280096 march 2014

Page 1

March 2014

www.cedmag.com

States to the Rescue New research commissioned by AED identifies all the highway funding and financing tools states are – and could be – using to help solve America’s infrastructure crisis.

Plus:

The human foibles of using machine data Hurting for workers, Canada hunts for solutions ‘Optimism Quotient’ smiles right off the chart

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Contents

Award Winning

MARCH 2014 Editorial Team Executive Editor and Director of Programs KIM PHELAN kphelan@aednet.org

Vol. 80, No. 3

FEATURES

FROM THE COVER

Attention OEMs: stronger dealers are built here.

Contributing Editor JOANNE COSTIN pr@aednet.org

Editor’s Note 7 Move into the Socialsphere with AED; we promise it won’t hurt.

Graphic Production EVA BELMONTE design@aednet.org eva@neggie.net

Just So You Know – an occasional guest column 45 Cummins’ Mike Brinker urges dealers to embrace T4F early.

Columnists GARRY BARTECKI AED Vice President of Finance CHRISTIAN KLEIN AED Vice President of Government Affairs and Washington Counsel ELI LUSTGARTEN ESL Consultants

Speak to Me 18 Telematics technology has become highly sophisticated, yet the vast amounts of machine data are only as good as the commitment to embrace by fleet owners, and ease of use – across brands.

RON SLEE R.J. Slee & Associates

Solving America’s Infrastructure Crisis 26 AED’s most recently commissioned study by researchers at the College of William & Mary reveals myriad highway funding and financing mechanisms available to state governments.

Aftermarket 51 Think customer convenience, think Amazon.

Washington Insider 53 Face your political risks head on at Fly-In.

Inside AED Groundwork Industry Beat Play It Safe Advertisers’ Index Dealer Data

Vice President–Sales/ Publisher DAVID W. GORDON 800-388-0650 ext. 334 dgordon@aednet.org Advertising Sales Manager ALBERT J. RAMIREZ 800-388-0650 ext. 311 aramirez@aednet.org

600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 www.aednet.org

On the Numbers 47 Steps to increase wealth – No. 1: if you got it, keep it.

DEPARTMENTS

Advertising Contacts

Production Manager MARTIN CABRAL 800-388-0650 ext. 313 mcabral@aednet.org

COLUMNS

From the Chairman 5

Anyone Want a Job? Anyone at All? 32 Canada’s deficit of skilled workers – or unskilled for that matter – has caused federal and local governments to attempt legislating solutions. For dealers, imported techs can fill critical gaps.

New Construction Industry Optimism Quotient Reaches All-Time High 40 Wells Fargo Equipment Finance annual survey results are unveiled, point to positive equipment industry sentiment.

8 10 12 16 55 56

Plus: Luck Stone Adds Value with Innovation 22 Closer Look: Screen Machine Industries – An American Success Story 42

March 2014 | Construction Equipment Distribution | www.cedmag.com | 3

From the Chairman President & CEO - BRIAN MCGUIRE Associated Equipment Distributors Oak Brook, Ill.

Hey Manufacturers – We Need Your Support!

Executive Vice President & COO ROBERT HENDERSON Associated Equipment Distributors Oak Brook, Ill.

OFFICERS

Chairman - TIM WATTERS Hoffman Equipment Co., Piscataway, N.J.

(And BTW, we know your dirty little secret!)

Vice Chairman - DON SHILLING General Equipment & Supplies, Inc. Fargo, N.D. Sr. Vice President - WHIT PERRYMAN Vermeer Equipment of Texas, Inc. Irving, Texas Vice President - RICK VAN EXAN Toromont Industries Ltd. Concord, Ont., Canada Vice President - WES STOWERS Stowers Machinery Corp. Knoxville, Tenn. Vice President of Finance MICHAEL D. BRENNAN Brandeis Machinery & Supply Co., Louisville, Ky. Past Chairman - MIKE QUIRK Wagner Equipment Co. Aurora, Colo.

AT-LARGE DIRECTORS

TODD BACHMAN Florida Coast Equipment, Inc. Boynton Beach, Fla. RON BARLET Bejac Corp. Placentia, Calif. DENNIS J. HELLER Stephenson Equipment Inc. Harrisburg, Pa.

LARRY R. MILLER Kelbe Bros. Equipment Co. Inc. Butler, Wis. MITCH NEVINS Four Seasons Equipment, Inc. Houston, Texas MIKE ROONEY Thompson Tractor Co., Inc. Tarrant, Ala.

REGIONAL DIRECTORS

RYAN GREENAWALT Midwest Reg. Alta Equipment Co. Wixom, Mich.

TODD HYSTAD Western Canada Reg. Vimar Equipment Ltd. Burnaby, B.C. PATRICK W. MCCONNELL West Reg. Clyde/West, Inc. Portland, Ore. CHRISTOPHER PALMER Northeast Reg. Wood’s CRW Corp. Williston, Vt. GILES POULSON Rocky Mountain Reg. Faris Machinery Co. Commerce City, Colo. JAY RODES, Southeast Reg. Wilson Equipment Co. Lexington, Ky. RICK VAN EXAN Eastern Canada Reg. Toromont Industries Ltd. Concord, Ont. GARY D. VAUGHN South Central Reg. OCT Equipment, Inc. Oklahoma City, Okla.

BY TIM WATTERS

Announcement to all construction industry manufacturers – AED needs your support! Yes, your distributors’ association has experienced a tremendous decline in membership over the past few years, and we need your support as we work to get this situation turned around. Whether a result of the recession or the consolidation of our industry, our association needs to get this membership trend reversed, and we won’t be successful without your active support. All types of help are welcome, but what we need most is your engagement. When you are engaged, your dealers are engaged, and engaged members are the prescription for what ails us! Your engagement and participation will help this association regain its footing and get back on our path to a strong future, one where all members of our channel – manufacturers, dealers, and customers alike – benefit from AED’s activities. 7KH &KDPSLRQ RI 'HDOHU 3URÀWDELOLW\ And why should you help??? Why should you care about AED’s success? Because your dealers need our help! We know your ‘dirty little secret’ – that each and every manufacturer’s distribution network (with one possible exception) is beset with dealers who are undercapitalized and, therefore, underperforming; and no other association is committed to helping your dealers to improve their performance and results! And when your channel is stronger, your customers benefit, and our industry is stronger. What are you doing to help your dealers in your own channel to improve their performance? Whatever it is, the statistics suggest that it is not enough. Even dealers that are not undercapitalized can improve their performance! Our industry distribution channel lags all others in terms of financial performance and operating performance (see Mike Marks’ article in CED’s October issue, cedmag.org) – our absorption lags

MHEDA dealers by a whopping 20 percent, and as a result MHEDA dealers return anywhere from 3 to 4 percent more on assets than an AED dealer! (YHU\ 0DQXIDFWXUHU·V 'HDOHUV %HQHÀW So, to whatever you are doing to improve the performance of your dealers, here’s an easy thing to add – support AED! Only AED is committed to turning the stats around and improving all of our industry distribution networks. No matter which manufacturer, AED is committed to helping your dealers improve their performance! Our workforce development activities help your dealers find and train technicians (to improve their product support capacity and capability); our ongoing training programs and webinars help your dealers improve their performance in all aspects of the business – parts, service, rentals, sales, and financial; our events and meetings help your dealers learn from their peers; and our advocacy efforts are helping to improve the landscape in which we all work by influencing the regulations that Washington imposes, as well as influencing the investment of national resources in our collective direction. Your dealers benefit from AED, and if your dealer is stronger, then so are you! Support your distribution network through your support of AED! Need ideas to get started? AED’s Dave Gordon (dgordon@aednet.org) and Rebecca Rakers (rrakers@aednet.org) at The AED Foundation are two great resources. Why would you not want to support this association? There is no other organization committed to helping your dealers – it’s an easy decision.

TIM WATTERS (timwatters@hoffmanequip.com) is president of Hoffman Equipment in Piscataway, N.J.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 5

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Editor’s Note

Let’s Be More Social Start following AED – we’re changing up our approach in ways I think you will Like. BY KIM PHELAN

Raise your hand if you’d like isn’t your spouse, sibling, offspring, too long, it won’t be read. some more e-mail in your Inbox today. employee, or nextdoor neighbor) has 2. Use interesting headlines. Ah, not too many hands. We’re got to be getting something out of it 3. Visuals are better than text. swimming in e-mail, aren’t we. It’s for themselves. So content matters. People love pictures. a fast and free way to market, so It’s just possible that AED has, on 4. Stay positive. Social media users naturally e-mail became the preferred don’t hop on Facebook or Twitter to occasion, leaned a tad heavily upon mode of mass-mailing to promote get depressed. e-mail to communicate with you. We everything from product specials to 5. Take a chance. There’s not admit it. But we are reforming (A) by events, and e-mail newsletters are much worse than having social media carefully monitoring, prioritizing, tarquite convenient, too – but we all geting, and disciplining e-mail volume, accounts out there that are exactly the know it’s gotten out of hand. same as all of the others. and (B) by stepping up our use of The tide is turning with Social Media, Social so that AED’s valuable resources 6. Follow the trends. If something and no doubt you’ve received a boatis hot right now, post about it. I know are presented in light, condensed load of persuasive information about it’s an obvious example, but Oreo’s “sound bytes.” We’d also like to turn that rammed down your e-mail throat, the spotlight on you, our members, “You can still dunk in the dark” post as well. There’s no denying, however, on Twitter during the power outage at so that dealers and their suppliers that Social has permeated society and the 2013 Super Bowl was up less than can benefit from the sharing of best must be embraced. practices – and even bragging on their 4 minutes from the power going out. People love Facebook for obvious [Result:] more than 15,000 retweets employees, too. Send me your ideas! reasons; possibly No. 1 is that people and more than 6,000 favorites for If you are an AED member reading like to talk about themselves and being trendy. I’d take that. this March edition of CED magazine, what’s important to them – it’s part of I’d like to ask for your action this week, 7. Include user-generated what makes us human, I guess. No. 2, content. If you’re constantly the one or how about today even? Please take we like to know what other people are two minutes and start following AED posting, your page will be quite boring. doing and thinking about – and from on Twitter (twitter.com/aednet) and on [Risky, but something to consider.] this basic truth you could probably 8. Don’t always talk about yourFacebook (facebook.com/aednet). And build a case for all other subreasons self. Boring. please encourage your managers to that drive Facebook popularity. It’s 9. Continue conversations. If one follow suit. There’s going to be someof your followers posts on your page very simple reasoning when friends thing new on a regular basis – but or tweets at you, don’t be afraid (or and family are sharing together. It’s good stuff. We’re tweeting and posttoo lazy) to write back. more dicey and challenging when ing updates on all kinds of resources 10. Measure your results. Go you’re a business or association trying and news to fortify the dealership. You back through your pages every once to be “friends” with people you maybe are the reason we exist, and we want know professionally, superficially, or to give you and your team access to all in a while and figure out what has engaged your audience and what not at all. the tangible benefits your memberhasn’t. If posting specials on your If your company is among the forship provides. product isn’t drawing any likes or comward-thinking leaders that are proacIn closing, here are 10 tips for ments, maybe you should keep that to tively utilizing Social, you probably have smart social marketing, authored by your e-mail campaigns. heard buzz about content marketing, Nathan Allen on MulitView Blogs|True Thanks for reading. which means you’re not just executStories From a Life in Digital Media, ing on Reason No. 1 above and talking edited down for space. I’m using KIM PHELAN (kphelan@aednet.org) exclusively about yourself – works them already as benchmarks for AED’s is the executive editor of Construction among actual friends; not so much revamped Social endeavors, and in the business world. Someone who maybe they’ll be useful to you, as well. Equipment Distribution and director of programs for AED. follows a business on Facebook (who 1. Be concise. If your message is March 2014 | Construction Equipment Distribution | www.cedmag.com | 7

Inside AED

Time to Nail 3URÀWDELOLW\ AED rolls out new HighProfit Dealer Groups; OEM partnerships will reduce costs for dealers Bringing together similar, noncompeting dealers to and provide easy access to participants on a Web portal. exchange best practices, experiences, ideas and strategies is Dealers can conveniently compare their results with their one of the best ways AED can improve the profitability of its peers and check on the group’s activities. Each group’s members. But after having experienced limited participation composite data will drive discussions about where dealers in its first “Dealer 20” effort, AED is revamping its existing can improve profitability. program. “High-Profit Dealer Groups” is a new initiative According to Bartecki, the financial data that members that offers dealers more for less, with groups moderated use to evaluate themselves is more comprehensive and by AED’s own financial guru, Garry Bartecki. Bartecki is vice timely than what is available from other sources. That means president of Finance for AED, and he knows dealer challenges dealers participating will be the first to be able to identify better than anyone. And as CFO for Illini Hi-Reach, a rental significant industry trends. At meetings held three to four company based in Lemont, Ill., he’s also an ace on the rental times per year, the moderator and attendees will discuss side of the dealer business. methods of operation, track progress toward objectives, “Participants will get more than they ever have from a exchange ideas and solve problems. Between meetings, each ‘Dealer 20’ group,” said Bartecki. member uses the composite to “It’s going to be cost-effective make operational comparisons and action-oriented.” AED will within his or her organization. $('·V QHZ +LJK 3URÀW 'HDOHU *URXSV DUH WKH track progress toward objectives Data collected by ADP PRVW FRVW HIIHFWLYH PHWKRG LQ WKH LQGXVWU\ WR during the year, and Bartecki Performance Group among UDLVH WKH EDU RQ GHDOHU SURÀWDELOLW\ will be available for member thousands of dealers suggests consultation between meetings. Who: Top management of noncompeting dealers that participants in the group Each group will choose their own Group size: 10-20 dealerships each perform better than those who leadership team, who will decide Commitments: Composite data quarterly; aren’t in the groups. “Other on the topics for discussion at meetings held 3-4 times per year industries have taken advaneach meeting. When: Beginning Spring 2014 tage of these groups for years,” To help make the groups more Where: Determined by group members said Bartecki. “It’s time for cost effective for members, AED Moderator: Garry Bartecki, AED Vice President construction equipment dealers is talking to OEM partners about of Finance to get on board.” providing assistance. Manufacturers “AED exists to enhance the have a vested interest in improving the financial health of sustainability of the distributor business model,” said AED their dealers. “The bottom line is that with OEM support Executive Vice President and COO Bob Henderson. “This new we will be able to offer a program to all AED members for program helps drive this mission. A profitable dealer means a significantly less than in years prior,” said Bartecki. profitable distribution model for manufacturers.” ADP Performance Inc., which currently has more than AED is targeting Spring 2014 for its first High-Profit Dealer 1,500 dealer members from various industries involved Group meeting. Interested dealers should call Garry Bartecki in their groups, will create composite financial reports at 630-574-0650, ext. 323.

Do This and Prosper

Proposed New Members Lashley Tractor Sales Lithonia, Ga.

Ironman Parts & Sales Corona, Calif.

Eagle Power & Equipment Montgomeryville, Pa.

Scania USA Inc. San Antonio, Texas

Finn Corp. - Fairfield, Ohio

Human Resource Techniques, Inc. Algonquin, Ill.

Barco Pump - Wylie, Texas

This list is published each month as required by AED bylaws. Comments on the applicants should be directed to AED President and CEO Brian McGuire 800-388-0650, ext. 326.

8 | www.cedmag.com | Construction Equipment Distribution | March 2014

Inside AED

MARK YOUR

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Groundwork OFFICERS

Chairman A. ROY KERN Equipment Corporation of America Coraopolis, Pa. Vice Chairman DENNIS VANDER MOLEN Vermeer MidSouth, Inc. Jackson, Miss.

