Scuppered by the backwash

The first boat Steve Marten built was a 4m dinghy, which he and his father lovingly crafted in 1964. He may not have known it then, but at age 16 he had found a talent which would turn into a spectacular career.

Over the next few years he designed and built his own Cherub class racing dinghies.

"A typical season finished with selling the current boat, upgrading my car and then, penniless, building a new boat for the next year's racing," Marten wrote for a British website in 2000.

The evolution of his faster models helped him to become world champion in 1972 and go on to represent New Zealand at the Munich Olympics in a Soling.

But the experience gave him more than a taste for racing and speed - he was captured by the love of building boats and turned his hobby into a fulltime profession.

Over the years, at least seven America's Cup yachts - including KZ 7, New Zealand's plastic fantastic - and ocean-going battlers such as Kingfisher for British solo sailing star Ellen McArthur, two Grant Dalton Whitbread entrants and many cruising boats took shape at Marten's Auckland yards.

With the boom brought on by New Zealand's America's Cup reign, it looked like Marten was in a dream position in a dream industry. The dream ended this month when Marten Yachts collapsed.

The voluntary liquidation of his company has come at a time when the marine export industry is struggling after years of tremendous growth.

Two main factors are raised as the reason for the slump: the rise and rise of the Kiwi dollar, which this week hit 73.05USc, the highest level since it floated in March 1985; and the loss of the Auld Mug to Alinghi in 2003.

In the past year, exports have dropped, companies have laid off staff, and the industry has been through a major overhaul, leading to the redundancy of one of the men who led it through the heady days.

Documents relating to Marten Yachts' could just as easily tell the story of the industry as a whole.

"The liquidators have been advised that the business had begun to experience trading and cash-flow difficulties as a result of the generally depressed state of the industry," says the liquidators' first report. "In addition, the strengthened New Zealand dollar has made the purchase price of yachts produced by the company much more expensive to foreign purchasers, thus precluding desired new contracts from being signed."

In the weeks leading up to the February 10 collapse, Marten tried to seal a contract for a large boat to keep the company afloat. But the efforts were in vain and the company was left with liabilities of $6 million, almost $2 million more than assets, as assessed at the time of the liquidation.

Among those owed money are unsecured trade creditors, who are out of pocket at an estimated $2 million.

Three yachts were under construction, including one for German businessman and sailing enthusiast Michael Illbruck, and discussions are underway with the owners.

Experts predict more companies will close as the industry adapts. By the Marine Industry Association's reckoning, many companies were close to dire straits - with dangerously low numbers of orders - in the six to 12 months after the loss of the Cup.

Fortunately, most have picked up sales since, but the situation is certainly tight for some.

Lane Finley, an American-born sailor and businessman who played an active role in developing New Zealand's marine export market during the boom period, believes there is more than just the loss of the Cup and the rise of the dollar to blame for the slump.

"I can sum it up really quickly by saying the problem was that we had quite a lot of momentum while we had the America's Cup. But when the Cup was lost we stopped promotion offshore, Government funding stopped and everything came to a jerky halt. The world focus was no longer on New Zealand - in fact, it's the furthest from people's minds."

Finley headed NZ Marine and its predecessor, the Marine Export Group for seven years before being made redundant last year following an industry shake-up.

The restructuring came about with a change of philosophy that Finley says he does not agree with, although he is at pains to point out he is not bitter - since leaving NZ Marine he has been earning American dollars as Auckland-based executive director of an international superyacht industry body, the Association of Yacht Support Services.

The Government, through New Zealand Trade and Enterprise (NZTE), funded NZ Marine with $150,000, enabling it to promote the industry overseas. But last year, a strategic switch was made so that money was instead targeted towards individual companies.

Finley says small companies have missed out on money and have dropped out of the international picture. "I'm gutted. But, who knows, maybe they are right. These things are really hard and we have to give them some time to see if the direction they are heading is maybe better for the industry."

A look at the figures shows why Finley may feel frustrated. Marine export sales figures quoted by the industry show that for the six years from 1998 to 2003, exports grew from just under $150 million to $525 million. By last year they dropped 20 per cent.

Statistics Department figures from Customs returns are more alarming, showing that sales of "ships, boats and floating structures" dropped from a 2003 high of $412 million to $223 million last year.

