June 2013
www.cedmag.com
Market strengthens, and bends with new demographic trends.
Housing Swings Back
Plus:
n Golf course building sector still struggling post-recession n Lift-rental specialists build second specialty: service n AED goes to bat with IRS over dual-use
Since 1920 Official Publication of
www.aednet.org
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To learn more, please visit our website today.
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Contents
Winner 2012 Journalism Award Construction Writers Association
June 2013 Vol. 79, No. 6
Editorial Team
Executive Editor and Director of Programs Kim Phelan kphelan@aednet.org
Features
from the cover
Possibilities are endless with technology in our business.
Contributing Editor Joanne Costin pr@aednet.org
Editor’s Note 7
Lip service vs. commitment – which one describes you?
Graphic Production eva Belmonte design@aednet.org eva@neggie.net
On the Numbers 45
Enlightening the IRS on your business and dual use
Columnists
Garry Bartecki AED Vice President of Finance Christian Klein AED Vice President of Government Affairs and Washington Counsel Eli Lustgarten ESL Consultants Jerry Randecker & Chris Sitter Jordan-Sitter Associates
Business Outlook 47
Diversified Golf Course Contractors Wait for Greener Days 20
BINGO! U.S. Housing Market Finally Getting Its Numbers 26
Joined at the hip with U.S. housing, the golf course construction sector turned to rental and foreign markets for survival.
Localized micro-recoveries add up to broader improvements, but multifamily still leads the charge.
Ron Slee R.J. Slee & Associates
Advertising Sales Manager Albert J. Ramirez 800-388-0650 ext. 311 aramirez@aednet.org
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Aftermarket 49
Stratification reports could reveal a 90-10 ratio.
Washington Insider 51
Will Baucus and Camp succeed with tax reform this year?
Inside AED 8 Groundwork 12 Industry Beat 14 Advertisers’ Index 55 Dealer Data 56
Vice President–Sales/ Publisher David W. Gordon 800-388-0650 ext. 334 dgordon@aednet.org
600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 www.aednet.org
A whole lot ’o muddle goin’ on
departments
Advertising Contacts
Production Manager martin cabral 800-388-0650 ext. 313 mcabral@aednet.org
Columns
From the Chairman 5
Plus: The Race to Provide Services Nobody Really Wants 32 Can you truly justify payroll expense for all the services you’ve created for customers? Al Bates explains how to measure and when to cut.
Lift with a Twist 36 Trico Lift, No. 45 on RER’s Top 100 list, defies the norm and beefs up service department for customer-owned machines.
Field Technicians and Building a Better Connection to Your Customers 40 A Closer Look – Realistic and Ready
Sany knows its North American success depends on high-quality dealers. 42 June 2013 | Construction Equipment Distribution | www.cedmag.com | 3
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From the Chairman President & CEO - TOBY MACK Associated Equipment Distributors Oak Brook, Ill.
Where Will Technology Take Us?
Executive Vice President & COO Robert Henderson Associated Equipment Distributors Oak Brook, Ill.
As distributors, we have an incredible opportunity to be our customers’ go-to source for working more efficiently.
Officers
Chairman - mike quirk Wagner Equipment Co. Aurora, Colo. Vice Chairman - Tim Watters Hoffman Equipment Co., Piscataway, N.J. Sr. Vice President - Don Shilling General Equipment & Supplies, Inc. Fargo, N.D.
Vice President - Rick van exan Toromont Industries Inc. Concord, Ontario Vice President - whit perryman Vermeer of Texas Inc. Irving, Texas Vice President of Finance Michael D. Brennan Brandeis Machinery & Supply Co., Louisville, Ky. Past Chairman - Larry Glynn CMW Equipment St. Louis, Mo.
At-Large Directors ron barlet Bejac Corp. Placentia, Calif.
Paula Benard C.N. Wood Co., Inc. Woburn, Mass. Gregg R. Erb Erb Equipment Company, Inc. Fenton, Mo. Dennis J. heller Stephenson Equipment Inc. Harrisburg, Pa. Mike Rooney Thompson Tractor Co., Inc. Tarrant, Ala. Michael J. Savastio Groff Tractor & Equipment, Inc. Mechanicsburg, Pa.
Regional Directors Bruce A. Bowman Upper Midwest Reg. Star Equipment, Ltd Des Moines, Iowa
gary frelick Western Canada Reg. Douglas Lake Equipment Langley, BC Patrick McConnell, West Reg. Clyde/West, Inc. Portland, Ore. christopher palmer Northeast Reg. Wood’s CRW Corp. Williston, Vt. Mark Romer, Southeast Reg. James River Equipment, Inc. Ashland, Va. Jeffrey Scott Rocky Mountain Reg. Intermountain Bobcat Salt Lake City, Utah Rick Van Exan Eastern Canada Reg. Toromont Industries Ltd. Concord, ON gary D. Vaughn South Central Reg. OCT Equipment, Inc. Oklahoma City, Okla.
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By Mike Quirk
I’m quite sure that everyone is aware that it is virtually impossible to escape technology today. We are bombarded by it everywhere we turn. Recently, I was depressed to see a three-year-old have her afternoon ruined when her five-year-old playmate was blazing through the various applications (Apps) on her mother’s iPhone. The younger child’s mother also had an iPhone but was not ready for her child to go there yet. She was understandably upset and the afternoon outing came to an early end. Frankly, I don’t know which was worse for me: Seeing the younger child’s disappointment or the fact that the five-yearold could run circles around me on the device. Most of the advances in technology produce far better outcomes. Not long ago, one of our employees told me that she cannot understand why so many people complain about computers. She has worked for us for 30 years and she proudly states that she can do 10 or 20 times more work today because of our systems and processes. On my way home, I pulled up to a red light. Almost as fast as I came to a stop I tripped a device that changed the light to green. I smiled and thought: How good it is to be the AED Chairman! Later that day, I picked up the paper and read in an article that the auto industry’s top technologists believe that we are only a few short years away from new cars that will be able to navigate stop-and-go traffic by themselves. Computers will soon control our vehicles at highway speeds and fully autonomous vehicles may roam the roads in significant numbers by 2025. That would mean that we could text and answer e-mail while commuting. Something tells me, however, that by then those two means of communication will have gone the way of the “Brick Phone.” So, the logical question is, “where will technology take the equipment business?” We have already developed machine and blade control on earthmoving machines. GPS-guided systems take the guesswork out of compaction as well as concrete and asphalt paving. Engines
report their own vital health information from afar, while agriculture tractors and implements literally steer themselves when tilling, planting, and applying fertilizer down to 1.5-inch accuracy. Through technology, our customers enjoy greater safety, productivity, and higher profits. We all benefit from significantly reduced impact on our environment. The same technologies that will enable the automotive industry to take the next steps are finding application in our equipment world. We will almost certainly see autonomous haul trucks, trenchers, dozers, and excavators that are programmed to follow a predetermined route, contour design, or trench depth and distance. Who knows where we go from there? I think that a better question for AED member companies is, “Where will we take technology?” If we are smart, we will find every way possible to add value to the technology. We all cut our teeth on being able to speak eloquently about the features and benefits of our products, and this should be no exception. The dealer should take every step to be the customer’s resource, working to ensure they get the most benefit from this and other exciting technologies – and thus ward off potential third parties who might try to carve a niche and operate in that space. Finally, we should look to where technology will bring value to us. As the level of sophistication of our products ramps up, so does the attractiveness of our industry to a whole new generation of potential technicians, equipment professionals, and commercial opportunities. Count on AED as a primary resource to help identify and develop these opportunities along with the training and expertise needed to operate in the fast lane!
Mike Quirk (mquirk@wagnerequipment.com) is vice president of Operations at Wagner Equipment Co., Aurora, Colo.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 5
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Editor’s Note
Safe Workplaces Are No Accident Measure the risks and manage them – it’s the only way to get the safety gorilla off your bottom line.
By kIM pHELAN
A handful of small signs are tion and service of aerial equipment, taped to the outside of my office door, but every AED member surely houses amusing reminders of some missignificant hazards to humans if not haps – or should I say missteps – that tightly and consistently managed. occurred in 2012. Stick figures, like One of my favorite speakers at the those you see on restroom doors or IPAF conference was Terex CEO Ron crosswalks, are depicted in assorted DeFeo, who was surprisingly transparslipping, tripping and falling perils; oh, ent (even for Ron) about his comand someone has artistically scrawled pany’s journey toward creating safer a patch of red marker upon the head workplaces worldwide. He admitted of each in a clever attempt to signify their lost time rate (LTR) in 2007 was some resemblance to me. at an unimpressive 3.92. (The “world I deserve these emblems, tokens of class” rate is .4.) And he described AED staff affection no doubt. Most a process, albeit with imperfecnoteworthy among my incidents last tions, that he launched in order to year was a complete wipe-out that, I reverse what he called “an unacceptswear, was not my fault. I arrived early able” safety trend at Terex operations to the local Holiday Inn café, where I around the globe. was meeting an out-of-town friend for Ron’s major point for the audience breakfast one May morning, so I dewas that it’s up to the leader of an cided to make a quick pit-stop in the la- organization to make safety culture dies’ room. I took one step forward and the No. 1 priority. Lip service doesn’t – bam! – I was on the floor smelling the cut it. And much better, he says, is the still-wet ammonia cleaner with which “committed” leader than he or she it had been very recently mopped. No who is merely “involved.” yellow cautionary sign was left to warn “Think about the traditional English me. I hobbled out of there with goose breakfast of bacon and eggs,” said bumps fast-arising on elbows and Ron, smiling. “The chicken is involved, knees, a sore neck and bruised pride, but the pig is committed! We need but luckily nothing worse. Lucky for me. commitment to achieve real progress Lucky for them, too. in safety.” I was thinking about that (now He practices what he preaches. humorous) episode while attending a Every bimonthly management meetsafety-focused conference hosted by ing begins not with reports on sales the International Powered Access Fed- but with reports on safety perforeration (IPAF) this spring. An accident mance. When a lost time accident can happen so swiftly to an ordinary has occurred, Ron handwrites a girl like me minding her own business personal get-well note to the injured – but the risks, odds, and magniteam member. He begins every public tude of potential injury are greatly gathering of his employees by identiincreased for those who spend their fying CPR-trained people in the room days working in and around the maand explaining locations of defibrillachinery your company sells, rents, and tors and exit doors – a practice that repairs. IPAF members are obviously saved a team member’s life six years dealing with the manufacture, operaago. Ron even asked his Board to
deduct a sizeable penalty from his annual bonus if company safety goals are not met, so that everyone would understand that it’s personal and that he’s committed. But here’s the thing that really stuck with that speech: The world class LTR standard of .4 is itself not the ideal goal, though a good place to start. The only goal that matters is zero. “Is 99.9 percent good enough?” he asked. “If 99.9 percent was good enough, then last year 164 pieces of our equipment that we sold would not start. Fourteen newborn babies would have been dropped, every hour, worldwide. If 99.9 percent was good enough, 4,368 babies would have been given to the wrong parents. And 1,666 surgeries in the U.S. would have operated on the wrong body part.” You have to admit, Ron’s got a way with words. June is National Safety Month, did you know? More important, do you know your company’s safety risks and their potential consequences? The safety of your employees affects their lives and families, of course, but a high LTR also represents a major threat to your business, in terms of insurance premiums, legal fees, fines, reputation, etc. On June 19, UL and The AED Foundation will present a free webinar titled, “Risk Management 101: Get the 800-Pound Safety Gorilla Off Your Bottom Line.” Please attend – even if your LTR is 99.9 percent perfect. Thanks for reading. Kim Phelan (kphelan@aednet.org) is the executive editor of Construction Equipment Distribution and director of programs for AED.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 7
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Inside AED
It’s The Do-ItYourself Recovery – And Forum Wants You to Take Control No one’s going to build your opportunities or do you any favors, except AED. Grab your seat now. You’re the consultant for a midsize equipment dealership and you’ve been given $1 million to make this company more profitable – what will you do to double the profits? Can it be done in this economy? In this industry? OK, what’s racing through your mind as you contemplate the possibilities? Well make a note to self, because you’ll have the opportunity for a little fun at Forum that will also generate some serious profitability strategies, perhaps on par with the kind of juice generated at a Dealer 20 meeting. It’s all part of a three-pronged examination of the: Bottom of the Heap: The Truth About the Dealer Profitability Plight, and How to Change It. Distribution consultant Mike Marks tackles the subject through a keynote lecture, group exercise, and an expert panel from the private equity sector and CE industry, who together will dissect the best practices dealers must adopt to transform the profitability of their companies. And that’s just one slice of the AED/Infor Executive Forum, which spans all of Thursday, Sept. 12 and wraps up at 10:30 Friday morning, Sept. 13. Forum returns to the Hilton Rosemont near O’Hare Airport with a provocative program designed to get dealer principals and senior management thinking differently – and even uncomfortably – about their companies’ strategies. While concentrating on profit and opportunity early in the agenda, Forum takes a hard turn into the shadows after lunch. Shadows of business and personal risk, that is. More “group think” time will bring all those “keep-youawake-at-night” threats into the light, where they can be diffused – or at least managed.
Sentry Attorney Joe Goldberg returns to the Executive Forum on Sept. 12 to discuss serious dealer liability threats occurring with greater frequency.
Then attorney Joe Goldberg returns to Forum’s stage to explore two controversial liability threats every dealer must be prepared for: (A) What happens when the dealer and manufacturer end up in conflict over a legal claim involving both product design and what the dealer “told” the customer; and (B) Used equipment product liability issues at a time when the used equipment business is very hot and perhaps more profitable than the new equipment side. Thursday ends like it has never ended before when we turn on the mic for threat-management expert Paul Michael Viollis, Sr., Ph.D. An author and CEO of Risk Control Strategies, Viollis is a captivating speaker who will change your thinking about the real and present dangers to your business, your finances, and your home and family. CED Editor Kim Phelan moderates this year’s program, rolling in fresh speakers and twists, while also bringing back some of Forum’s favorites, like market analyst Eli Lustgarten, who takes attendees on his perennial walk through the weeds and leads us to a clear view of the CE horizon. Come for eye-opening presentations, or come for the networking among owners and execs throughout North America – either way, you won’t be disappointed. The value of Executive Forum is untouchable elsewhere at $895, which includes two continental breakfasts, sit-down luncheon featuring a keynote from syndicated radio personality Steve Cochran, and two evening receptions. Register at www.aednet.org/forum, and book your travel before you go on summer vacation. Bring your right-hand (wo)man and we’ll knock $200 off the price of a second (third, fourth, etc.) registration.
