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Blame It On Detroit


It seems the rules of the road apply to the world of water as well.

As the automobile industry struggles with layoffs due to weak sales, an unexpected blow has been dealt to the $37 billion recreational boating industry.

The situation is hurting sales in the Midwest, especially Michigan, which used to be the strongest state in terms of unit sales, says Joe Hovorka, a leisure industry analyst for Raymond James Financial. Incidentally, Daimler Chrysler recently announced plans to cut its workforce by 16%, firing 13,000 Chrysler workers.

“If you lost a job or are worried about losing your job, that has a chilling effect on spending on something that’s not necessary,” Hovorka said.

Boat buyers are essentially investing in a lifestyle, says Bill McGill, CEO of MarineMax, the largest boat retailer and dealer in the U.S., which sells everything from whalers to megayachts.  "It's stress relief, an escape," he said.

But it's still a discretionary purchase. And unlike high income buyers, blue collar workers and even middle income buyers are more affected by rising fuel prices and interest rates and will be more cautious with their discretionary income and thus hold off on buying a boat, he added.

Retail powerboat dollar sales fell an estimated 4% to 6% in 2006, while unit sales are down 5% to 7%, according to the National Marine Manufacturers Association. And with the Miami International Boat Show under way this weekend, industry insiders are expecting another down year as companies continue to weather a storm of soft demand and ballooning inventories.

It’s not just the boating industry either, Hovorka added. Sales in anything related to leisure, including cruises, motorcycles, and all terrain vehicles (ATVs), are all weak.

Editor's Note: Raymond Jones has done business with MarineMax as of February 2005.

Staying Afloat

Annalisa Burgos is a features reporter/editor for CNBC.com. She can be reached at Annalisa.Burgos@nbcuni.com.