President BOB HENDERSON The AED Foundation Oak Brook, Ill. Treasurer JOHN D. CRUM Wells Fargo Equipment Finance Pittsburgh, Pa. Immediate Past Chairman CHRISTOPHER PERA Able Equipment Rental Deer Park, N.Y. AED Board Representative WES STOWERS Stowers Machinery Corp. Knoxville, Tenn. Executive Director STEVE JOHNSON The AED Foundation Oak Brook Ill.

DIRECTORS

GARY BRIDWELL Ditch Witch of Oklahoma Edmond, Okla. JOHN COSGROVE Central Power Systems & Services, Inc. Liberty, Mo. MIKE HAYES Komatsu America Corp. Rolling Meadows, Ill. TIMOTHY KRAMER Kramer Ltd. Regina, Sask. DR. WAYNE LONGBRAKE Former Dean, Penn. College of Technology Williamsport, Pa SONJA METZLER Ohio CAT Broadview Heights, Ohio DAVID REILLY John Deere Construction Equipment Moline, Ill. KENNETH SILVERMAN Volvo Construction Equipment Shippensburg, Pa. MARK TEEL Caterpillar, Inc. Peoria, Ill. M. KEITH TIPPETT Kirby-Smith Machinery, Inc. Oklahoma City, Okla.

Sponsors Are the Life of the Parties Foundation’s workforce development and education programs get big boost from generous sponsorships at Summit events. Thanks to numerous sponsors at the AED Summit in Houston, The AED Foundation raised a grand total of more than $50,000 it will use for strengthening dealership operations in 2014. Two separate benefit events – Cabaret Night on Jan. 15 and the 7th Annual Live Auction Jan. 17 – raised proceeds to support and expand workforce development initiatives and professional education for dealer personnel. Cabaret Night Many attendees kicked off their Summit experience at the Foundation’s Cabaret Night Benefit, featuring the hilarious guitarist virtuoso Mike Rayburn. The “Classically Trained ... Comically Derailed” performance was an energetic odyssey of masterful guitar and great comedy fun. Rayburn’s rendition of Bohemian Rhapsody left the audience in complete awe of his guitar skills. Thank you to our Cabaret Night Sponsors, which included Sentry Insurance – Main Sponsor; AmTrust Insurance Company; Berry Companies, Inc.; Bell Trucks America, Inc.; Caterpillar, Inc.; Komatsu America Corp.; and Liebherr Construction Equipment, Co. Live Auction and TGIF Party The 7th Annual Live Auction was held in conjunction with the TGIF Party. Richie Bros.

auctioneer Pat Hicks (above) warmed up the audience and prepared them for the bidding. Auction items ranged from wine and jewelry to golf vacations. During this live, unreserved benefit auction, participants bid against each other, and the highest bidders walked away with some highly coveted items. The Live Auction event would not have been a success without the support of our sponsors, those who donated items, as well as the bidders. Thank you to Ritchie Bros. Auctioneers for co-sponsoring the TGIF Party and contributing a major auction item. Other auction items were donated by Ajax Tool Works Inc.; BLS Enterprises Inc.; Bomag; Caterpillar, Inc.; Caterpillar Financial; Chubb Group of Insurance Companies; Gorilla Hammers, Inc.; IronPlanet; Eddy Kilman from J. Smith Lanier & Co.; Komatsu America Corp.; Liebherr Construction Equipment Co.; LiuGong Construction Machinery; Manitou Americas; United Group, Industrial Seats Div.; Volvo Construction Equipment North America, Inc.; and WTP Exchange. For more information about sponsorship of an auction item for the 2015 Live Auction in Orlando, please talk to Rebecca Rakers at 630-468-5113 or rrakers@aednet.org.

Anonymous Bidder Purchases Diamond and Sapphire Necklace An anonymous bidder purchased the diamond and sapphire necklace for former AED CEO Toby Mack and his wife Marti DeGraaf as a token of appreciation and recognition of their years of service to AED. AED Foundation Executive Director Steve Johnson presented the necklace (donated by BLS Enterprises) to the couple.

10 | www.cedmag.com | Construction Equipment Distribution | March 2014

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Industry Beat

AGC Survey: Optimism Rises Among Contractors

73 percent plan to buy new equipment in 2014, but projected dollar investments are conservative

Many firms plan to start hiring again and most for the other four segments, ranging from net positives contractors predict demand will either grow or remain of 5 percent for public buildings, 4 percent for schools, 3 stable in virtually every market segment this year, according percent for transportation facilities other than highways, to to a recent Associated General Contractors survey. The a negative of 2 percent for marine construction. survey, conducted for The 2014 Construction Industry Many contractors also report they plan to add new Hiring and Business Outlook, provides an upbeat outlook construction equipment in 2014. Seventy-three percent for the year even as firms worry about growing worker of firms plan to purchase construction equipment and shortages, rising costs and the impact of new regulations 86 percent report they plan to lease/rent it this year. The and federal budget-cutting. Contractors have a relatively ƐƚŝŵĂƚĞ ƚŚĞ ĚŽůůĂƌ ǀĂůƵĞ ŽĨ ĐŽŶƐƚƌƵĐƚŝŽŶ ĞƋƵŝƉŵĞŶƚ ŝŶ ϮϬϭϰ ƚŚĂƚ LJŽƵ ǁŝůů ƉƵƌĐŚĂƐĞ Žƌ ůĞĂƐĞͬƌĞŶƚ͘ positive outlook for virtually all 14% Do not plan to purchase/lease/rent equipment in 2014 27% 11 market segments covered 34% $100,000 or less 30% in the Outlook, in particular 19% $100,001-$250,000 14% for private-sector segments. 12% $250,001-$500,000 9% For five of those segments, at Lease/rent 8% $500,001-$750,000 least 40 percent of respon5% Purchase 6% dents expect the market to $750,001-$1 million 4% expand and fewer than 20 6% $1.1 million-$5 million 8% percent expect the market to 3% Over $5 million 4% decline in 2014. The differ0% 5% 10% 15% 20% 25% 30% 35% 40% ence between the optimists and pessimists – the net positive reading – is a strong 28 percent for private office, scope of those investments is likely to be somewhat manufacturing and the combined retail/warehouse/lodging limited, however. Forty-four percent of firms say they will segments, and 25 percent for power and hospital/higher invest $250,000 or less in equipment purchases and 53 education construction. percent say they will invest that amount or less for new Among public sector segments, contractors are more equipment leases. The Outlook was based on survey optimistic about demand for new water and sewer results from more than 800 construction firms from every construction, with a net positive of 17 percent. Contracstate and the District of Columbia. Varying numbers tors are mildly optimistic about the market for highway responded to each question. Contractors of every size construction, with a net positive of 10 percent. Responanswered more than 40 questions about their hiring, dents are almost equally divided regarding the outlook equipment purchasing and business plans.

AED Joins New Coalition to Advance Mining Interests AED and 10 other industry associations came together last month to form the Minerals Science and Information Coalition (MSIC) to advocate for reinvigorated minerals science and information functions in the federal government. MSIC is composed of trade associations, professional societies, and groups representing the extractive industries; geoscience, physical, chemical, and material science professionals; processors, manufacturers, and other mineral and material supply-chain users; state government; and other consumers of federal minerals science and information. The group seeks to increase funding and support for federal minerals research, information gathering, analysis, and forecasting to sustain economic prosperity

12 | www.cedmag.com | Construction Equipment Distribution | March 2014

and ensure national security. Over the past decade, funding for the U.S. Geological Survey’s Mineral Resources Program has been slashed by nearly a third, slowing economic development and innovation in a number of industries. To ensure a continued supply of rare earth metals and other materials vital to our economy, leaders in Washington must make investing in the extractive minerals industry a priority. As a founding member of the coalition, AED looks forward to raising the profile of mining and related industries with key policymakers to ensure sustained investment in our nation’s mineral resources.

Industry Beat

Opportunity? Sure, But Rental’s Got Risks Dealers Must Control, Too

GE Capital panel explains trends, explores how to seize opportunity without surrendering profitability.

To help dealers plan a strategy to capitalize on the growing $24 billion rental market, GE Capital Equipment Finance brought together three rental industry experts to discuss the opportunities and threats surrounding a growing rental business in a webinar held on Jan. 29, 2014. Brian Battaglia, commercial leader of retail and wholesale programs at GE Capital Equipment Finance, led a panel that included consultant Frank Manfredi, president, Manfredi & Associates; Gary McArdle, executive vice president and COO, Rouse Services; and Garry Bartecki, AED’s vice president of Finance.

at an annual pace of about 4.5 percent. “As equipment costs go up, rental companies are going to try and drive rate increases,” said McArdle. And despite significantly large fleet size, rental companies have been able to maintain a strong level of utilization. The appraised value of the rental fleet has continued to rise since it bottomed out during the recession The average retail value of the fleet has increased 23.9 percent since then, while auction values have increased 42 percent, near the prior peak in 2006. Fair market value is now 82.1 percent, while auction or forced liquidation value is 61.4 percent.

Reasons for Rental Growth and Impacts on Market In a rental market overview, Manfredi examined the reasons for U.S. rental market growth, and why it has become the “new normal” for contractors to choose rental over ownership. In addition to capital conservation, Manfredi said contractors are avoiding Tier-4 issues in choosing rental. Not only is Tier-4 equipment more expensive, but contractors are also protecting themselves from the risk that Tier-4 equipment won’t hold its value on the used equipment market. Tax incentives no longer encourage Frank Manfredi equipment ownership. Manfredi also reported that rental is being used as a cost containment strategy among contractors who are now traveling longer distances to jobsites. Availability of even specialized equipment does not seem to be an issue for contractors, as the inventory of machines available for rent continues to grow. “There is almost always (rental) equipment available for almost any type of job,” said Manfredi.

Managing Rental Fleet Risk The financial implications of a growing rent-to-rent business was the topic of Bartecki’s segment. He first explained the differences between rent-to-sell and rent-to-rent. “Rent-tosell is a financial merchandising strategy focused on machine sales and building market share,” he said. “Rent-to-rent is a solutions-based outsourcing business focused on lowering customer cost per hour while meeting a distributor’s return on investment and return on asset targets.” Bartecki offered dealers advice for managing the increased leverage and commitments that come with rental. “Balance sheet management is a must,” he Garry Bartecki said. Calculating EBITDA monthly as well as on a trailing 12-month basis is necessary to see how cash flow to cover debt service is tracking. He also recommends using a depreciation rate that tracks orderly liquidation value. Educating bankers on the rent-to-rent market is also important. Bartecki advised dealers to equip bankers with Rouse reports and provide them with an annual appraisal for the rental fleet. “Rent-to-rent transactions need to be separated from rent-to-sell transactions,” warned Bartecki. From a tax standpoint they are treated differently. It is also important for dealers to understand the significant impact rental rates have on cash flow. Dealers also need to be aware of tax issues affecting their rental business. Effective in 2014, a 3.8 percent tax on investment income takes effect, which can include rental tax profits if certain tests are not met. Bartecki also noted that moving forward aggressively into rental is likely to have a negative impact on a dealer’s market share. “It is tough to purchase the same level of inventory as your rent-to-rent business grows,” he said.

Utilization, Rental Rates and Fleet Value Trends McArdle offered a perspective on the rental market based on historical and recent statistics gathered from the Rouse Database, which uses sales and rental transaction data from the nation’s leading rental companies. “Utilization is running strong,” he said. Physical utilization of the rental fleet averages 69.6 percent across all product categories, while dollar utilization averages about 40 percent. There are seasonal dips in utilization due to cold weather, but in general, utilization has been growing. According to McArdle, there has been an increase in the average rental rate month on month and year on year since January 2011, but the pace of rental rate increases is beginning to slow. In 2013, the rates rose Gary McArdle

(continued on next page)

March 2014 | Construction Equipment Distribution | www.cedmag.com | 13

Industry Beat

Infrastructure, Cross-Border Issues Top AED’s Canadian Priorities

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AED is building its Canadian public policy presence cost recovery system with a focus on infrastructure and cross-border issues. – 30 percent on a Over the past year, the association has been working with declining balance the Canadian Chamber of Commerce to complete a report basis – to a straight titled “The Foundations of a Competitive Canada: The Need line 25 percent per for Strategic Infrastructure Investment,” which quantifies year depreciation Canada’s infrastructure challenges and the impact of schedule, meaning underinvestment and recommends strategies to address that construction the challenges identified in the report. In 2014, AED will equipment would be pushing out resources to help its members be part of be fully depreciated over five years, as it is in the the education effort and get directly engaged in dialogues U.S. The five-year life would more closely match about infrastructure with their members of parliament and the useful life of a machine and encourage new capital government leaders. investment. Additionally, AED has been leading efforts Beyond infrastructure advocacy, AED has been monion two policy issues with enormous market activity for toring an effort by the Canadian Construction Association equipment distributors on both sides of the border: the (CCA) to change the tax treatment of construction equipKeystone XL pipeline and the new Detroit-Windsor Bridge. ment. The CCA has proposed moving from the current

AWP Fatalities Reported for 2013 Through IPAF Database There were 53 fatalities worldwide in 2013 involving aerial work platforms (AWPs), according to preliminary results from IPAF’s accident database. This is an increase from 32 fatalities in 2012, the first year of the accident-reporting project. The main causes of these fatalities were: overturn (16), fall from height (13), entrapment (10), electrocution (7), impact with AWP (4) and falling object (2). Almost half of the number of reported fatalities (26 or 49 percent) involved mobile booms. Fourteen fatalities (26 percent) involved mobile verticals and 11 (21 percent) involved static booms. Thirty (57 percent) of the fatalities occurred in the U.S., home of 54 percent of the world’s rental fleet.

IPAF’s accident reporting project has filled a gap where there was previously no single mechanism for reporting and analyzing serious accidents involving AWPs and no definitive data on the number and main causes of fatal accidents. IPAF technical officer Chris Wraith stressed that the accident project is still in an early stage and cautioned against direct comparisons in its second year. “It will be at least 2016-2017 before any realistic year-on-year comparison on the frequency of accidents can be of value,” he said. All manufacturers, rental companies, contractors and users are encouraged to report any known fatal and serious accidents involving aerial work platforms and mast climbing work platforms worldwide at www.ipaf.org/accident.

IN THE NEWS

JCB Plans $49 Million Golf Course JCB dealers will have a new place to entertain customers and prospects. The company plans to construct a $49 million golf course next to its world headquarters in Staffordshire, England, to help boost sales and build global awareness of its brand. A spectacular 18-hole, par-72 championship golf course located on 240 acres of rolling countryside will be built to tour-quality standards. Woodseat Hall, an 18th century mansion currently in ruins, will have a new lease on life under plans to renovate it as the course clubhouse, complete with a new luxury spa, leisure facility and five-star hotel-style accommodation for JCB guests from across the world. 14 | www.cedmag.com | Construction Equipment Distribution | March 2014

“The golf course will be the biggest marketing tool available to JCB in its history, helping grow sales and create jobs,” said Graeme Macdonald, JCB chief executive officer (pictured at right). The course will be made available primarily to JCB’s network of 770 global dealers. Upon completion, golf days will become a feature of the wider JCB visitor experience, which already includes factory visits, the “Story of JCB” exhibition and machine demonstrations.

Thompson Machinery to Build New Full Service Facility in Beldin, Miss.