Proposed New Members ACT Construction Equipment Winston-Salem, N.C.
Bell Trucks America, Inc. Houston, Texas
Chicago Machinery Lynwood, Ill.
Kobelco Construction Marlin Leasing Machinery USA Inc Corporation Houston, Texas Mt. Laurel, N.J.
This list is published each month as required by AED bylaws. Comments on the applicants should be directed to AED President Toby Mack at 800-388-0650 ext. 326 or jtm@aednet.org.
8 | www.cedmag.com | Construction Equipment Distribution | June 2013
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Stronger. SANY America is bringing global equipment leadership to North America. We offer our dealers and customers equipment solutions, including crawler cranes, rough terrain cranes, crawler excavators, port container reach stackers and empty-container handlers. We’re expanding our world-class dealer network. We invite you to learn more about SANY America and the global SANY brand. Together, let’s change the world.
Equipment. Performance. Dealers. Innovation. SANY.
To learn more about SANY America dealer opportunities, contact Kirk Erlinger (kerlinger@sanyamerica.com) for cranes and port equipment, or Eric Teague (eteague@sanyamerica.com) for excavators and earthmoving equipment.
318 Cooper Circle, Peachtree City, GA 30269 Tel: 678-251-2869 | Fax: 770-632-7820 Email: sales@sanyamerica.com www.sanyamerica.com
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Inside AED
mark your
calendar
For information on any upcoming AED events, visit www.aednet.org or call 800-388-0650. June 11 Webinar: Delivering Superior Customer Service 10-11:30 a.m. CDT | Presented by Christine Corelli
Sept. 18 Webinar: Industry Financial Updates for CEOs/CFOs 2 p.m. CDT | Moderated by Garry Bartecki
June 12 Webinar: Industry Financial Updates for CEOs/CFOs 2 p.m. CDT | Moderated by Garry Bartecki
Sept. 24 Webinar: The Serve Process 10-11:30 a.m. CDT | Presented by Don Buttrey Sales Professional Training™
June 17-18 Parts Management Unit II: Performance Excellence (PE) Presented by Ron Slee |Dallas, Texas June 19-20 Service Management Unit II: Performance Excellence (PE) Presented by Ron Slee |Dallas, Texas Sept. 12-13 AED Executive Forum Hilton Rosemont near O’Hare
Sept. 26 Webinar: Customer Satisfaction Process Now that you have the data, what do you do with it? 10-11 a.m. CDT | Presented by Rich Jilek Sept. 26 Webinar: Get Found - Strategies for Digital Marketing 2-3 p.m. CDT | Presented by Ed Steenman Nov. 7-8 AED Leadership Academy Orlando, Fla.
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10 | www.cedmag.com | Construction Equipment Distribution | June 2013
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AED Washington Fly-In – A Photo Flashback
Inside AED
To all who attended, thanks for representing AED’s legislative priorities on the Hill.
Sen. Deb Fischer (R-Neb.)
Rep. Tom Petri (R-Wis.)
Marty Durbin America’s Natural Gas Alliance
Sen. John Hoeven (R-N.D.)
Ron Barlet (left), Bejac Corp., visits Rep. Ed Royce (R-Calif.)
Tim Watters (right), Hoffman Equipment, talks to Rep. Donald Payne (D-N.J.)
Ken Taylor, Ohio Cat, AED Govt. Affairs Chairman
Mark Romer, James River Equipment, visits with a staffer for Rep. Rob Wittman (R-Va.)
From left: Bryan and Jon Campbell, Wheeler Machinery, meet with a staffer for Sen. Orrin Hatch (R-Utah)
Jade West National Association of Wholesaler-Distributors
Rep. Peter Roskam (R-Ill.)
From left: Chris Gaylor, Power Equipment Co., Dennis Heller, Stephenson Equipment, Rep. Pat Meehan (R-Pa.)
Chris Palmer (left), Woods CRW Corp., From left: Mark Romer, Wagner Equip- Jim Parker (left), Carter Machinery, visits with a staffer for Rep. Nick Rahall (D-W.Va.) sits with Rep. Peter Welch (D-Vt.) ment’s Mike Quirk and Bruce Wagner, and Rep. Cory Gardner (R-Colo.) June 2013 | Construction Equipment Distribution | www.cedmag.com
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Groundwork Officers
Chairman Chris Pera Eastern HighReach Company, Inc. Horsham, Pa.
Vice Chairman A. Roy Kern Equipment Corporation of America Coraopolis, Pa. President Bob Henderson The AED Foundation Oak Brook, Ill. John Crum Treasurer Wells Fargo Equipment Finance, Inc. Pittsburgh, Pa. Immediate Past Chairman Walter Berry Berry Companies, Inc. Wichita, Kan. AED Board Representative Whit Perryman Vermeer Equipment of Texas Irving, Texas Executive Director Steve Johnson The AED Foundation Oak Brook Ill.
Directors
Gary Bridwell Ditch Witch of Oklahoma Edmond, Okla. Mike Festing-Smith NORTRAX, Inc. Tampa, Fla. Mike Hayes Komatsu America Corporation Rolling Meadows, Ill. Timothy Kramer Kramer Ltd. Regina, SK Dr. Wayne Longbrake Former Dean, Penn. College of Technology Williamsport, Pa. Sonja Metzler Ohio CAT Broadview Heights, Ohio Kenneth Silverman Volvo Construction Equipment Shippensburg, PA Mark teel Caterpillar, Inc. Peoria, Ill. Keith Tippett Kirby-Smith Machinery, Inc. Oklahoma City, Okla.
Thank You to the Many AED Foundation Investors
The 2013 Annual Fund will support vital equipment industry education. Thank you to all AED members who contributed to the 2013 The AED Foundation Annual Fund Campaign, who helped us raise more than $265,000. The success of this campaign means that The AED Foundation can continue to move forward with its current goals. The AED Foundation investor dollars will be utilized to: n Continue developing and regularly updating national industry college technical standards
n Managing and administrating the AED Accreditation program n Supporting AED members with employee recruitment and providing industry-specific educational programs n Recruiting industry volunteers to assist in roles such as accreditation Evaluation Team Leaders and membership on our Technical Training Committee. For a complete list of 2013 investors, visit www.aedfoundation.org.
Raise the Bar for Managers, Dealership When you invest in your managers through AED Management Certification, you are working to build a powerful leadership force within your dealership. AED Certification will ensure that your managers have the crucial skills they need to lead your dealership effectively. Jude Adams, Through their commitproduct support ment to ongoing profesmanager, Amaco sional development and Equipment, is a dedication to serving AED Certified their organizations, in Service AED-educated managers Management set the benchmark for workplace performance. “In working through the courses in AED’s Certified Parts and Service management program, I have found that my employee’s attitudes towards customers, employee satisfaction, and productivity have improved,” said Jude Adams, AED Certified in Service Management and product support manager at Amaco Equipment, Mississauga, Ont. “Happy employees will get the job done. I would recommend this program to anyone with a desire to advance from parts rep to parts manager, or service administrator to service manager.” The AED Foundation recognizes
certified managers with a plaque and a pin at the time of certification as well as in Construction Equipment Distribution magazine. In addition, all newly certified managers are invited to attend AED’s Annual Meeting & CONDEX, where they are publicly recognized for their accomplishment. The AED Foundation initiates the certification process by working with managers to create a Personal Development Plan that measures managers’ strengths and indicates areas that can be improved. Then, an individual path to certification is outlined based on current performance levels and goals for achievement. Managers may complete their certification requirements through self-study courses and seminars. Those who successfully complete the required formal training and examination are certified. Also, to be considered for AED Management Certification, managers must have three years of management experience, current employment with an AED member company, and the written recommendation of a supervisor for workplace performance at any exemplary level. Encourage your managers to become AED Certified industry leaders by seeking management certification in 2013. For more information, contact Pat Novak at (630)468.5135, pnovak@aednet.org.
12 | www.cedmag.com | Construction Equipment Distribution | June 2013
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Industry Beat
AED Urges Congress to Fix Archaic Tax Code
At a House Small Business hearing, AED officer gives lawmakers the equipment business point of view.
The overly complicated and uncertain tax code is undermining economic growth – that’s what Tim Watters, AED Vice Chairman, told the House Small Business Committee on April 10. Watters, who is president of Hoffman Equipment in Piscataway, N.J., cited a recent AED tax survey outlining the construction equipment distribution industry’s tax reform priorities and urged lawmakers to simplify federal tax laws to spur economic growth and job creation. “The Internal Revenue Code is a complex web and we’ve become tangled in it,” Watters said. He pointed to the example of the Affordable Care Act’s new 3.8 percent tax on unearned investment income, which was created to ensure individuals who derive their earnings from passive sources, like stocks and beach houses, can’t avoid paying Medicare taxes. “Unfortunately, because the passive income rules are so arcane, even the tax experts on the Hill who drafted the law didn’t understand that brick and mortar companies that rent equipment would also be
AED Vice Chairman Tim Watters testifies about the complicated tax code during a Congressional hearing on April 10.
subject to the tax,” Watters told lawmakers. AED is now working to resolve the problem for its members.
ASC and Swanston Equipment Companies Canadian Budget Includes Realign Distribution of Volvo Construction $47 Billion in Funding for Equipment in North Dakota, Western Minnesota Infrastructure ASC Construction Equipment has taken over heavy equipment (motor grader, articulated hauler, excavator, and wheel loader) sales and service of the Volvo brand, as well as the utility product line (backhoe, compact wheel loader, compact excavator and skid steer loader) from Swanston Equipment Companies. Swanston Equipment Companies, with a long 77-year history in the region, will continue to offer customers the Volvo paving equipment product line, which includes asphalt pavers, milling and compaction. Volvo-trained heavy equipment technicians, as well as sales personnel, will remain in place and are transitioning to ASC, thus avoiding disruption to customer sales and service. ASC, one of Volvo’s largest dealers in North America, now occupies the newly opened state-of-the-art facility in Bismarck, N.D., and is temporarily
sharing facilities in other key locations with Swanston. “We truly are working together with Swanston to better serve Volvo customers in the region,” said Brad Stimmel, president of ASC. “We are going to build on Swanston Equipment Companies’ great tradition by leveraging our Brad Stimmel experiences and resources and hope to accelerate the growth of Volvo’s success in North Dakota and western Minnesota.” “This agreement will allow us to focus on the distribution and support of paving machinery products to customers in this region,” said Mike Swanston, president of Swanston Equipment Companies. “We remain fully committed to the Volvo product and look forward to continuing to support Volvo’s customers in the future.”
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Canada’s 2014-’15 budget includes more than $53 billion in investments over 10 years, and more than $47 billion in new funding in support of local and economic infrastructure projects. Highlights include: n $32.2 billion over 10 years under a Community Improvement Fund to build roads, public transit, recreational facilities, and other community infrastructure across Canada n $14 billion for a new Building Canada Fund to support major economic projects of national, regional, and local significance n $1.25 billion for the renewal of the P3 Canada Fund to continue supporting innovative ways to build infrastructure projects faster and provide better value for Canadian taxpayers through publicprivate partnerships The plan will also provide funding for expanded skills and apprenticeship training programs. AED has ramped up its advocacy activities in Ottawa and the equipment industry is playing a more visible role in the Canadian policy process than ever before.
5/31/13 12:18 PM
Equipment that pays off! Explore dealership opportunities
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Industry Beat
Holt Cat Contributes More Than $54,000 to Texas for Technical Training Programs HOLT CAT and the Caterpillar Dealer Excellence Fund demonstrated continued support for career development and training of specialized technicians by contributing $54,800 to technical programs at nine schools across Texas. Recipients included Cedar Valley College (Lancaster), Dubiski Career High School (Grand Prairie), Kilgore College, Laredo Community College, MacArthur High School (San Antonio), Skyline High School (Dallas), South Texas College Diesel Program (McAllen), St. Philip’s College (San Antonio) and Texas State Technical College (Waco). The Caterpillar Dealer Excellence Fund provided a matching donation of $27,400 in conjunction with HOLT CAT to the nine recipient schools.
Ron Craft (left), HOLT Cat vice president of Machine Parts and Service, presented a grant check to Laredo Community College’s Dean Luciano Ramon (center) during a grand opening of the Holt CAT’s new LEED gold certified facility in Laredo. HOLT CAT and the Caterpillar Dealer Excellence Fund presented the check, which will be used for professional and technical skills training programs. HOLT CAT is the Caterpillar Equipment and Engine dealer for South, Central, North and North East Texas. The new 24,000-square-foot facility is located in the Las Lomas Industrial Park on State Highway 359 in Laredo.
Miller-Bradford & Risberg Hosts Open House at New Negaunee, Mich., Facility Miller-Bradford & Risberg recently hosted an open house to celebrate their new 11,000 squarefoot facility at 165 US 41 East in Negaunee Township, Mich., one mile east of the former location. More than 275 people attended the event, which included raffle prizes and lunch. The company will offer a full range of services including shop and on-site maintenance, on-time parts delivery, rental equipment, and a wide variety of new and used equipment.
Taking part in the ribbon cutting were (left to right) Scott Erbisch, Marquette County ambassador; Christine Pesola, Marquette County ambassador; Tom Edmark, Marquette County ambassador; Mike Soley, president & CEO, Miller-Bradford & Risberg; Matt Anderson, branch manager of Miller-Bradford & Risberg Negaunee facility; Dan Soley, executive vice president, Miller-Bradford & Risberg; Debbie Pellow, Marquette County commissioner; Sam Elder, Marquette County ambassador; and Betsy Babcock, LSCP director of Marketing & Communications.
