Financial life in a big town

People are finally replacing the cars and trucks they held onto during the economic slump, giving a boost to sales at Chrysler, GM and Nissan in November.

Chrysler’s sales rose 45 percent from a year earlier, while GM’s climbed 7 percent and Nissan’s 19 percent. The three companies were among the first to report U.S. sales of new cars and trucks on Thursday.

Dealers say they’ve had strong floor traffic all month, with surprisingly high sales for a month that’s normally lackluster because of colder weather and holiday distractions. But this November, buyers went to showrooms because of good deals on leases, more confidence in the economy and a need to trade in older cars, says Ryan LaFontaine, a partner in a six-dealer chain in Michigan.

The activity underscores projections that Americans bought new cars at the fastest pace in more than two years as they replace aging vehicles. Analysts expect that the annual sales rate for November could range between 13.3 million and 14 million cars and trucks. That is far better than the rate of 12.6 million through the first 10 months of the year.

November sales also could approach the 14.1 million annual rate from August of 2009, when the government offered big rebates for drivers to trade in their gas-guzzling clunkers.

Sales at Chrysler Group LLC last month were led by the Jeep Compass small SUV, which had a nearly ten-fold increase in sales. Jeep brand sales rose 50 percent, while Chrysler brand sales nearly doubled on strong demand for its 200 and 300 sedans. But Chrysler also raised its incentives to nearly $3,300 per vehicle, up 6 percent from October.

At General Motors Co., buyers snapped up small cars and pickup trucks. Sales of the Chevrolet Cruze compact rose 54 percent, while the Silverado pickup, GM’s top-selling vehicle, saw sales jump 34 percent.

“We are seeing a broad spectrum of customers return to the market,” says Don Johnson, GM’s U.S. sales chief.

At Nissan, the tiny Versa led sales with a 38 percent increase, but SUV and truck sales also rose 32 percent.

People have been holding onto their vehicles in an unstable economy, and the rate of cars that are scrapped has surpassed sales for several years. The average age of a car on U.S. roads is a record 10.6 years, according to the Polk auto industry research firm.

The sales increases at the three car companies also reflect consumer confidence for November, which rose to the highest level since July, according to the Conference Board. October’s number was the lowest since the recession.

With the increased confidence, car buyers are releasing pent-up demand, said Larry Dominique, executive vice president of data for the TrueCar.com automotive website. “I think consumers are just starting to say `it’s time to start spending money again,’ ” he said.

TrueCar expects November sales to be nearly 12 percent higher than a year earlier, capping six months of sales gains compared with the same month in 2010. Last November, the annual sales rate was only 12.3 million as the auto industry was just starting to recover from the economic meltdown.

Sweet lease deals, helped by low interest rates and high used-car values that make leased vehicles worth more when they’re returned, also are fueling sales. GM, for instance, is offering a Cruze lease $169 per month for 39 months. According to TrueCar, the average industry spending on incentives such as leases and low-interest loans was $2,534 per vehicle in November, up 2.5 percent from October.

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If Toronto fireman Alexander Gunn was alive today, he might well feel like the Warren Buffett of his times.

The semi-detached home he bought in Toronto’s Riverdale neighbourhood for $1,200 in 1906, sold in November for $825,000.

Conventional wisdom has it that buying a home is one of the smartest things we can do. If you have been lucky enough to live in the Greater Toronto Area, especially in the last 10 years when house prices have doubled, that would be true.

But over the long run, is home ownership such a great deal? To find out Moneyville took a close look at Gunn’s house over the last 105 years.

Here’s what we found: Adjusted for inflation, an investment in the stock market would have yielded a better return, including all the ups and downs — starting with the 1929 stock market crash that ushered in the Great Depression.

Toronto was still rebuilding from the Great Fire of 1904 when Alexander Gunn was promoted to district captain after years of climbing the ladder at the city’s No. 3 firehall at Yonge and Carlton Sts. With his new responsibilities came a pay hike, from $850 to $1,000 a year.

It was the nod he needed to buy his first home.

The three-storey house in what is now known as Riverdale was brand new, part of a development on what had been fields where locals grew food to sell at market. It promised good luck: A shamrock had been crafted into its soaring gable, most likely by Irish immigrants who helped build these turn-of-the-century subdivisions.