Industry Beat

IN MEMORY OF:

-DPHV :KLWÀHOG :DLW]PDQ

Thompson Machinery is building a new, 42,000-square-foot, $6 million facility, to serve the Tupelo, Miss. area. Staff gathered for a photo during a groundbreaking ceremony held Jan. 31 at the site of the new store in Beldin, Miss. Thompson Machinery, which is celebrating its 70th anniversary in 2014, is the Caterpillar dealer for Middle Tennessee, West Tennessee, and North Mississippi. The shop area will include 17 service bays, four 7.5 ton bridge cranes and four jib cranes deployed in an innovative quad design that allows more options for placing machines and engines. Also planned is an undercarriage shop with full track press, an 8,000-square-foot parts warehouse with cross-docking, and 11,000 square feet of office space. Completion is expected in late 2014.

Former AED Chairman (1968), James Whitfield Waitzman passed away at the age of 91 on Feb.1, 2014. Waitzman started his career at Tractor and Equipment Co. in Birmingham, Ala., after WW II and worked his way through all departments to become president and chairman of the board. He also served on the Board of the Alabama Roadbuilders Association and the Alabama Coal Association and was elected to the Roadbuilders Hall of Fame. A lifelong resident of Birmingham, Waitzman attended Auburn University before joining the Navy in 1942, immediately after Pearl Harbor. He was commissioned as an officer and as a Naval Aviator and proudly served until 1945. Waitzman is remembered for his strong Catholic faith and devotion to family and friends.

Michael D. Hart Longtime AED member Michael D. Hart passed away on Jan. 29, 2014, at the age of 68. Hart was president and owner of Hart’s Tractor, based in Elmhurst, Ill. He was the beloved husband of Dana; father of Michael J. (Katie), Dorothy, Steve, Shari and Allison; papa of David and Connor.

LOWE MANUFACTURING COMPANY, INC. 18903 High Point Road Viola, WI 54664 PH: (888) DIG-LOWE (344-5693) FX: (608) 538-3995 www.LoweMan.com Lowe@LoweMan.com

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March 2014 | Construction Equipment Distribution | www.cedmag.com | 15

Play It Safe

Know The Risks of Doing Business With Independent Contractors Tips for minimizing your dealership’s liability BY ERIC STILES

Dealers hire independent contractors to perform a variety of work, including maintenance and janitorial duties, building construction and renovation, customer or rental equipment delivery, and more. When you hire an independent contractor, do you know your risks? In theory, independent contractors are responsible for themselves and their liability is not transferred to you (the hiring company). However, several factors could actually transfer liability to your business, resulting in workers’ compensation benefits being paid to injured contractors, or auto liability resulting from accidents while delivering your equipment. Knowing the risks associated with hiring independent contractors can help you protect your business from unnecessary and potentially harmful liability claims. Potential Liability Your dealership may be held liable for the acts or omissions of an independent contractor. Consider the following circumstances that may give rise to liability: Contributory negligence – It may be alleged that you are partly to blame for an accident. The likelihood of this increases if the contractor was using your equipment at the time of the accident, or if the loss occurred on your property.

Negligent entrustment – It may be alleged that you either knew or should have known that the contractor you hired was incompetent, reckless or not qualified for the task. For example, you may be liable for an auto accident caused by a driver known to be reckless.

16 | www.cedmag.com | Construction Equipment Distribution | March 2014

A nondelegable duty – Some duties cannot be shifted to an independent contractor. For example, a landlord has a nondelegable duty to provide a reasonably safe environment to a tenant.

Inherently dangerous activities – In some cases, strict liability may be imposed on a business engaged in inherently dangerous activities, such as the disposal of hazardous waste materials.

Independent Contractor or Employee? Businesses have a higher degree of responsibility for their employees than they do for independent contractors. However, if a court rules that you have treated a contractor as an employee, you could be held liable for injury or damages resulting from an accident. Courts will look at several factors to determine if a party is considered to be an independent contractor or an employee of your business. Although the factors are similar to those used by the IRS for tax status, courts may interpret them differently. In addition, interpretation and emphasis varies from state to state. Courts will typically review the factors including: the independence of (or your control over) the hired party during the scope of work, the tools and equipment used to perform the job, any formal contracts, and insurance covering the acts of the worker to make their final determination. How to Work Safely with Independent Contractors Select contractors based upon their expertise in performing the necessary work and their safety performance. Consider the contractor’s accident rate, safety culture, compliance history, etc., to determine if the

Play It Safe

contractor meets your safety expectations. Also, you should consider the following practices: Require a contract or agreement that clearly denotes the nature and scope of the work being performed. Be sure your contract or agreement includes an unambiguous indemnification and hold harmless clause, as well as requirements for liability and workers’ compensation insurance.

Your contractor and any subcontractors should be required to carry a full line of insurance coverage, including general liability and workers’ compensation. Certificates of insurance with specified levels of coverage should be required. Secure the original certificate of insurance and make sure the coverage is up to date and maintained year to year. If you allow a contractor or sub to begin work without verifying their insurance documentation, you are at immediate risk for assuming liability as their employer.

Prior to the start of a new job, conduct a meeting with all contractor representatives to discuss contract requirements for safety and health and information about onsite hazards or hazards created by the contractor’s operations.

you’ll also protect the integrity of your business.

ERIC STILES is Sentry’s

This document is made available by Sentry Insurance a Mutual Company and its subsidiaries and affiliates (collectively “SIAMCO”) with the understanding that SIAMCO is not engaged in the practice of law, nor is it rendering legal advice. The information contained in this document is of a general nature and is not intended to address the circumstances of any particular individual or entity, nor the best practices applicable to any particular individual or entity. Legal obligations may vary by state and locality, and best practices are unique to specific items and situations. No one should act on the information contained in this document without advice from a local professional with relevant expertise.

lead account executive responsible for maintaining the AED/Sentry relationship. He can be reached at eric.stiles@ sentry.com. As the endorsed P&C carrier for AED, Sentry Insurance offers superior coverage options and services to meet your dealership needs.

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Limit your employees’ access or exposure to contractor work areas. If an unsafe act or condition is noted in an area or by an activity created or controlled by the contractor, report it in writing to the designated contractor representative.

Develop a written contractor safety policy that addresses your guidelines.

Working with independent contractors is a regular part of business for many dealerships. Know the risks associated with hiring independent contractors. You’ll not only help keep your insurance costs down, but

March 2014 | Construction Equipment Distribution | www.cedmag.com | 17

A Closer Look

Speak to Me The machines are talking now – but can all the equipment stakeholders listen to each other and leverage the data? BY GILES LAMBERTSON

Tracking fleet, monitoring a machine’s working hours, evaluating how effectively a machine is operated – these are some of the metrics that contractors, dealers, and manufacturers want at their fingertips. To secure such data and inform their decision-making, they increasingly, if reluctantly, are turning to telematics. “We can provide ridiculous amounts of information in a fashion that is palatable to users,” said Steve Blackburn, vice president of Navman Wireless, which delivers fleet management products and services to customers around the globe. And, yes, collectable data is voluminous, if not ridiculously so. A piece of equipment can have upwards of 100 “data points.” Each point gives a readout of information to help an engineer or engine specialist determine if the machine’s function at that particular point is deficient,

excessive or just right. The information from two or more data points can be cross-referenced and give an even more sophisticated picture of a machine’s functional state. The data collected is transmitted constantly or periodically. Either way, at the end of a work day, a lot of information has been sent to a linked computer for analysis and storage. The information is all useful – or can be if it isn’t just allowed to sit and clog up a computer file. If analyzed in a timely way, the accumulated data lets an equipment owner act to maintain a piece of equipment or better utilize it. That is the key: There is nothing magical about the information itself. Unless it is acted upon, a glut of information is no more valuable than no information. “Telematics is not the solution,” said Mike Kucharski, product support

18 | www.cedmag.com | Construction Equipment Distribution | March 2014

sales manager at MacAllister Machinery, an Indianapolis Caterpillar dealer with 17 branches across Indiana. “The solution is the people behind the telematics who give the recommendations. It is what you do with the information that makes telematics a success for a dealer and its customers.” Warming to the Technology Essentially, telematics is transmission of information using telecommunication devices. The transmission can be two-way, with the receiver both downloading real-time information from a piece of equipment and uploading directives to the equipment. The genesis of the technology goes back a half-century or more to development of global positioning via satellites. Raytheon Corp. engineers devised a primitive “GPS” system for the U.S. Department of Defense to help guide intercontinental ballistic missiles. The

Telematics

geopositioning technology entered the commercial market in 2000. In the construction industry, keeping tabs on mobile equipment was one of the first applications. It let an equipment manager check a computer screen to learn where an excavator was working at that hour. The technology also was employed as virtual fencing of an equipment yard, with stolen equipment easily tracked. While these functions were, and still are, valuable, usage has gravitated toward such applications as maintaining engines. “The maintenance functions and record-keeping provide the most immediate benefit,” said Brad Stemper, solutions marketing manager for Case Construction Equipment. “With telematics, fleet managers have a clear and concise program for organizing equipment maintenance data.” Yet maintenance monitoring is still a straight-forward task compared to some others, Stemper says. “We as an industry need to do a better job of making the customer aware of the full capabilities of the technology. From equipment utilization to reducing engine idling, gauging productivity and keeping unauthorized use and theft in check, there are so many possibilities that telematics offers the end-user. It’s just a matter of showing customers how easy it is to accomplish and to get over the ‘new technology’ intimidation factor.” Whether intimidated or just disinterested, contractors indeed are not rushing to employ the technology. Kucharski says only about 10 percent of MacAllister Machinery customers – “the early adapters” – embraced telematics when it was introduced in 2007-08; five years later, customer usage is up to 16 percent, with some 2,750 pieces of operating equipment connected to the dealership. The goal is to have half of MacAllister customers using telematics by 2016. “The biggest thing I have learned through this entire telematics rollout – and the rollout continues – is that it

company ORBCOMM). He worked early on with Kawasaki and then Doosan construction equipment companies. From his experience, Purdie believes fears about warranty claims are misplaced. “Manufacturers would like to know if a machine is being misused. End-users would like to know if an operator is misusing a machine. But no one wants a claim.” In any event, griping by guys in the operator’s seat is not what threatens to scuttle the system. Wariness among manufacturers is the big problem, because it limits overall industry access to proprietary telematics systems. This results in different telematics hardware and software systems “speaking different languages,” as one industry observer described it. The problem manifests itself when contractors have mixed fleets – running Caterpillar and John Deere excavators, for example – and can’t monitor the whole stable of equipment in a common back-office system. If data feeds are being sent to dealers – some contractors exclude dealers from the telematics informational loop in favor of third-party providers – it The Trust Factor means telematics contracts must be Some of the resistance to signing a signed with more than one dealer. telematics contract is the feeling that A first stab at breaking down this too much information is being shared. informational wall occurred in 2008 Some equipment operators are anxious about having their every work when the Association of Equipment move recorded and analyzed. Contrac- Management Professionals acted at tors worry about data that shows day- the urging of its members. AEMP got Cat, Deere, Komatsu and Volvo to-day operational dynamics of their executives to sit down and bring companies falling into the hands of some commonality to telematics. The competing contractors. Manufacturresult was standardization of five ers are concerned about rival brands data points dealing with maintenance getting proprietary information from issues. Just five? telematics output. “Some of the data feeds are tied to “Trust is the biggest issue,” Kucharfirmware,” explained Stan Orr, AEMP ski said. “Some contractors are president and CSO. “Manufacturers worried a manufacturer will use the telematics information against them in naturally don’t want to share that. a warranty claim. A dealer has to have There also was concern about aggrea great relationship with his customers gation of data across multiple fleets of different brands, with people if he goes down this road.” starting to publicly compare perforIn 1996, Bill Purdie founded mance.” Only after a year of talking MobileNet Inc. (now a subsidiary of satellite data communications (continued on next page) takes 7 to 11 times to communicate to a customer the full value of the technology,” Kucharski said. That may be why enrollment is so flexible, with a customer more or less able to cherry-pick applications that meet his needs. Furthermore, contracts range in length from seven years down to month-to-month. “Everything is completely customizable.” Proponents of telematics believe it virtually revolutionizes heavy equipment operations. They claim that if machines are faithfully monitored, data is collected, and the information methodically handled, the result for a contractor is more efficient equipment use and, ultimately, more profit. The extra revenue is subtly derived. It comes from smarter utilization of a machine, with individual pieces of equipment assigned to appropriate tasks. It comes from analyzing operational data after a completed job and submitting better bids on future jobs. Dealers can certainly leverage the data in a consultative way to show equipment operators how to run machinery more efficiently.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 19

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person unable to compensate for the mismatches. Even so, incomplete standardization did the four manufacturers negotiate of systems is not, at heart, a hardware the common platform for the five or software problem. It mostly is a data points; other manufacturers boardroom problem, with executives followed suit. in Moline, Peoria, Gothenburg and Needless to say, the agreement other headquarters balking at the didn’t solve the problem. Orr says he sharing of proprietary information “felt a storm brewing� among endwith rival manufacturers. The quesusers of the equipment who were tion now is whether end-users will frustrated by the lack of uniform wait another five years for another data systems. So in early 2013, Orr dollop of standardization. went to the Association of EquipKendall Delp is feeling some ment Manufacturers. AEM leadership impatience. The global service and formed a telematics taskforce of maintenance manager for Ameco CEOs – a higher level of managefleet services ultimately oversees ment discourse than in 2008 – and a second round of negotiations ensued. about 9,600 pieces of rolling stock. He is a fairly recent user of telematics In February, AEMP and AEM jointly as a result of customers wanting it, announced an industry agreement and is an advocate of the technology. that standardizes another 19 data “I can almost see greater efficiency on points and 42 fault codes that were a regional and global basis,� he said. deemed to be most important. He believes every equipment “It is our view, and AEM’s as well, owner – even a small contractor that the standard will continue to with a couple pieces of machinery evolve,� Orr said. “This is a first step.� and a truck or two – should invest in telematics. “Cost should not be the Do You Read Me? ultimate factor in deciding to gather Creating programming interfaces this data. The time to do it is when for proprietary systems admittedly you have limited pieces of equipment. is complex. That’s because different Going forward as a business owner, systems measure data differently – you can have a better understanding or sometimes don’t measure it at all of what equipment is best suited for – as well as use different error codes an application.� to red-flag perceived problems, and But Delp says there is “an absolute take readings at different intervals. need� for standardization, regardless This hodge-podge of methodology of manufacturers’ reservations. “If can result in apple-and-orange data the manufacturers can’t do this on that can misinform a back-office (“Speak to Me� continued from page 19)

&RQWDFWV LQ \RXU 5HJLRQ **& DGPLQLVWUDWLYH FODLPV RIĂťFH ORFDWHG LQ 6W 6LPRQV ,VODQG *D Vice VicePresident PresidentSales Operations Slade Rowland 912-638-4320 6ODGH 5RZODQG Southeast/East Territory Manager Vice President Sales Greg Schultz 678-697-2715 5LFN 6WDF\ Midwest Territory Manager Eastern Territory Manager Ed Semara 414-975-5353 *UHJ 6FKXOW] Central Territory Manager Midwest Territory Manager Michael Raley 817-301-7984 5\DQ &DUWHU West Territory Managers Western Territory Managers Jeremy Cockroft 970-946-8132 -HUHP\ &RFNURIW Brian Freitag 970-946-8133

Monitoring machine health and location is a breeze with OEM proprietary systems, like Case’s SiteWatch, unless you want to monitor data simultaneously on multiple brands in your fleet – for that reason, fleet managers are calling for more a common platform among the different manufacturers.