In the News Bell Equipment, SA, has appointed Bell Trucks America, Inc. (BTA), as its distributor in the U.S. Located in Houston, Texas, BTA will distribute articulated truck models B35D, B40D, B45D and the largest production ADT, the Bell B50D. The new Bell B25E and the B30E will be available in January 2014 to complete the line-up of articulated trucks. The company announced four new dealers in their first month: Four Seasons Equipment, Inc. located in Houston, Texas, with offices in Dallas, Sulphur, La., and Williston, N.D.; Hills Machinery in South Carolina and North Carolina; Heavy Equipment Rentals & Sales, LLC, located in Corona, Calif., and Highway Equipment Company in Western Pennsylvania.
Wayne Michels (left), general manager, Bell Trucks America, and Kevin O’Donnell, vice president of Sales, are looking for new dealers in the U.S.
The Board of Directors of Trico Lift has appointed Chris Carmolingo as the company’s new chief executive officer and president. Carmolingo replaces company co-founder and former president Ken Pustizzi, who announced his retirement earlier this year. Carmolingo is Chris Carmolingo an 18-year veteran of the company. Ritchie Bros. Auctioneers announced its commercial launch of EquipmentOne (www.EquipmentOne.com), an online marketplace for the private sale of equipment and
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Industry Beat
materials where buyers and sellers can negotiate, complete and settle their transactions all in one safe and transparent environment. Ritchie Bros. also held its first Chinese unreserved public auction at the company’s new auction site in the Beijing Tiazhu Free Trade zone on April 18.
Wacker Neuson presented its first annual Technician of the Year Award for 2012 to Nick Pearcy, (pictured) Logan Contractors Supply, Olathe, Kan.
Wagner Equipment Co. has acquired the Bucyrus equipment distribution and support business for its territories from Caterpillar Global Mining. Wagner Equipment Co. is the Caterpillar dealer for Colorado, New Mexico and far West Texas. Hyundai Construction Equipment Americas Inc. has named Pete’s Equipment Sales & Rental of Morrisville, Vt., to be an authorized Hyundai dealer. Bobcat Company has added Hoven Equipment Company, based in Great Falls, Mt., to its dealer network. Metro Bobcat Inc. of Eldersburg, Md., has also been appointed as an authorized distributor. Bill Norman has been promoted to branch manager of the Brilliant, Ohio, location of Southeastern Equipment Company. Curtis Bill Norman Hagelberger has joined the company as sales representative at the Holt, Mich., location. Chris Morgan joined the company as a sales representative at the Brunswick, Ohio, location. John Engels, longtime executive vice president of Berry Companies., retired after 41 years of service with the Wichita, Kan., distributor. Most recently, Engels was responsible for the company’s 22 Bobcat locations. He will be succeeded by Steve Meadows, formerly with Kansas City Bobcat.
Wacker Neuson also presented regional awards to the top technicians nominated by the company’s service and sales staff including: Brandon Smith, All Access Rentals, Spring Valley, Calif.; Nathan Frohnapple, Southeast Industrial Equipment, Raleigh, N.C.; Peter Davis, Able Tool and Equipment, South Windsor, Ct.; and Joe Moore, Franklin Equipment, Columbus, Ohio. Kirby-Smith Machinery, Inc. announced the recipients of “The Guild Program,” an annual award to recognize superior achievement for service and parts personnel. Members of “The Guild,” are required to attend 40 or more hours of technical training each year and to score 100 percent on quarterly exams. Ceremonies were held in March with more than $15,000 in cash and awards distributed. Winners included Gary Cox and Mark Foster who tied for first place in the parts category; David Harris who received third place in the parts category; Dale Schmidt who received first place in the crane category, and Ron Hagood, Paul Cheeks and Steve Barboza, who received first, second and third respectively in the construction category.
AED Recognizes 25and 50-Year Member Companies
The Charles Machine Works received the AED 25-Year Membership Award. Pictured: Ed Malzahn, president and chairman of the board, and CEO Tiffany Sewell-Howard Kirby Smith received the AED 25-Year Membership Award. Pictured left to right: Keith Tippett, vice president and CFO (AED Foundation board member), Glen Townsend, vice president and general manager, and Ben Graham, vice president, Crane Division Williams Equipment & Supply Company, Inc. received the AED 50-Year Membership Award. Pictured left to right: Bob Shannon, vice president; Mrs. Petie Williams (wife of late company founder Jimmy Williams); Bob Henderson, executive vice president and COO of AED, and Gordon McIntyre, president. Marvin Johnson (left), president of Associated Power, was presented with AED’s 25-Year Membership Award by AED At-Large Director Ron Barlet. AED’s Bob Henderson (center) presented AED’s 75-Year Membership Award to Highway Equipment Co’s Dan (left) and Tom Reynolds.
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Industry Beat
Tetsuji Ohashi assumed the positions of president and CEO at Komatsu Ltd., on April 1. Volvo Construction Equipment (Volvo CE) recently cut the ribbon on its $100 million expansion program at its Shippensburg, Pa., facility. The event also marked the start of wheel loader production at the company’s North American base in there. James E. Walker, vice president, Case IH NAFTA for CNH in Racine, Wis., has been elected to the Board of Directors of the Association of Equipment Manufacturers (AEM). Atlas Copco agreed to acquire the business of U.S-based RapidTorc, which develops and markets hydraulic torque wrenches as well as the assets of Saltus-Werk Max Forst GmbH, a manufacturer of mechanical and electric torque solutions based in Germany. Saltus-Werk makes products for quality assurance in tightening, including mechanical, mechatronic and electronic wrenches as well as special sockets. Atlas Copco was also named one of the World’s Most Ethical Companies by the Ethisphere Institute. Caterpillar Inc. recently announced the creation of a new order-to-delivery organization to be headed by Dave Bozeman, current Caterpillar vice president with the responsibility for the Integrated Manufacturing Operations Division. Bozeman will be senior vice president with responsibility for the Caterpillar Enterprise System Group. He will be a member of Caterpillar’s Executive Office and will report directly to Caterpillar Chairman and CEO Doug Oberhelman.
Caterpillar also entered into an international power projects (IPP) agreement with Zahid Group, which recently formed a new subsidiary company, Altaaqa Global. As an IPP partner, Altaaqa Global will provide multi-megawatt temporary power solutions around the world, supported by partnerships within the worldwide Cat dealer network. Takeuchi-US has expanded its existing partnership with H&E Equipment Services Inc. in Southwest region locations in Louisiana – Alexandria, Baton Rouge, Kenner, Lafayette, Lake Charles, Shreveport and Little Rock, Ark. IronPlanet, an online marketplace for used heavy equipment, launched TruckPlanet, an online marketplace dedicated exclusively to buying and selling used commercial trucks. BidSpotter.com, a U.S.-based industrial and commercial online auction company, was acquired by ATG Media Holdings Ltd, a UK-based company. Wacker Neuson announced that it will identify its efficient and ecological products with a new ECO seal – ECO for ECOlogy and ECOnomy. Jason Holt has been named to fill position of vice president of Operations Omaha Standard Palfinger. Infor introduced Infor Service Management 4.20, the next generation of Infor’s leading service management application. Infor also reached an agreement to acquire CERTPOINT Systems Inc., a provider of SaaS-based learning management software (LMS) and learning content management software (LCMS).
Hamilton Strayer Dies at 94 Hamilton Strayer, formerly owner and president of concrete equipment manufacturer Erie Strayer Company, passed away at age 94 on March 16. Strayer led the company for more than 35 years. He was as a long-time member of AED and active in many industry associations including the Associated Equipment Manufacturers and the National Association of Manufacturers. He held leadership positions with The National Ready Mixed Concrete Association and the Concrete Plant Manufacturers Bureau, as well as the Manufacturing and Business Association in Erie. According to his son, Robert Strayer, president and CEO of Erie Strayer Company, Hamilton Strayer led by example and had a sincere passion for the concrete industry. He continued to work up until December 2012.
Ernest L. Ransome III Dies, 86 Chairman of the Ransome Family of Companies Ernest L. Ransome III, passed away on Sunday, May 5, at the age of 86. Ransome, along with his two brothers, represented the second generation of ownership of Giles & Ransome Inc., which his father P.A. Ransome founded in 1916. Ernest Ransome III played a pivotal role in both the transition of the Caterpillar dealership to third generation Wayne Bromley, and most recently, to Kristin Bromley Fitzgerald as the fourth generation owner. The company attributes Ransome III as a key reason why Giles & Ransome has been a leader in the local construction industry for nearly 100 years. Giles & Ransome serves southeastern Pennsylvania, southern New Jersey and northern Delaware and is among the largest and oldest familyowned companies in the tristate area. In addition to his role as chairman, Ransome III was a father, grandfather, great-grandfather, as well as president and chairman of Pine Valley Golf Club. He earned All-American honors in lacrosse and football at Princeton University, received an honorary doctorate of laws degree from Saint Andrews University in Scotland, and served as Second Lieutenant in the U.S. Marine Corps.
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Diversified Golf Course Contractors Wait for Greener Days
Sector Check
Heritage Links of Houston, Texas, performs creek work along a fairway at Liberty National Golf Club in New York, making use of an articulated dump truck from Hydrema.
Builders say the industry took it on the chin during the recession, and equipment demand for course construction has changed dramatically. By Larry Coffman
While the stock market has made a nice recovery in the wake of the recession, it’s not exactly fun and games for the golf course building industry right now. A recent report from the National Golf Foundation showed that 13 new courses opened in America in 2012, while 154 closed. This means that a lot of heavy machinery used for earth moving and sculpting is sitting idle. “For the past four years, the industry has been struggling,” said Mark Slugocki, vice president
of Wadsworth Golf Construction Co. Slugocki, 59, has been with Wadsworth for 37 years and works out of the company’s southwest region office in Buckeye, Ariz. “There are very few new projects in the country,” Slugocki said. “The main reason is housing (construction) is down. It appears that east of the Mississippi is doing better than west of it. The international markets have also slowed down.” The tough economic times have forced the golf construction industry
to change in order to survive. That means that renovations are outpacing new construction. “While new course construction is at an all-time low, renovation-type projects are at record highs,” reports Justin Apel, executive director of the Golf Course Builders Association of America (GCBAA). “Many courses are updating their irrigation systems, reducing maintenance areas and modifying their courses for player enjoyment, creating a market for contractors and suppliers.
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Sector Check
“The recession has caused some attrition to golf course construction companies and suppliers,” he continued. “Many companies that depended solely on the golf course construction market were forced to either sell or merge with other organizations. Many of our current members made the wise choice many years ago and diversified their businesses into other landscape construction, allowing them to weather the economic storm. “Recently, there has been some movement by facilities to move forward with maintenance projects.” Rick Boylan, president of MidAmerica Golf and Landscape, Inc., in Lee’s Summit, Mo., sees a glimmer of hope on the horizon. “A couple of years ago I would have phrased the industry as both stagnant and struggling,” Boylan said. “Since then I believe we have begun to see a small increase of work in the United States, although this work is primarily renovation – greens, bunkers, irrigation, cart paths – of some sort. “Also, before 2013, several companies went overseas, where work was not by any means booming. But for the fortunate companies, it was a way to stay in business, since the golf market matched the housing market and had little or no growth. As with all businesses in a down economy, several of our (GCBAA) members have downsized and also branched out into other forms of construction, utilizing their equipment and personnel. “In the GCBAA we have seen some membership decline. However, I think it is more related to going into another sector of the construction business and waiting for a comeback to the golf construction market.” Boylan, 54, is volunteer presidentelect of the GCBAA. Ron Weingartz of Ann Arbor, Mich., has tweaked his equipment business to survive the recessionary times. He is owner of Weingartz Equipment, a 68-year-old company that has five stores in Michigan.
“We actually sold golf course maintenance equipment for 16 years,” said Weingartz, 50. “We were the John Deere distributor for the state of Michigan. But we got out a year ago because golf courses are running old equipment and not investing in new equipment.” Weingartz, who has been working in his family’s business since the age of 15, added, “We deal more in landscape equipment, selling to lawn maintenance companies,” he said. “Golf course construction is virtually nonexistent, and construction activity is very slim right now. “In the landscaping business, people are still having their lawns cut, so that end of it is doing rather well. Landscaping has been very good for us.” In the way of light equipment, Weingartz sells track loaders and other such machinery. The company also purchases attachments such as forks and buckets, from Paladin Light Construction of Dexter, Mich., for landscape contractors. Having opened a new store in Ann Arbor two years ago, Weingartz said his company is not looking at further expansion. “The feedback from our customers is good,” he remarked. “Now we’re just waiting for good weather. With this cold spring [in April], the grass isn’t growing very fast. But, overall, we’re very optimistic about this year.” Rent Versus Own If renovation currently is the name of the game, what equipment is in demand? “Depending on the type of work,” Apel said, “some areas need heavy earthmoving equipment, drilling machines for blasting, large excavators and large haulers. Most renovation projects require specialty equipment that minimizes impact and disruption to the course. I would assume this to be true across any horizontal-type construction in which each need for equipment becomes a
case-by-case decision. “Most of our contractor members benefit from the fleet of equipment provided by national rental companies. While the majority of our members are able to mobilize anywhere in the country, the costs associated with mobilizing their equipment becomes challenging. Along with the expense of depreciating large equipment that might not be used for several months, the option to rent or lease over owning is a calculated decision. “In fact, we have provided several educational sessions to our members provided by equipment manufacturers and distributors, along with our rental membership, showing how to calculate the best option based on individual project and company needs.” Wadsworth, which has been doing business for 55 years, owns its own primary equipment, Slugocki said, and rents additional machinery near each construction site. “We have outside firms move it to our different locations,” he said. Slugocki added, “We bring our key people to the project and then hire locally. The number can vary from 10 to 50, depending on the size and schedule on the job.” Wadsworth, based in Plainfield, Ill., has completed about 1,000 golf course projects, according to Slugocki. Boylan said Mid-America has downsized its fleet to smaller equipment. “Currently, we have more equipment than we have ever had, but it’s smaller,” he said. “I also think that the rental market has grown in recent years. This happens to be a time in our economy that buying new or used equipment does not make sense. If you previously owned and had taken good care of it, you can afford to maintain and repair it. Otherwise, contractors are renting their equipment for a job and sending it back when the job is complete. “In years past, contractors would take equipment on a lease purchase (continued on next page)
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Sector Check
(“Diversified Golf Course Contractors Wait for Greener Days” continued from page 21)
Like many golf course contractors, Total Golf Construction of Vero Beach, Fla., sought work outside of U.S. boundaries over the last few years, such as the Elizade Golf Resort in Ilara-Mokin, Ondo State, Nigeria, which opened last year.
