The Demise of Tanzer Industries (a reprint with comments)

The Demise of Tanzer Industries (a reprint with comments) -- September 7, 2015

I bought my first sailboat, a San Juan 21, four years after returning from Vietnam—about June of 1973.  One of the Clark brothers sold it to me himself.  He had sold it to a young guy and had to repossess it. That guy must have had a lot of fun with the boat.  It took me weeks to pull all the wine bottles out of the far recesses of the hull.  At that time Clark was running two shifts mostly making SJ 21’s and C-Larks.  They couldn’t make boats fast enough.  Dealers had waiting lists.  It was the same way for many other boat builders.

Every other person who was a 20, 30 and 40-something was buying a boat even if they didn’t know how to sail.  They named their boats Shadow Fax (a horse in some Tolkien novel I’m told) and other fanciful, crystal-hugging names.  They were all going to head out to the water and “be one with the wind.”  It took a few years, but they learned what sailors know. 

·         Sailing is lots of hard work and drudgery; just every once in a while it’s like riding a stallion.
·         Sailing uses up lots of time.  It doesn’t leave much time for sipping wine with your friends, or mowing lawns, or raising kids, or getting ahead in your career.
·         Trailerable boats spent a lot more time on their trailers than in the water.
·         Sailing is expensive.  (Cheaper to stand in a cold shower and rip up $20 bills.)

And they learned that they didn’t like sailing as much as they like the idea of sailing.  So the tipping point happened one year in the late ‘80’s.  Suddenly everybody who wanted a boat had one.  A year later there were a lot of really good used boats available a lot cheaper than new boats.  It was over.  Just like that the bottom dropped out of the small boat market.  People were laid off, companies folded, you couldn’t get parts.  All of this over-supply echoes with us today.  There are still a lot of good boats available for a fraction of what they cost 35 years ago. 

Against this background, I offer the following article.  I can’t remember where I found it, and I haven’t been able to verify it.  BUT, it has the ring of truth.  It looks like Tanzer got swallowed up in the panic even though they were solvent.  Here, for what use you may find, it is reprinted. 

jim slosson
September 2015

The Demise of Tanzer Industries
The following is a short history of the events surrounding the demise of Tanzer Industries and was originally posted on the Tanzer Mail List discussion group. It is based on an article which appeared in the business section of the Ottawa Citizen newspaper about efforts to reform Canada's Bankruptcy Act. In doing so, the article also gave a detailed account of the death of Tanzer Industries at the hands of the Royal Bank (Canada's largest bank). Unfortunately, the newspaper clipping wasn't dated, but it likely appeared in the spring of 1987.

According to the article, Tanzer Industries appeared to be on "a roll" during the previous May (probably the May of 1986). It had recently spent $400,000 for a French design and tooling for its new 25 foot and 29 foot models. The new boats were reported to be a major success. Sales jumped 86 % and Tanzer had $3 million worth of orders (with deposits) waiting to be filled.
On May 15, the Royal Bank told Tanzer it was concerned with the general slump in the sailboat industry. The month before, C&C had gone into receivership (a company which was also financed by the Royal Bank).
The Royal Bank insisted that Tanzer hire a particular financial consulting firm to assess the company's operations. At the time, Tanzer had overdrawn its half million dollar line of credit by $129,000, but none of its loans were in default and all payments were up to date.
The financial consulting firm began its investigation of Tanzer on May 20 and filed a report on the 26th. The report indicated that Tanzer was a viable company and never recommended calling in the loans. The consultant also revealed that by August of that year, Tanzer's debt/equity ratio would have improved by 50% over the previous two years. The report did indicate that Tanzer had a cash flow problem and it recommended an injection of at least $300,000, the reduction of overhead costs, and financial restructuring after the completion of the year's production cycle.
The day after the report was submitted, the Royal Bank walked into the Tanzer plant at 3 p.m. and demanded the immediate repayment of $1 million dollars plus $2,200 interest charges. Tanzer was given 1.5 hours to come up with the money. It didn't.
Johann Tanzer had gone home early for supper that day. He was planning to go back to the plant in the evening to prepare for the next day's production. His son phoned to tell him what was happening. By the time Mr. Tanzer returned to the plant, a locksmith had already changed the locks.
The Royal Bank sold Tanzer's assets to a liquidator for $793,000. The newspaper article claims the assets were valued at $1.5 million. The bank also received $400,000 as a result of a loan being insured by the Quebec Government. In other words, the Royal Bank easily recouped $1 million, but other creditors were left "out in the cold".
In the end, 85 people lost their jobs, and Johann Tanzer lost everything. The article indicated that he immigrated to Canada in 1956 with $5 in his pocket, a tool chest, and a "head full of boat designs". 

Written by
 Michael McGoldrick.
© Michael McGoldrick, 1997.

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