%ULDQ )UHLWDJ 20 | www.cedmag.com | Construction Equipment Distribution | March 2014

Telematics

their own, end-users will start getting together and figuring out a way to do it. It is our data. We understand our applications better than manufacturers do. They can build equipment and make it efficient, but as far as how end-users utilize the equipment, that is our area of expertise.” Technology in Transition How the technology evolves in the next few years is not Steve Gosselin [left], vice president, perfectly clear at the moment. Caterpillar’s Customer Services Support Division, who chaired If manufacturers can figure AEM’s Telematics Task Force, and Bob Merritt, former AEMP chairman and the global director out how to share the bulk of equipment, Energy and Construction division data-point information without of of URS Corp, led the last round of telematics giving away the store, the standardization talks. major annoyances will mostly disappear. If proprietary concerns operate. We can take that information prevail, third-party hardware and back to R&D and find new methods software solutions may supplant to improve equipment design and factory-installed systems. function. The possibilities are endless.” As for contractors, they must “I believe that in the next five decide if fully partnering with dealers years,” said Kucharski at MacAlin data collection and analysis is a lister Machinery, “we will look on trustworthy arrangement that will machines without telematics like we best serve them. Heavy equipment did looking back at the old suitcase operators must come to grips with phones. The people who get on being “watched” constantly and board earlier will be the contractors receiving feedback on their perforof tomorrow, today.” mance from unseen back-office Stan Orr at AEMP is even bolder in monitors. his forecast. “I will make a prediction In addition, new generations of that you will either use telematics or the technology must be increasingly cease to exist as a successful, profituser-friendly. “It has to be easy,” said able company. In the future, if a Blackburn at Navman Wireless, “so machine has a motor in it – whether that customers will actually use it. A it’s a weedeater or a huge crane – if customer will do what is easiest for it has a motor, it is going to have him – either pick up a phone and call telematics. I don’t think fleets of the about a piece of machinery or go into future will be able to compete unless a telematics system. Ease of use is they are using telematics.” what it’s all about.” One way or another, telematics GILES LAMBERTSON is likely to grow in influence as a is a retired journalist management tool. Stemper at Case and freelance writer believes manufacturers will build whose interest in the better machinery as a result. “I believe construction industry that we’re going to continue to goes back to his carpenfind new ways to gauge and assess try days. He can be reached at geepeela@ machine and operator performance, yahoo.com. learning more about how machines

March 2014 | Construction Equipment Distribution | www.cedmag.com | 21

A Closer Look

Bob Grauer, president, Luck Stone, introduced the company’s remote control loader during a press conference last year.

Luck Stone Adds Value With Innovation

One of the largest family-owned material producers talks about innovation, equipment management and dealer partners. BY JOANNE COSTIN

A 90-year-old material production innovation. The phrase “igniting company might not be the first place human potential” is the mantra that defines the organization’s culture, you would expect to find a commitleadership strategy and process. ment to innovation. But it’s not part “We grow through value add and of Luck Stone’s DNA to be content customer inspiration,” added Grauer. with the status quo. A long history “While we are a material company, we of innovation paved the way for the try to think about what customers Virginia-based company to stake its care about.” claim as the largest family-owned According to Grauer, customers material production company in today need more than just a load the U.S. “Innovation isn’t something new for of stone. They want to know where their stone is. They want to be able to Luck Stone,” said Bob Grauer, presicommunicate with drivers and avoid dent. In the 1920s the company was costly delays. They want vendors that one of the first operations to switch are easy to do business with. The power from steam to electricity. In service aspects of the business, he says, the 70s they began to fully automate their operations. Today, innovations are become differentiators. primarily focused around customers. Grauer had an unusual introduction Technology In Action to Luck Stone. Not long after college With roughly half of deliveries he was hired as a carpenter to work on dispatched by Luck Stone and the an expansion of the company’s offices. other half picked up by customers, a Before the project was complete the purchased telematic solution that chairman of the company offered him would provide better information for a job. That was 30 years ago. When customers wasn’t economically feasible. he became president in 2012, Grauer However, a brainstorming session focused on rebranding the company among a group of Luck Stone employand furthering a culture that supported ees provided a viable alternative: the 22 | www.cedmag.com | Construction Equipment Distribution | March 2014

result was LOGIQ, a proprietary Webbased software that connects Luck Stone offices, customers, and transportation partners. A mobile app gives customers a 24/7 access to the system, complete with navigation, order tracking and a tonnage calculator. To deploy the system in the field, Luck Stone purchased approximately 250 iPads for contract haulers. Though management worried whether truckers would be receptive to the technology, it didn’t take long for them to see the benefits. In fact, one customer was so impressed they asked Luck Stone to set up the system for their entire fleet of 60 trucks. “If somebody owns a truck and they can get an extra load a day by leveraging technology, that is going to move a purchasing decision our way,” said Grauer. Luck Stone is working to develop efficiencies for public sector customers as well. They demonstrated to the Virginia Department of Transportation how the LOGIQ program could be used to create a paperless system for (continued on page 24)

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Customer Connection

reserves using the technology. According to use on state-funded projects. The state Grauer, remote control is very is currently deciding whether or not it new to the aggrecould be accepted into the system as gates industry. an approved protocol. “It is a game Technology is also working to changer for us. improve efficiency and safety at Luck It is very unique Stone. As the company examined how to see a remote it would mine its quarry in Fairfax, Va., A Cat 988 G loader operates remotely within the pit area. The machine can be controlled from an operator house or pickup through its last decade, the question of control machine truck where the operator can see the site. It can also be in a production safety came up. One employee asked, operated manually. role,â€? he said. “What if nobody was in the loader?â€? “We have people who can challenge That question resulted in months of Standardization and Support assumptions.â€? investigation and ultimately a remote Drives Fleet Management In this case, the company leveraged control (RC) loader that Luck Stone Decisions the knowledge of an employee with When it comes to everyday product, developed. Installed on a Cat 988G experience in underground mining inventory and technical support, Luck wheel loader, the innovation allows operations to develop a solution. They the company to more safely access Stone is reliant on its dealers and worked with Anchises Equipment Cana- manufacturers. When it comes to material within the smaller footprint of da, Inc. to obtain the remote control the older, deeper quarry. The machine purchasing, their vendor partners capabilities. “We had to find someone can be operated both manually and are “as important as the piece of who could provide the technology remotely. In a typical quarry, the iron itself,â€? said Grauer. Luck Stone’s support on a small scale for what we company estimates it will be able to fleet is primarily comprised of large were trying to accomplish,â€? said Grauer. wheel loaders (8 to 12 yard) and large access an additional 1 to 2 tons of rigid-frame trucks (35-100 tons). A supporting fleet of equipment includes small wheel loaders, excavators, cranes, clean up loaders, and graders. While Luck Stone’s fleet is largely Caterpillar, the company also runs John Deere equipment and has used Volvo and other brands at various times. Except for a contractor subsidiary (Chesapeake Materials), most equipment doesn’t leave the site where it is designated for use. Luck Stone purchases the vast majority of equips &ORGED BLADE ment new, runs it approximately s (IGH IMPACT ALLOY STEEL 2,000 hours per year, and with a complete machine rebuild they are able to extend the life of the machine to 20,000-30,000 hours. Rebuilds are primarily done in-house, with dealers responsible for rebuilding major s 2EINFORCING RIB ADDS STRENGTH components. Currently, Luck Stone AND STIFFNESS TO MINIMIZE completes approximately nine or 10 TWISTING AND DEmECTION LOADS rebuilds annually. Luck Stone drives efficiency though MADE IN THE USA standardization – which for them means sticking to fewer brands in order to achieve mechanic expertise info@ajaxtools.com We Make Pounding and simplified parts stocking. the Pavement ProďŹ table! 30%#)!, ,%.'4(3 !6!),!",% 50 4/ &4 ,/.' “When [our] rebuild mechanic knows Visit www.ajaxtools.com to see our Post Drivers, Deck Busters, Frost Wedges, Tamping Pads & More! (“Luck Stone Adds Value With Innovationâ€? continued from page 22)

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24 | www.cedmag.com | Construction Equipment Distribution | March 2014

Customer Connection

the CAT 988, we pick up some efficurrent challenges for Luck Stone. surplus equipment to new operations. ciency,” said Grauer. One area where Grauer would like “There are still opportunities to grow For Luck Stone, standardization to see some additional focus is operaand diversify and get into new business provides a comfort zone, although tor training. “I think we have done a lines,” said Grauer. While quarrying Grauer acknowledges that for manureally good job developing, designing and crushed stone provide the bulk facturers and dealers whose brands and improving machines; figuring out of revenues, Luck Companies also has they do not use, their standardization how to repair and maintain them. We an architectural stone division (Charles presents a challenge. Changes in Luck’s haven’t put as much effort on how to Luck Stone Centers); a division that purchasing decisions are not likely to operate the machine. Really, operating supplies clay tennis courts (Har-Tru happen overnight, but they’re not out the machine is where you find the Sports); and a land development diviof the question, either. sweet spot,” he said. This year the sion (Luck Development Partners). “We are not averse to learning and company is reinforcing that belief with Challenges will always exist but experimenting – if we can find someadditional operator training. Luck Stone has shown itself to be a one out there who is likeminded with Luck Stone enjoys partnering with company that is not afraid to innovate; Luck Stone that has good product and organizations with competencies it to change the conversation; to add can support it well, ” said Grauer. doesn’t have – for example, forecasting, value for customers. There’s more than Beyond service, relationships are financial modeling, and organizational a little bit dealers can learn from a important to the company. “We design. In 2003, they partnered with customer like Luck Stone. are big on values, commitment and Holt Development Services (HDSI) to integrity, and we feel like we get that JOANNE COSTIN is a develop a values-based leadership freelance writer from our dealers,” he said. program. HDSI shares Holt CAT’s model and marketing consultant Driven by economic and employ– and success – with other organizations. focusing on the construcment conditions during the recession, Despite a lackluster economy, Luck tion industry. She can the company’s volume declined Stone has continued to expand its be reached at (847) significantly in 2008 and 2009, and has operations. Since 2008 they have 358-1413 or jcostin@costincustom.com. yet to fully recover, Grauer reported. added five locations, deploying some Some older and underutilized machines were sold off. Today, the company runs fewer annual hours on its machines than it once did. As a result, the average age of the fleet is older now, and operating costs have risen slightly. “It’s more challenging to keep the fleet fresh,” said Grauer. Despite the challenges posed by the recession, the company remains committed to fleet maintenance. “We have not changed WITH OUR TEAM SELLING APPROACH, YOU SELL course on the basic philosophy,” said THE EQUIPMENT AND WE STRUCTURE THE DEAL. Grauer. Working with their dealers, they have been able to successfully extend service intervals. They conduct extensive Programs for new & used heavy oil sampling. And while the company has not utilized telematics on its machinconstruction equipment ery, it is currently under consideration.

Close Sales Faster With Financing

Dealer Support The company will also be relying on its dealers to help them through the challenges of new Tier-4 technology. “While we believe it’s the right thing to do, there is a learning curve,” said Grauer. “We are happy to have the great support we have.” The aggregates producer views the high cost and serviceability of the machines as

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Solving America’s Infrastructure Crisis

States must step up to the plate and increase both their transportation revenues and use of all available financing mechanisms. BY SARAH BEASON, IRINA CALOS, AND MEGHAN STUBBLEBINE Editor’s Note: AED recently commissioned researchers at the College of William & Mary’s Thomas Jefferson Program in Public Policy to conduct a comprehensive census of state transportation infrastructure financing and funding mechanisms. One goal of the study, which was released in January 2014, was to help lawmakers on Capitol Hill understand available options to restore the solvency of the Highway Trust Fund. The second purpose was to give equipment distributors around the country a tool to help them advocate more effectively for infrastructure in their own states. The study includes a description of all the major mechanisms states can use to support road and bridge investment, as well as a snapshot of each state’s program. We encourage AED members to share the findings with their local, state, and federal lawmakers and encourage them to use the findings to help solve America’s infrastructure crisis. The full report is at http://bit.ly/aedwm2014. A summary brochure with a state-by-state chart is at http://bit.ly/wm2014brochure.

Roadway infrastructure offers countless public benefits: improved safety, economic growth, and increased job opportunities. Despite these benefits and voters’ recognition of the importance of transportation infrastructure, the purchasing power of federal transportation funding has been steadily declining. In an era of tight federal budgets, state legislatures find

themselves increasingly burdened with the responsibility of maintaining and building roadways. States must improve the sustainability of their funding sources and increase their financing opportunities to facilitate roadway projects. Although there is no single mechanism suited to support every state’s roadway needs, legislators should understand the inherent benefits and risks of each available option to make informed decisions. States should diversify funding and financing sources to stabilize revenue streams, focus on user-fee-based mechanisms, and accompany implementation efforts with educational initiatives. Following these general recommendations, states can further serve their constituencies by implementing mechanism-specific strategies. Funding Options Offer Investment Opportunities Dozens of mechanisms fund roadway infrastructure across the country, but only six are widely used: fuel taxes; tolls; general fund revenues; vehicle registration, licensing, titling, and permitting fees; vehicle miles traveled fees; and freight-related fees. Fuel taxes, including excise and sales taxes, are the most common funding mechanism. Although universally implemented, reluctance to increase the tax at the

26 | www.cedmag.com | Construction Equipment Distribution | March 2014

Photo courtesy of Broce Broom. The MK-1 Transfer Sweeper utilizes a large brush that continually sweeps debris to a conveyor, keeping pace with the milling process and cleaning more thoroughly so tack sticks better to the road surface.

A Closer Look

state level has led to a rapid loss of purchasing power. States can rejuvenate fuel taxes by increasing and indexing rates to preserve purchasing power. Indexing the fuel tax to construction costs may better account for changes in the purchasing power of states’ transportation funds. Alternatively, states can index fuel taxes to the consumer price index to ensure the tax keeps pace with market inflation. Fuel taxes alone, however, cannot sustain states’ baseline revenue requirements for roadway infrastructure. One funding mechanism gaining momentum is the vehicle miles traveled (VMT) fee, which charges drivers a fee for every mile driven. States have several options for tracking mileage, ranging from the collection of odometer readings on tax forms to the automatic collection of fees at gas pumps via GPS systems. This type of direct user fee may eventually become the most sustainable mechanism because of its flexible pricing options, but the administrative, political, and technological difficulties of tracking users’ mileage makes this mechanism viable only as a future funding option. Forward-looking states like Oregon are already preparing for the VMT fee by conducting statewide trials of various tracking devices. In the short-term, states need to rely (continued on page 30)

Wednesday, April 2 Government Affairs Program Update ERH 0IKMWPEXMZI &VMI½RK Infrastructure Policy Roundtable Panelists will discuss top infrastructure policy issues and water infrastructure projects and what AED and NAEDA members must do to restore the Highway Trust Fund’s solvency. Tax Reform Roundtable Lawmakers and lobbyists share their insights about what’s likely to happen and what’s at stake for equipment distributors.