option and, if they had sufficient workload, they would convert lease to purchase and move the equipment to another project.” At Wadsworth there are no fleet management problems currently. “Since we work throughout the country, we use the main suppliers, like Cat, John Deere and Case,” Slugocki said. “We have accounts with the main rental companies. Between that and personal relations, that is how (equipment selection) decisions are made.” Supply chain issues for golf construction, Apel said, revolve around planning. “The ability to make timely orders and give advance notice on product orders is extremely important for the project’s success,” he said. “Since many manufacturers are not carrying as large of an inventory as in years
past, and with a number of suppliers involved with other growing industries, it is important to give advance orders along with as accurate a delivery schedule as possible. “Probably more important is the window of guaranteed pricing given during the bidding process. With a number of products dependent on petroleum prices and with the current unstable market prices we are seeing in the cost of oil, many bids only guarantee pricing for a short period of time.” Boylan commented, “I don’t think supply chain is an issue so much as there are just fewer suppliers in the business. I do know that the cost of materials has risen dramatically during these economic times. The cost of oil and fuel is perhaps the biggest driver of this. “In the last five years we have seen such a steady increase (in the price)
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Sector Check
of fuel and oil, it has been extremely hard to be competitive in the market. If you have a project that has a schedule of five to six months and the fuel cost goes up 30 to 40 percent, as it has in recent years, what do you do but take it on the chin? “It used to be that when you were quoting a project, the pricing you received for petroleum-based products was good for the project. Today it is not uncommon to have prices that are good for only seven days, or to receive pricing with a fuel surcharge attached to it. Pretty tough to manage when you have a lump sum project you’re bidding, and the market is very competitive.” Slugocki pointed out that the price of irrigation pipe, a staple of new construction and renovations, is directly tied to oil prices. (continued on next page )
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Sector Check
Golfers Can Help Heal the Golf Industry GCBAA’s Justin Apel has high hopes for the sector. By Larry Coffman
The main advocate of the golf course construction industry is the Golf Course Builders Association of America. Heading the Lincoln, Neb.-based organization is 35-year-old Justin Apel. A graduate of the University of Nebraska, Apel joined the association in 2006 and became its executive director in 2011. He has helped lead GCBAA in expanding its membership categories while also participating in international initiatives that support Justin Apel the game of golf. The association membership represents the contractors who construct and renovate golf courses around the world, along with suppliers and consultants whose products are used in construction. GCBAA, established in 1970, also partners with the China and Asia golf shows. Additionally, Apel is responsible for administering the GCBAA Foundation, a youth player development program in more than 350 cities in the United States, 30 cities in China and more than a dozen U.S. military bases globally. Apel has a degree in agricultural sciences and worked for a Nebraska state senator. He has lobbied for the state’s natural resources districts. If Apel were to assume the title of “Golf Industry Doctor” and give the game a physical examination, how would he evaluate the patient? “Golf is one of the healthiest lifestyles/sports a person can remain involved with,” he said. “Walking 18 holes of golf burns nearly 2,500 calories and provides both physical and mental exercise. “Golf as a patient needs to take its own medicine and get out and play. Not by going out and playing with the regular Saturday morning group, but also inviting a new golfer to join you, or take your spouse or child. “Play more and invite others to play the great game. That will turn the industry.” Kurt Huseman of Kingwood, Texas, is the current GCBAA volunteer president. Rick Boylan is the volunteer president-elect and will begin a two-year term as president when GCBAA has its winter meeting next February. The GCBAA states that its goal is to support the growth and vitality of the golf course industry while promoting the continued enjoyment of the game through the construction of the highest quality golf courses in the world. Apel said, “There are many companies seeking … work [with] a false mentality out there that, with competitiveness of contractors seeking the work, low bids are a great reason for a (golf property) to move ahead with its project. We feel this is an unhealthy attitude for any industry. “For a facility to expect a finished product that would complement the expectations of their players and users of their course, they will need to hire a company with the experience and skill set to meet those expectations. “That type of quality should come at a fair price. “With the number of courses available to a stagnant number of players in the U.S., many of the leading associations involved in the golf industry are working together on player development programs to shift the demand/supply curve for these courses. “With several creative programs to retain current players, invite lapsed players back into the game and teach the next generation of golfers, the industry feels very optimistic about increasing the total number of golfers in the U.S. and increasing the demand for golf across the country.”
(“Diversified Golf Course Contractors Wait for Greener Days” continued from page 23)
Regulatory Considerations Now, as always, environmental factors are hurdles for golf course builders. “Depending on the area,” Apel said, “there are usually local and state permitting requirements that must be met. Typically, the members carry the appropriate state licenses for the type of work to be completed. I have heard countless stories about scheduling the time requirement needed for [getting] approval of necessary applications and permits before any earth is disturbed. It’s just as important as factoring grow-in periods when the course is completed.” Water and the environment always will be an issue for golf course designers and builders, as it should be, according to Boylan. “All of the different sectors of golf understand and respect Mother Nature and the things she can do – good and bad,” Boylan said. “In the days of 400 new courses a year, I would say on average it would take about 12 months from the time you heard about a potential project to breaking ground [on it]. Today, with regulations regulating regulations, I would say that time has at least tripled. “I also know that with the recent droughts that we have seen in the Midwest region of the country, golf courses that have survived are severely hurt financially if they have to purchase water.” Slugocki remarked, “There always have been environmental factors that the industry has addressed. One issue that may come into play in California is having Tier-4 equipment. Most equipment rental stores do not have them. That could be a big issue in the near future.” As of Jan. 1, 2014, all new machinery of 175-750 horsepower must be Tier-4 final compliant from the factory. California is notoriously
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Sector Check
known as the state with the strictest emissions laws. Up in Michigan, Weingartz is balancing his equipment business with his personal ownership of the Whispering Pines Golf Club in Pinckney. He bought the course four years ago and has had to persevere with making course improvements before he can concentrate on being profitable. “The course had been rundown,” Weingartz said. “It needed some work to get it back in shape so, when we started [operating it], the rounds played were very low. Last year was probably the first year we saw the number go up. In Michigan things bottomed out in about 2008’09, and things picked up the last couple of years.” Promotions are a two-edged sword for a course owner, according to Weingartz. “We have [tried
promotions], but part of the problem is that it’s hard to get your rates back up to where they need to be,” Weingartz said. “It seems like, in general, courses are doing less of that.” According to the Whispering Pines website, weekday greens fees are $20 and the weekend rate is $25. There are periodic online specials with reduced rates for tee times booked on the website. While these are lean times in the golf construction industry, Boylan does not see only gloom and doom. “The challenges we face are also our opportunities,” Boylan said. “By that, I mean we have to look at the vast knowledge we have in being a specialty contractor that really requires us to do several different types of construction all in one project. For example, we do clearing, excavation, drainage, irrigation,
landscaping and finish work. I know several [companies] have adapted themselves into doing utility work, parks, sports fields, roadwork and storm remedial work. “Our company, for example, has downsized our equipment in regards to large excavators, bulldozers and scrapers to much smaller equipment like tractors, mini-excavators, skid steers and dump trailers.” And that just may be the prevailing trend in the golf construction industry until the economy fully rebounds. n Larry Coffman is a freelance writer based in Phoenix. The Illinois native has been an avid golfer for five decades. He can be reached at coffman@hardrockers.com
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Market Trends
BINGO!
U.S. Housing Market Finally Getting Its Numbers
Led by multifamily starts for now, recovery will gradually continue as demand bends to new kinds of demographic trends. By Dana E. Neuts
Since the nation’s recession in 2008 and 2009, the U.S. economy has experienced a bumpy road to recovery, impacting everything from employment to housing. GDP revealed the economy experienced several strong quarters of growth beginning in 2010, but an average economic growth of just 1.6 percent in 2012 was not exactly what one would hope to see in a recovery. But there’s good news – relatively speaking – according Dr. David Crowe, chief economist and senior vice president for the National Association of Home Builders. Despite the uncertain, up-and-down recovery, NAHB forecasts economic growth for the next two years: 2 percent in
2013 and 3.2 percent in 2014. “We are still struggling, so 2 percent for the year is not that great,” Dr. Crowe explains. “Improvement will be gradual, but the fundamentals are all here.” The housing market, which represents 3 percent of U.S. GDP, typically leads the economy out of a recession. Not only did that not occur following the Great Recession, but the homebuyer tax credits that helped stimulate the housing industry briefly in 2009 and 2010 provided only a temporary tourniquet – the market dipped immediately after the tax credits expired, dropping to a record low of nearly -30 percent in September 2010. (continued on page 28)
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Market Update
(“BINGO! U.S. Housing Market Finally Getting Its Numbers” continued from page 26)
Beginning in the final quarter of 2011, the housing industry finally began bouncing back, and it’s doing so in a big way. In fact, it is outpacing economic growth exponentially. In December 2012, for example, overall economic growth was 0.1 percent, while housing growth was 17.4 percent. GDP and Housing in Recovery
Annual Change
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Crowe illustrates: “We’ve got housing growth – the component of GDP that’s attributable to housing construction – growing at two, three and four times the overall rate of economic growth. [Housing] is finally doing the job that it is usually expected to do.” Localized Housing Growth This positive housing trend is also evident in NAHB’s improving markets index that indicates which metropolitan areas are improving based on three key indicators of economic health: single-family housing permits, home prices and employment. When an area shows improvement in each of these areas for six months or more, it is considered an improving market by the NAHB. In September 2011, the first month for the NAHB index, only 12 markets out of 360 – slightly above 3 percent – made the list. In May 2013, that number grew to 258 communities, just under 72 percent, indicative of positive growth in the housing market. All 50 states and the District of Columbia are represented by communities in this list, including four markets new to the list – Dothan, Ala.; Elizabethtown, Ky.; Salisbury, Md.; and Salem, Ore. Though 19 metro areas dropped from the list, the overall trend is positive. “This points to the notion that the recovery is localized, and it will continue to be localized until we get enough
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Market Update
communities that this trend shows up on a national scale,” said Crowe. “Bingo! That’s what’s happened. We have enough communities that you’re beginning to see these kinds of improvements overall.” Demographics Impact Housing Demand In addition to economic indicators, U.S. shifting demographics also impact housing demand, starting with baby boomers born between 1946 and 1964. Beginning in 2011 and continuing through the next two decades, approximately 10,000 baby boomers will retire every day. As they age, their housing needs will change. Older homeowners might downsize, become renters instead of owners, rent out their properties as investments, or may even combine households with younger family members. Other demographic shifts are also having an effect on housing. For example, more foreign-born buyers are purchasing properties in the U.S., often paying in cash. The number of Hispanic homebuyers is also growing. By 2020, sources indicated that approximately half of all homebuyers will be Hispanic. Ideal Time for Gen Ys The group to watch will be the Millenials, also called Gen Y, born in the 1980s and 1990s. This group of 80 million or
so potential home buyers is at the prime age, 25 to 34, for household formation, says Crowe, so housing demand is expected to grow dramatically. “We have this enormous boom of additional people who will be forming households and needing houses,” he explained. “The underlying fundamentals behind homebuilding are very positive. Now what kind of home and where is a totally different picture, but still we know we have an oncoming flow of housing demand.” Though household formations are on the rise for Gen Y, more households overall are switching to renting versus home ownership. In fact, of the new households formed since 2011, the vast majority opted to rent a home instead of buy one. This is occurring for several reasons. In some cases, owners lost their homes to foreclosures or short sales. They still want to live in single-family homes, but can’t qualify for a mortgage, so they rent single-family homes instead. In other situations, people aren’t ready to buy homes yet, particularly Millenials. This group tends to be entrepreneurial in nature and therefore mobile in terms of employment. By not settling into a job for more than a few years at a time, this age group is less likely to purchase a home, at least not right away. In addition, Millenials often have student loan debts, may (continued on next page)
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June 2013 | Construction Equipment Distribution | www.cedmag.com | 29
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Market Update
Gen Y Fun Facts:
Twenty-four to 33 percent of Millenials have moved back home with their parents at some point in their adulthood. n Microunits and microhousing, 200 to 300 square feet, are growing in popularity among Echo Boomers. n A third of Gen Y want to live in the city, and a third want to live in the suburbs. The rest are split among preferences for small towns and country living. n Currently, 35 percent of Gen Y own their homes and 37 percent rent. n
(“BINGO! U.S. Housing Market Finally Getting Its Numbers” continued from page 29)
not have sufficient savings for a down payment, and, as noted, might not qualify for a mortgage. These factors keep them renting, even as they strike out on their own to form households separate from their parents. In spite of these trends, Crowe believes that homeownership will eventually come for Gen Y, but it might be later in life than it did for previous generations. “There is some evidence that owning will just come later when these barriers are eliminated and there is a more stable lifestyle,” he said. “Our polls show continued desire for homeownership even among younger individuals, but they just don’t have the ability to buy at this time.” Multifamily Housing Need Increases Between 1970 and 2011, housing stock held fairly steady with the percentage of single-family housing ranging from 70 to 74 percent, duplexes and four-plexes from 8 to 14 percent, and multifamily housing from 15 to 19 percent. In 2012, however, those numbers changed dramatically. While single-family housing stock only dipped to 68 percent, duplexes and four-plexes bottomed out at 1 percent and multifamily housing jumped to 30 percent. Stock of Homes by Building Size
Share of 2-4 unit buildings falling in stock, but flow significantly different 100% 90% 80%
15%
18%
19%
18%
18%
14%
12%
10%
10%
8%
70%
30% 1%
60% 50% 40% 30%
72%
70%
1970
1980
71%
72%
74%
2000
2011
68%
20% 10% 0%
1990 SF
2 to 4
2012YTD Flow
5+
What does this mean? More multifamily units were produced than single-family homes in 2012, a trend we can anticipate will continue over the next several years. It also indicates that, due to foreclosures and other economic factors, some single-family homes were purchased as investment properties and then converted into multifamily housing. While this opportunity created new uses for existing housing stock, it also reduced the demand for new stock. For the last four quarters, NAHB’s multifamily production index has been positive. In 2012, there were approximately 247,000 multifamily home starts. NAHB predicts this figure will increase to 312,000 in 2013 and 331,000 in 2014, with
the majority of multifamily starts consisting of five or more units. These higher numbers are consistent with the multifamily home construction of the early 2000s, a period of time considered normal for the housing market. “The multifamily market is nearly healed,” Crowe said. “It’s a positive, forward-looking, very viable market right now.” Single-Family Starts Leave Room for Improvement The outlook for single-family homes is not as positive. In fact, Crowe describes the market for the construction of single-family homes as still struggling, but this also provides the greatest opportunity for improvement as the economy continues to rebound. In 2012, for example, there were 534,000 single-family starts, about 41 percent of the 1.3 million new home starts that occurred between 2000 and 2003. In 2013, Crowe forecasts 658,000 single-family starts, followed by 848,000 in 2014. Compared to 353,000 in March 2009, these figures represent significant improvements. Of course, some markets are nearer to previous construction levels than others. Comparing 2000 to 2003 against 2012 housing permits, the top four markets were all in Texas, namely: Odessa, Midland, San Angelo and Austin. Crowe also anticipates an increase in demand for singlefamily homes as Millenials grow older. They will settle into more stable jobs and lifestyles, and gravitate toward home ownership. Existing homeowners from different age groups will “trade up,” creating resale opportunities for their existing homes and driving the need for new construction. “As the economy gets better, we will see the return of home ownership demand,” Crowe said. In terms of overall economic health, the U.S. is recovering slowly. As the housing industry adapts to demographic shifts and changing economic conditions, it continues to outpace the economy, creating a positive new construction outlook for 2013 and 2014. Good news all around. n Dana Neuts is a freelance writer based near Seattle, Wash. She is the editor and publisher of iLoveKent.net, and also serves as the national secretary/treasurer for the Society of Professional Journalists. Dana can be reached at dana@ virtuallyyourz.com. (See Dana’s Gen Y sidebar on page 56)
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Profit Improvement Report
The Race to Provide Services Nobody Really Wants What customers care about most – and what dealers should excel at – is inventory availability. By Dr. Albert D. Bates
Distributors in virtually every line of trade have worked hard to increase their service profile through the years. As one obvious example, the time between receipt of a customer’s order and delivery has shrunk dramatically. The list of other, equally significant, service enhancements is lengthy. Today, distributors continue to look for additional ways to enhance “service” in order to lock in their customers. The problem is that all of these new and better services increase payroll costs with no guarantee of actually locking in the revenue. If they don’t, distributors will suffer from payroll expense creep.