Each day on his way to work, Gunn would have headed down Broadview Ave. with its sweeping view of the downtown and watched the burned-out city being rebuilt.

He would have kept warm at night in front of the house’s wood-trimmed fireplace and watched through its lead-glass windows as thousands more homeowners flocked to the area after 1912 when Danforth Ave. was paved and, later, the Bloor Viaduct erected across the Don Valley.

Gunn paid just a little more than a year’s salary for the modest house on a 20 foot by 112.5 foot lot. Today, a buyer would pay a fortune, relatively speaking — about five times their annual income given that the average price of a GTA home in October was $465,000 and the average household income $82,000, according to the Canada Mortgage and Housing Corp.

Gunn and his family lived at 56 Simpson Ave. for more than four decades, through two World Wars, the Great Depression and the remarkable transformation of Toronto.

The house changed hands just four times before its most recent sale. And the average annual gain over the 105 years, adjusted for inflation, was just 3.9 per cent.

“If I had to give new homebuyers some advice, it’s that houses aren’t always the ultimate investment. You should never bet the farm on the house, so to speak,” says Francis Fong, an economist with TD Economics.

Fong and his colleague Sonya Gulati helped Moneyville adjust prices for inflation and compare the appreciation of the home against Toronto Stock Exchange returns.

The challenge was to compare apples to apples. We had the home’s sale price going back to 1906, but the Bank of Canada’s inflation records don’t begin until 1914. Toronto Stock Exchange records start in 1919.

So we opted to track gains from 1947 onward, seven years after Gunn’s death, when the house sold for $6,300. We found that in those 64 years, the house appreciated at an average annual rate of 2.3 per cent, adjusted for inflation. (Inflation averaged 3.9 per cent during the same period, largely because of spikes in the 1970s and early ’80s.)

The TSX, on the other hand, did marginally better — producing average returns of about 3 per cent.

But when the everday costs of a house were included, things likes taxes, maintenance and upkeep, 56 Simpson fared much worse

“A house is not a good investment. It is a roof over your head,” says James McKellar, director of the real estate and infrastructure program at York University’s Schulich School of Business.

These days, homeowners in hot markets like Toronto and Vancouver may feel they have hit the jackpot: Most Toronto homes have virtually doubled in price over the last decade and in Vancouver they have almost tripled.

But once you factor in the other costs — interest on the mortgage, new kitchens, bathrooms, furnaces and electrical updates, “you’re lucky to make anything,” says McKellar. Studies have shown that it’s $800 a month cheaper to rent a 1,000-square-foot home than to own it, he notes.

“By any empirical study, houses do not inflate. They are a cost. But we all have to live somewhere.

“Calling a house a good investment is a process of rationalization. The last thing you want to admit is that, ‘I bought the house because I fell in love with it.’”

Catharine Grossi is proud to admit that. She and her husband Paul bought 56 Simpson for $462,500 back in 2001 because they were keen to move back to the city from the suburbs.

“When I saw that so much of the original house was there, and it was updated . . . That was good for me. I loved it as soon as I saw it.”

She became fascinated by the home’s history — she spent a day at the City of Toronto archives — and details such as its original fireplace, century-old exposed brick, the shamrock.

The house proved to be the perfect place for Grossi’s two sons and daughter to drop their bags after university or stints abroad.

Grossi wasn’t thinking so much about the gains she’s made, but rather the life she’s lived at 56 Simpson when the house sold Nov. 4. She and Paul are downsizing into a home two doors from their daughter and her newborn twins.

Grossi asked just one thing when her realtor called to say there had been an offer at asking price: “Do they love the house?”

James McKellar gets that.

He has lost money in the housing market: About $25,000 in the wake of the oil patch bust in Calgary in 1983 and $35,000 on a Boston home during the ’90s recession.

He now owns a home in Moore Park.

“The big drawback of renting is that it doesn’t give you the emotional satisfaction of owning,” he says with just the slightest chuckle.

“At the end of the day, when you go home and make dinner and relax, the numbers really don’t matter.”