Advocacy Training Insider Perspectives Capitol Hill Visits

Government Affairs Luncheon: A New Path Forward Guest speaker, former Rep. Steve LaTourette, experienced the political dysfunction on 'ETMXSP ,MPP ½VWXLERH ,I VIXMVIH JVSQ 'SRKVIWW in 2012, in part due to his frustration with the breakdown of the process. He now runs the Republican Main Street Coalition, a political group supported by AED that works to elect pragmatic GOP candidates to Congress. Regulatory Roundtable Policy experts discuss hot regulatory topics that affect dealer costs of doing business and product markets, including Obamacare implementation and labor issues. Breakout Session 1: Energy Roundtable Experts discuss the economic outlook and policy issues surrounding coal, natural gas, tight oil and renewables – and how this affects production and infrastructure development. Breakout Session 2: Agriculture Roundtable Experts discuss the farm bill and the future of agriculture policy in the country. Equipment Industry Government Affairs Reception

Thursday, April 3 AED Members: AED Political Action Committee Breakfast NAEDA Members: 8VEHI &VMI½RK &VIEOJEWX Taking it to the Hill: Meetings with Lawmakers Meet with your representatives, senators, and congressional staff. While you are responsible for making your own appointments, AED and NAEDA staff are available to assist. Congressional Reception

Highway Funding

(“Solving America’s Infrastructure Crisis” continued from page 26)

on funding mechanisms other than the VMT fee to supplement the fuel tax. Vehicle registration, licensing, titling, and permitting fees generate some of the greatest revenues for states. Thirteen states derive more revenue from these than from the fuel tax. Moreover, they represent a stable revenue source and do not require additional administrative costs to implement. With recent technological advancements, states can also rely on tolling to increase roadway infrastructure funding. Electronic tolling enables states to optimize revenue collection and reduce congestion through variable pricing. Tolling most efficiently funds individual road systems; it realistically cannot support an entire surface infrastructure budget. General funds also provide a large revenue source for transportation infrastructure funding, but states cannot rely on these funds because they are frequently

shifted to nonroadway projects. The last widely used funding mechanism is various freight-related fees, given their revenue potential. However, state legislators must be cautious about increasing freightbased fees due to their downstream cost to consumers. Financing Mechanisms Can Incentivize Growth Political realities and economic difficulties make increasing investment difficult. In addition to boosting direct revenues for infrastructure, states should harness financing (strategic borrowing) mechanisms to spur transportation infrastructure growth. Compared to funding mechanisms, states employ fewer financing mechanisms – including state revolving funds (SRF); public-private partnerships (PPP); and bonds. Employing a diverse array of interrelated financing mechanisms is critical. For example, bond issuances often fund SRFs, which are collections

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of funds that partially fund PPPs and are also dedicated to granting lowinterest loans to transportation infrastructure projects. Bond issues similarly can be involved in some PPP agreements. Employing all three financing mechanisms enhances the long-term availability of sustainable funds. Unfortunately, states simply do not use available financing mechanisms to their full potential. Most states do not have a state-funded SRF, which reduces their ability to (1.) create new roads without raising taxes or (2.) offer low-interest loans to roadway developers. SRFs can be successful if properly managed through interest rates maintained above the level of inflation, leveraged through bond issues to promote fund growth, and guided by an informed project selection process that includes a loan payback risk assessment. PPPs offer many of the same benefits as SRFs, with the added advantage of financing very large projects that

How States Pay For Highways FUNDING

neither the state nor the private sector alone could afford. Although many are wary of PPPs given the risk of unfavorable contract terms and limited state control, state legislatures should continue to pass PPP-enabling legislation because the benefits of a well-executed project far exceed the risks. By requiring upfront payments, states can ensure a consistent revenue stream during the lifetime of the asset and create a regular selection process to choose the best projects. Many of the risks of PPPs can be properly mitigated in the contractual agreements for these projects. Policy recommendations concerning roadway infrastructure often do not highlight bond issues, but bonds play an important role in roadway financing. Bonds are the least risky financing mechanism and offer the most flexibility for small projects. States can minimize many of the risks associated with bonds by ensuring debt service costs resulting from a new bond issue do not cause a state to exceed its ability to service all of its debts. Bonds should continue to be used in roadway financing strategies both as a relatively safe option for projects and as a strong supporting mechanism for SRFs and PPPs. 'LYHUVLÀFDWLRQ ,V .H\ Developing a successful strategy for funding and financing roadway infrastructure is a complex and state-specific process. No state can successfully rely on any single funding or financing mechanism. Therefore, state legislatures must increase their emphasis on employing multiple mechanisms to fund and finance road construction and maintenance. Whether legislators are interested in improving road safety or generating economic activity, investment in their roads is a sound policy to meet valued public goals. „

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The authors are graduate students in public policy at the College of William & Mary in Williamsburg, Va.

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March 2014 | Construction Equipment Distribution | www.cedmag.com | 31

A Closer Look

Anyone Want a Job? Anyone at All? Facing a nationwide dearth in candidates to fill skilled trades jobs – even just warm bodies to apply – Canadian employers, including dealers, look beyond borders to patch critical vacancies. BY TOM VAN DUSEN JR.

The boom is being blamed for the bust – the bust in Canada’s skilled labor force, that is. The boom to which we refer is the storied Baby Boom. Many labor experts maintain that, with the first wave of Baby Boomers hitting retirement age and leaving jobs that many held for 40 years, there aren’t enough new recruits coming into the system to fill the vacancies. The shortage in Ontario alone could reach 100,000 workers in five years. “A skilled labor shortage is a real threat to our long-term economic health,” says Sean Strickland, CEO of the Ontario Construction Secretariat. “A growing labor force is one of the foundations of economic prosperity.” Although inconsistent depending on the trade in question and region of the country, worker shortages are clearly documented and have been raised by many respected individuals and institutions, from Prime Minister Stephen Harper to the Canadian Chamber of Commerce (CCC). Referring to the PM’s pronouncement that lack of skilled workers is the biggest challenge facing the country today, the CCC has echoed the concern, calling on employers and policy-makers to stay focused on the issue in order to counteract the shortages affecting Canada’s growth. The chamber was joined in a recent statement by 16 influential, national organizations representing labordeficient industries, including Associated Equipment Distributors. Rick Van Exan, vice president of marketing at Toromont Industries, Inc., as well as an AED officer and regional director for the Eastern Canada Region, says the construction industry is working through its associations and by other means to help meet the growing need for new skilled workers.

At Toromont, the Cat dealer covering Ontario and parts of Atlantic Canada, Van Exan explained his company’s main concern is maintaining an ongoing supply of licensed mechanics. Toromont employs about 800 mechanics in the region, who earn an average of $100,000 a year; each new recruit requires about 18 months of education in the trade, followed by a four-year apprenticeship. “We’re getting by for the time being, but difficulties in getting qualified people are going to increase as major projects come on line.” Former federal cabinet minister Perrin Beatty, CCC president and CEO, notes there are those who claim the skills gap isn’t real. However, many Canadian businesses representing all sectors and all regions continue to maintain they can’t find the right people to fill various vacancies. “Competition to hire qualified professionals is intense,” Beatty observed. Compounding the issue is that it’s not always about money; many skilled Canadians would rather not work in remote locations or on rotation, two characteristics of many resources-based jobs. To lure the tradespeople they need, some big companies are pulling out all the stops in laying on the perks, including housing complexes with indoor golf, gyms and in-house movie theatres. Meanwhile, wages of some oil and gas workers on Canadian projects have been pushed up to 60 percent higher than their counterparts in the U.S., according to labor data available in both countries. The dearth of workers for Canadian Oil Sands and mining projects will be exacerbated by a new wave of infrastructure construction to enable gas exports. (continued on page 34)

32 | www.cedmag.com | Construction Equipment Distribution | March 2014

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Workforce Shortage

temporary foreign workers. The federation maintains: “Employers are using the program to undercut Canadians.” Moved by political pressure and negative publicity, the Bad as They Say? Oil Sands company in question – Pacer Promec Joint Are labor shortages being exaggerated? A report late Venture – announced it regretted its actions and rehired last year from Canada’s TD Bank attempted to debunk the displaced Canadians. what many see as a crisis as mostly a myth. Prepared by It was none other than the Royal Bank of Canada that TD Deputy Chief Economist Derek Burleton and three first brought the TFWP under national scrutiny last year colleagues, the bank report maintains that whatever shortafter it contracted for IT assistance. Established Canadian ages exist are isolated and no greater than a decade ago. jobs were cut in favor of lower-paid foreign workers. The TD economists do allow that skills mismatches Assailed from all sides, the bank soon remedied the situcould increase. They urge governments, businesses and ation, apologized, and implemented a new hiring policy educators to focus on training to provide Canada with “ a favoring Canadian workers while limiting what jobs can be world-leading workforce in the 21st century.” outsourced to foreigners. The TD report’s findings have been supported by a Bank The government has declared that any employer found of Canada business outlook survey showing that, while to have violated the terms of the TFWP would be blacklistthere is an increase in firms reporting difficulty filling ed and denied future access to the program. It has further skilled jobs, most companies claim the labor situation isn’t tightened the rules and now charges employers $275 for very different from 12 months ago. each application made under the TFWP to ensure taxpayers But AED member Tony Hodgins of Calgary-based Wajax aren’t picking up the processing tab. A new questionnaire Ltd. says such assessments miss the mark. Shortages may attempts to determine whether an applicant is seeking to not exist in all trades but they’re certainly present in many replace Canadian workers. of them, including the mechanics and welders his company With mechanics idle in some countries, Van Exan said relies upon. Toromont has made use of the TFWP in the past to briefly Claiming the equipment industry is heading for a deficit fill some vacancies but doesn’t do so on a regular basis. of 30,000 workers in Western Canada over the next seven Hodgins insisted the TFWP remains a valid and valuable years, Hodgins emphasized that mechanics are increasingly tool for employers trying to keep their rosters intact. Abuses in short supply, even though they’re earning $44 an hour occur in all systems, he pointed out, but most companies plus full benefits and pensions. are just honestly looking for ways to acquire additional qualiThe federal government sides with the industries fied staff under the TFWP, not to replace Canadian workers. expressing hiring difficulties. At the beginning of this year, Last year, Hodgins said, Wajax brought in 300 techniit launched an immigration program aimed at streamlincians from all sources. About 10 percent were foreign ing the process of getting skilled workers permanently workers on two-year permits who receive training and get into the country. To take part in the program, foreign paid the same amount as Canadians. If the relationship applicants need to have a job offer or be prequalified to works out, Wajax will help them extend their stay and work in a given province or territory. They’ll also have to eventually immigrate. meet language requirements and have a minimum of two Insisting labor shortages aren’t a myth, Todd Hystad years experience in a skilled trade. The central government of Vimar Equipment in Burnaby, BC, has been researchcooperated with the provinces, territories and labor groups ing TFWP and sees it as another way to acquire necessary in drawing up a list of eligible occupations. The program will tradesmen, as long as Canadians come first. AED’s regional accept a maximum of 3,000 applications in the first year. director for Western Canada, Hystad brought forward a Meanwhile, the long-standing federal Temporary related labor problem: Smaller operations such as Vimar, Foreign Worker Program (TFWP) has become undermined which has nine mechanics including two apprentices, are by controversy. Use of the program has exploded in recent having trouble retaining skilled workers. years, even as unemployment levels in the country have “We end up training young technical talent who, when remained above 7 percent. The latest apparent breach of they earn their tickets, might be off to the bigger compaTFWP rules involves an Alberta Oil Sands contractor who nies that can afford to pay more.” Vimar pays $32 an hour. layed off 65 skilled domestic workers to replace them with In an attempt to counter the trend, Vimar works at buildhelp imported from Croatia. The Alberta Federation of ing a “personal culture,” a family atmosphere among its Labor says the unionized ironworkers literally walked past staff so that they enjoy coming to work. their replacements on the way off the jobsite. The federaSome Want It All tion claims the imports were to be paid less than half the Another key labor-boosting program has also run into rate earned by Canadians. snags. It’s called the Canada Job Grant (CJG), sponsored Increasingly, instead of being filled by Canadians, in partnership by the federal, provincial and territorial some of the best jobs in the country are being given to (“Anyone Want a Job? Anyone at All?” continued from page 32)

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Workforce Shortage

governments, and is scheduled to come into effect April 1. collectively to ensure necessary labor force growth.” Under the original plan, $15,000 would be provided Mining Association of Canada President Pierre Gratton per worker for skills training. Funding would be a threecautions that industry context is essential in understandway split between the government levels and employers. ing the worker shortages. “Sweeping claims about Federal Employment Minister Jason Kenney has since shortages across the whole economy can misrepresent offered to pick up the provincial/territorial share as well – important industry-specific trends and regional labor with a catch: Labor Market Agreements (LMA) between market pressures.” governments would be cut by close to $300 million, nearly Meanwhile, forest product companies have set a goal 60 percent. of recruiting at least 60,000 workers by the end of the But the second-tier governments object to the federal decade. “This is going to be an ongoing challenge for our level siphoning from existing agreements that provide skills sector,” said David Lindsay, president and CEO of the Forest training for young adults, aboriginals, new immigrants, Products Association of Canada. older workers, people with disabilities and other groups As Van Exan mentioned, to help ease the strain of under-represented in the workforce. They want all that and unfilled jobs, industries are combining with educational the CJG too! institutions to attract more young people to certain “Ministers are united in their concerns and expressed occupations and to maximize training and retention efforts. disappointment that you continue to propose to fund In the U.S., The AED Foundation fosters community-based the Canada Job Grant through substantial cuts to LMA relationships between post-secondary technical schools programs,” Prince Edward Island Innovation Minister Allen and neighboring equipment dealerships and manufacturRoach wrote to Kenney. The two ministers co-chair the ers. The Foundation is also devoted to undoing stereotypes national Forum of Labour Market Ministers. and improving the image of technician careers. Canadian Kenney countered that provincial/territorial concerns distributor members also have access to recruiting tools were weighed and the CJG design was significantly restruc- and workforce-building resources at aedworkforce.com. tured based on that feedback. He insisted the structure The Ontario Construction Secretariat is another organireflects the fact employers know better than governments zation hoping to dispel the myth that a university degree is what training needs exist. the only path to a rewarding career by placing a spotlight Worker-deprived employers say shortages aren’t just firmly on the skilled trades. about lack of skilled applicants. It’s becoming difficult CEO Sean Strickland cites several projects – such as to get warm bodies – any warm bodies – to fill positions public transit expansion across the Greater Toronto Area, despite excellent wages and training offered. mining in Northern Ontario and infrastructure required The high demand is largely because almost all natural for the 2015 Pan Am Games in Toronto – that are fuelling resources industries are booming in Canada, competing the regional labor demand. To help entice young people with one another for the same skill sets and to get those into the trades and meet that demand, the OCS is sponseats occupied. Be it oil and gas development, mining, soring “Future Building,” a three-day construction career forestry or manufacturing, having the right people is expo aimed at students Grades 7-12. It’ll take place within critical to delivering projects on time and on budget. Over the GTA at Mainway Recreation Center in Burlington, the next eight years, large projects in several regions of the April 8-10. country will generate increased demand in construction “Students who learn a trade have excellent prospects of and related trades. quickly establishing themselves in a viable, sustainable and “The construction industry will need to replace 210,000 honorable career,” Strickland affirmed. retiring workers and add 42,000 more to keep pace with According to Hodgins at Wajax, the equipment sector rising demand,” noted Michael Atkinson of the Canadian needs to buff up its marketing to high school prospects. Construction Association. “Of the total requirement, about “We’re just not seen as sexy to 18-year-olds. They envision 152,000 will come from domestic sources; the remaining guys covered in oil, grease and mud with big wrenches in their hands. These days, our jobs are sophisticated; they’re 100,000 will have to come from outside the industry, or more about the latest technology than about wrenches.” possibly from outside the country.” Truck driving is a related occupation where the deficit could reach 33,000 within seven years, warns David TOM VAN DUSEN JR. has written for Bradley, president and CEO of the Canadian Trucking Allidaily and weekly newspapers in Canada for ance. The oil and gas industry alone supports 550,000 jobs more than 40 years. A freelancer based near across the country, and that number is expected to double Ottawa, Ont., his specialties include the general over the next decade. economy, politics, agriculture and the environ“Labour shortages are an issue shared with other ment. He can be reached at 613-445-3407, industries,” said David Collyer, president of the Canadian tomvandusen@sympatico.ca. Association of Petroleum Producers. “We need to work March 2014 | Construction Equipment Distribution | www.cedmag.com | 35