This report examines the nature of the service revenue/service cost issue. It will do so from two important perspectives: n The Revenue/Payroll Relationship – An analysis of how sales and payroll growth interact to drive profit in the firm n A Profitable Service Profile – Some specific suggestions for ensuring that service enhancements actually lead to profit improvement The Revenue/Payroll Relationship Throughout the distribution industry, including AED members, payroll is the overwhelming expense factor. This can be seen clearly in Exhibit 1, which
Exhibit 1 The Impact of 3% Payroll Expense Creep For the Typical AED Member
Income Statement--$ Net Sales Cost of Goods Sold Gross Margin Payroll and Fringe Benefits All Other Expenses Total Expenses Profit Before Taxes
Current Results $35,000,000 27,475,000 7,525,000 4,000,000 2,895,000 6,895,000 $630,000
5% Sales Growth $36,750,000 28,848,750 7,901,250 4,120,000 2,895,000 7,015,000 $886,250
No Sales Growth 35,000,000 27,475,000 7,525,000 4,120,000 2,895,000 7,015,000 $510,000
Income Statement--% Net Sales Cost of Goods Sold Gross Margin Payroll and Fringe Benefits All Other Expenses Total Expenses Profit Before Taxes
100.0 78.5 21.5 11.4 8.3 19.7 1.8
100.0 78.5 21.5 11.2 7.9 19.1 2.4
100.0 78.5 21.5 11.8 8.3 20.0 1.5
40.7
-19.0
Change in Profit--%
presents the current performance of the typical AED member based upon the latest CODB Report of financial performance. As can be seen in the first column of numbers, the typical firm generates $35 million in sales, operates on a gross margin of 21.5 percent of sales and produces a bottom line profit of 1.8 percent of sales or $630,000. Of most significance, payroll is 11.4 percent of sales or 58 percent of the total expense load for the firm. In some instances distributors may feel they are forced to enhance their service profile in the face of new offering by competitors. In other instances, firms are seeking to establish their own competitive advantage. In either case, the key profitability issue is how much of a sales increase can be generated, if any, in relationship to the payroll cost associated with providing the additional service. The last two columns of numbers in Exhibit 1 present the potential good and bad results associated with an increase in payroll expense. In both columns it is assumed that the increase in costs is associated with an additional service. Further, in both columns payroll costs are assumed to increase by exactly 3 percent. The middle column of numbers represents a situation where the increased payroll costs are offset by a 5 percent increase in sales. In short, the firm has developed a service-enhancement profile. Total profit increases by (continued on page 34)
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(“The Race to Provide Services Nobody Really Wants” continued from page 32)
40.7 percent and the bottom line rises to 2.4 percent of sales. The final column, in very sharp contrast, reflects a situation where payroll costs increase due to the additional services offered, but revenue
is stagnant. This might represent a situation where all of the competitors increase services at the same time resulting in no measurable change in market share. The economic impact is dramatic. Profit declines by $120,000 or 19 percent, even though the increase in payroll was only 3 percent. In short,
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service expansion programs must generate the revenue to cover their costs and produce enough additional revenue to drive higher profit. Research in distribution suggests that in many instances service expansions are less likely to reflect the second-column economics in Exhibit 1 than third-column ones. Simply put, the value of the additional services may not be there. A Profitable Service Profile In building a service profile that drives sales growth faster than payroll growth there are two opposing strategies that can be followed. First, add or strengthen truly profitable services. Second, minimize or eliminate unprofitable ones. As simple as this may sound, it actually has somewhat counter-intuitive implications in terms of the potential changes in the service profile. Service Strengthening – Research conducted by the Profit Planning Group indicates that with very few exceptions, customers do not desire any additional services from distributors. Instead, they would like some existing service components strengthened. In particular, they want better performance with regard to inventory. The expressed inventory needs were two-fold. First and foremost they desired an improved in-stock position. Second, they desired a broader assortment to facilitate the ability to engage in one-stop shopping. To a real extent this is a serious condemnation of distributor performance. The most essential role of distribution is product availability. Failure to perform adequately in this arena is simply unacceptable. The pressures associated with cash flow are an excuse for inventory inadequacy, but not a valid reason. The economics of improving service through better inventory performance are extremely compelling. Additional inventory investment comes with a carrying cost implication. However, in today’s environment of low interest rates, carrying costs are dramatically
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Profit Improvement Report
reduced from previous periods. On the positive side, a higher fill rate is one of the few service enhancements that automatically generates higher sales volume. Every lost sale, whether caused by being out of stock or anything else, is a pure loss of volume. Eliminating lost sales reverses the economics of the third column in Exhibit 1. Service Elimination – While it is heresy to suggest, there may be some services that everybody in the firm thinks are wonderful but which customers find to be without benefit. This is often a surprisingly fertile field for profit enhancement. In service elimination a reasonable motto would be to “copy the banks, not the airlines.” Banks no longer return checks with the monthly statement. Most customers find having less to throw away to be an actual benefit. ATM machines have largely, but not completely, replaced tellers. Self-service means better service for the preponderance of customers. Airlines, in sharp contrast, have started charging extra for meals, blankets, checked bags and just about everything else. Customers go along with the add-on charges because they have to. Even if fares are lower, there is a continual bitterness about the service fees. The best way to determine if a service elimination decision is a bank action or an airline action is to ask customers. Often the feedback is enlightening. When the firm discovers it has been able to brilliantly provide a service that nobody really cares about, it is an eye-opener. Moving Forward All distributors sell products. The best ones also provide an array of services that customers value. The challenge is to identify exactly which services are truly important to customers and which ones are not. The valued services must be provided with absolute precision. And to those that are nonessential, bid adieu. n
Dr. Albert D. Bates is founder and president of Profit Planning Group. His latest book, Triple Your Profit!, is available at: www.tripleyourprofitbook.com, as well as Amazon and Barnes & Noble. It includes Excel templates for understanding the profit structure of the firm and developing meaningful financial plans. ©2013 Profit Planning Group. AED has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited.
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Lift with a Twist
Rental dynamo Trico Lift takes customer service to a whole new level with the hiring of 20 new mechanics. By Joanne Costin
Trico Lift’s road service technicians are regularly dispatched to jobsites, plants and other locations to perform emergency repairs and routine maintenance on customer-owned equipment. Trico is willing to invest in hiring less experienced mechanics and provide them with additional training and tooling.
Newly appointed CEO and president of Trico Lift Chris Carmolingo inherited a well-defined niche for the company, and he’s not giving up on it anytime soon. “We’re lift specialists and we’ve always been a full-service aerial lift provider,” said Carmolingo, who recently replaced retiring president, Ken Pustizzi, who co-founded the company in 1952. Carmolingo is an 18-year veteran of Trico Lift, which has eight locations in New Jersey, Pennsylvania, Maryland, Virginia and Texas. The company is about one thing and one thing only: aerial work. Boom lifts, scissor lifts, rough-terrain forklifts, vertical mast lifts and atrium lifts round out the company’s offerings. According to Carmolingo, historically there were many more companies pursuing this niche in the 1980s
Substantial repairs to customer-owned aerial lifts, such as boom inspections and engine overhauls, are handled regularly at Trico Lift’s facilities. Here at the company’s New Jersey-based Fleet Maintenance Center, multiple functions are performed, including major contracted work such as paint services and complete equipment rebuilds.
and 1990s, but through mergers and acquisitions, – and competitors adding equipment lines – few true lift specialists remain today. Doing one thing and doing it well has paid off for Trico Lift. According to Carmolingo, every year since 2008 the company has seen double digit growth in revenue. This year Trico Lift will surface on RER’s Top 100 Rental Fleets list ranked No. 45, with $42.3 million in rental volume, up from No. 53 and $30 million just two years ago. While rental remains the primary revenue stream for the company, Carmolingo says that since 2009, Trico has increased percentages each year in parts, service and training. Having once represented Case Construction Equipment, Trico Equipment, Inc., which now does business as Trico Lift, is a company that has always known parts and service – but according to Carmolingo, it’s somewhat unusual for a rental company to focus on this aspect of the business. Despite growing service revenues, Carmolingo says it’s not revenue that drove a recent decision to expand the company’s service capabilities. “The real reason is to make sure we are offering our customers what they need and that we are not just focused on renting equipment.” He explains why it is difficult for traditional rental companies to focus on service. “When you own a thousand pieces of equipment and rent to your end user, it’s a very difficult situation to stop that train for the rental business and tend to someone else’s equipment. There’s an inherent conflict,” explained Carmolingo. Nevertheless, determined to avoid that scenario and serve customers by excelling in both rental and equipment service, Trico Lift has grown its service infrastructure. They have added more than 20 service technicians (a 30 percent increase) in a concentrated effort to expand the company’s (continued on page 38)
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ability to provide a complete line of repair, maintenance and inspection services to customers who own aerial work platforms. The additional technicians complement Trico Lift’s 28,000-square-foot New Jersey-based Fleet Maintenance Center and branch locations. The Fleet Maintenance Center is where the company handles fleet repairs, major customer repairs as well as paint services and complete equipment rebuilds. Branch locations also have service areas, though not as large, but they have been fully tooled and outfitted to accommodate the additional staff. For repairs that need to be handled in the field, there are 25 Trico Lift road service technicians the company can dispatch to jobsites, plants or other locations for emergency repairs or routine maintenance. Along with adding technicians throughout all the company’s locations, Trico expanded its transportation truck fleet to handle the work and to improve its response times to customers. Inspection services are another growth area for Trico Lift. The company offers inspection service contracts, enabling equipment owners to comply with the OSHA and ANSI (the American National Standards Institute) endorsements of routine inspections. “Safety is the foundation of the company,” said Carmolingo. The company has been honored with numerous safety awards in recent years such as Sunoco’s Certificate of Safety Excellence and a Contractor Merit Safety Award presented by the National Petrochemical & Refiners Association. Carmolingo insists the company has not uncovered any new demand for maintenance service – instead, the demand has always been there. “As long as there are people who own aerial lift equipment, they will need to have readily available and experienced resources to maintain it,” he added. Small fleets without their own maintenance facilities and staff are a key market for aerial maintenance and inspection services. “We’ve seen a massive increase in activity – primarily because, after promoting our ability to do repairs and maintenance, we identified customers who had been looking for a resource. I believe we’re filling a void.” Willing to Train So what does it take to hire 20 mechanics? Every dealer knows the answer: hard work and continual effort. “There’s no magic,” reported Carmolingo. Recruitment strategies for Trico Lift range from partnerships with local vocational and technical schools in virtually all their service areas to job fairs and advertising. What sets them apart is perhaps a willingness to put the time and effort in to train less experienced mechanics. Rookie technicians work alongside experienced technicians during an initial training period. Their maintenance department is also sufficiently staffed to handle retraining of mechanics from other fields such as auto and diesel. Manufacturer partners (primarily JLG and Genie) set up training programs in-house for Trico Lift.
