Boating Industry Canada

ness, sweeping from the US to Canada. No matter how hard the professionals in Canada try to get dealers floor planned, the US head offices are so ‘risk averse’ on major leisure items like boats and RVs that dealers in many areas are being crushed.

Brock Elliott stated that, “The industry is going into darkness without a good floor plan situation. Without the ability to buy boats for inventory, dealers are certain to lose sales. The dealer is going to have to find private financing where they can (for example), raise a mortgage on their own assets. If they are able to put a one million dollar line of credit together, they can get it at three quarters of a point over prime (at present about 3 1/4%) and use that to floor plan their own boats, but I’d speculate that few dealers are in a position to do that.”

Interviewing Bruce Cleland at Gordon Bay Marine and Chris Wert at Hurst Marina for the Brunswick Dealer Advantage article (see page 14), they both said they had sufficient floor plan support and also that their customers did not seem to have difficulty getting their finances together. But, that might not mean taking out a consumer loan.

We interviewed a banking professional in consumer loans with one of the major institutions. He asked not to be identified, but said few buyers were financing; his business was really down and his marinas (mainly smaller businesses) were also reporting low sales levels. The registration data, though, says registrations are not down, so we suspect people are buying used, paying cash, or using a secured line of credit.

Here is another question that we struggle with: how many marine dealers are older people and won’t want to take out mortgages or pick up the battle? Will they sell or close?

Selling or closing is where the US market is at. On June 2, 2009, Genmar, North America’s second-largest boat builder filed for Chapter 11. That’s huge.

We talked to Sara Anghel at NMMA Canada about her lobbying efforts to secure dealer financing through Ottawa. The NMMA may have success in Canada eventually, but it seems certain our gov-

ernment will not move fast enough to support summer 2009. NMMA president Thom Dammrich was recently quoted, during his government lobbying efforts to get floor plan money in the US, as saying that 50% of employees in the US boat business were unemployed.

The NMMA is succeeding in the US. On May 28, 2009, the American Small Business Administration (SBA) announced a new pilot program that will offer government guaranteed loans to finance inventory for eligible boat, auto, RV and other dealerships. The program, which will begin on July 1, will be administered through SBA’s 7(a) program.

Irwin Jacob made his fortune by buying bankrupt companies and few people in our business would understand Chapter 11 better. Jacob believes that Genmar Corporation will emerge even stronger and better from the process.

SBA Dealer Floor Plan loans, or “DFP loans,” will come with a 75 percent government guarantee and a maximum repayment term of five years. DFP loans will be available for a minimum of $500,000 up to the $2 million allowable under the 7(a) program. DFP loans will be made only for titleable inventory such as boats or boat trailers.

The NMMA’s success in the US may rescue enough American dealers that the stocks of boats in the “pipeline” may vanish quickly. Do Canadian dealers have sufficient inventory at present?

We asked the Ontario Marine Operators Association head, Al Donaldson, about what keeps him up at night. He immediately cited dealer uncertainty. “Huge cutbacks in inventory can become a self-fulfilling prophecy of declining sales. In the fall, the inventory was depleted, so there isn’t much out there to sell.”

Donaldson continued, “We’re not seeing a huge problem on the marina side. Things are picking up, but certain regions in the province are suffering terribly, for example the Windsor/Detroit area. Also, floor planning is the big concern for many dealers in Ontario. With only GE in the floor planning business, prices and contracts have become more onerous, so dealers are buying less, cutting back on inventory. Now, when they get an order, they can place an order but this won’t satisfy the buyers.”

Another Ontario issue is that the government will be harmonizing GST and PST. Donaldson feels this will equal an 8% increase on slip costs for example, stealing profits in 2010. Donaldson admitted that “We are seeing members dropping out of the OMOA due to the $495 membership fee. They’re running their businesses that close to the line.”

It seems the exactly wrong time to drop association support.

We also asked about the skills shortage because the OMOA has been so active on that issue. Donaldson said, “The skills problem is still there. The average age of marine technicians is rising and although we’re succeeding in training more people, many of them are second career people, so they may not be a long-term solution for the industry. Demand for marine technicians is actually increasing even in this environment.”

Traditionally, a much more stable region for sales and employment has been Manitoba and Saskatchewan. Jim Flood who runs the Mid-Canada Marine Dealers Association told us in his area, aluminum boats are down while fiberglass is up but overall, everybody’s fine.