Sales Manager

Every Sales Rep Has a Limitation

Attack What Holds Them Back You don’t have to fix everything – just find and resolve each salesperson’s weakest point, and watch their numbers fly. BY BOBBY WEBER

Professional selling in the 21st century continues to change and evolve. This is especially true for sales managers in the equipment industry who face a significant number of challenges. Manufacturers increasingly insist that dealers deliver more market share. Cost-conscious customers are driving market commoditization, demanding more value while offering less loyalty. Dealer principals need greater performance and a strong return on investment while yet cautiously controlling inventory. Salespeople want more inventory and internal support to build better customer relationships, maintain the competitive edge required to win more deals, and achieve career success. And sales managers in the 21st century sales must bridge wide gaps between numerous people who all have increasingly demanding expectations. There is a universal expectation for growth and increase. Regardless of how well your business performed last year, the expectations are greater this year. Moreover, if business revenue is to grow, then your sales people will have to grow, too. Success in sales

management hinges on attracting top sales talent, facilitating growth, and developing the latent potential within each sales person. An effective sales manager must enhance the performance of the entire sales team. His or her leadership must drive team performance, collectively yielding more sales revenue than what would otherwise occur if (s)he were personally selling to contribute to the team’s total sales revenue. Therefore, if the sales manager is managing five sales people, who each annually average $6 million in sales, then as a manager, his minimum contribution to each sales person’s performance should be collectively more than an additional $6 million or a minimum team total sales revenue of $36 million. As a responsible sales manager, (s)he has an obligation to lead each $6 million sales rep along the path to becoming a $7.2M sales rep. A sales team’s performance is an absolute reflection of the sales manager’s leadership. Great sales managers must help each salesperson spend more time engaged in high-payoff, revenuegenerating activities. A salesperson must understand the real value of a

36 | www.cedmag.com | Construction Equipment Distribution | March 2014

single hour. An hour, for a salesperson netting $7.2 million in annual sales revenue for the dealership equates to $3,000 per hour. Financial reality forces the best sales people to quickly eliminate low-payoff activities and poorly qualified prospects from their schedules. Average and below-average salespeople frequently waste time chasing wrong priorities. A great sales manager creates clarity about what high-payoff, revenue-generating activities really are. Holding It All Together Sales teams are a disparate collection of talent, not unlike the diverse musicians in a symphony. And like myriad instruments, successful salespeople come with all kinds of temperaments, personalities, backgrounds, technical levels, diversity of age, and ethnic culture. There are common traits like motivation, drive, communication, and customer empathy, but it is amazing to observe the diversity that exists among top performing salespeople. A sales manager must inevitably deal with varying performance levels. Top performers set the bar for the rest of the team, while others consistently

Sales Manager

struggle to reach the potential within their territories. A seasoned veteran may lead the way for the rest of the team by setting new records, but even an old pro can fall into a diabolical sales slump. New rookies can come out of the gate immediately winning big deals, but there are also plenty of new reps who crash and burn before they get off the runway. Loyal, long-term customers can acquire other companies and open the door for a stream of new revenue, but a merger can also result in a closed door to a long-standing relationship. Any number of volatile sales scenarios can tip the scales toward success or failure. Sales managers can take steps to strategically equip salespeople for success, greasing the skids to win deals. Here are some tips that may help you tip the scales in your favor and proactively drive sales performance. 1. Be situationally aware – Situational leadership requires you to adjust your leadership based upon the needs and requirements of any given situation. It is a mistake to rely upon a default response tied to your own personal preference. Your personal preference may not be a reliable indicator of what the situation really requires. Managers limit their options by relying on pre-established defaults for dealing with sales challenges. It is best to develop the situational awareness needed to adjust your approach based on the requirements of unique situations. One of my clients had been frustrated early on in his sales career because of a micromanaging sales manager. As a result, years later when he became a sales manager, he preferred to be hands-off by giving his salespeople the freedom to direct themselves and their activities as they saw fit. This approach worked fairly well with experienced

salespeople. However, it did not always work so well with new or underperforming salespeople. His personal preference made him reluctant to immerse himself in the details of an underperforming salesperson’s activities and routines in order to get performance on track. He refused to micromanage even when the situation vehemently demanded it. Situational leadership involves learning to ignore your own bias and personal preference, choosing rather to objectively analyze the particular situation to determine what the circumstances are requiring. Your preference or personal bias may not always be a reliable indicator as to how you should manage in any given situation. 2. Be selective about what you need to correct – Great sales managers recognize the unique needs and obstacles of each salesperson. There’s a theory of constraints that says you do not have to fix everything to improve everything; you only need to fix the one thing where your sales rep’s performance is bottlenecking. Every salesperson has some kind of limiting constraint. There are two kinds of constraints. There are those beyond your control that are fixed (or unchangeable) and there are flexible constraints that are within some measure of your control. Case in point, most equipment dealerships have regional restrictions. A dealer could only likely overcome this particular regional constraint by securing permission from a manufacturer to acquire a dealership in an adjoining region. The box below demonstrates how constraint theory applies to a manufacturing scenario for a firm producing widgets. Each department has a certain level of production capability per shift that varies from one department to another.

Capacity per shift

Dept. A

Dept. B

Dept. C

Dept. D

300 widgets

500 widgets

700 widgets

900 widgets

Total capacity per shift = 300

While each department has varying production capacity, the total production capacity of the whole plant is only 300 widgets per shift – they’re limited by the constraint, which in this case is Department A. To overcome this constraint, we might buy additional equipment or we could add a second shift to Department A, enabling us to double capacity to 600 widgets per shift and move our constraint over to Department B. The total production capacity would grow to 500 widgets per shift. We can nearly always do something to overcome a bottleneck, if we do not get too distracted with trying to fix everything. Other examples of constraint theory could relate to a parts or service department, a sales department, or a dealer’s overall equipment inventory – any of which could pose a significant constraint. For example, if your sales department sells more machines than your dealership can support with parts and or service, then your parts or service (continued on next page)

March 2014 | Construction Equipment Distribution | www.cedmag.com | 37

Sales Manager (“Attack What Holds Them Back” continued from page 26)

departments become the constraint limiting the dealership’s potential. Conversely, you could have phenomenal parts and service departments and an awesome sales team, but if you do not have an adequate inventory of machines to support market demand then inventory becomes the bottleneck. Every dealer principal should be concerned with the accurate

identification of the constraints limiting the potential of the dealership. Constraint theory also specifically applies to sales management. On a macro level, sales managers need to focus on the things they can do to ensure the sales department is not the constraint that is limiting the dealership. On a micro level, sales managers must dial into the specific daily activities of

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38 | www.cedmag.com | Construction Equipment Distribution | March 2014

each salesperson to identify, coach, and correct any bottlenecks in each salesperson’s sales process. 3. Excel in sales process management – A sales manager must be process-oriented in order to help salespeople consistently perform with excellence. As we saw previously, you do not have to fix everything about a salesperson’s performance to improve everything. If you examine the proficiency of each salesperson’s sales process, you can strategically manage each salesperson for better results. If a salesperson sold $6 million in sales revenue last year, it is because $6 million is as much as the weakest link in his sales process will allow him to sell. He might have enough product knowledge to close $10 million, but if he can only qualify leads for $6 million then lead qualification is his primary constraint. It would not make sense for him to focus on more product knowledge if he is spending all his time with the wrong prospects. Helping him to focus on improving his ability to qualify leads will increase the capacity of his entire sales process. Salespeople need help to avoid being stuck on the steps. Action Plan All sales managers should map out a sales process – use the eight sales steps from our example on page 37 and modify the list to fit your dealership’s protocols and priorities. Then evaluate each salesperson’s effectiveness in each discipline on a 1 to 10 scale. Ask each salesperson to evaluate themselves, as well, and then compare evaluation scores and come to agreement about each of their most critical constraint(s). I won’t say that the next three steps are easy, but incorporating this 1-2-3 plan into your professional “MO” will elevate your effectiveness as a sales manager as your team responds very visibly to your input and support. 1.) Create a coaching plan. Be a coach who cultivates a culture of accountability and commitment to excellence. The best salespeople are avid students of their customers’ business, their own product line, and their industry. Customers expect salespeople

Sales Manager

be preeminently excellent at what they do. This means salespeople need to be passionate about the products they sell and the problems they can solve for customers. It also means holding people to high standards – and high performers do not typically mind being held to high performance standards. Sales managers who are serious about coaching and development have a huge opportunity to help people become successful. Sales management is not really about “being the boss.” In fact, the outdated “boss” mentality positions you as more of a constraint than a coach. Enlightened leadership is immensely more rewarding and it can help your sales team reach their potential; it is also critical to growing your business. Coaching and mentoring helps sales people to act and think like business people, making them more valuable to your customers and to your company. 2.) Teach salespeople how to build strong business cases. Customers tend to push for bottomline price concessions because they feel it simplifies the decision-making process. A great sales manager will equip salespeople with powerful and persuasive business cases to help convince customers of the value and real cost of ownership. The best overall solution is rarely the cheapest price, but it takes preparation to lead such a complex sales dialogue. Salespeople sometimes need a sales manager’s help to construct a conversation that results in a convincing business case. 3.) Help salespeople achieve and maintain a healthy life balance – A sales position in the equipment industry is a spectacular career opportunity. I routinely reaffirm this to clients in the industry. I encourage sales professionals to whole-heartedly commit to go the extra mile and work like crazy on the front-end of their careers and it will pay off big-time in their earning potential later on. However, salespeople must remember that it is possible to have a great career / life balance. A great career will require some great sacrifices along the way, sacrifices that may affect family

life. It is critical to get the family all on board to support the career that the salesperson is working so hard to build. A sales position in the equipment industry can be a great way to achieve your family’s financial goals and dreams but it takes a lot of hard work, planning, sacrifice, and support from home.

BOBBY WEBER, president of Maximum Performance International, works with equipment dealerships to improve sales and service performance. He can be reached at 214-6183059, bweber@team-mpi.com. Visit his website at www.team-mpi.com.

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March 2014 | Construction Equipment Distribution | www.cedmag.com | 39

New Construction Industry Optimism Quotient Reaches All-Time High

Forecast

Dealers are considerably more positive about 2014 than contractors, but the good vibes are nonetheless overwhelming throughout the construction industry. BY JOHN CRUM

Each January, Wells Fargo Equipment Finance (WFEF) surveys construction industry executives to gather their insight into current business conditions and to measure their sentiment for construction activity in the coming year. The survey’s primary metric for assessing respondents’ sentiment of local nonresidential construction activity is called the Optimism Quotient (OQ) – it’s a directional metric that compares perceptions for the coming year against the previous year. OQ scores above 100 are considered highly optimistic. Scores between 75 and 100 are cautiously optimistic and scores below 75 are considered more pessimistic. After tumbling to an all-time low of 42 in January 2009, the OQ has climbed steadily and reached new high points in two of the last three years. For 2014, the OQ is an unquestionably positive 124 – the highest overall score in this metric’s 19-year history. Executives overwhelmingly expressed anticipation that local

nonresidential activity this year will increase compared to 2013. Construction equipment distributors tend to be more optimistic than construction contractors, and that trend holds true once again for 2014. The OQ for distributors reached a new

high of 133 and contractors tallied up at 113, which is still a strong indicator of directional improvement. This 20-point gap between contractors and distributors is the third widest gap in the history of the OQ. More than half of respondents

Construction Optimism Quotient hits record high for 2014 U.S. National Optimism Quotient (OQ)

2014 marks an all-time high in the history of the survey.

150 125 100

Highly optimistic (100+)

95

96

105 104 102

93

103 88

109

89

Cautiously optimistic (75-100)

114 102 86

124 106

96 80

75

66 42

50 Pessimistic (0-75)

25

Great Recession

Economic recovery

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The Optimism Quotient is a very positive 124 – signifying that executives believe non-residential construction activity will improve compared to the prior year. After touching its all-time low of 42 in 2009, the OQ has steadily climbed and shown five years of positive momentum. Source: Proprietary data collected by Wells Fargo Equipment Finance

40 | www.cedmag.com | Construction Equipment Distribution | March 2014

Forecast

(55.4%) believe nonresidential activity will increase compared to last year. Another four in 10 construction executives (38.9%) said they anticipate the level of nonresidential construction activity to remain comparable to that of 2013. This survey has never seen so few executives respond that local activity would decrease. Of the 233 executives who said they expect similar or decreased activity compared to 2013, about half (45.5%) said they anticipate some improvement in the industry before the end of 2014. The sentiment for residential construction activity in 2014 is very similar to that of nonresidential activity. In years past, we’ve seen differences in what executives expect for commercial versus residential construction. This year, however, executives were equally optimistic about housing and nonresidential construction. More than half of respondents (55.7%) said they expect increased residential activity. Risks and Regulations The survey also offered a chance for executives to weigh in on risks they considered most pressing and the regulatory issues that were of greatest interest. Close to 82 percent (81.8%) of executives cited “economic uncertainty” as the factor that poses the greatest risk to the U.S. construction industry. “Political uncertainty” (67.6%) was not far behind, while rising interest rates (45.0%) and regulatory uncertainty (43.5%) were a close third and fourth. The regulatory issue of greatest interest (69.2%) for the year was related to tax incentives such as bonus depreciation and Section 179 deductions. The highway funding bill (60.2%) and the Affordable Care Act (46.6%) were also among those issues most frequently listed. Equipment Rental Remains Hot Contractors and distributors alike expect the equipment rental market to remain strong in 2014. Almost 80 percent (79.7%) of surveyed contractors said they rented equipment in 2013, and 91.2% said they intend to rent in 2013. In contrast to a year ago, the percentage of contractors who said they will increase their rentals (22.2%) surpassed the percentage who indicated they will decrease their rentals (14.6%). More than 95% of equipment distributors and rental companies said they will increase their rental fleet or maintain it. When asked to cite their reasons for renting versus purchasing, 72.8% of contractors identified “Lack of consistent work” ahead of “Need for project-specific equipment” (67.4%) and “Overall equipment costs” (52.5%). Equipment Acquisition Wells Fargo Equipment Finance recently started looking at the impact that the Internet has had on equipment buying. The proliferation of information technologies has created new channels through which equipment buyers can confidently acquire the equipment they need – and get the customer experience they want. One in five contractors

said that they have recently acquired equipment over the Internet without having inspected it personally. Of those who acquired equipment without a personal inspection, 80.4% said their purchase amounted to less than $250,000. They also overwhelmingly said they were satisfied (68.6%) or extremely satisfied (19.6%) with the purchase. Sentiment among U.S. contractors is that purchases of new construction equipment in 2014 will remain similar to, or perhaps increase slightly, compared to 2013. One in 10 contractors (11.9%) said they would not acquire new construction equipment in 2014, an improvement from 19.1% in 2013. A quarter (26.1%) said their purchases of new equipment would increase compared to 2013, a 5.3 percentage point increase from a year ago. Distributors remain quite optimistic about realizing year-over-year improvement in sales of equipment. For the coming year, almost two-thirds (62.7%) said that they expected an increase in new equipment sales. A similar but less robust group (57.5%) said they expected growth in used equipment sales. Contractors also shared insight into how they intend to allocate funds for equipment acquisition. Six out of 10 respondents (60.3%) said that term lending accounted for 50% or more of their budget allocated to equipment acquisition. Conclusion The numbers are clear that contractors, equipment distributors and other industry executives are anticipating a 2014 that features more construction activity than in 2013 – both in the residential and nonresidential categories. The risk of economic uncertainty still looms, however, and has created a climate that continues to encourage equipment rental and have a moderating effect on long-term equipment acquisition.