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Product Support
Chris Carmolingo Takes the Helm at Trico Lift In late April, Trico Lift announced that Chris Carmolingo, an 18-year veteran of the company, would be the next CEO and president, replacing Ken Pusttizzi, the company co-founder and former president, who announced his retirement earlier this year. Carmolingo recently served as chief operating officer leading the daily management of the company’s eight branch locations covering the Northeast, Mid-Atlantic and Gulf Coast regions. In 1998, he was named vice president of Sales and Marketing and was instrumental in the company’s significant growth throughout the next decade. He advanced to COO of Trico Lift in 2011 to accelerate the company’s growth and further develop and strengthen its operations and customer service objectives. In the announcement of his appointment, Pustizzi commended Carmolingo for his most recent accomplishments: “Under Chris’ leadership as chief operating officer, the company has achieved efficiencies and performance consistencies in virtually every business function.” One advantage of working on the same types of machines day in and day out is that mechanics get very good at diagnosing and fixing aerial lifts. “We offer our customers the same depth of equipment maintenance and expertise that we require for our own fleet,” said Carmolingo. “We have factory-trained mechanics who work on this equipment five or six days a week. A customer might have one piece of aerial equipment. I find it difficult to believe that their maintenance personnel could service it cheaper. Even if they did know what to do, would they be tooled to do it efficiently?” In other words, Carmolingo says, customers save money by farming out service work to Trico Lift. He strongly believes that competitors supporting multiple product lines just can’t provide the same level of expertise as Trico Lift. “I can’t emphasize enough that our only business is aerial lift equipment – that is all we do.” Trico’s results indicate that customers are buying into the idea. n Joanne Costin is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at (847) 358-1413 or jcostin@costincustom.com.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 39
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Field Technicians and
Sales
Building a Better Connection to Your Customers He’s there to fix a machine – but you can make the most of all jobsite opportunities by teaching field techs how to repair and strengthen customer relationships, too. By Barry Himmel
When I speak with dealers regarding their dealership’s customer service needs, inevitably the discussion will gravitate toward the service delivered by their field service techs. They talk about how their techs are often the most important person in building a quality and trusting relationship with their customers. The time that these techs spend at the customer’s location is critical. They are engaged to work on what may be the customer’s most expensive and important piece of equipment. If the equipment is not working, then the dealer’s customer is not making money. Not only do the techs have to fix the equipment, they need to repair and strengthen the relationship you have with your customers. Not a small job! When it comes to being in front of the customer, your techs have more exposure than perhaps anyone else in your organization. They become the face of your company. You work hard to prepare them to fix the equipment. You send them to
classes, provide detailed manuals, buy them expensive trucks and tools, and give them time to practice. However, when it comes to building customer relationships, how much training and coaching do they get? If the customer is not complaining, they must be doing a good job – right? Dealers recognize the need for this development. You have some great techs and you know what an asset they are to the organization. Your customers love them. However, when it comes to training techs there are a couple of challenges. The one I hear most often is taking the techs out of the field, even for a few hours. The productivity of the tech is directly linked to revenue. If they are participating in training they are not generating revenue. There is also the challenge related to reinforcing the skills in training. How do you ensure that the skills presented in the training are being implemented? In recognizing the importance of developing these skills, there are
several things you can do to build this culture of excellence among your field service techs. n Set standards and expectations. It is difficult (even impossible) to change behaviors when techs don’t fully understand what is expected of them related to delivering exceptional customer service. Setting achievable standards brings clarity and direction to your expectations. Many dealerships have standards that include appearance, greeting the customer, thanking the customer, and keeping the customer current on their progress. n Develop buy-in. As a training company, we never minimize the importance of buy-in. Your techs need to know that their job extends beyond repairing the equipment. They are your ambassadors and you appreciate and value the important job they do. n Training. I understand that it is hard to dedicate time to training your techs in customer service skills; however, it will be a good investment for you. You can get creative on when
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Customer Service
to present the class or how the program is presented. n Follow up. To truly change behavior there needs to be some type of reinforcement. This becomes a challenge with this group, as their work is done at the customer’s site and it can be difficult to observe. However, that does not mean you can’t periodically follow up with the customer to assess their experience. The customer will appreciate it and you will get reliable feedback on your tech. n Recognition. Everyone likes to be recognized and when you receive positive feedback on your tech, don’t keep it a secret. I recall sitting in the office of the vice president of service at a large dealership when he called a tech and his manager to share with them a customer compliment about the field tech. It was a great message and that message was well received. Passing along compliments should be part of your regular activities. In developing the customer service skills of field service techs we have also found that it’s important to teach them readiness for a variety of situational issues, such as what to do when a customer is upset (how to apologize and empathize), as well as what to say and not say to customers – for example, they should never remark that “we always see this problem with this machine!” And, as your company’s representative at the customer’s jobsite, your field tech should be taught how to recognize and act upon additional sales opportunities. All of these skills training activities do come at a price – there’s the cost of the training, as well as the lost-revenue cost of your tech being away from his field service work. But consider what it costs when a tech damages a customer relationship because they were indifferent or insensitive to the customer’s needs. I have heard many horror and success stories as to how the tech has impacted customer retention. Just as you would (or should) do with any departmental group of employees (sales, parts counter, etc.) you need to develop a strategy for building legendary customer service skills in your field service technicians. Your customers will appreciate it and so will your bottom line. n
Barry Himmel is a senior vice president for Signature Worldwide, a Dublin, Ohio-based company offering sales and customer service training, marketing and mystery-shopping services for a variety of service-based industries. For more information, call (800) 398-0518 or visit www.signatureworldwide.com. You can also connect with Signature on Twitter @SignatureWorld and on Facebook.
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A Closer Look
Realistic and Ready Tim Frank knows what it’s going to take for Sany to succeed in North America, and he’s betting on dealers to see the potential. By Joanne Costin
well capitalized dealers with strong management teams – proven entities.” Coming into the market with a limited line of products presents challenges – Sany offers excavators, crawler cranes, rough-terrain cranes, port reach stackers and empty-container handlers. But Frank says the company is here for the long haul, and he’s out to convince dealers about the potential. To date, 26 dealers have signed on to represent cranes and excavators, with the majority based on the East Coast. “We offer dealers a very attractive profit opportunity,” said Frank, “and we will add more products over time. Our goal is to ultimately become the dominant products they carry.” International Construction Yellow Table 2013 Rank Company Country CE Sales 2012 CE Sales in US $Million 2012 Share 1 Caterpillar U.S. 40492 21.8% 2 Komatsu Japan 21012 11.3% 3 Hitachi Construction Japan 10248 5.5% Machinery 4 Volvo Construction Sweden 9394 5.0% Equipment 5 Sany China 7929 4.3%
There is a beginning for every foreign manufacturer trying to break into the U.S. market. No matter how big or successful you are somewhere else, you can’t succeed in the U.S. without a strong dealer network. Tim Frank, appointed chairman of Sany America in May 2012, knows the realities of the market. Prior to becoming chairman, he consulted with Sany on global strategic planning and before that he was vice president of retail distribution and senior vice president of operation strategy and marketing at Volvo Construction Equipment in Asheville, N.C. “We recognize the reality,” said Frank. “There is a limited supply of quality dealers, and everyone wants
Source: KHL Group
Sany is already dominant in China with a full line of products including concrete pumps, crawler cranes, truck cranes, pile driving machinery, road construction machinery, port machinery, and wind turbines. In 2013, the company ranked No. 5 in the world according to KHL Group’s annual Yellow Table survey, which ranks the Top 50 construction equipment manufacturers based on revenue. While 90 percent of the company’s sales are currently in China, Sany is committed to becoming a global player – and North America is a key target for its expansion. Sany’s goal is to have 40 percent of sales coming from outside their homeland. According to Frank, the U.S. and Canada currently represent 35 percent of the revenue that comes from outside of China and is the fastest growing region in the world for Sany. Sany America doubled its revenue last year, and expects it to double again this year. According to Frank, excavators are currently selling above their expectations and the company has a three-month backorder for machines. Sany America was formed in 2007 and the first machines distributed were concrete products. In 2010 they began marketing crawler cranes
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A Closer Look
and in 2011 launched their first are priced 20-25 percent lower than excavators. All of the products are the predominant brands. “It’s a great designed specifically for the North value,” said Lyle. American market. He believes Sany is doing About the time the U.S. constructhings right. tion equipment market was unravel “Sany went out there and backed ing in 2008, Sany was busy building a up what they are doing with a threestate-of-the-art 400,000 square foot year warranty,” he said. “That shows manufacturing and assembly facility confidence in your product. in Peachtree City, Ga. Frank shows On the crane side of the business, prospective dealers the facility to Frank believes market-leading design demonstrate Sany’s commitment to is Sany’s competitive advantage. the U.S. market. Mike Lyle, president of Landmark The Profit Opportunity Equipment, a dealer with four locafor Dealers tions in the Dallas/Fort Worth area, Current Sany dealers vary in size and was impressed enough with his visit type. Some very well established and the products to sign on with dealers might represent Sany prodSany in January. So far he’s been ucts in territories where they cannot happy with the positive feedback he’s represent other brands. Others are received from customers renting the newer dealers that Sany is commitSany excavators. ted to help grow. “We have a good “Customers are pleased with the product with good support,” said quality and performance of Sany Frank. “We don’t want a balance excavators,” said Lyle. “They love the sheet to hold up what is otherwise similarity of the components to other a great operating team at a dealer. machines. It gives a comfort level to If the dealer isn’t making a healthy the customer. profit (15 percent on machines and “People today are not as loyal 35 percent on parts) ultimately we to one brand,” he added. “They’re will never grow.” exploring.” Until it has a significant machine The company’s slogan “Quality population in the field to support the changes the world,” was chosen to dealer, Sany knows it must offer a demonstrate the company’s commithigher margin on new machine sales. ment to changing the perceptions “We built our financial structure about Chinese products. “Once around the reality of where we are,” buyers experience the machines, said Frank. the perception of low quality fairly Sany is more than half way to its quickly disappears,” said Frank. “The distribution goal of 40 to 45 dealers things that dealers are concerned in North America. about and that we focus on most is According to Frank, acquisitions to how to set up a global supply chain – achieve a technological or distribunot just finished machines in a quick tion advantage are a regular topic of time frame but also the parts needed discussion at Sany. The acquisition of to support the machine. Parts on Putzmeister in January 2012 showed the shelf, machines available and the company wasn’t afraid of a big competitively priced – that’s what deal. “Sany is an extremely profitable makes money for them.” and well-funded company,” said Frank understands that as a relative Frank. And while the highly publinewcomer to the market Sany needs cized economic downturn in China an aggressive price. He believes it’s has caused Sany to make adjustthe total value of Sany excavators ments, Frank says GDP growth in that will ultimately win customers China is still at 8 percent. over. According to Lyle, excavators
Making His Mark Frank has made some significant decisions since taking the helm last May. First and foremost is the decision to bring in more American talent. Rich Jilek has been hired as director of Parts; Andy Clevenger has taken on the role of vice president, Excavator Product Development - North America & Europe; and John Lanning is now deputy general manager for the parent company Sany Heavy Industry Co. Ltd. John is also director of engineering and development for Sany crawler cranes globally. Frank has also put more emphasis on parts. “If we don’t get parts right, we won’t have success,” he said, citing big differences in the way the parts market operates in China versus the U.S. Aggressive marketing is already in the works. The company plans a huge presence at CONEXPO-CON/ AGG in 2014 and is sponsoring Tommy Baldwin Racing and the No. 7 Chevrolet SS in the 2013 NASCAR Sprint Cup Series, which it is using to build stronger relationships with customers and dealers. Realism about where they are and what they have to accomplish hasn’t dampened Frank’s optimism about Sany. “When Komatsu first came, there were dealers that rolled the dice with that,” he said. “Sany is all about potential and I’m betting on them to get it right. I think an investment in a Sany relationship today would be one that, five years from now, most dealers would be pretty happy with.” n
Interested? Dealers interested in learning more about an opportunity with Sany should contact Eric Teague (eteague@sanyamerica.com) for earthmoving equipment (678) 251-2931 or Kirk Erlinger (kerlinger@ sanyamerica.com) for cranes and port equipment (678) 251-2922.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 43
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5/31/13 11:05 AM
On the Numbers
Dual Use Update AED is working with the IRS on your behalf to define parameters for sale of rental units.
By Garry bartecki
As mentioned in previous columns, AED is working to respond to the IRS’s invitation to submit comments about tax accounting for dual use transactions. Our industry and the IRS are hoping to develop an industry standard or bright-line test to determine if specific types of rental transactions or groups of transactions are eligible for both tax depreciation and LKE. In simple terms, the IRS has an issue with our industry when an inventory unit is sold as part of a rent-to-own transaction, or is just sold out of a rental fleet after being in the rental fleet a short time. In my mind, if a unit is sold within the fiscal year both the rentals and final sale proceeds would fall in the same year and the appropriate taxable income recognized. And even if the transaction straddles a year-end there are ways to account for the transaction so as not to be penalized in any one year. Where we get into a problem is with a short-term rental that converts to a sale with the dealer using LKE to spread the tax gain over a fiveyear period, which reduces taxable income in the transaction year and reverses itself through reduced depreciation deductions over the next five years. LKE is 100 percent available when business assets (rental asset) are sold. No doubt about it. Set LKE up right and stick to the strict compliance rules and you should have no problems under audit. The problem lies in defining a sale of inventory versus the sale of a business asset – remember, LKE is not available for the sale of inventory. Consequently, the IRS needs to
be convinced that your transaction was not the sale of inventory but the sale of a rental asset, and so far they’re apparently not very convinced. They believe a dealer is in the business to primarily sell inventory and that maybe certain inventory sales are merely disguised as “rental” transactions. To reach a conclusion one way or the other the IRS looks primarily at three issues: n How long the unit was in the rental fleet before sale n How many times it was rented to different lessees n What percentage of the cost is recovered through the sale My personal opinion is that cost recovery is the major point of consideration, because if a rental unit is put to use as a rental its orderly liquidation value or retail value is diminished by the hours put on the unit in the field. So if you rent a unit and then sell if for original cost you are going to have a problem that is hard to defend. On the other hand, if you rent the unit and sell it for 70 percent of original cost you can demonstrate a reduced value resulting from the rental activity. Back in 2002, the IRS issued a TAM that suggested a few things along these lines: n 70 percent of the rental pool in question was rented at least one time, with the remaining units not yet placed in the dirt. n The units were rented at least five times to different parties and remained in the fleet for 18-24 months. n The units were sold for 68-81
percent of original cost. These certainly sound like rental transactions to me. The deadline to respond to the IRS is June 16, but AED and its allies are petitioning for an extension to give us more time to gather data. To help the IRS understand how a dealer operates today – blending sales, rentals, and sales of rental units as needed – AED will be conducting a survey to determine how you handle RPO transactions, how long rental units remain in the fleet before they are sold, and at what percentage of cost they are sold for. We are going to get pretty specific and probably work along the line of those classes of equipment represented in the Rouse Reports. We will use your input and work with the IRS to set standards for: n How long a unit must be in the rental fleet to be considered a rental unit n How many times it needs to be rented to different customers (not a big issue in my mind) n Determine an appropriate percentage of cost that demonstrates the equipment lost value as a result of rental hours in the field If we get this resolved all dealers will have the opportunity to depreciate their rental assets and use LKE if they choose. If you hope to retain your current method to account for RPO transactions, make it a point to respond to our survey. Garry bartecki (gbartecki@ aednet.org) is AED’s vice president of Finance.
