The Owners’ Tale

Our story of the defective boat begins two years ago when members of a Lafayette, LA, family bought what they thought was a one-owner 1998 Mako 282 that had seen use as a dealer demo. At the time of sale, they believed the boat was covered by what remained of the manufacturer’s warranty. After the transom and hull began to crack, they learned otherwise. The boat actually had four prior owners, one of whom was a Mako employee who sold it to the man from whom they bought it. Turns out that the Mako employee bought the boat “as is” from the manufacturer in 1997 after it was bought back by the factory because of structural problems. The employee refurbished the boat and, allegedly, with the help of a notary who worked in Mako’s bookkeeping department, fudged the boat’s certificate of origin to obscure its history. Then he sold it as though it was a new boat.

Long before the new owners uncovered the boat’s true history, however, Mako offered to build them another hull for $35,000, which the owners rejected as too costly, since they’d already paid nearly $60,000 for the boat. The owners did make a counteroffer of $25,000 for a new hull — an offer rejected as too low. The owners told BoatU.S., “If they’d accepted our offer two years ago, we’d be out fishing right now, not knowing anything about what went wrong.”

Instead, Mako told the family that the boat’s warranty was no longer in effect and an attorney representing the company told the owners, “Direct any future communications regarding this matter to me as opposed to Mako’s customer service department.” BoatU.S. attempts to mediate the dispute with Tracker Marine, Mako’s parent company, received no response.

Records the boatbuilder has since provided to the Coast Guard show that 19 of the 216 Mako 282s built in 1997 and 1998 were repaired under warranty because of problems related to transom failures. There is no record of the total number of boats with defects, where owners either didn’t report their problems to Mako or where the problems surfaced after the boats’ warranties expired.

Although many Mako 282s, including the Louisiana boat prior to its current owners’ tenure, were repaired at the factory by the manufacturer, the Louisiana family was told the cracks on their boat were strictly cosmetic. Their Mako 282 was built in late 1997.

According to U.S. Coast Guard documents obtained by BoatU.S., the Mako 282 model’s design was derived by adding two feet to the design of an earlier 26 ft. model. A Coast Guard inspector concluded that the transom extension “was not provided with adequate structural support to accommodate the weight of the outboard engines.”

“Carried to its ultimate conclusion, the rear two feet will disconnect from the forward part of the hull,” the Coast Guard report concludes.

Contrary to Mako’s initial assertions that the hull cracks were cosmetic, the Coast Guard warns that, without adequate reinforcement, “eventually the hull will fail and may result in the transom disconnecting from the hull. Should this occur while the boat is underway, it could result in injuries or, under severe conditions, death.”

Nevertheless, Mako sparred with the Coast Guard for nearly a year, first over the question of whether the 282 model line was even defective and then over the question of how to correct the model’s defects.

As this issue of BoatU.S. Magazine goes to press, the two sides had just ironed out details of how the boats would be repaired. The Coast Guard rejected as “not good practice” Mako’s initial proposal to laminate fiberglass cloth over existing gel coat. “Simply sanding down the gel coat will not result in a good bond and will result in future delamination,” the Coast Guard warned. The agency also questioned whether Mako’s repair plans would address boats where lack of reinforcement has also resulted in excessive hull flexing.

“The Coast Guard does not dictate to the manufacturer what needs to be done as we would then have to assume the responsibility for the vessels that are corrected,” said Phil Cappel, chief of the Coast Guard’s Recreational Boating Product Assurance Division, which oversees boat manufacturing issues. “The manufacturer has to propose a fix that we agree will resolve the problem.”

“Sometimes (as in this case) it takes time for the manufacturer to find a solution that we approve. Since the Mako 282 problem is complicated it is taking longer than usual to determine the right solution but it will not go on indefinitely,” Cappel said.

The Congressional Tale

Two years ago, just as the Louisiana family was buying its Mako 282, members of Congress began to take an interest in boat defects, after hearing poignant testimony from the parents of children who died as a result of carbon monoxide poisoning due to the exhaust design on certain houseboats.

Hearings on the CO deaths coincided with the Firestone tire scandal involving defective tires, vehicle rollovers and corporate records documenting hundreds of accidents. On the heels of the subsequent recall of hundreds of thousands of Firestone tires, BoatU.S. published an article (“Could Firestone Fiasco Happen In Boating?” (http://boatus.com/consumer/Firestone.asp), BoatU.S. Magazine, January 2001) comparing the recall statutes for automobiles and boats.

BoatU.S. came to the conclusion that Coast Guard regulations lack enough teeth to protect the boating public. The Coast Guard took this criticism to heart and proposed two significant changes to its boat defect recall laws. The first, to extend the recall statute from five to 10 years, was passed in 2002.