About the Survey The 2013 annual research represented the 38th year in which WFEF and its predecessors have surveyed executives and published their findings. This year, we had the strongest response we’ve seen since moving to an online format. During a three-week period in January 2014, we collected 522 responses. Half of our respondents were construction contractors and another 27 percent identified themselves as equipment distributors, many of which are AED members. The remainder included equipment rental companies, equipment manufacturers and other industry consultants and stakeholders. JOHN CRUM is senior vice president and national sales manager, Wells Fargo Equipment Finance. He can be reached at john.d.crum@ wellsfargo.com.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 41

A Closer Look

Screen Machine Industries – An American Success Story With quality products made in the USA, Screen Machine Industries is making more than a name for itself. BY JOANNE COSTIN

What’s not to like about the Screen Machine Industries’ story? The family-owned company is bringing jobs to its local community having found success manufacturing quality-built, American-made portable crushing and screening equipment. Recognized by the U.S. Department of Commerce and state of Ohio Governor’s Office for Export Achievement, SMI President Steve Cohen was chosen to represent small business leaders as a prime time speaker at the Republican National Convention in 2012. And the company’s Ohio manufacturing facility hosted presidential candidate Mitt Romney twice during his presidential campaign. History But Screen Machine Industries is hardly an overnight success story. When the company was founded in 1966 by Cohen’s father, it was a steel fabrication business. It wasn’t

Screen Machine Industries President Steve Cohen represented small business leaders when he spoke at the Republican National Convention in 2012. 42 | www.cedmag.com | Construction Equipment Distribution | March 2014

until the late 70s that SMI manufactured their first portable screening equipment, a 4-foot x 6-foot shaker screen for an Ohio coal mine. According to Cohen, Screen Machine filled a demand for screening equipment manufactured in the U.S. Most competition was European-manufactured, metric screening equipment. And so a market was born. Steve Cohen joined his father in the family business full time after graduating from Ohio State University, and he became president in 1998. His brother Doug Cohen, an MIT grad, manages engineering. “We complement each other very well,” said Cohen. As the company expanded and Screen Machines’ customers became increasingly distant from its Ohio headquarters, Cohen recognized the need for a dealer network. Currently, 20 North American dealers as well as several international dealers have helped the company achieve double-digit increases in sales growth for several years. International sales now represent more than 50 percent of the company’s revenues, a reversal from the mid-2000s. While the company’s sales are inherently tied to GDP, sales of portable crushing and screening equipment has flourished as contractors and government agencies have sought savings from recycling and reusing concrete on the jobsite versus purchasing virgin material from a mine. They have increasingly favored portable equipment that cuts down on shipping costs and improves profit. “It is harder for new mines to get started with the EPA permitting process and landfills are less and less accepting of anything concrete,” explained Cohen. “You can purchase recycled materials far cheaper than virgin material.” The company’s diverse product line consists of heavyduty, track-mounted jaw, cone and impact crushers;

A Closer Look

screening plants; trommels and conveyors. “The key to our business is to take anything that comes out of the ground, crush it, reduce it in size, then screen it to become a sellable product,” explained Cohen. He believes the company’s wide range of products provides dealers with a convenient “one-stop-shop” advantage. “We are the only one with products from small to very large and everything in between,” said Cohen. While the bulk of their business centers around rock and stone, Screen Machine also offers products to process topsoil and demolition debris. ‘Steeling’ the Show According to Cohen, what really sets the company’s products apart is access to high-quality American steel. “American steel is the best money can buy,” said Cohen. What that provides dealers and customers is durability. Screen Machine uses Grade-80 steel, while the industry standard for machinery is Grade-36. “The difference is toughness. We want our machines to outlast our competitors,” said Cohen. Screen Machine holds six unique patents that maximize productivity. “Our company may be smaller than most of our competitors,” said Cohen, “but we are high-tech.” Product design utilizes the latest 3D software and 3D printers to reduce manufacturing errors. Computer-controlled fabrication and robotic welding stations ensure one machine is exactly the same as the next. “Once you talk a customer into taking a factory visit and they get to see how it is built, the quality that goes into it, we always have success,” said Walter Berry, president of The Berry Companies, parent of Berry Tractor & Equipment, a dealership representing Screen Machine in Kansas and southwest Missouri. Serviceability of the machines is enhanced by using major name brand components and designing products to be service- and maintenance-friendly. “The key is access to the machines,” said Cohen. A customer or dealer doesn’t want to spend a day to take it apart. Everything on the machine needs to be designed so it can be accessed quickly.” Products range in size from 14,000 to 120,000 pounds and in price from $20,000 to $700,000. Because much of the market prefers a rental or rental purchase transaction, dealers must have the financial wherewithal to make a significant investment. Market economics have increased rental of Screen Machine products. Typically, machines are purchased for the rental fleet, where dealers will hold them for one to two years, or they are sold under a rental purchase agreement. Service and support are other factors the manufacturer looks for from its dealers. “The No. 1 aspect we look at is the service. They have to have the trucks, the coverage to be able to service the machines; and be able to respond to the customer in the same day or within 24 hours.”

Remote control on the 4043T Impact Crusher from Screen Machine Industries allows wheel loader or excavator operators to move and operate the crusher from the comfort of their cab.

Cohen says that while most contractors will have backup loaders or other earthmoving equipment on a jobsite, there is typically only one piece of crushing and screening equipment. “If our machine goes down, several other pieces of equipment are put out of business, too,” said Cohen. Screen Machine looks for dealers with an ownership that shares the same cultural beliefs. “They don’t sell on price but on features and benefits. They understand what is best for the customer,” said Cohen. Dealer Success Despite the fact that “there’s not that much stone in Kansas,” Berry Tractor & Equipment has experienced their own success story with Screen Machine. According to Cohen, the dealer’s market share rose from zero to 50 percent within three years. “I think it’s a good match with what our market needs. They make a good quality product,” said Berry. He concurs that the potential has been more than they anticipated. “As we got in to it, we probably learned more about the other products they sell,” Berry said. General Manager Jon Berry says they’ve done especially well on the governmental side of the market. “It’s purely coaching – walking them through the numbers. Several of the counties have experienced huge cost savings.” The dealer has been pleased with the product quality and support from Screen Machine. “Rental equipment can be heavily used, if not abused,” added Jon Berry. “Parts availability has been good. So far, the machines have held up well, even with some tougher rental customers.” The manufacturer’s North American location gives dealers parts and engineering support during normal business hours. If machines break down in the U.S., Screen Machine can ship via air and have a part to them next morning. A personalized relationship with the manufacturer is a plus for Berry Tractor & Equipment “It’s very rare that as a dealer we can get real high up the chain, but with Screen Machine, we have minor issues and we can talk to engineers at the factory, even Steve Cohen. It is nice to have that level of communication available if you need it.” Dealers interested in making the Screen Machine Industries’ success story part of their own can call Steve Cohen at 740-927-3464. March 2014 | Construction Equipment Distribution | www.cedmag.com | 43

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Just So You Know – a guest column

Get Ready For Final Dealers have the opportunity to get a jump on competition by being among the first to roll out the finest iron ever made.

BY MIKE BRINKER

Tier-4 Final really begins at CONEXPO. Although the near-zero emissions regulations for new machines took effect on Jan.1, the gravity pull of the world’s most important construction show makes March 4 in Las Vegas the place where operators will get a first look at what Tier-4 Final is all about. While it is often said that what happens in Vegas stays in Vegas, this is certainly not true of the Tier-4 Final machines being launched at the show. They will soon be everywhere – the lineup of Tier-4 Final equipment highlighted at CONEXPO will quickly be joined by many more machines as production ramps up during 2014. So what does this mean for equipment dealers? They need to be Tier-4 Final-ready – ready to understand the technology, ready to answer the questions from machine owners and operators, and ready to know how to best sell Tier-4 Final and then support these new machines in the field. Equipment dealers need to get ahead of the Tier-4 Final curve now, as the speed of introduction will be faster than we experienced with Tier-4 Interim-powered machines back in 2011. The Best Machines Ever Start thinking about Tier-4 Final as an opportunity to help your customers improve their productivity by introducing the most capable machines the industry has ever seen. Cummins conducted its largest ever field test program to demonstrate that Tier-4 Final technology not only brings cleaner and quieter machines, it also lowers the cost of operation and improves cycle times. Compared to an equivalent Tier-3 machine, the fuel

consumed by a Tier-4 Final machine can be 6 to 10 percent lower. For the field test program, we selected the toughest duty cycles and located the machines in areas with punishing site conditions, from high heat to extreme cold, from high altitude to extreme humidity, and in very dusty mining environments. As a result, we were able to prove just how tough Tier-4 Final machines really are. OEMs have used the engine emissions changeover to also upgrade and improve many aspects of their machines, from more comfortable cabs to smarter control systems and more efficient drivelines. In fact, the contrast in features and performance between a Tier-3 and a new Tier-4 Final machine is substantial, more than outweighing the initial higher cost of acquisition. Of course, you need to add Diesel Exhaust Fluid (DEF), but that aside, there are very few additional service requirements compared to Tier-3 engines. Dealers, Now It’s Up to You The message here for dealers is clear – get moving. Get your OEM’s Tier-4 Final machines on order. Get them delivered and start using them. Take full advantage of your OEM initiatives to seed these machines with your customers. Do this while the T4F machine population is low. Get ahead of your competition. Be brave enough to lead! Get experienced and knowledgeable about them. Just having Tier-4 Final machines on your lot can change the status quo. It causes customers to ask questions and get interested. The sooner you do this, the sooner your

customers will realize that Tier-4 Final machines offer the opportunity to improve their business operations. You’ll see internal changes, too, as the sales, service and parts staff at your dealership acquire the “need for speed” – that is, the need to get up to speed, and quickly. They need to start learning how to answer customer questions. I would also like to see dealers engage their OEMs on Tier-4 Final through normal product performance feedback channels. Don’t wait. Don’t delay. Get T4F machines operating. The sooner you begin, the faster your team will get up to speed, and the sooner your OEMs will learn how to become even better. It’s taken a huge investment by both engine manufacturers and OEMs over the last six or more years to get these machines to the performance level they now achieve. It’s time for the dealer networks to take advantage of all that innovation and help drive these new – and much better – machines into the market. We are counting on you to take up the challenge. Embrace the new technology by becoming champions for Tier-4 Final to drive your success and that of your customers.

MIKE BRINKER is director, Cummins Industrial Sales. He can be reached at mike.brinker@cummins.com. Cummins has created a virtual resource called the ‘Forward To Final Toolbox’ to help dealers get up to speed. Local Cummins distributors are also to support equipment dealers and can connect you with service training certification courses.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 45

The AED Foundation Financial Symposium will help distributor executives and other industry stakeholders with dealer-specific solutions addressing the latest “burning” issues: How do I handle the new tax regulations? How much rental fleet do I really need? How current are my rental contracts? How can I deal with rising health care costs? How can I hire and keep good, skilled employees?

Plus, you’ll enjoy new panel discussions about best practices in these and other areas. The new location near Chicago’s Midway Airport provides complimentary shuttle service as an added convenience.

Register now: www.aednet.org/cfo

On the Numbers

How to Increase Wealth Here are two of the five steps essential to every dealer’s business and personal financial wellbeing – we’ll cover Steps 3-5 next month. BY GARRY BARTECKI

Step 1 – If You Have It Make Sure You Keep It. No big secret here; just take the time to ensure that your assets are properly protected and unavailable to creditors should an unfortunate incident take place. In today’s litigious society, it pays to use ownership vehicles that limit exposure to creditors. Family limited partnerships and similar structures, properly formed, can achieve this goal. For example, a business owner can own 1 percent of the FLP and still control 100 percent. In the construction equipment business it pays to make sure that the corporate veil is maintained, meaning all compliance requirements are met and documented annually with business and personal transactions kept separate. One little personal liability slip can wipe you out in a heartbeat. Me, I like sleeping at night, and knowing that the legal entity I use is properly managed lets me do that. Updating your tax planning annually is a must. For example, the tax bill required when you sell your company is extremely different from what you owe if you sell your stock. I have seen numerous cases in which the amount of the tax bill from asset sales killed the deal. If you plan to sell within five years you better start figuring out how to lower the tax bill and increase the proceeds now – while you have to time to do something about it. Knowing the status of your retirement accounts is also a must. You would be amazed at the options you have to consider to minimize the tax bite related to 401(k)s, defined contribution profit sharing plans, IRAs, etc. You worked hard to accumulate

the amounts in these plans, and if you are not careful you could give back the bulk of the balance in income and estate taxes, when in many cases you could stretch the tax liability another 30 to 40 years, with the balances keeping their tax-free earning ability. One last point regarding your personal situation, and that relates to life insurance. Life insurance today, especially the term policies, are very cost effective and a great way to (A) defer a detrimental tax event, (B) facilitate a buy or sell transaction, (C) add to certain types of retirement plan benefits, or (D) just fund your family’s lifestyle should you die at an early age. Every business owner should annually address these issues with professionals who know what they are talking about – if you need better help, I know where you can get it. Step 2 – Benchmark. Every business has changed over the last 10 years, and yours is no different. Almost every outside influence on your business has been beating up your balance sheet and operating results. So, to reverse the impact, many of you adopted new technology, new product lines, made personnel adjustments, changed arrangements with OEMs, embraced the transition into the rental business, pared down investments in assets, and in general have done more with less. So, how you doing? Really? How do you know? AED offers three major resources you can use to benchmark and improve your business. First we offer the annual Cost of Doing Business Report (CODB), a very

good tool to indicate which department or expense categories need reviewing and further study. If your internal financial statements are set up using industry standards it should take no more than 90 minutes to complete the survey. The survey and instructions can be found at http:// www.aednet.org/codb/. Best of all: The report is free to survey participants. Note: If you have never participated in CODB, do it this year – this is the year to catch up and make sure you are competitive in your market. AED also offers a higher level of benchmarking using 20 Groups, where dealers meet two to four times a year to discuss best practices and specifically how each participant can improve their operating results. Group members usually remain in the group for 11 years, and if I pointed out AED’s 20 Group members to you, you would see they are among AED’s best dealers. AED is now also offering a new, flexible High-Profit Dealer Group – one to four meetings per year, plus virtual meetings to discuss specific topics, monthly access to participant financial statements, monthly review of financial information by the moderator, calls with the moderator to review monthly or quarterly operating results, access to industry experts as required. And it’s all moderated by yours truly. We’ll work together in whatever form you like to make you more money and help you keep what you earned. GARRY BARTECKI (gbartecki@ aednet.org) is AED’s vice president of Finance.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 47

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Business Outlook

Inventory Overhang Abates, Time For End Markets To Grow Residential markets offsetting dips in private nonres and public construction. ELI LUSTGARTEN

