How’d you get into this business?
In 1987 All American Marine was founded by Pat Pitsch. He started building aluminum monohulls for the commercial fishing industry in Bristol Bay and Cordova, Alaska. For the first eleven years that was the primary focus of the business. In1998 he had an opportunity to build his first catamaran.
A charter fishing boat operator from the San Francisco bay area approached Pat and asked him if he could build him a 64’ catamaran? Pat is a go-getter and is very innovative. So he took on the challenge to build his first US Coast Guard inspected hydrofoil assisted catamaran. Although it wasn’t an easy build, the vessel performed beyond everyone’s expectations and became an overnight success.
Pat and I had some mutual friends that felt like we could team up to seize the market potential of this state-of-the-art vessel design. I had a track record of coming along successful entrepreneurs and helping them take their business to the next level. Towards the end of 1999, Pat had made arrangements for a group of vendors and potential customers to travel to San Francisco and experience the boat. I travelled with Pat and AAM’s technical manager to the Bay Area and met up with the naval architect from New Zealand. I was impressed with what I saw and agreed to put together a comprehensive business plan over a three month consulting period. The idea was that if Pat liked it and I liked the opportunity, then I would join the company as CEO and execute the business plan. So that’s what happened.
At the end of 2002, we negotiated a Lease with the Port of Bellingham to get us into our current facility at the foot of Harris Ave. in the shipyard area. At that time, I became the managing partner and obtained a fifty percent ownership in the company. In 2012, I signed an agreement to purchase the remaining shares of the company. So just a few more payments and we’ll have that obligation taken care of.
That’s pretty exciting! Are you going to celebrate when that happens?
Eleven more payments… not that I’m counting.
No. Of course not!
So for a boat building operation like this is it a requirement that you are down by the water or is it just much more convenient?
Well, if you’ve got a real wide road that has minimal overhead clearance obstacles that you can use to transport these boats, then you can build them anywhere. But for all practical purposes, you need to be adjacent to the water where launching facilities are available. For the past 18 years, we have used Fairhaven Shipyard’s boat launching equipment. Sometimes the challenge is that they have boats on the railway when we need to launch our boats. We have been dodging the bullet for a long time. They have been very amiable and have worked with us as much as they can. It becomes a challenge if they get some last minute project or there’s extra work that needs to be done on a vessel that is already on the railway. In that case, they might notify us that the railway won’t be available when we were planning on using it and that if we don’t launch our boat in the water now (or in some small future window) it is going to be three months before they have an opening again. Our labor costs are 2-3 times greater once the boat hits the water as a result of crew members having to travel back and forth from the shop to the dock to complete their work. Unfortunately, launching any other way—like having a barge and a crane come up from Seattle, is prohibitively expensive.
So do you build catamarans exclusively?
Historically, over ninety percent of the boats we build are catamarans. The vast majority of those are hydrofoil assisted catamarans – truly state-of-the-art vessels.
Other catamarans, like the ones that we built for King County (Seattle area) in 2015, do not have hydrofoils. One boat goes to Vashon Island from Colman dock next to the Washington State Ferries terminal and the other one goes to West Seattle. These boats can carry up to —278 passengers. The cruise speeds of these boats are 28 kts. King County chose not to utilize our hydrofoil technology on their vessels, so our designer in New Zealand used a supercomputer to optimize the hull shape. We have an exclusive design agreement for North America with Teknicraft Design since 1999.
Does the hydrofoil lift the boat out of the water at speed?
The combination of the unique tunnel shape and the hydrofoil displaces a third of the weight of the boat. The operators are able to achieve the same performance, with a third less horsepower. That means a third less fuel. This is very significant, especially in the work boat industry. Compared to a monohull, a medium to high-speed Teknicraft hydrofoil assisted catamaran burns about half of the fuel and provides a superior ride for the passengers.
Because there is less boat in the water?
Yes, that’s the primary reason. Another benefit of displacing less water, is that these boats have a much lower wake-wash characteristic then other catamarans and monohulls. Beach erosion is becoming an increasingly significant issue, especially with high-speed ferries.