In mid-July of this year, Congress was poised to adopt the second Coast Guard recommendation, that would impose criminal penalties, including jail sentences of up to one year and fines up to $10,000, for industry executives who “knowingly and willfully disregard” recall requirements when the Coast Guard deems a boat defective.

The Coast Guard has authority to require companies to notify owners when boats don’t comply with federal manufacturing regulations or when they contain defects that create safety risks. However, before the recent amendment the Coast Guard could do little more than levy a $2,000 civil fine if companies didn’t cooperate.

A Coast Guard analysis of this dilemma concludes that, while civil penalties can serve as a deterrent, “manufacturers can often recoup the existing penalty amounts by simply selling a single boat or engine.”

But, the Coast Guard states, both civil and criminal penalties “are irrelevant if manufacturers simply carry out their responsibility to manufacture safe products and conduct appropriate recalls.”

While many in the marine industry approach defects in a responsible way, BoatU.S. has observed a number of instances where the Coast Guard has had to cajole companies to recall defective marine products. And, in recent years, several safety problems have made headlines when manufacturers did not take the initiative on recalls, despite being aware of safety risks to the public.

For example, in addition to the houseboat CO situation, which resulted in hundreds of vessels being recalled, internal Outboard Marine Corp. (OMC) documents showed that high level executives were well aware of fuel leaks that caused 1999 and 2000 Evinrude Ficht outboard engines to explode. This information came to light only after OMC filed for bankruptcy in 2000. Likewise, CO poisoning deaths as a result of exhaust system failures in Onan and Kohler generators were well-documented by internal memos, which surfaced in court documents filed in wrongful death lawsuits by victims’ relatives. Kohler later recalled thousands of generators built between 1959 and 1989.

But, just as Congress moved to enact the Coast Guard’s recommendation for criminal penalties, the marine industry launched a PR and lobbying campaign maintaining that the Coast Guard and Congress were going overboard and that most boat defects were the work of just a few “bad actors” who could be best handled on a voluntary basis by the industry itself.

The Marine Industry’s Tale

The National Marine Manufacturers Association, which at first opposed the criminal penalty proposal, has been faced with two significant and sometimes mutually exclusive challenges in recent years. The first involves improving the marine industry’s overall image in light of lackluster boat sales and mediocre grades from customers. The second challenge is a perennial one for any industry trade group: fighting what it considers to be restrictive state and federal legislation. In NMMA’s case, this means boat lemon laws, marine dealer agreements, the 10-year boat recall statute and the proposed criminal penalties for industry execs who flaunt Coast Guard-mandated recalls.

Initially, NMMA issued an all-out “Action Alert” to its members, urging them to voice their opposition to the change by contacting their Congressional representatives. “This addition is unnecessary, vague and ill-conceived,” NMMA’s alert stated.

“Safety is a priority for NMMA and recreational marine manufacturers across the nation,” said Jeffrey S. Gabriel, NMMA’s legislative counsel. “In instances of willful violations of safety standards, however, criminal prosecution is the wrong answer.”

Gabriel, who joined the NMMA staff earlier this year, said, “To support criminal penalties… would be wholly counterproductive.” Instead, he said the industry should regulate itself.

“In order to be effective, regulatory regimes charged with enduring public safety must maintain a close and cooperative relationship with industry. This relationship encourages manufacturers to be forthcoming about potentially unsafe products and results in speedy recalls and informal settlements when necessary,” he concluded.

BoatU.S. took issue with NMMA’s position. “We believe the government should be able to prosecute those who ‘create a substantial risk of personal injury to the public’ and who ‘knowingly and willfully violate the law’ and that these offenders should be held responsible once they have been notified and warned by the Coast Guard,” said BoatU.S. founder Richard Schwartz, the architect of the 1971 federal law establishing the Coast Guard’s authority to recall defective boats.

Citing the Consumer Product Safety Act and the Transportation Recall Enhancement Accountability and Documentation (TREAD) Act, which was enacted in response to the Firestone tire scandal, Schwartz pointed out that other industry executives face criminal penalties when they defy safety recall laws after receiving government notice and that the marine industry should be held to the same standard. Otherwise, he noted, “The boating consumer would always be at risk.”

The original criminal penalties language approved by the U.S. Senate would have given the government the authority to impose criminal penalties on anyone who manufactured a defective boat or marine engine. After initially opposing the Senate proposal, NMMA decided to try and narrow the scope of the proposal so that penalties would apply only to corporate executives who continue to build or don’t recall defective boats after being warned by the Coast Guard.

(c) Copyright BoatU.S. Magazine, September 2004