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Business Outlook
Construction Equipment Industry Will Muddle Through 2013
As world economies face their respective challenges, machinery demand grinds downward, including here in North America. Eli Lustgarten
Industrial activity peaked globally in the spring/summer of 2012, after which came the weakening of construction equipment demand. Global politics froze virtually all major markets. Further, most global manufacturers opted for inventory liquidation in 2H2012 and 1H2013 in response to weakening global activity led by two sectors that overproduced more than any other – heavy trucks and construction equipment. Currently, U.S. end markets have been somewhat stronger, Europe weaker, and emerging markets somewhat disappointing but beginning to improve. In Japan, quantitative easing is promoting the decline of the Japanese Yen, which will affect competitive positions, but U.S. companies will likely fare better than their European counterparts due to far stronger demand. China’s 2013 growth plans are more muted as they attempt to remake their economy with more domestic demand, driven with less reliance on exports and investments in capital-intensive, stateowned companies. A modest GDP growth target of about 7.5 percent (1Q13 7.7 percent) suggests Beijing is willing to tolerate slower growth short term to revamp its economy for the future. While 1Q2013 GDP growth in the U.S. was a disappointing 2.5 percent (consensus was 3.2 percent), it did allay many near-term economic fears. The U.S. economy has survived everything from the payroll tax hike to early sequestering with a record stock market and an unexpected modestly improving jobs picture. Quarterly results ending March 2013 pointed to a bottoming of inventory destocking. Within the construction equipment market, we saw greater-than-expected strength in
AWPs, sluggish demand for cranes, and very weak mining markets that will likely persist through 2014. In sum, “Muddle Through” remains the theme with slow global economic growth in 2013. Construction equipment sales in 1Q2013 is following suit according to CNH Global with global sales of light equipment down 8 percent worldwide and heavy equipment sales falling 23 percent, reflecting the sharp fall-off of demand in the mining sector. North American sales fell about 5 percent across most end markets – Europe was down 12 to 13 percent, and Asia Pacific countries saw an 8 percent decline in light equipment shipments and a 31 percent fall-off in heavy equipment led by continuing weak China demand. Only Latin America reported flat light equipment sales due to a modest recovery in Brazil, though heavy equipment in that region did fall about 9 percent. While the second calendar quarter will still see somewhat soft activity, the outlook for the second half of 2013 is beginning to show some promise. Inventory liquidation will likely come to an end for virtually all manufacturers in virtually all regions except perhaps China, where reduction of all equipment on the ground may take most of 2013. The housing recovery is gaining some steam and the big debate for 2013 is: Which side of a 970,000 forecast do you believe in (compared to 780,000 in 2012)? Further gains are expected in 2014, taking us on the road to a more normal level of housing activity, likely between 1.3 million and 1.5 million starts. Nonresidential construction should continue its moderate recovery in the 5- to 10-percent range, but it is a tale of two very different markets. Private nonresidential spending will more
likely grow in the 10 to 15 percent-plus range (versus 18 percent in 2012), led by power, pipelines, manufacturing, warehouses, higher education, data centers and hotels. Public nonresidential markets will likely decline at least 2 to 5 percent (versus -3 percent in 2012) with minimal to negative growth in highway, education and other markets because of declining federal funds. Our forecast for 2013 construction equipment demand remains at flat to down 10 percent in North America, a double-digit decline in Europe, and plus-or-minus 5 percent in Asia Pacific. The one bright spot is Latin America, where we expect 5 to 10 percent increases driven by Brazil’s major infrastructure needs for the World Cup and the Olympics. Our surveys indicate that in the U.S. rental companies, which bought more than 50 percent of the equipment in 2012, are planning flat expenditures for 2013, with a shift from earthmoving equipment to other products. The only sector facing a very difficult outlook for 2013 is mining – our latest surveys suggest that capital expenditures will fall at least 37 percent for domestic coal mining and slide in midsingle digits or more in most other markets. While we expect domestic coal mining spending to stabilize next year, noncoal mining capex will likely fall at a double-digit rate in 2014. The construction sector is currently in a transition year. Push the politics (and perhaps mining) aside, and the construction industry is poised for at least several years of moderate growth. Eli Lustgarten (elustgarten@aol. com) is president of ESL Consultants, an industrial consulting firm.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 47
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2/25/13 4:24 PM 2/14/13 3:37 PM
Aftermarket
Customer Stratification and Retention Slicing and dicing can expose interesting facts.
By Ron Slee
The opportunity that you have when you are in the product support business is huge. The shame is that we don’t capture more of it. There are some opinions about where the dealer’s market capture rates should be, running from 20 to 40 percent for parts and from 5 to 20 percent for service. I don’t know where your thinking takes you on these numbers, but no matter what the thinking arrives at it is clear we can do much better. I challenge you to look at your labor market capture and tell me that you have more than 25 percent of the total. Think about the fact that maintenance is roughly 50 percent of that market. So if you are like most dealers with a very low penetration on maintenance, caused by any number of reasons, you will have to have around 50 percent share of the repair side to get to 25 percent of the total labor recovery pie. Let’s go a little further and consider the nontechnical labor in your territory, and I will assume you get very little of the tooth changes, or cutting edge changes, or even the lamps or gauges. So my 25 percent proposed market capture is not too far off the real number. Maybe it is even too high. But while that is going on, I want you to also consider that the only technicians who are for sure going to buy your parts are your employees – now you can start to understand why I get a little cranky with low labor market capture rates. But it goes deeper than simple market capture rates. Run a report in descending sales sequence of all your parts business. Run another for your service business. Then slice the
report up into 5 percent increments. Draw a line through the report with each 5 percent of the customers in the total report. If you have 2,500 customers, then the first 125 are the top 5 percent and so on. Now calculate the sales for each 5 percent block and you have the makings of a stratification report. And what does this tell you? For starters, an extremely high percentage of each of your parts business and service business is coming from an extremely small number of your customers. It is not unusual to find a ratio that is very different from the old normal 80:20 rules that suggested 80 percent of your business came from 20 percent of your customers. When you are finished with this report for your business don’t be surprised if 90 percent of the business is coming from 10 percent of your customers. Let me take a step back here for a moment. If you still have a COD or cash customer, you have trouble. In the old days – when computer disc storage was $100,000 for 44 MB there might have been a reason not to have an account for each and every customer, but when 5 GB costs $20 or less there is no reason at all. Each day that there is a cash sale for a customer who does not have an account, create an account for them with the credit terms being cash. It seems rather a waste of an opportunity to have someone buy from you, walk out the door, and you don’t know anything about them. I have heard all kinds of reasons why we can’t do this, however none of them makes sense in the current world of
business. So now, one of your largest customers for either parts or service is the cash customer. Part of the reason for the shift to 90:10 is due to customer defections. You all know who your larger customers are, and you are very sensitive to their needs and wants. How that translates down through the ranks to the smaller customers, however, changes. In the last AED Product Support Opportunities Handbook, 15 percent of surveyed customers told us that every year they chose to do maintenance and repair work with someone other than an OEM dealer. That means that 48 percent of your customers leave you for a competitor over a five-year span. This is a serious issue no matter whether you believe the survey data or not. Too many customers are defecting on an annual basis. So there is the second step. Now it is your turn. Run the reports and do the stratification. Do your own calculation on defections next. I will go a little further with this process next month. The time is now.
Ron Slee (ron@rjslee.com) is the founder of R.J. Slee & Associates, Rancho Mirage, Calif., celebrating more than 30 years in business in the United States, a consulting firm that specializes in dealership operations. Ron also operates Quest Learning Centers, a company that provides training services specializing in product support, and Insight (M&R) Institute, a company that operates and facilitates “Dealer Twenty” Groups. Follow Ron on Twitter: @RonSlee; and read his blog at learningwithoutscars.com.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 49
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BidSpotter.com opens your auction floor to a world of machinery buyers. BidSpotter.com
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11/27/2012 10:49:40 AMPM 11/27/12 1:57
Washington Insider
Tax Reform: The Time is Now! There’s reason to believe that a bipartisan deal will happen this year. By Christian Klein
Tax reform is high on the radar screen in D.C. at the moment. The hotly-charged partisan environment is a barrier to progress on many issues, but there’s a sense that stars may be aligning for an historic, once-in-ageneration tax reform deal. U.S. Senate Finance Committee Chairman Max Baucus’ (D-Mont.) decision to retire at the end of this Congress gives him more political room to maneuver. Both he and U.S. House of Representatives Ways & Means Chairman Dave Camp (R-Mich., who will be forced to give up his gavel at the end of next year due to GOP chairmanship term limits) are now thinking about their legacies. Nobody knows at this point if Baucus and Camp will succeed, but conventional wisdom says a tax deal must happen in 2013 if it’s going to happen at all (2014 is a midterm election year) and it would be ripe for consideration in conjunction with the next debt ceiling increase debate early in the fall. Baucus and Camp both deserve credit for trying to make tax reform bipartisan. In the House, Camp has created an unusually transparent process to gather input from individuals, businesses, and interest groups about how to improve the tax code. AED has been front and center in that conversation. On April 10, AED Vice Chairman Tim Watters (Hoffman Equipment) was one of just five witnesses to appear with Camp at a House Small Business Committee tax reform hearing. The extensive comments that AED submitted to the Ways & Means Committee echoed the priorities that Watters articulated in his testimony.
First, AED believes the tax code’s complexity and unpredictability are undermining the nation’s economic growth. We therefore strongly support simplifying and restoring long-term certainty to the nation’s tax laws. Second, the equipment industry is dominated by pass-through entities whose owners pay the taxes. For tax reform to have broad economic benefits, corporate and individual reform must proceed simultaneously. Third, our members and their customers are capital-intensive. We need to improve the climate for investment. Camp has proposed making higher Sec. 179 small business expensing levels permanent (they’ve been temporarily increased in recent years as an economic stimulus). We support that idea, but we also believe Congress should look for other ways to encourage capital investment for companies of all sizes. Taking a hands-off approach to Like-Kind Exchange would be a good first step. Maintaining business interest deductions is also important. Fourth, we’re urging Congress to undo some of the damage done by the Affordable Care Act by holding equipment distributors harmless from the new Medicare tax on passive income. Due to the complexities of the passive income rules, some dealer rental income will likely be subject to the tax, which we don’t think brick and mortar companies like AED members were intended to pay. Fifth, the equipment industry is dominated by family-owned companies. Even with recent changes, the federal estate tax is still a burden, particularly to companies in capital intensive sectors like ours. We project
that AED members are collectively spending close to $32 million per year on life insurance premiums to protect their companies from the tax. That’s why we’re urging lawmakers to come up with a new and simple way to protect family businesses and farms from having to pay the tax when an owner dies. Sixth, a large number of AED members use LIFO (“last in, first out”), an accounting method that has been falsely characterized as a tax preference. AED is telling lawmakers that repealing LIFO, as President Obama wants to do, would unfairly subject equipment distributors to hundreds of millions of dollars in retroactive tax liability. Finally, the problems surrounding the federal highway program are actually a tax problem. The Highway Trust Fund gets its money from the gas tax and other user fees, but they’re not adequate to support current investment levels or needs. We’re urging Congress to use a tax reform deal as an opportunity to create new revenues to restore the highway program’s fiscal solvency. Our friends on the Hill have told us that when it comes to tax reform everything – including popular preferences like the home mortgage interest deduction – is on the table. That means there’s an historic opportunity to improve the tax environment for AED members and make our country more competitive. But it also means deductions on which AED members have long relied are at risk. We hope you’ll join us in the fight! Christian klein (caklein@aednet.org) AED’s vice president of Government Affairs and Washington counsel. He can be reached at 703-739-9513.