We recently built a second hydrofoil assisted catamaran for an operator in Long Beach, California. The first one is called Triumphant. The new one is called La Espada; it’s a 250 passenger, eighty-three foot vessel based out of Long Beach, California.
So the boats that you build are ferries,…
Yes, ferries, vessels for whale watching, harbor and dinner cruises, ecotour boats, research vessels, and survey boats.
I saw some pictures of NOAA boats on your website.
Yes. Those are research boats for NOAA’s National Marine Sanctuary program. They are basically, a floating scientific laboratory.
What boats are you working on now?
A survey boat for the U.S. Army Corps of Engineers that will be going to Philadelphia. We are currently conducting sea trials. It’s tied up at Berth 3 at the Cruise Terminal.
We are also building two 72’ 150-passenger ferries for the National Park Service’s Gulf Island National Seashore in Pensacola, Florida.
We also have under construction a 125 foot, 500 passenger monohull for Argosy Cruises in Seattle. This boat’s primary use will be to transport passengers to and from Tillicum Village on Blake Island, where the company features traditionally-prepared alder fire roasted salmon, Northwest Native American storytelling and live stage performance inside a cedar longhouse. It’s a great attraction.
We are also getting close to signing a contract for a similar type of boat, but it’s going to have hybrid propulsion and potentially an all electric propulsion system for the San Francisco area.
So you mentioned the new building. Where will it be?
In Squalicum Harbor. It is being built off of Hilton Avenue, just west of Roeder Avenue.
The new building is coming at the perfect time, allowing us to enter into the large monohull market. Our current facility isn’t large enough to complete vessels of this size. We’re hopeful that these two boats will showcase our expanded capabilities.
We’ve got a twenty-five year lease there. I’ll be ninety years old when the lease runs out, but don’t worry, I’ve got a twenty year extension. [laughs]
So you’ll be one hundred and ten.
And maybe then I’ll start thinking about retirement.
So when you are able to weather a recession like you did you, obviously have newly created opportunities for growth but did you also lose some of your workforce? Did you have to cut back?
No. We feel extremely blessed that we were able to maintain our continuity and our workforce. We had to sharpen our pencil a bit on pricing to remain competitive. Our employees are our highest priority. Not just as workers, but as individuals. We know every single one of them and their stories.
We had some contracts come in prior to the recession. Since our boats are generally a three month design and an eight to nine month build, we had the pump primed pretty well with a backlog of contracts before the economy started to deteriorate. We did have to do some creative things to keep everyone busy, but overall the timing worked out really well for us.
How many boats can you be working on at any one time?
In our current facility we can have up to three boats in some phase of the construction cycle.
And the new building will increase your capacity for about how many at a time?
It will double our current capacity and will allow us to build much larger vessels.
We will have forty-four thousand square feet of production and support space, whereas right now we have twenty thousand square feet.
Are there some unique advantages to doing business in this industry in Bellingham as opposed to moving a little further down south? Seattle is a much bigger place.
We can be more competitive here than yards in Seattle, because Bellingham has a slightly lower cost of living. We also have a good labor force here. Their cost of business is higher for both labor and infrastructure. Our material costs are the same since we utilize common suppliers.
The premier boats in the boat market are built in the Northwest and the Northeast United States. But there is a lot shipbuilding on the Gulf Coast, especially in Mississippi and Louisiana. I estimate that their labor rates are currently about 80% of our rates at the present time. So when you have a vessel in the range of three to six million dollars and forty percent of it is labor and their labor is a 20% less than yours it is extremely difficult to be competitive. That’s a delta of $250-500K. They also have substantially lower infrastructure, business and environmental costs then what we experience here in the Pacific Northwest. In addition, we have transportation costs to contend with if we want to sell boats to customers on the East Coast and Gulf Coast areas.