NZTE's David Penny defends the new approach, which he believes will turn the industry around. He makes no apologies for handing money to companies rather than NZ Marine and says small companies have just as much a chance of qualifying for grant money as bigger ones. In the past year NZTE provided about $600,000 to the industry in grants and sponsorship.

Penny says companies have to be smarter and better run and believes that the future is in production-line boats rather than custom-made orders.

The new head of NZ Marine, Kevin McPherson, comes from a background in the dairy industry and admits that he has not landed the job at the easiest of times.

But unlike his predecessor, he has no complaints about the Government's changed philosophy. He thinks the theory of "targeting winners" is the right approach and believes there should be more rationalisation in the industry.

McPherson says Asia is a growing area and Europe is emerging as a bigger market than North America. As a result, he is targeting boat shows further afield.

As well as the giant Fort Lauderdale International Boat Show - where about 15 New Zealand companies exhibited last year, well down on the previous year - New Zealand will be at Monaco, Amsterdam, Dubai and several Asian shows. In April, New Zealand will be at the China International Boat Show for the first time.

McPherson sees much potential for New Zealand in China, where dozens of marinas are under construction. He believes New Zealand needs to look at these new markets and think laterally, maybe even tackling joint projects with companies in other countries.

"We need to get out there because customers are not necessarily going to be coming to New Zealand all the time like they were [during the Cup]," McPherson says.

Peter Busfield, executive director of the the Marine Industry Association, says the value of the dollar has made it very tough, especially when the cost of boats can rise considerably while they are being built.

He also says that to compensate for the loss of the America's Cup and the stopover in the Volvo around-the-world race, New Zealand has to fight hard for other events.

In the next few weeks, the association has organised three events to attract overseas interest - the Auckland International Boat Show, a design symposium called Yacht Vision, and Marinas8, an international marina conference.

Busfield is optimistic about the industry. The domestic market is still growing, particularly trailer powerboats, which sell at a rate of about 100 a week. And there are signs of health in many companies, with 22 superyachts under construction.

In Auckland this month, Cookson Boats launched a 30m, $6 million supermaxi yacht called Maximus, the biggest racing yacht built in the country.

The company is also to show off its new 50ft boat at the Auckland show.

In Northland, New Zealand Yachts has sent a multi-million dollar superyacht to the Mediterranean to show to prospective buyers.

And Tenix will reopen its Whangarei shipyard to build boats for the Navy in a deal which is expected to contribute $110 million to the economy over the next five years.

Some would be surprised to know that out at Hobsonville, west of Auckland, Bill Lloyd, of Sovereign Yachts, is still in business.

In the past, he has said he would leave the country, frustrated after being caught in a political storm over his background in the Canadian marine trade and how the Government helped him to secure a waterfront site at the Hobsonville air base.

But Lloyd has kept going, his skin obviously as thick as an ocean liner's hull, and is still determined to build a marine park on a neighbouring 12ha site.

The park plan would see marine industry companies cluster to gain strength in numbers. "I think the park will go ahead one day," Lloyd says. "Once we start opening it up, people will come in."

Undeterred by his experience of three years ago, he is still hopeful about the negotiation process, with the Government to sell the 12ha of unused air-base land.

As for his own production, he admits he has fallen short of expectations, but now he has a wealthy investor keen on becoming involved. Owen Glenn, an expatriate New Zealander living in Sydney, who became a multi-millionaire in the logistics and freight-forwarding business, owns the 112ft yacht Ubiquitous, and wants to build mega-yachts with Lloyd.

Glenn says he is disappointed by what happened to the New Zealand marine industry and wants to see it back on top of the world.

"You don't see New Zealand being mentioned as often as it was in the past," Glenn says. "I just think New Zealand almost strangles itself on the world stage. It's almost embarrassed by its success."

He thinks New Zealand is losing business to places which have state support, such as Australia.

"The New Zealand Government needs to be a bit more open-minded, to clear the way. You need the Government right in there."

Undoubtedly, though, the biggest help the industry could get now is relief from the currency markets, and for Grant Dalton's regime at Emirates Team New Zealand to bring the Cup back to Auckland.