our customers work there, it got your attention. Our customers, hey, they’re the top of the top. That’s what shook them, and that’s what shook us.”
Because Viking runs a backlog of a year in a half in an up economy, it was 2009 before the company saw orders drop off. And because Viking wasn’t over-leveraged, as many other builders were, it did not have the struggles that others faced.
But perhaps the biggest key was ensuring the return of a trained work force when things did rebound, something many others were unable to achieve.
“The amazing thing today is our market share has doubled in the last five years, and that’s [due to] the strength of new-product development and having a great team,” Healey said. “When we had to lay people off, we let them keep medical benefits, and our in-house medical team got beefed up and we had them make visits. So we made sure that during the recession it didn’t matter whether it was a guy sweeping the floor, they were taken care of medically.
“We were able to get 98 percent of our people back, so when we came back we came back with a trained workforce,” he said. “There are a lot of boatbuilders here that didn’t fare well and we were able to get a lot of their great people. And everybody knows a lot of the casinos in Atlantic City were taking it on the chin,” so many boatbuilders lost in the 1990s recession who had gone into construction returned, Healey said. “They now have come full circle and come back. Today we sit with a folder full of applications. We’re at 100 percent now, but we’ll be expanding and increasing, and bring that up at around 15 percent growth per year.”
Healey also attributes Viking’s success through the recession to the fact that during informal cafeteria lunches, six to eight executives sit and chat about new designs or ideas.
“It’s a wonderful thing because decisions are made and implemented immediately,” Healey said. “We don’t have to go to a board of shareholders to get approval. We have a meeting and we make decisions, and we implement those decisions.”