I believe that we are building some of the highest quality of boats in the industry. The overall value has kept us in business. The Gulf Coast yards have traditionally built boats for the” oil patch”. Most of those shops down there are just sheds—literally carport type sheds. That being said, there is a is a key player down there that has been very successful building high-quality homeland security patrol vessels. Now that the funding for those boats is dropping off, because the pipeline is getting full, they have expanded their markets to stay in business. They recently won a portion of a big ferry order from New York City and they have never built a ferry before. It’s going to be interesting to watch this dynamic unfold.
The moral of the story is that this is a very competitive market and it keeps us on our toes. We have been able to use very innovative technology to keep us ahead of the pack. We are definitely one of the top builders in the country for work boats and ferries. We just have to work hard to control our costs and not be priced out of the market.
What’s the hardest role for you to fill here. Is there a particular skill you are constantly looking for?
No. Our turnover is very low.
We are at a stage in our development where we are looking for some key people—some engineers. One—a sales engineer and another a design engineer. We are very, very selective about whom we hire. Culture is everything to me.
I look for “Attitude” and “Aptitude” when hiring new employees. Attitude is about your ability to work and get along with people. Aptitude is the ability to learn the job. If a prospective employee has these two characteristics, we will train them to be experts in the particular crafts.
I read a book recently, The Ideal Team Player, that identified humility, hunger and people smart as key ingredients for hiring . I really like that. Humility is really important to promote that good attitude—you need your crew to work together as a team to be efficient. Hunger—you have to have a fire in your belly, not only for personal success, but the success of the company as well. We need people who are thinking all the time — not just about how to get the job done, but how they treat their fellow workers. All of us you are involved in the hiring process will be looking for these characteristics when we expand our workforce in the coming years.
Our production team consists of aluminum welders-fabricators, mechanics, marine electricians and interior installers. I believe that we have some of the best craftsman in the industry here at AAM. We work hard at developing a rewarding culture for our crew, As a result of that commitment and the high caliber of people we have, many of the best people in the industry want to work here. I believe that good people attract good people.
What is your biggest challenge in building boats? You already mentioned the competition.
That would certainly be the main one. Because we’re a custom boat builder things change all the time. For instance, the number of man hours need to build one boat might be drastically different from one boat to the next. A seventy-two foot ferry might require twenty thousand man-hours but the next boat might be sixty thousand man-hours. There’s a huge difference between this kind of work and production line work.
So you build boats for a living. When you get a day off do you spend time on boats—do you fish, or sail?
My wife and I enjoy boating in the San Juans and Gulf Islands. We have a 32’ foil-assisted Teknicraft catamaran. Crabbing and shrimping is always a hit with family and friends.
What’s your favorite spot in Bellingham? Where do you go when you are not working or boating?
We have been fortunate to live and raise our kids near Lake Whatcom. So I’d have to say there’s no place like home where I’d rather be – at least on the ground. .
I have been a private pilot for forty years and am a part of Chuckanut Flying Club. There’s nothing like experiencing the freedom of flying an airplane.
I am also a hunter. I’ll be going elk hunting next week.
What’s the misperception about your job that you encounter most often?
Private business owners are facing daily challenges and risks that not too many people understand. It’s certainly not an occupation for the faint hearted. Profits (at times they can be sparse), need to be reinvested in the business to seize growth potential and be prepared for the inevitable ”rainy day” when things turn south. We could have 20 years of relative success and then lose everything in a very short period of time.
I believe there’s a public perception that business owners only care about themselves and use workers as pawns to make them rich at their employees expense. In contrast, my number one goal is to create a stable and productive environment for our crew. If they have to spend eight to ten hours a day working, I want that time to be as enjoyable as possible. On Tuesday we had a lunch barbeque and we took some time to fill the crew in on some of our new and pending contracts and give them an opportunity to ask questions. We do Christmas parties and summer beach parties. We take the crew, their friends and families routinely out on the new ferries that they build, and tour the San Juan Islands. It’s fun to see them walk around and show their friends and families with pride, what part of the boat they were involved in building. Unfortunately, we have to walk that tightrope between being competitive in the marketplace and paying our employees top dollar. I always wish that we could do more for them.