A Second Wind

By JAMES S. GRANELLI

Feb. 15, 1998 12 AM PT

TIMES STAFF WRITER

Roger MacGregor looks out the second-story window of MacGregor Yachts in Costa Mesa and remembers the days when the roads would be jammed with sailboats being hauled from nearby manufacturing plants that teemed with workers and reeked of fiberglass resins.

WestSail was across Placentia Avenue. Islander was at the corner, sometimes trying to keep city firefighters and inspectors away from its debris-ridden plant. A block or so away, Jensen Marine pumped out its popular Cal line, and behind it sat the world’s biggest sailboat maker, Columbia Yachts, with 500 employees building six or eight boats a day.

“You couldn’t drive down the street for all the sailboats out there,” MacGregor recalls.

From the 1960s to the early 1980s, “Costa Mesa was Costa Mecca” to the sailing business, says industry expert Dan Spurr. Its companies produced about 90% of the up to 40,000 sailboats built each year.

Today, all the big guys but MacGregor are gone, victims of bad management, changing lifestyles, nearly indestructible used boats and half a dozen other factors that devastated the sailboat business. Nationwide, only Catalina Yachts in Woodland Hills and Hunter Yachts in Florida are larger. The title of the world’s biggest went overseas, to Beneteau in France.

In North America, the industry hit bottom during the recession seven years ago, when fewer than 8,700 sailboats were built. But the 125 mostly small operations remaining are gradually coming back. Production steadily increased until last year, when a glut of 11-to-19-footers and the failure of 13 small boat builders sparked a 9% drop.

But manufacturers expect to build 19,452 boats this year, their highest number in more than a decade, according to a survey by Sailing Co., a Newport, R.I., publisher of trade magazines.

“There is a revival in sailboating,” says Sally Helme, Sailing’s associate publisher. “What the industry has done is try to bring the costs down and make it easier for boaters to get in the water.”

Sales are booming for small day sailers, simple, inexpensive boats meant for fun close to shore. Engineering changes have made bigger boats less cumbersome to operate. Boat rentals also remain popular.

The general economy and a buoyant stock market have once again helped boost consumer spending--and nothing says conspicuous consumption quite so loudly as a big, expensive sailboat. It was one of the badges of success for the suddenly wealthy of the 1970s and early ‘80s.

Surviving boat builders, though, are taking the increased interest in sailing with a healthy dose of sea salt.

“It’s been a little better than the last few years, but with the stock market so high, you’d think more people would be buying,” says Richard Valdes, who built up Columbia before selling out and switching to power boat manufacturing.

Tom Schock, owner of W.D. Schock Corp. in Corona, maintains that the sailboat industry has been in a “terrible recession since 1985.”

Sailing became too expensive, time-consuming and wrong-headed, stressing competition instead of family fun, says Schock, whose company was one of the larger sailboat makers when it was based in Santa Ana.

Indeed, the number of U.S. residents who say they’ve been sailing more than once a year has fallen from 6.7 million in 1988 to 4 million in 1996, according to a National Sporting Goods Assn. survey.

More boats are being sold because the foreign market is growing. MacGregor, for instance, began focusing on European and Pacific Rim sales in the mid-1990s, Roger MacGregor says, and now the company ships a third of its production overseas.

“The international market is stabilizing our production line too,” he says, and that allows year-round manufacturing, without dips in daily output.

Boat builders know the boom days are gone. Too many factors are distracting even the serious sailor.

Sailing enthusiast Jerry Willburn of Cypress, for instance, sold his 35-footer earlier this year.

“I just wasn’t using it often enough to justify owning it,” he says. “My first love is automobiles, and that was taking up what little free time I had in the last few years. I was getting on the boat every other month or so, and the slip fees made it too expensive to keep.”

Indeed, the younger adults sought by the industry “don’t want to spend every weekend on the boat,” says Spurr, editor of Practical Sailor, a consumer-oriented sailing newsletter in Portsmouth, R.I. “They want to do other things--rafting, skiing, hiking. Sailing doesn’t fit our culture anymore.”

Through it all, MacGregor Yachts has survived, an oddball even among other survivors. It builds about 1,000 boats a year, focusing on one market, meticulously controlling costs and stubbornly refusing to grow.

“I measure success by how big my backlog is, because I don’t increase production,” Roger MacGregor says. “If you can’t do well on $10 million worth of boats a year, you might as well not be in the business.”

Currently, he says, there’s a six-month wait for the MacGregor 26, the only boat he builds.

The unique 26-footer uses water ballast that can be expelled quickly in mid-trip so the boat can be converted to power at speeds up to 25 knots.

MacGregor entered the business in an unusual way, and that has helped give him a different perspective and an unorthodox business plan. Though he enjoys sailing, he’s no die-hard sailor himself.

MacGregor was born in Cleveland and reared in Southern California, earning a degree in economics from Occidental College before he enrolled at Stanford University for a master’s in business administration.

In a series of self-study courses, he was required to design a business he thought he could manage successfully.

As did many his age in the late 1950s, he (with his father) had built a couple of wooden sailboats from kits. In college, he and his future wife, Mary Lou, built another one. He learned about manufacturing operations mainly from his father, an oil company salesman who took him on sales trips to various plants.

By the early 1960s, fiberglass powerboats were becoming popular, and Costa Mesa was the fiberglass capital, thanks in part to Wizard Boats, which was founded in 1947 and helped introduce the nation to “laminated plastic craft.” Fiberglass hulls dramatically reduced construction and maintenance costs associated with wooden hulls, thus making boats more affordable.

MacGregor put his boating experiences together with the emerging technology, took a few engineering courses and came up with a business scheme that earned him A’s for the self-study courses.

