Should struggling boat dealers get the same sort of bailout from the federal government that is being doled out to the flailing auto industry? The Small Business Administration thinks so. It has just started a program that offers loans to help boat dealers to finance their inventory. But at least so far, few dealers seem to be interested.
The National Marine Manufacturers Association (NMMA) says the U.S. recreational boating industry contributed $33.6 billion to the U.S. Economy in 2008 and estimates there are about 17 million recreational boats on the water. But the industry is suffering in the recession. Sales are off 35% this year, and the industry has lost 135,000 jobs since 2005, according to the NMMA.
So why is the dealer floor plan all at sea? Darren Plymale, the general manager at Galati Yacht Sales in Tampa Bay, Fla., says many dealers are probably consumed with taking care of their customers and don't have time for the hefty application required. A dealership has to be worth less than $8.5 million to qualify. Plymale's dealership is too large to qualify, but he worries the program is too complex and cumbersome for those who do. "I have some great industry relations, and I don't know anybody that has applied for it and taken advantage of it," he says. In fact, most of the smaller dealerships who actually qualify would probably need to hire a tax person to do the necessary paperwork anyway, he says.
Although the program started almost a month ago, the SBA says it has yet to make any actual loans. "We're still somewhat in a ramp-up period," SBA press secretary Hayley Matz said last week, adding that the agency is still working with lenders to get the program rolling.
Earlier this year, lawmakers from Indiana lobbied the government for months to get financing for RV and boat dealerships. "We don't see this as a bailout," said Indiana Rep. Joe Donnelly. "What we see these are loans to businesses who have always paid their loans back." Donnelly, along with fellow Indiana Rep. Mark Souder, say boats and RVs have the same financing challenge as the auto industry. Many auto dealers had their financing yanked, forcing some out of business. Traditional lenders like GMAC aren't as available to boat dealers due to the credit crunch, and the SBA is there to "fill the void," Matz adds. The loans will range between $500,000 and $2 million for the pilot program, approved at least through Sept. 30, 2010.
Yet even dealership owners whose legislators pushed the program don't plan to use it. Tom Whowell, who owns Gordy's Boat Dealership in Lake Fontana, Wis., says he received some information and knows of one dealer who might go forward with an application, but said he "didn't get the impression from my talks with my peers that many of them or any them were using (the plan)."
That's why critics don't think the program was worth the effort, questioning if niche industries like boats and RVs deserve the same financing aid as the auto industry. Dean Baker, co-director of the Center for Economic Policy and Research said that although the financing program leaves some of the risk on the lenders, (only 75% is guaranteed by the SBA, not the maximum 90%) it's hard to see what the Administration's goal is and how effective the plan will be over time. "The question is, what exactly do we hope to do with subsidizing this sector?" he says. "I'm very hesitant to say that's a good use of public funds at this point."
"Not every business can be special," says J.D. Foster, senior fellow at the Heritage Foundation, a conservative think tank in Washington. "When you start identifying federal programs to prop up every conceivable industry that's complaining of economic hard times, you end up with a situation in which everybody is supporting everybody which means nobody is being supported."