With the Fort Lauderdale International Boat Show just around the corner (Oct. 31-Nov. 4), we recently interviewed Billy S. Smith III, vice president of sales and marketing for Trinity Yachts, of New Orleans and Gulfport, Miss., the largest custom yacht builder in the country.
Smith is an avid boater, a shareholder in the company and a leader in the superyacht segment.
One of the two questions and answers below deals with U.S. builders competing with China in the superyacht space. I think you’ll find Smith’s answer compelling. The other focuses on what is needed to help ignite a resurgence in manufacturing in this country, a subject that all boatbuilders have a vested interest in.
The full interview with Smith will appear in Fort Lauderdale Today, the “daily” show magazine we are producing at FLIBS. One issue will be distributed at the opening on Thursday, the second on Saturday. If you’re going to the show, make sure you pick up a copy. You won’t be disappointed.
What efficiencies have you adopted in the manufacturing process to keep American-made superyachts competitive in price with, say, Chinese builds?
Since it is impossible to compete with the Chinese labor rate, we will never compete with them on just price, as labor makes up approximately half the cost to build a yacht. There will always be someone who will build on just price, and we do not see any benefit to us or our owners to try to compete solely on price.
Yachts are one of the ultimate luxury items, and our clients are buying based on perceived value, not simply price. Does anyone spend $20,000 on a watch just to tell time? Fortunately, the Chinese have to overcome the reputation acquired in other industries of delivering inferior and, in some cases, dangerous products, so it will take a while for them to overcome this reputation in the luxury market.
We prefer to compete on value to the owner, which involves much more than just the initial price. Quality and building a true custom yacht to the owner’s desires, along with a proven resale history, are the factors that our clients analyze when deciding to build with Trinity. We also reduce the number of man-hours during construction by utilizing capital expenditures on machinery such as plasma arc and water jets to cut aluminum and steel, plate-bending machines and robotic welding.
We design structures in such a way as to reduce the labor required to build it — modular construction, as an example. We use overhead cranes to efficiently move components, the latest strategies for project management and quality control systems designed to military specifications.
In the final analysis it is not simply what you are paying for labor but also the efficiency of your labor. Having in-house naval architects and marine engineers allows us to design yachts that can be built efficiently, not cheaply. I have been to China three times to study the emerging market for both construction and sales and did not come back with a positive impression. It appears to me that when a Chinese-built yacht in the 150-foot range or greater comes on the resale market the public tends to discount the price by a greater margin than the actual initial cost savings.
Most people think a Chinese-built yacht should be half the price of an American yacht, but that is impossible if materials alone are almost half the cost to build. The real savings may have been 20 to 25 percent, and that is not enough savings for clients looking for quality.
There are some Chinese-built yachts in the 100-foot and under range that are nice boats due to their American distributors demanding the quality, but it seems to be difficult for them to make the hurdle to the over 150-foot range.
By the way, if the U.S. government put the same tariff and import duties on Chinese-built yachts imported into the U.S. as the Chinese do to U.S.-built yachts entering China, there would be no U.S. market for Chinese-built yachts. A level playing field would help U.S. yacht builders.
And, finally, the best way we have found to compete with the Chinese is by being responsive to our clients’ requirements and designing and building them unique, truly custom yachts with innovative features and high quality. By constantly improving our yachts and changing them to meet customers’ needs, we can add value to the yacht. Clients are then more willing to pay the additional cost to obtain exactly what they feel best suits their needs.
Do you foresee a resurgence of big yachts built in America? What would drive this return to domestic manufacturing? Do we have the skilled labor to sustain manufacturing at a high level of technology and excellence?
Unfortunately, the current political climate of class warfare is hurting the large-yacht market. Most of our recent owners do not want to be seen owning or building a yacht for fear of being labeled a “one percenter” or similar. A good start would be to educate the press and the public that yacht building represents highly skilled and highly paid manufacturing jobs in a world market where “Made in the U.S.A.” can compete without subsidies. It would also help to convince more yacht owners about the quality and value of building in the U.S.
If we stop demonizing the wealthy and recognize them for the jobs they are sustaining, that will help. Skilled labor has always been difficult to find and keep, and today it appears to be getting more difficult. We are working with the schools in our areas to develop training programs for high school students who want to become ship-fitters, electricians, engineers, etc.
There are still those workers who love to create physical works of art and take great satisfaction in their work. The workers in this country can do anything they put their minds to and have proven that over and over again since World War II.
Remember, as you read this, the U.S. has two unmanned vehicles driving around on the surface of Mars sending photos and data back to our scientists. No other country in the world can come close to doing this and yet we still question whether the U.S. can compete in the yacht market.