Also read:

How we paid off our mortgage in three years

Why I sold my house and rent instead

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Please remember that a payday loan is a rather expensive line of credit. Much like taking something to the pawn shop.

Greece’s embattled prime minister and main opposition leader agreed Sunday to form an interim government to ensure the country’s new European debt deal, capping a week of political turmoil that saw Greece face a catastrophic default that threatened its euro membership and roiled international markets.

As part of the deal, Prime Minister George Papandreou agreed to step down halfway through his four-year term. He and conservative opposition head Antonis Samaras are to meet Monday to discuss who will become prime minister and the makeup of the Cabinet.

The new unity government’s main task will be to pass the European rescue package, reached after marathon negotiations between European leaders barely a week ago _ a move considered crucial to shoring up the euro. The interim government will then lead the country into early elections, expected early next year.

Officials had been anxious to reach some form of agreement before a meeting of eurozone finance ministers in Brussels on Monday.

“Of course it’s a breakthrough,” government spokesman Elias Mossialos said. “It is a historical day for Greece, we will have a coalition government very soon, early next week. The prime minister and the leader of the opposition will discuss tomorrow the name of the new prime minister and the names of ministers.”

Papandreou sparked the latest crisis by announcing last week that he was taking the hard-fought debt agreement to a referendum. That outraged European leaders, who said such a vote could raise the specter of Athens leaving the common currency _ setting off an unpredictable chain reaction that could drag down other European countries.

They also warned a vote would jeopardize the disbursement of a vital $11 billion (euro8 billion) installment of Greece’s existing $152 billion (euro110 billion) bailout, which the country desperately needs to avoid the potential of a catastrophic default within weeks.

In the ensuing market turmoil, Italy _ which also faces severe financial difficulties, but is considered too big to bail out _ saw its borrowing costs spiral, sparking fears it could be dragged into the fray.

Papandreou withdrew the referendum plan Thursday in the wake of European anger and after it sparked a rebellion among his own Socialist lawmakers, many of whom called for him to resign. The turmoil also pushed the conservative opposition party to publicly declare it would back the debt agreement.

Any interim government that is formed with the support of both major parties will be almost guaranteed to push the European rescue package through parliament, even if it has to be approved by a reinforced majority of 180 of the legislature’s 300 lawmakers.

The new European deal would give Greece an additional $179 billion (euro130 billion) in rescue loans and bank support. It would also see banks and private investors write off 50 percent of their Greek debt holdings, worth some $138 billion (euro100 billion). The goal is to reduce Greece’s debts to the point where the country is able to handle its finances without relying on constant bailouts.

Greece’s lawmakers must now approve the package, putting intense pressure on the country’s leaders to swiftly end the political crisis so parliament can convene and put it to a vote.

A planned meeting with the leaders of all political parties in parliament, which was to take place Monday evening, was canceled after two leftist parties refused to attend, the president’s office said.

Sunday’s agreement came after a late-night meeting between Papandreou and Samaras called by President Karolos Papoulias at Papandreou’s request to end a two-day deadlock. Direct talks had failed to get off the ground because Papandreou had said an agreement had to be reached on a new government before he stepped aside, while Samaras insisted Papandrepou resign before the start of negotiations and demanded quick elections.

An opposition conservative party official said Samaras’ New Democracy party was “absolutely satisfied” with the outcome of the talks and that party officials were to hold meetings late Sunday night with Finance Minister Evangelos Venizelos and his advisers to discuss how long it would take to finalize the new debt deal and when elections could be held.

“Our two targets, for Mr. Papandreou to resign and for elections to be held, have been met,” the official said, speaking on condition of anonymity to discuss the process.

The Finance Ministry said a late-night meeting between Venizelos and opposition party members determined the “most suitable” date for elections was Feb. 19.

Two turbulent years after coming to power in a landslide election victory, Papandreou has seen his popularity plummet as his government has been forced to severely cut spending while hiking taxes to tackle a runaway deficit and debt that led Greece to become the first eurozone country to seek an international bailout.

Ireland and Portugal have since followed suit, but European leaders have been desperate to ensure other countries with larger economies are not also dragged down.

