S2 Yachts launches Energetx Composites

June 22, 2009
| By Pete Daly |
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S2 Yachts Inc. of Holland has launched a new company, Energetx Composites LLC, with plans to start manufacturing commercial wind turbine blades and other related parts late this fall at the Tiara plant, a diversification plan that will reduce the company's reliance on the ailing boat business.

Last week the Michigan Economic Growth Authority voted to grant Energetx a state tax credit valued at $27.3 million over 15 years, starting in 2010, to encourage the company to locate in Michigan rather than at competing sites in other states.

Energetx will invest $37 million in Holland and is expecting to create up to 1,068 new jobs by the end of five years, according to David Slikkers, CEO of S2 and Energetx.

Slikkers said Energetx is negotiating with six of the major wind turbine companies to supply blades, nacelles and hubs for turbines in the largest category as well as the "community scale" turbines. The largest commercial-size wind turbines have blades that range from 37 to 60 meters long, while the mid-sized "community-scale" turbines have blades from 10 to 20 meters long. The nacelle is the fuselage-like housing containing the generator, with the hub mounted on one end and the blades attached to that.

Production is expected to begin late this fall and will result in the hiring of perhaps "a few dozen" new employees by then, with a little more than 100 new jobs by the end of 2010.

"The overall mission here, in diversification, is to try to bring stability and added jobs to our region," said Slikkers.

S2 boat sales were "down considerably" in 2008 — "more than what we were expecting," said Slikkers. He said he didn't have precise sales numbers in front of him, but he added that the decline is "fairly common" in many industries today.

S2 would sell between 400 and 500 boats "in what we call a good, normal year — and we're not there," he said. A softening in the boat market became noticeable in the first quarter of 2008, he said, and "kept accelerating."

Hayley Wolff, a boating industry analyst at Rochdale Research in Stamford, Conn., said earlier this year she was expecting a "precipitous" decline in pleasure craft sales in 2009, with "a huge contraction in the industry."

Slikkers said he believes that various sectors of the worldwide economy have been significantly challenged by the global credit crunch.

"It will take awhile before banks will start to be more fluid with their funds," said Slikkers, predicting that until banks are "more relaxed," commerce will be virtually paralyzed.

"Right now, banks in general — even if your financial situation is good — are still not lending money. They are in a state of paranoia," he said.

When asked where S2 found the $37 million for its investment in Energetx, Slikkers would only reply that "you try to get creative when you need to."

Although national indices indicate that consumer confidence is improving, Slikker said "the reality is, consumer confidence has to be higher than what it is today to be making large discretionary purchases," which he noted is certainly the category in which S2 luxury watercraft fall.

S2 has undergone "a couple" of staff reductions recently, said Slikkers. Right now S2 employs about 400, although some are off at any given time on "work furlough cycles," he said. "We're trying to figure out how to work differently so that we can keep as many (employees) active as we possibly can. I can tell you right now we don't have nearly enough activity as what I would like."

Last year a major drop in boat sales forced S2 to lay off more than a hundred employees. It was the second year in a row of a drop in sales in the recreational boating industry.

In 2005, S2 invested $14 million in a 300,000-square-foot expansion to its production facility on 40th Street.

Slikkers said that about eight years ago, the company began switching over to a closed mold process for using composites in production of boats and components. Composites are a combination of resins and glass fibers. Closed mold composites production is "a technology and a process that is readily transferable, as we consider diversification," said Slikkers.

He added that large wind turbine blades "are made in a closed mold process, so it was a natural thing for us to leverage the core competency that we had from the marine side into the wind side."

Slikkers said that not all marine products manufacturers "have moved to the closed mold process, in fact, very few have. So what we were doing was not the norm."

He said it was a "blessing" when S2 "learned that this was a natural transition and fit for us, in another industry."

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