Incat sinking with unsold inventory

by Bruce Montgomery The Australian on 4 Mar 2002 One of Australia's export flagships, Hobart's Incat shipyard, is struggling to remain
afloat.

It is drowning financially under the weight of the $100 million aluminium bipod
behemoths it builds -- but can no longer sell.

It is pinning its hopes on snaring a big military order and being able to fill that order
by having the vessels ready.

This means the yard has become a spec builder, producing ever bigger and faster
high-speed catamarans.

There is rarely ever a known buyer. Today it has four unallocated ships.

Outright sales have become a rarity. Many of Incat's deals are charters or
leasebacks in which it has to retain equity, often 100 per cent.

Indicative of its problems is that the Tasmanian Government, the state's biggest
public employer, refuses to bail out Incat, the state's biggest private employer, by
buying a ship at a time when it is looking to upgrade its Bass Strait fleet.

Tasmanian Premier Jim Bacon doesn't believe the cats are suitable: mooted designs
for the strait are untested.

Sympathetic to his position are the reported 80 per cent of passengers who throw
up on the summer Devil Cat service from George Town to Melbourne, no matter the
weather. In any case, the cats are not allowed across the strait when there are
seas of over 4m.

Bacon has already given Incat $30 million, secured against its completed ships, to
help with cash flow. The weekly wage bill of the 700 welders, metal tradesmen
and labourers is over $1 million.

Its banker, National Australia Bank, is 'monitoring closely', says Incat managing
director Craig Clifford, who remains upbeat about the prospects.

Incat was started by his father, ferry-boat operator Robert Clifford, and by naval
architect Philip Hercus from the springboard of the Tasman Bridge collapse in 1975.

They parted company in 1989 as Clifford drove the enterprise into bigger and faster
ships towards an industry position that he saw ultimately becoming the maritime
equivalent of Boeing.

'I was never comfortable to being party to such a big production line,' Hercus told
The Australian.

Incat is a private company in which Robert Clifford is the majority shareholder. He
chose not to diversify the production line: the ships just kept getting bigger and
faster.

Today, still the main salesman, he is in Scandinavia chasing military and commercial
orders as his completed ships concertina at the yard in Hobart's Prince of Wales
Bay.

His main opposition in the world market for high-speed catamarans is another
Australian company, Austal. They chose to diversify.

They are building Greg Norman's luxury cruiser, they don't spec build, they sell, and
they don't charter. Their order books are full. They are poaching Clifford's dejected
and declining workforce, already down from 1000 a year ago.

In January, Austal won a landmark $80 million US military contract to supply a
101m-long, high-speed support ship to move troops around Japanese islands over
the next three years. It may lead to contracts for up to 14 such boats: the same
contracts that Incat also seeks.

A week ago, federal Cabinet refused to come to Incat's aid, a decision that Austal
managing director Bob McKinnon supports. 'We all should be treated equally,' he
says.

'We sympathise with Incat's position but we compete and what support they get
must be made available to others. The real issue they have is that they have built
boats without clients. The market is full of boats that weren't ordered.

'I am hesitant to comment because they are friends of ours but some time ago we
took a view that to have the right risk profile for our business we had to diversify. We have a broad product range.




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