____

Associated Press writer Nicholas Paphitis in Athens contributed to this report.

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Apple’s latest iPhone arrived to an enthusiastic response from buyers camped out at stores Friday, but many observers noted the crowds were smaller than those that had gathered for previous releases.

The iPhone 4S, which went on sale in seven countries, is faster and comes with better software and an improved camera.

But with the fifth unveiling of its popular iPhone, Apple is finding it difficult to maintain the excitement of past iPhone introductions. For starters, the phone is more widely available than in the past. In addition to Apple stores, people can buy the phone from one of three wireless carriers: AT&T Inc., Sprint Nextel Corp. and Verizon Wireless. Some Best Buy, Target and Walmart stores and authorized resellers also carry the phones. Buyers also were able to pre-order the phone on Apple’s website and have it shipped to their home or office.

Many diehard Apple fans and investors were disappointed that Apple didn’t launch a more radically redesigned new model _ an iPhone 5. It’s been more than a year since Apple’s previous model was released.

That also may have contributed to smaller gatherings at some Apple locations.

“People are not as excited about this version as they might have been if a (iPhone) 5 came out,” said Charles Prosser, 50, a retired teacher and a computer technician from Tuscaloosa, Ala.

Even so, hundreds of buyers camped out in front of stores for hours to be among the first to get an iPhone 4S. About 200 people were at Apple’s Fifth Avenue store in Manhattan as the iPhone 4S went on sale.

Steve Wozniak, who created Apple with Steve Jobs in a Silicon Valley garage in 1976, was first in line at a store in Los Gatos, Calif., having arrived on his Segway the afternoon before.

Wozniak, who typically waits in line for new Apple products, said he barely slept Thursday night as he was busy chatting with Apple fans, taking photos and giving autographs. Wozniak pre-ordered two new iPhones; on Friday, he bought two more.

“I just want to be part of an important event, so I feel it more deeply,” he said.

Many said the event resembled a remembrance to Jobs, who died last week, a day after Apple Inc. announced the new phone.

Emily Smith, a 27-year-old user experience designer in New York, checked in to the line on the location-centric social network Foursquare. She got a virtual Steve Jobs badge that read: “Here’s to the crazy ones. ThankYouSteve.”

Others joked that the 4S model stood “for Steve.”

Tony Medina, a 25-year-old student from Manhattan, got in line at 11 p.m. and stayed despite getting soaked by an overnight thunderstorm. He said he planned on ordering the phone online, but decided to join the crowds to honor Jobs. “For loyalty, I felt I had to do the line,” he said. “I had to say thank you.”

In Chicago, Nicole Pacheco, 17, dragged her brother and a friend out to buy Apple’s latest gadget.

“I wanted to see how it was, to come out here for once,” she said as she looked at the line that stretched past her. “We’re kind of a memory for Steve Jobs. It’s one of his last inventions. It kind of motivated me to get the next one.”

As was the case with past Apple product launches, employees at many Apple stores greeted customers with cheers and smiles and congratulated them on their purchases. The company provided free coffee.

Dina Nguyen, who works at the Great America amusement park in Santa Clara, came to the store with her brother, Kennedy, to pick up four iPhones for their family. They are the first Apple products for the siblings. Their mom has the iPhone 4.

The siblings said it was a bit sentimental to get the phones now, right after Jobs’ death.

“He left a good legacy. He had a good life. He wanted to make people happy. It’s good to support that,” Kennedy Nguyen said.

Apple and phone companies in seven countries started taking orders for the iPhone 4S last Friday. Apple said Monday that more than 1 million orders came in, breaking the record set by last year’s model, which was available in fewer countries and on fewer carriers.

The death of Jobs could be helping sales. Marketing experts say products designed by widely admired figures such as Jobs usually see an upsurge in sales after their death.

Una Chen, a 24-year-old banker, said she was just happy to swap out her BlackBerry Bold for the new iPhone, particularly after a BlackBerry outage affected her phone this week.

“It’s not good to have a phone and not be able to use it,” Chen said.

The base model of the iPhone 4S costs $199 in the U.S. with a two-year contract. It comes with 16 gigabytes of storage. Customers can get 32 gigabytes for $299 and 64 gigabytes for $399. Customers have a choice of white or black.

