Buyers' Guide to Outboard Boats

The Nature of the Industry

The boat building industry is unique and unlike most other major industries that produce large, expensive products.

As industries go, it is smallish and remarkably undercapitalized, unlike the auto industry which is very consolidated and limited to little more than a dozen giant international corporations with revenues in the tens of billions.

The gross revenues of a General Motors or Toyota are greater than that of many nations. As for boat builders, their revenues may number from a few million to a few tens of millions; virtually none are in the billion dollar category.

At any given time there are around 1200 boat builders offering products in the US. Imagine if you had 1200 automakers to choose from!

That the boat building industry has not consolidated and generated a “big three” (though it is not that some have not tried) is due to the fact that it is highly vulnerable to recessions and economic downturns.

When the economy slows down, boat sales come to a near complete stop because pleasure craft are not a necessity like cars and appliances or homes. Every time we have a serious recession, about half of all builders go bust.

Hence, few who understand this industry are willing to invest in it, for it is far too risky and so it is extremely difficult to raise capital by means of selling stock. The recent demise of OMC during boom times is a good case in point.

Yet another problem affects the small boat industry: per unit profits are so low due to strong competition that it becomes almost impossible for these companies to survive economic downturns.

This is a case where competition tends to lower prices to the point of extinction. While it appears to buyers that boat builders are getting filthy rich, through what appears to them to be outrageous prices, the truth is that most won’t make enough to survive the business cycle.

I have personally witnessed this cycle seven times in my own lifetime, and there is no reason to believe that these cycles will not continue, or that the industry will fundamentally change in any way. The fact of life is that it is a marginal industry.

If you’re wondering why, in spite of all this, there are still so many venerable old name boat builders still around, it’s because old names are valuable for marketing.

Most companies bearing names like Chris-Craft are companies that have gone bankrupt numerous times. It’s just the trade name that keeps being reincarnated. There are very, very few builders that have been operating continuously for several decades.

This situation causes problems that seriously affect product quality and reliability. First, boat builders either can’t afford, or won’t hire, the kind of high priced engineering talent that is needed to assure high quality and reliability.

The truth is that boat building pretty much fits that old saying about watching sausage being made. If you could see it, you probably wouldn’t want to eat it.

Boat building now, as in the past, suffers from a serious lack of R&D, product testing and engineering skill.

And now that it has entered the realm of high tech plastics chemistry and composites, the engineering skills required have become even more complex.

Yet the industry continues to make-do as it always has on the basis of trial and error. Unfortunately, much of this kind of product testing is done at the consumer’s expense, with the boat buyer as beta tester, which helps explain why the industry as a whole has had such a poor record of customer satisfaction.

The truth of this could not be more forcefully demonstrated than by a large number of boat builders returning to an idea that failed in the 1960’s when it was first tried.

This involved the use of cores in boat bottoms. A core is a method of attempting to increase strength while at the same time reducing the amount of costly materials by substituting cheaper materials.

A core basically makes a sandwich of a cheaper material such as balsa wood or foam between two thin layers of fiberglass. What this does is essentially to create a truss that is stronger in certain situations, but not all.

The great risk of this method is the risk of water getting into the core since the materials used are porous and contain large amounts of air space.

And when water gets into the core, boat bottoms begin to come apart. It was a bad idea 40 years ago, and is a bad idea now as cored bottom boats are now meeting the same fate as they did back in the 1960’s and 70’s.

With these things in mind, it only makes good sense to be careful about what you buy. Just because a company has been successful in promoting and selling its products is no guarantee of quality and good service.

Just because a company offers what appears to be a good warranty is no guarantee that the warranty will be honored, especially if a recession hits and the company goes out of business.

To show you that this is no idle threat, consider that in the recession of 1989-92, over 50% of all boat builders went bankrupt, including many of the industry’s best known names like Bertram and Viking.

When bankrupt companies get sold, typically only the assets are sold, without the liabilities, which means warranty liabilities. So, even though the brand name continues to exist, the legal obligation to honor warranties given by prior ownership usually doesn’t.

Consider another point: Automobile models typically sell in units of hundreds of thousands and up into the millions.

Boats don’t come anywhere close to that. A boat model that sells a total of 500 units is a lot in this industry. The larger and higher priced the boat, of course, the lower total unit sales will be.

What this means for the consumer is that very few boat models are in production long enough that whatever shortcomings they may have never gets time to be perfected.

Obviously, the longer a model is in production, the more likely it is that it will become perfected as problems and weaknesses are discovered over time, and then get the opportunity to be corrected.

From year to year, in the auto industry, chassis and engines tend to remain the same, while it is only the shape of the outer wrapper and interior that is changed annually.

In large part this is why the automakers have become so large and prosperous. Thus the fundamental and most important part of the car has the opportunity to become highly perfected.

Boat builders do not have this advantage. The boat hull and deck is its chassis, and thus major model changes forces major changes in tooling. Hence, model changes are very costly and builder’s profits suffer, as does product reliability.

Finally, for the most part, boats are hand made items. There is very little in the way of robotics in boat building. Some have criticized the industry for being primitive and backward in this respect.

However, they fail to realize that the market simply will not support this kind of huge capital investment. And besides, no one has yet figured out how to design a robot that can lay up fiberglass at lesser cost.

We also have the same identical problems caused by low production numbers with engines.

It was fortunate in the past that basic outboard engine designs tended to remain the same over periods of many years, so that basic designs, though perhaps faulty at the outset, eventually got perfected over the years.

In large measure, the acute problems that have been encountered in recent years, were mainly caused by government mandates forcing major engine changes in a too short period of time.

As manufacturers rushed to meet these mandates, there wasn’t sufficient time to perfect the designs so that far less than perfect products ended up on the market.