June 2013 | Construction Equipment Distribution | www.cedmag.com | 51
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New & Improved
New Class of ETVs Offers Versatility in Eight-Wheeled Platforms Extreme Terrain Vehicles designed for demanding applications in remote camps and worksites Argo introduced three versatile 8-wheeled platforms for its line of extreme terrain vehicles (ETVs) including the Argo 8x8 HDi, Argo HD XTI and Centaur 8x8, each featuring a variety of options and components to adapt the vehicles to unique requirements. Configured to carry cargo, passengers or tools, all three ETV types offer a light step on soft or sensitive terrain, excellent stability to safely negotiate slopes and rough ground, and ground-eating mobility to climb through a variety of soft, wet and uneven terrain. A low center of gravity makes them one of safest brands of off-road vehicles available. Because of their zero turn radiuses, and a ground clearance of 9 inches or more, Argo ETVs are able to steer through the tightest bush and rock conditions. The Argo 8x8 HDi and Argo 8x8 XTI are both amphibious, enabling the units to drive straight into and out of flooded areas and small lakes. The larger Centaur ETV will ford streams as deep as 26 inches. The ETVs are offered with a list of quick-change components that tailor the baseline vehicle to its job with
customized equipment for carrying cargo, people, special equipment and fuel. The Argo 8x8 HDi and Argo 8x8 XTI closely resemble previous models of ARGO UTVs in appearance, enclosed by a vacuum-formed sealed body with full skid plate provided as standard. Both are powered by 31 HP Koehler Aegis 750 cc engines coupled to the triple-differential ADMIRAL standard or high-torque steering transmission developed by Argo’s parent company, Ontario Drive and Gear Ltd. (ODG). The transmission delivers even torque to all eight tires and is up to 50 percent more efficient than hydrostatic drive systems. The 2013 Centaur 8x8 tops the Argo line. Shifting to an automotive-style steering control, the Centaur is driven by a 34 HP Daihatsu/ Briggs & Stratton engine with the advanced Centaurmatic transmission, designed specifically for this ETV by ODG. Operating at speeds up to 28 mph, the Centaur is capable of hauling loads up to 1,500 pounds and boasts a towing capacity of up to 2,000 pounds using an auxiliary trailer. For more information visit www.argoutv.com
Infrared Remote Control System from Wacker Neuson Promotes Operator Safety Wacker Neuson’s SC (Smart Control) system for remote controlled compaction equipment offers added jobsite protection to workers remotely operating machines. Wacker Neuson’s infrared remote control system is safer than radio control remote control systems because it does not require line-of-sight operation. With radio control systems a machine will keep moving if the operator is distracted and turns away from the machine, or if the machine moves behind obstructions. Wacker Neuson’s system eliminates equipment moving into dangerous blind spots that can occur when using some radio controlled units. This line-of-sight control combines with a built-in safety zone that stops the machine should the operator come within about 6 feet of the working unit. A 16-channel transmission allows for multiple machines to be used on the same jobsite without the threat of interference with one another. The infrared system is not
subject to radio interference from other jobsite systems, such as cranes, boom pumps and other radio control equipment. The patented infrared remote control system can be found on Wacker Neuson’s RT trench roller and reversible plates. For more information visit www.wackerneuson.us/en/infrared-tech
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New & Improved
Enhanced Operator Comfort, Added Safety Featured in New Kubota BX70 Series Sub-compact Tractors With improved comfort, convenience and operation incorporated into their design, Kubota Tractor Corporation introduced its new BX70 Series sub-compact tractors with four models, the BX1870, BX2370, BX2670 and the BX25D. The new BX70 Series features a high-back reclining seat with armrests standard on all models except the BX1870 (optional enhancement). A new steering wheel incorporates a smaller hub and is positioned closer to the operator for better comfort and visibility. New, easy-to-read dash instrumentation feature a large analog tachometer, digital gauges and warning lights with the brake pedal repositioned to the left of the fully-flat floor for easier access and simultaneous HST/brake operation An optional two-pin Quick Attach system allows easy switching from the standard bucket to two new front
attachments, a 60-inch straight blade or pallet forks. A tractor-mounted hydraulic quick attach remains available along with more attachments such as a 50-inch front snow blower, rotary broom and blades. A foldable Rollover Protective Structure (ROPS) is now standard across all BX-Series models. The ROPS easily folds down without tools, allowing the tractor to pass under lowhanging obstructions. For more information visit www.kubota.com
New Vei Loader Scales Offer a Better Look at More Data Tractors VEI Loader Scales, represented in North America by RMT Equipment, has introduced new versions of two of the firm’s most popular models. The Helper X is the new top-of-the-line loader scale from VEI, providing today’s most advanced data management capabilities for in-motion weighing. The Millennium 5 model offers a lower cost version with the same weighing accuracy, ease of data entry, easy readout screens and an easy upgrade path to convert it to a Helper X. Both systems are equipped with new high-definition color displays, automatic brightness control and high visibility in any light conditions. The easy-to-read information is now presented in a more compact layout, allowing the displays to fit a smaller footprint in the cab. VEI’s latest weighing technology includes faster microprocessors and advanced algorithms for greater precision, especially in rough terrain. USB data transfer is standard. VEI’s iPot web-enabled payload analysis software can also be accessed directly by both systems. The VPrint thermal printer is now faster and smaller, and can be integrated with the monitor or mounted separately. Compatible with virtually any make or model of wheel loader, skid steer or fork lift, the Helper X and Millennium 5 can be configured with model-specific data by simply loading the required information from a USB key. Helper X’s built-in database can now manage up to
20 operator IDs with a capacity to program up to 500 customer names and addresses into the system. Up to 500 vehicle IDs can be attached to customer names. Customer entries can also be expanded with custom messages and details to be included on load tickets. The Millennium 5 system has been reduced in overall size without compromising visibility or usability for the operator. A new keypad data entry system design provides large, lighted buttons that make the scale easy to use and program, even when wearing gloves. For more information visit www.rmtequip.com
June 2013 | Construction Equipment Distribution | www.cedmag.com | 53
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New & Improved
World’s Largest Self-Propelled Boom Lift by Genie The new Genie SX-180 claims to be the world’s largest self-propelled lift. The lengthy 180-foot machine is designed to be productive, reliable and easy to transport. Travel speeds vary based on boom position and range from 2.5 mph with the boom in the stowed position, 0.4 mph below 125 foot, and 0.1 mph above 125 foot. It is designed to be driven at full height. Providing a working envelope ideal for the most extreme access jobs, the 8 foot by 3 foot platform has an unrestricted capacity of 750 pounds. The 10-foot, 180 degree, rotating jib positions workers and gear exactly where they are needed. New platform controls consist of toggle switches and fully proportional jib and boom controls. The ground controls offer an updated function diagram layout and tactile membrane switches. Customers may choose from either a Deutz or Perkins engine. A 50-gallon fuel tank for longer run time and a 7.5 KW generator are standard. Designed with reliability and serviceability in mind, the SX-180 offers easy access to important systems and components, robust hose and harness routings and access to slew bearing bolts from topside. The rotating jib offers a robust slew bearing and worm drive arrangement. Units will be available worldwide in the second half of 2013.
For more information visit www.terex.com
Genesis Attachments’ New LXP 800 Features Powerful Jaw Openings and Power Genesis Attachments expanded its Logix Processor, LXP product family with the new LXP 800, providing the line’s largest jaw openings, jaw depths and capacities. Featuring concrete pulverizer, shear and concrete cracker jaw openings of 61, 40 and 71 inches and jaw depths of 39, 35 and 50 inches respectively, the LXP 800 is a powerful demolition tool for large columns, structures and projects, fitting 90,000- to 150,000-pound excavators. The LXP 800 is a versatile, interchangeable-jaw attachment that now has more power and capacity that may enable demolition contractors to use one tool on a job that previously had two. Jaw sets can be changed in 15 minutes. All LXP jaw sets feature a patented pivot system that keeps each jaw set’s pivot group intact, providing a power curve that matches the jaw’s primary application. Genesis Attachments also introduced the XT Mobile Shears, which are designed to process scrap more efficiently and fit on smaller carriers, reducing initial acquisition investments and hourly energy consumption costs. For more information visit genesisattachments.com
54 | www.cedmag.com | Construction Equipment Distribution | June 2013
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Market Update (“BINGO! U.S. Housing Market Finally Getting Its Numbers” continued from page 30)
Gen Y’s Big Impact on Future Housing Demand Gen Y. Millenials. Echo Boomers. Whatever you call them, they’re the generation born in the 1980s and 1990s. Roughly 80 million strong, this group of people comprises about one-third of our nation’s population, representing a critical segment of today’s population with the highest impact on the housing industry. Now in their 20s and 30s, Millenials are described as having a prolonged adolescence – aka delayed entrance to adulthood. They are pursuing higher education, incurring significant student loan debt and living at home longer. Once they form their own households, they often choose to live alone for longer periods of time before getting married. “We’re taking our time to grow up,” explains Kaitlin Jackson, a project manager for Heartland, LLC, a real estate advisory firm in Seattle. In addition, many Echo Boomers graduated right before or during the recession, so they are more mobile job-wise, either as entrepreneurs or as employees who haven’t found a job they expect to hold longer than five years. When they can’t find a job they love, they create their own, as evidenced by the huge popularity of crowdfunding websites like Kickstarter, where entrepreneurs raise funds for
their passion projects. “We like to find ways around existing norms to do the things we want to do,” Jackson said. According to Jackson, a Gen Y’er herself, owning things is not a high priority for her generation. “This devaluing of traditional status symbols is changing the way we think about things that we own and the space that we need,” she said. Millenials are also known as the sharing generation, sharing their lives on social media sites like Facebook and Tumblr but also on user-generated content sites like Yelp and Airbnb. They value great experiences, intergenerational living (i.e., living at home with their parents) and collaborative work spaces. Living Trends As a generation, Gen Y exhibits characteristics that have a direct impact on their housing needs. One key difference between Gen Y and previous generations is that they prefer living alone after leaving their family home. They often grew up living in the suburbs with spacious homes and yards, and they didn’t have to share their bedrooms. This translates to not wanting roommates, so they need less living space. In addition, Millenials
are often pet people, so pet-friendly amenities like dog washing stations and dog parks are important. Single members of Gen Y require less living space, but want space for storing their kayaks, skis and bikes. Jackson explains that Gen Y places less of a sense of their identity on housing and homes than other generations. Instead, they are focused more on self-expression. They want to be out and about, spending less time at home and sharing their lives online on Instagram, Faceook and Twitter. “The things that we do are what define us. We want to live in great neighborhoods, have hip retail and new trends nearby, and we want to have cool experiences,” said Jackson. “Our living room is the six block radius around our home.” In terms of home ownership, Millenials are not in a position to buy homes fresh out of college and into their early 30s. They still value how and where they grew up and are optimistic about the future, but they have significant student loan debt and aren’t settled into their dream job yet. “I don’t think this is deterring Gen Y from home ownership in general,” Jackson said. “However, our timing to enter the ownership market is delayed.”
Advertisers’ Index
4D Excavator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARGO - Extreme Terrain Vehicles. . . . . . . . . . . . . . . . . . . . . . . 4 Bell Trucks of America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 BidSpotter.com. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 BOKF Equipment Finance Inc.. . . . . . . . . . . . . . . . . . . . . . . . 28 Charter Software Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Dispatching Solutions, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . 29 EPG Insurance, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Gensco America, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 HKX, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Infor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 John Deere Power Systems. . . . . . . . . . . . . . . . . . . . . . . . . . 48 Kobelco Construction Machinery . . . . . . . . . . . . . . . . . . . . IFC LayMor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Leading Edge Attachments. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Light Engineering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Okada America, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 PFW Systems Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Ritchie Bros. Auctioneers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SANY Heavy Industry Co., LTD . . . . . . . . . . . . . . . . . . . . . . . . 9 Sentry Insurance Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Solesbee’s Equip. & Attachments Inc.. . . . . . . . . . . . . . . . . . 46 Strickland MFG, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Sullivan-Palatek. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Vacuworx International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Wacker Neuson Corporation. . . . . . . . . . . . . . . . . . . . . . . . . 15 Wells Fargo Equipment Finance. . . . . . . . . . . . . . . . . . . . . . . 31 Werk-Brau Company, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . IBC Woods Equipment Company. . . . . . . . . . . . . . . . . . . . . . . . 41 XAPT Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OBC
As the official magazine of Associated Equipment Distributors, this publication carries authoritative notices and articles in regard to the activities of the association. In all other respects, the association cannot be responsible for the contents thereof or the opinions of contributors. Copyright © 2013 by Associated Equipment Distributors. Construction Equipment Distribution (ISSN0010-6755) is published monthly as the official journal of Associated Equipment Distributors. Subscription rate — $39 per year for members; $79 per year for nonmembers. Office of publication: 600 W. 22nd St., 220, Oak Brook, Ill. Phone: 630-574-0650. Periodicals postage at Hinsdale, Ill. 60521 and other post offices. Additional entry, Pontiac, Ill. POSTMASTER: Send address changes to Construction Equipment Distribution, 600 W. 22nd St., Suite 220, Oak Brook, Ill. 60523 56 | www.cedmag.com | Construction Equipment Distribution | June 2013
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Dealer Data
March Construction Improves 8 Percent Gain followed two months of decline, led by strong increase for public works, electric utilities. Year-To-Date Construction Starts Unadjusted Totals, In Millions $
Monthly Construction Starts Seasonally Adjusted Annual Rates, In Millions $ Nonresidential Building Residential Building Nonbuilding Construction TOTAL Construction
March 2013
February 2012
% Change
$136,185
$139,665
-2
199,629
201,341
-1
139,866
98,200
+42
$475,680
$439,206
+8
Source: McGraw-Hill Construction, www.construction.com
Nonresidential Building Residential Building Nonbuilding Construction TOTAL Construction
3 Mo. 2013
3 Mo. 2012
% Change
$29,276
$32,082
-9
42,907
32,268
+33
28,291
36,591
-23
$100,474
$100,941
-0-
Source: McGraw-Hill Construction, www.construction.com
Monthly Sales Volume by Original Equipment Cost with Recovery %
Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520
The graph to the left illustrates sales of used rental fleet by the major North American rental equipment companies for the last 24 months. Each month’s equipment sale volumes are expressed as a percentage of the total original equipment cost (“OEC”) sold in the highest volume month, with December ’11 representing 100%, (e.g. total OEC sold in January ’13 was approximately 60% of total OEC sold in December ’11). Actual sale $ volume is illustrated as the blue component of each bar in the graph. The recovery (i.e. sales $ as a percentage of OEC sold) is indicated within the bar for each month (e.g. January ’13 sales $ recovery was 47.3.0% of total OEC sold). *Measured by OEC $
The Dirty Dozen - UCC filings on 12 earthmoving units. Equipment Description Articulated Dump Trucks Crawler Dozers Crawler Loaders Excavators - Crawler, Hydraulic Excavators - Wheeled, Hydraulic Mini Excavators Motor Graders
MAR 12
APR 12
MAY 12
JUN 12
JUL 12
AUG 12
SEP 12
OCT 12
NOV 12
DEC 12
JAN 13
FEB 13
Grand Total
44
63
86
58
48
108
50
57
69
86
32
21
722
213
278
247
269
240
255
246
368
306
375
339
172
3,308
4
12
4
1
4
3
2
1
6
10
7
9
63
418
494
563
568
471
556
476
691
550
741
624
405
6,557
21
21
17
31
19
35
23
22
31
47
31
9
307
458
662
714
635
554
621
555
681
615
717
823
429
7,464
88
85
105
108
95
78
59
99
115
133
89
44
1,098
10
3
13
4
8
3
7
4
7
5
2
66
Scrapers - Conventional Skid-Steer Loaders
808
867
976
868
826
811
833
1,121
1,479
1,680
1,406
Tractor Loader Backhoes
282
294
300
326
295
351
351
423
366
384
335
752 12,427 245
3,952
Wheel Loaders < 80 HP
33
36
56
43
38
38
48
69
72
96
78
49
656
Wheel Loaders > 80 HP
345
393
447
348
362
435
366
536
625
623
608
318
5,406
2,714
3,215
3,012 4,075 4,238 4,899
4,377
Grand Total
3,518 3,268 2,956 3,299
2,455 42,026
Supplied by Equipment Data Associates, Charlotte, N.C.
56 | www.cedmag.com | Construction Equipment Distribution | June 2013
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