The phones also debuted Friday in Australia, Canada, France, Germany, Japan and Britain. They are coming to 22 more countries by the end of the month.

The phone has a faster processor and an improved camera compared with last year’s model. It has a new operating system that allows users to sync content without needing a computer. It also includes a futuristic, voice-activated service that responds to spoken commands and questions such as “Do I need an umbrella today?”

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Stocks cut the day’s steep losses by nearly half after Greece’s finance minister said a conference call with debt inspectors was “productive and substantive.” That gave investors some hope that Europe can contain its debt woes.

Pessimism about European debt sent stocks sharply lower Monday, ending a five-day winning streak for financial markets. On Friday, European finance ministers said they would delay authorizing an installment of emergency funds for Greece payday loans guaranteed no fax.

At the closing bell, The Dow Jones industrial average is down 108 points, or 0.9 percent, at 11,401. The Standard & Poor’s 500 index is down 12, or 1 percent, at 1,204. The Nasdaq composite is down 9, or 0.4 percent, at 2,612.

About six stocks fell for every one that rose. Trading was light, at 3.7 billion shares.

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Retail sales in August may have been flat, but for one day this week, there was a spending spree going on reminiscent of Black Friday.

Yes, I’m talking about the Missoni for Target line. Many folks were baffled by the fuss over a bunch of dresses with zigzags. But devotees who love the Italian fashion house swamped Target stores around the country.

In case you haven’t heard, Target unveiled a limited-edition Missoni line in its stores and online on Tuesday. The regular stuff sells in the range of several hundred dollars to thousands of dollars at the likes of Neiman Marcus.

Anyway, Missoni lovers were so zealous to get a hold of Missoni dresses at prices such as $54.99 that many stores sold out of their inventory within hours. And the Target website was so overwhelmed that it crashed for several hours on Tuesday.

Niky Roberts, who works in public relations in St. Louis, was one of the lucky ducks to nab some Missoni. She was in Springfield, Mo., on business, so she went straight to a Target there after she was done with work. The store had been mostly cleaned out by then, but upon the suggestion of a fellow shopper, she checked out the children’s section, where she found an extra-large sweater.

“It fit like a glove,” she said proudly. “I am a Missoni fan, but I do not have a Missoni budget. So this was a nice way to own a Missoni piece.”

I called around to some local Target stores on Friday afternoon, and many of then said they still had a couple of Missoni odds and ends left

An Alberta couple who entrusted Canada Post to deliver important legal documents to sell their home in Ontario won’t do that again.

That’s because their package, guaranteed to be delivered within two days, got lost for more than a week and put the sale of the house, five months on the market, in jeopardy.

This case comes on the heels of news in July that sensitive cancer documents, also sent via Xpresspost, are missing, putting the personal information of thousands of patients at risk.

Richard and Tania Vander Ploeg, along with their four children, moved from Owen Sound to Ponoka, Alberta, where Richard had found a better job at dairy farm.

But due to a soft housing market in the Grey-Bruce region, they didn’t manage to sell their house before they left in May.

As the family juggled costs associated with maintaining two homes, they prayed for a buyer and in August, they finally got an offer.

Their lawyer in Owen Sound emailed documents, which the Vander Ploegs printed out and signed along with getting the necessary officials to witness their signatures.

Richard took their documents to the local post office on Aug. 22, and was told with Xpresspost service, it was guaranteed to be delivered Aug. 24 — two days before the deal was scheduled to close.

But when the documents hadn’t arrived on schedule, they started to worry. Frantic calls to Canada Post offered little information, other than to say the tracking showed it was somewhere between Edmonton and Toronto.

“We stressed how important this was to us, that we might lose the sale of our house,” said Tania Vander Ploeg. “We were on pins and needles.”

The documents finally turned up on Tuesday via Kitchener, eight days after they were mailed.

Canada Post spokeswoman Anick Losier said this incident should be considered an unfortunate exception.

“This is not the type of service we want to offer our customers,” she said. “In fact, we work constantly to improve our performance. The experience by our customers in Alberta should not be a reflection of the postal service today and really be considered an unfortunate exception.”