After graduation in 1961, he went to work for Ford Aerospace in Newport Beach, while he and Mary Lou put his self-study project into operation--as a hobby.

But six years later, he says, the hobby “became more lucrative” than his job at Ford, so he quit to build boats full time.

His timing could not have been better. The market for fiberglass sailboats was exploding. The 1950s and even the rebellious ‘60s had produced a generation that yearned for the quiet peace of the ocean, where time was lost in the adventure of testing human skill against the elements.

“There was a conscientiousness about the environment,” Spurr says. “Fuel was expensive, sailing made financial sense and suited the culture at the time: Be mellow, go slow, smell the roses.”

Says sailor Willburn: “The great thing about sailing is that once you get 150 feet offshore, the rest of the world ceases to exist. You put all the pressures of work and life behind you.”

Sales were so frenetic throughout the 1970s and early 1980s, quips Harry Monahan of San Clemente, former executive editor of Sea magazine, that “there used to be a sailboat dealer on every corner.”

The success of the industry also caught the eye of corporate America, which began buying up companies such as Columbia and Jensen.

Operations were moved to bigger quarters elsewhere in Orange County, or to the East Coast where air quality standards were less rigorous and sales efforts were concentrated.

But once the original owners and managers left, the boat makers soon died. Conglomerates didn’t really know how to run them, say MacGregor and others in the industry. Some trimmed-down companies were resold, but few survived.

“Sailboat companies are best run by entrepreneurs,” says Valdes, Columbia’s founder. “Entrepreneurs have a feel for the business.”

Valdes, who sold Columbia to Whittaker Corp. in 1967 and continued to operate it until 1974, now produces power boats at his Mediterranean Yachts in Santa Ana.

Mismanagement, of course, wasn’t the only factor that crippled the industry.

“The property the plants were on became more valuable than the plants themselves,” Monahan says. “So the big companies sold off the operations, then sold the property and made a bundle.”

Demand also sank. Costs were out of control, driving prices well beyond affordable, and insurance and slip fees together were as high as home mortgage payments. Besides, sailboats were too slow for the fast-paced 1980s.

Safety and air quality regulators also clamped down. MacGregor recalls watching Costa Mesa firefighters perched with cameras atop cherry-pickers so they could be lifted through an open window at Islander’s plant to take pictures of the mess inside.

But the companies’ biggest enemy has been their own success.

“Fiberglass boats don’t rot or rust,” Spurr points out. “A 10-year-old boat is almost like new and costs half the price.”

MacGregor figures that for every new boat sold, about 10 used boats change hands.

One by one, most big sailboat makers sank to Davy Jones’ locker. And many of those that made it into the 1990s were washed away by the short-lived 10% luxury tax in 1991. The industry’s production dropped 26% that year.

Fighting with MacGregor for survival, as well as for market share, were Catalina and Hunter, both of which targeted the larger boat market, mainly because boats longer than 30 feet carried bigger profit margins.

Like them, MacGregor had to make adjustments. He had long targeted the smaller, less expensive boat market and built a number of models in an effort to keep growing. But production had to change.

“I saw that sailing was kind of losing its enthusiasm,” he says. “I saw no reason to cling to a market that was getting tired.”

On the advice of his wife, educated as a teacher but trained to help run the business, MacGregor concentrated on making only one bare-bones model and limiting production, creating assembly-line techniques to make production easier and quicker.

“You can get any color you want, as long as it’s white,” he says with a laugh.

His water-ballast system means his boats can go without the heavy keel that forces so many sailboats to live forever in the water. Most cars can haul his 26-footer, which is sold with a trailer.

With a boat that can shed half its weight in water and have its mast lowered easily, MacGregor realized he could put a 50-horsepower outboard on it and let owners have the option of powering to Santa Catalina Island, for instance, at speeds only a powerboat could match.

The concept isn’t entirely new, Spurr says, but “Roger is the only one successful at it.”

“The trailer gives you mobility and no marina fees, which are expensive,” Spurr says. “And a lot of people use the boat just to cruise along Baja or to go to Catalina.”

At $15,000, the MacGregor 26 is aimed at the so-called trailerable market, which has always been the biggest and usually the fastest-growing sailboat market.

The segment typically covers boats up to 20 feet long, so the chance to get a 26-footer on a trailer at a low price is giving MacGregor a big backlog of orders.

Other boat makers point out that the MacGregor 26 isn’t made for racing or for cruising too far from shore.

“Roger MacGregor does a fine job for what he does,” says Roger Olson, owner of boat builder Sam L. Morse Co. in Costa Mesa. “He introduces people to sailing. They learn to sail and learn to get a better boat if they want to be serious.”

Olson’s boats, the classic Bristol Channel Cutter and the Falmouth Cutter, are heavy vessels with fiberglass hulls much thicker than the MacGregors.

Loaded with wood paneling and all the amenities, they’re designed for a lifetime of traveling--something Olson himself hopes to resume in a few years.

Boat builders such as Olson are passionate about the sea, experienced in cruising the world and eager to get back to the oceans.

But MacGregor enjoys the land, too, and plans to continue building boats for a long time.

“I’ve never had the urge to sell the business,” he says. “I’ve never had an unprofitable year. This has been a gold mine.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Buoyancy

North American sailboat manufacturing over the last 10 years, in thousands of units:

1998*: 19,452

* Forecast

SOURCE: Sailing Co.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Sizable Market

Expensive, larger boats give builders bigger profit margins, but the small-boat market is the most active. Here’s what manufacturers are making, by size:

Boat sixe, in feet

11 & under:

1995: 2,870

1996: 3,350

1997: 3,440

1998 (Forecast): (Figure is included in 12-to-19 category)

12 to 19

1995: 7,476

1996: 8,625

1997: 6,740

1998 (Forecast): 14,379

20 to 29