Losier said Canada Post is continuing to investigate to what happened. .

In Cancer Care Ontario’s case, the agency told 6,500 patients that their personal information may have been compromised because it could not account for 15 colorectal screening reports sent to doctors’ offices across the GTA by Xpresspost courier in February and March.

The agency was also looking for 11 other missing reports, containing the data of another 5,440 individuals, and has since tracked down nine of them. Two remain missing.

The cancer agency used the Canada Post service to deliver 6,951 packages to doctors’ offices in three batches. An investigation by Cancer Care Ontario showed 185 packages were delivered without getting the required signatures.

The sale of the Vander Ploegs home was salvaged. More calls between lawyers, real estate agents and the Vander Ploegs resulted in a plan to allow the sale with copies via fax because the original documents were lost in the mail.

They asked Canada Post for $100, the amount insurance covers for lost items, but were told they could only get a refund for the postage, a little more than $14, because the item was eventually delivered.

But after the Star contacted Canada Post, a customer service manager called them Friday afternoon, apologized, offered the $100 and promised to get to the bottom of the situation.

“I really appreciate her sincere apology,” Tania Vander Ploeg said. “I told her the $100 won’t make us or break us. We just want consumers to be aware.”

Though FedEx or Purolator Courier services are not available in their town, in the future, they’ll drive to Red Deer, about 45 minutes away, for important documents.

“It would be worth the drive, even considering fuel costs,” said Richard Vander Ploeg.

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Pfizer to focus on new drugs

Nokia Corp., battered by the popularity of smartphones, is abandoning the Japanese market, after a brief foray with luxury cell phones costing as much as 20 million yen ($250,000).

The Finnish handset maker is closing by the end of July its last store selling high-end Vertu cell phones in Ginza. Previously, it had four such stores in Japan, according to Tomoko Morinari of Sunny Side Up, a Tokyo public relations company that has Nokia as its client.

She declined to say when the decision to leave Japan was made or how many Vertu phones Nokia had sold in Japan.

Vertu said in a statement Wednesday that it was “withdrawing from the Japanese market” to better focus on priority businesses. It thanked business partners, said its Tokyo office will fold by the end of this year, but promised to continue to do work with Japanese craftsmen in its business elsewhere.

Nokia phones have never been that popular in Japan, where the iPhone from Apple Inc. is hugely popular in addition to offerings from Japanese electronics makers such as Sharp Corp payday loan lenders.

Vertu handsets were billed as luxury items including one of lacquer by a Japanese craftsman decorated as a National Treasure that went for 20 million yen ($250,000), Morinari said.

Last month, Nokia warned its second-quarter sales and margins are expected to be much lower than anticipated because of global competition in both the high- and low-end markets.

Since 1998, Nokia has been the world’s biggest seller of cell phones, but in the first quarter of this year Apple overtook it as the world’s top handset vendor in revenue. Nokia’s market share continues to fall, and at 29 percent in the first quarter, is at its lowest level since the late 1990s.

Even more damaging has been Nokia’s inability to meet modern challenges of the smartphone market, the lucrative sector in the handset industry.

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Caprice Lam took 90 minutes to close his first luxury-yacht sale, from the time the customer stepped aboard the 62-foot (19-meter) vessel on China’s Hainan Island to the moment the bank wired the 35 percent deposit.

“I don’t even have his name card,” said Lam, hours after the 13 million-yuan ($2 million) deal on April 2 at a boat show in the tropical resort of Sanya. “He just gave me his cell phone number, called his bank and paid the deposit.”

The sale shows how China’s industrial base is breaking into the most expensive luxury markets. While wealthy Chinese typically entered markets for jewelry, clothes, cars and planes through U.S. and European brands, Lam works for Xiamen Hangsheng Yacht Building Co. Ltd. in Fujian province. It’s one of at least half-a-dozen Chinese yacht builders competing in the country’s nascent nautical market with Azimut Yachts, Ferretti Yachts, Princess Yachts International and Brunswick Corp.

“This is a sign of China’s own industrial confidence,” said Ryan Swift, Hong Kong-based editor-in-chief of Asia-Pacific Boating magazine. “A yacht is a very complex product requiring all the engineering of a house, which has to float, survive waves and have a fine finishing on the inside.”

Spiral Staircase

This time, Chinese companies are entering a luxury market early. While China now has as many as 400 dollar billionaires, there are only about 100 Chinese-owned yachts longer than 60 feet, according to Rupert Hoogewerf, who compiles the Hurun Report of wealthy Chinese. In the U.S. there were more than 7,000 yachts that size in 2006.

In Zhuhai, two hours from Hong Kong by ferry and car, Sunbird Yacht Co. Ltd. is building two vessels it plans to ship to Italy in July. The buyer, a Milan boatyard, plans to unveil the craft at the Genoa boat show in October.

Sunbird’s boatyard is operating seven days a week to meet the deadline. On a recent afternoon, about 20 Chinese laborers were working on the first of the yachts, a 70-footer. Workers sanded the teak decks by hand and sealed tubes of electrical wires. Carpenters assembled the wooden, spiral staircase leading to the bridge from the deck below.

Sunbird’s staff of 400 workers is capable of making about 20 boats per year. Large-yacht building is new to China, and workers lack skills and experience of their Western counterparts, said Filippo Bertoni, a naval architect from Perugia, Italy, who designed the export boats for Sunbird.

“That first boat was like a school boat for them,” said Bertoni, who expects the vessel will require 100,000 man hours to make in China, a task that would take an Italian crew 35,000 hours. “For the next boats, they will be faster.”

Higher Wages

The yacht builders show how Chinese companies are moving into higher-value products as inflation and rising wages pare the country’s competitiveness for cheap manufactured goods and assembly plants.

Sunbird pays unskilled workers at least 2,000 yuan per month including overtime, rising to three times that for electricians and carpenters, according to Charles Luo, vice president of international business. While that’s more than double the average provincial wage, it still allows the company to build its boats for about 30 percent less than foreign competitors.

With 43 percent duties on boats imported into China, “we have a huge advantage over foreign brands,” Luo said.

European Competition

Still, some Chinese buyers are willing to pay a premium for a European yacht. Wang Da-fu, chairman of developer Shenzhen Visun Real Estate Group, bought a 72-foot Pershing made by Forli, Italy-based Ferretti to entertain clients and help add cachet to his marina in Sanya.

“If I don’t buy a foreign boat, how can I ask others to?” said Wang, who is also a Ferretti dealer.

“There’s a lot of interest for boats bigger than 30 meters,” said Robert How, general manager of Princess Yachts Asia. “China is really, really coming on here.”

Plymouth-based Princess, owned by LVMH Moet Hennessey Louis Vuitton SA, has sold five yachts since entering China in 2009.

Luxury yacht builders also have to tailor boats differently for the Chinese market. For many local customers, out with the big sun decks and water-sports facilities popular in the U.S., and in with mahjong salons, karaoke machines and large galleys.

Karaoke Lounge

“Europeans go on cruise for 10 days or two weeks,” said Gordon Hui, managing director of Sunseeker Asia, which sells the Poole, U.K.-built boats. “The Chinese use the boat for a few hours per weekend to entertain clients, family and friends. They use boats no differently than they would a karaoke lounge in the city.”

Boat owners need special permits to travel on their yachts from one province to another and are restricted to China’s coastal waters.

The largest Chinese-built boat so far is a 45-meter (144- foot), steel-and-aluminum hull vessel under construction at Hong Kong-based Kingship Marine Ltd.’s shipyard in Zhongshan, Guangdong province, that carries a price tag of nearly 18 million euros ($27 million), about one-third less than it would cost if built outside China, said Diana Liang, director at Kingship.

That’s still dwarfed by some of the giants coming out of Germany. The world’s largest yacht is the 557-foot “Eclipse,” built for Russian oil billionaire Roman Abramovich by Blohm + Voss Shipyards, a subsidiary of Hamburg-based ThyssenKrupp AG. (TKA)

Oracle Corp. (ORCL) Chief Executive Officer Larry Ellison owns a 447-foot boat built by Lürssen Bardenfleth in Bremen.

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