Field reports indicate that demand for construction equipment at year-end 2013 was robust. The strength was likely driven by tax buying in anticipation of the expiration of the bonus depreciation and Section 179 incentives, and possibly to beat the Final Tier 4 emissions mid-single-digit price increases. Most of the inventory overhang in the channel has cleared, suggesting that any uptick in purchases will favorably impact manufacturers through increased production. Now it’s up to construction spending to drive industry growth. Unfortunately, industry momentum is not on our side, as construction spending at the end of 2013 was far from impressive. December 2013 construction spending inched up to $930 billion, only 0.1 percent over November (which was revised down by $5 billion) and up 5.3 percent over December 2012. Full-year 2013 spending of $898 billion was up only 4.8 percent, a disappointment from the 5 to 8 percent consensus as we entered the last part of the year. The strength in residential markets continued offsetting a disappointing dip in private nonresidential and public construction. Private residential spending rose 2.6 percent in December and was up 18 percent for the full year, in line with forecasts of up 15 to 20 percent led by the multifamily sector (up 44 percent), single family (up 28 percent), and remodeling (up 3.8 percent). Private nonresidential spending dipped 0.7 percent in December, was down 1.7 percent from December 2012 and was down 0.4 percent for all of 2013. This was clearly a disappointment compared to consensus forecasts of up 4 to 7 percent for private

nonresidential spending for 2013 as we entered the fourth quarter of the year. The largest private nonresidential segment, power, fell 14 percent in 2013, principally reflecting very difficult comparisons due to a surge of wind projects at the end of 2012 to qualify for the expiring production tax credit. Public construction slumped 2.3 percent in December and was down 2.8 percent for the full year of 2013, slightly better than the downward projections of 3 to 5 percent. The two largest public segments, which account for more than half of spending, saw highway and street construction rise 1 percent and public educational spending fall 8.4 percent. Optimism still exists for 2014 with the expectation that contractors will find more projects to bid on in the coming year. Residential construction ended 2013 with strong momentum, which should carry it at least through the first half of 2014. We still expect residential spending to rise at least 10-plus percent, led by multifamily construction and somewhat less expansion in single family. Private nonresidential spending (55 percent of total nonresidential outlays) appears to be poised for a rebound in the mid- to upper-single digits in 2014. According to the Associated General Contractors of America, gains of 6 to 10 percent are possible, driven by double-digit gains in power – oil- and gas-related spending and associated projects such as pipelines, railroads, manufacturing plants, natural gas and oil storage facilities, and even refueling complexes for natural gas-powered vehicles, along with lodging and warehouse construction. Even office and retail should show modest gains. Public spending outlook, however, remains

flat to slightly negative. We are holding to our low doubledigit growth for small and medium (light) equipment in part to replenish inventory sold during the tax-driven surge at year-end 2013, and in part reflecting the continuing optimism by dealers that construction growth will continue, especially with housing starts generally projected to exceed 1.1 million in 2014. In addition, the Final Tier-4 (FT4) emissions schedule allows manufacturers of equipment at the lower end of the scale, under 174 hp, to phase in the new compliant engines all through 2014 and into 2015. We would not be surprised to see some purchases of equipment to beat the upcoming price increases (estimated at 4 to 6 percent) for the FT4 models. The outlook for larger equipment (over 174 HP) is more uncertain. FT4 compliant equipment will have to be introduced this year at higher prices. Unfortunately, mining equipment demand is still a disaster, off well over 50 percent, though the hope is that the marketplace stabilizes in 201415, allowing demand to move toward a more normal replacement level (modest improvement in demand) next year. The key for increased activity probably lies with the oil and gas sector, particularly if we could get needed pipeline approvals such as the controversial Keystone XL Pipeline. Structurally, the construction sector is poised for multiple years of modest to moderate gains, hopefully meeting our targeted 6 to 10 percent annual growth projection. ELI LUSTGARTEN (elustgarten@aol. com) is president of ESL Consultants, an industrial consulting firm.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 49

Aftermarket

Make Parts Buying Easier for the Customer – Think Amazon Differentiate yourself, not based on availability – which everyone can do – but on serviceability and convenience. BY RON SLEE

For as long as I can remember, have also improved. Today “best practhe No. 1 requirement for customers tice” vendors have replenishment cycles from an equipment dealership’s parts consistently approaching two to three department is parts availability. The days. That consistency leads to differing recent Product Support Opportunities inventory levels and much better Handbook (PSOH) – now for sale as a serviceability. That is truly something to PDF at aednet.org/products – confirms brag about in the marketplace. it again. I want to review what we do Delivery Systems. From customers in parts inventory management, expewalking into dealer/distributor stores diting and delivery systems to live up to to using the telephone, to the Internet this availability challenge. and parts kiosks, delivery systems Inventory Control Systems have become much more user friendly. and Processes. The business system Electronic catalogs allow customers suppliers (DMS) and vendors have not and technicians to determine their own been sitting still. The use of statistical parts requirements, and use of the probabilities and the demand pattern “shopping cart” online order style for matching with various statistics models customer convenience and responsivehas helped dramatically. The statisness has become much more common. tical approaches vary by vendor; MMI Operating Standards. The goals from Volvo, Poisson from Caterpillar, are more evident, clear and visible. Put John Deere with their Critical Codes, away every stock order the same day and Komatsu’s shared approach with it is received. Find every part that the their dealers. Yet they all are aiming at dealer is short the day of the order, and the same target: higher availability for communicate with the customer as to customers via the supply chain. The where the part is available before the main software providers have been end of the day. Ship every order the making adjustments as well. From lead same day it is ordered. Simple goals that times by part numbers to abnormal make a difference to the customers. Isn’t demand recognition and much stronger that what we are here to do? interfaces between vendors and distribSo with all of these improvements, utors and worldwide search patterns on why shift the emphasis? I am not sure shortages, systems are much more responwe can do much better in the support sive to the needs of customers and dealers. systems, but I want to move the soluReplenishment Cycles. Over my tion closer to the customers. In the career, the replenishment cycles (lead words of Jack Welsh, “When the world times) have been reduced dramatically. around you is changing at a faster pace It starts with the order frequency being than you are, the end is near.” Let’s increased. Most of the major vendors look at the world around us. today offer daily stock orders. From a Amazon offers a “club” for frequent biweekly or weekly stock order to daily buyers called Prime. This comes with is a very significant improvement. With perks for the customers – access to a the increased order frequency the order lending library, access to streaming size is reduced, allowing the vendors videos, elimination of freight charges, to turn around stock orders much to name a few. American Express has more quickly. Transportation logistics their “member rewards” and catalog

and Internet retail sales, plus entertainment venues for select card members. Visa and Master Card offer their programs, too. Everyone is trying hard to differentiate themselves in the retail world from their competitors. I believe that the differentiation that used to exist with parts availability has been eliminated. Almost every major vendor in the capital goods industries provides similar levels of availability. The large differences have completely disappeared. Availability is good from everyone. So, we need to find enhanced serviceability standards and methods. Perhaps convenience will become more of an issue. We could have supply items “stores” more conveniently located to the customer jobsites. We could bring our parts to jobsites with vans and “Sprinter” type vehicles, rather than waiting for our customers to order from us. We should help customers with their purchasing. We could deliver parts to the customer – what a concept. With the Opportunity Model in the PSOH, we should know what the customer will need, discuss this with the customer, and make buying easier for them – not just easier for those of us in the distribution channel. 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.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 51

Washington Insider

Want A Good Reason to Come to the AED Washington Fly-In? I’ll Give You Four You have everything to gain by attending this unique event, and lots to lose if you don’t. BY CHRISTIAN KLEIN

AED’s 2014 Washington Fly-In on April 2 and 3 is shaping up to again be the year’s premiere public policy gathering for equipment distributors. If you’re on the fence about whether to attend, here are four good reasons you should: Unprecedented risk for equipment markets, dealer CODB. In the almost two decades I’ve been working for the equipment industry in Washington, I’ve never seen so much political risk for distributors. For starters, the federal highway program is on the verge of collapse. The Congressional Budget Office (CBO) says that the underfunded Highway Trust Fund (HTF) won’t be able to support any new road, bridge, or transit spending in FY 2015, putting $40 billion worth of highway investment, $2.4 billion in related equipment market activity, and 4,000 dealership jobs at risk. The HTF’s long-term prospects are equally dim. Just keeping highway funding flat for the next six years is going to require lawmakers to come up with more than $100 billion in new HTF revenues (gas tax, etc.) or equivalent general fund transfers. That’ll be a heavy lift at a time when the government is bleeding red ink. Not all AED members sell equipment to highway contractors, but road construction leads to additional development activity (housing, utility, commercial building), so it’s likely that one way or another you’ll be affected if the highway program collapses. Dealers also face enormous risk on the tax front. Most AED members would lose big under the tax reform plan unveiled by the Senate Finance Committee in November. Among the proposals: much longer cost recovery

periods for equipment and other business expenditures and the repeal of last-in, first-out (LIFO) accounting and like-kind exchange (LKE). Aside from playing defense, AED is also working to reinstate higher Sec. 179 small business expensing and bonus depreciation and trying to get Congress to hold equipment rental revenue harmless from the new 3.8 percent Obamacare tax on passive income. There are other issues for dealers to worry about, including the National Labor Relations Board’s proposed ambush election rule, the Environmental Protection Agency’s ongoing abuse of the permitting process to shut down coal mines and development activity, the Obama administration’s foot-dragging on the Keystone XL pipeline, and the risk that misguided regulations or legislation could disrupt the booming shale energy sector. Helping AED move the ball forward. If you care about any – or all – of those issues, the AED Fly-In is your best opportunity to impact the outcome. Lawmakers want and need to hear how their decisions affect employers like you “back home.” That’s why a full day of the Fly-In is reserved for your Capitol Hill meetings. Don’t worry if you’re a political novice: The first day of the meeting is packed full of briefings to help you understand the issues better and AED has staff standing by to help you make your Hill appointments if you’ve never done it before. Gathering political intelligence to guide business decisionmaking. If you accept the premise that events in Washington, D.C., have ripple effects for your company, then you’ll want to know what’s likely to happen in the coming year so you

can plan accordingly. The Fly-In is a way to break through the noise and hear directly from policy experts and lawmakers about issues, outcomes, and consequences for your company. Will uncertainty surrounding federal construction programs create volatility in equipment markets? Will tax changes affect your bottom line and customer purchasing decisions? Come to D.C. to find out, and give yourself an edge over the competition. Networking with industry leaders. The Fly-In consistently attracts the equipment industry’s big thinkers – people who understand what happens locally is affected by federal government decisions. That makes the Fly-In a top-notch networking opportunity. We’ve included plenty of time on the agenda – breaks, meals, and receptions – for you to mix and mingle with the best and brightest from leading AED member companies from around the country. We’re confident you’ll make valuable new contacts, reconnect with old friends, and learn something from your peers. We Hope You’ll Be There Those are just four good reasons to join us in April. There are many more. Come to the Fly-In and find out for yourself. More information is at aednet. org/fly-in. If you’re one of our regular attendees, we’re looking forward to seeing you again – maybe you’ll invite someone else from your state to join you this year. If you’ve never been before, we hope you’ll give us a try. CHRISTIAN KLEIN (caklein@aednet.org) AED’s vice president of Government Affairs and Washington counsel. He can be reached at 703-739-9513.

March 2014 | Construction Equipment Distribution | www.cedmag.com | 53

New & Improved

Atlas Copco Introduces New WEDA Small Range Pumps Both are portable with easy plug-ins. Adding to its extensive pump line is a new small range of WEDA dewatering pumps from Atlas Copco, including the WEDA04 and WEDA08, which provide drainage pumping; the WEDA08S for sludge pumping, and the WEDA04B for low suction pumping. The new WEDA04 is equipped with a 400-watt electric motor. A 750-watt electric motor is powers the WEDA08. Both models feature a polyurethane semi-vortex impeller, which reduces the risk of clogging. In addition the models are designed with built-in motor protection, high torque capacitor and a three-terminal automatic cutoff to prevent motor overload and dry burning. With a rubber-coated bottom plate to protect against scratches or damages, the WEDA04B residual pump has the ability to pump down to 1 millimeter of water and is suited for

applications requiring low-suction pumping. Equipped with a 750-watt electric motor and a vortex cast-iron impeller, the WEDA08S sludge pump is specifically designed for difficult sand and mud applications. Using a three-bolt disassembling design, particles and debris up to 25 millimeters can go through the pump housing with minimal wear. These portable pumps come with easy plug-ins and smooth and threaded discharge with each new model designed with an outer jacket for cooling. A triple shaft seal assures long life, and the semi-vortex wet end minimizes maintenance. All feature dry running capability.

Maeda Offers Four Mini-Crawler Cranes in 2014 Maeda USA offers four minicrawler cranes that are compliant with all OSHA and ASME B30.5 standards for mobile cranes, and engines that conform to current EPA emissions standards. According to the company, the outrigger-equipped “spider” minicranes can fit through doorways for indoor use; can reach as high as 68-feet; have rated capacities up to 4.2 tons; and specialize in limited access and tight work space lifting. The MC series three models include units with dual power (diesel/ electric and gasoline/LPG), and a new optional auxiliary winch with high rope capacity allowing operation from rooftops as far as 330 feet below the machine. Other options include a jib style searcher hook boom extension, a fixed mounted man basket, fly jib attachment, and a remote controlled manipulator vacuum device for placement of glass, steel plate, or smooth stone. All MC models come standard with wireless radio remote control, moment limiter safety systems with load indicator, heavy duty black or non-marking white rubber tracks, three sheave hook blocks and various other features. The company also offers the LC785M-8, a 5.4 ton capacity telescoping boom crawler with a no-outrigger design offering a 67-foot maximum tip height and near zero tail swing. The LC model is similar in size and design to the mini-excavators, except equipped with a telescopic boom and hook. The LC785M-8 has a front blade attachment and stowed swing away fly-jib attachment. For more information visit www.maedausa.com

54 | www.cedmag.com | Construction Equipment Distribution | March 2014

For more information visit www.atlascopco.us

New Stump Removal Tool from Leading Edge Attachments Leading Edge Attachment’s new stump removal tool, The Stumpiranha, is designed to replace stump grinding. It allows for complete stump removal without leaving grindings or remains that can cause sinkholes. Manufactured in the U.S., the Stumpiranha is a patented attachment to an excavator or backhoe that allows cutting and ripping under the stump from the roots. It features high strength T1 alloy steel for abusive, abrasive and cold weather conditions. Staggered sharp pointed blades cut the roots under the stump one pointed blade at a time, thus allowing the maximum cutting force to be achieved. The vertical arms of The Stumpiranha straddle the stump while the blades rip the roots below allowing the stump to be removed completely, only leaving the ends of the roots. The stump can then be scooped up and loaded into a truck, without leaving insect infested grindings at the site. For more information visit www.stumpiranha.com

New & Improved

Infor Field Service Management Tool PFW Previews New Dealer Management System Infor Service Management 5.0 is the company’s latest generation service management application. Version 5.0 offers users easier contract creation and cloning, the ability to highlight configurable rental rates, robust search functionality and a new intuitive interface. A new rental counter desk has been added for use by dealers who are expanding into equipment rental. Designed to support both small and high-volume rental businesses, it involves a check-in and out-process and the ability to quickly view inventory availability and establish the terms of a rental contract over the counter. To satisfy FDA requirements, Infor made changes to increase the visibility of component serial numbers and customer ownership through new reporting features; electronic signature capabilities and requirements are also included. For more information visit www.infor.com

ADVERTISERS’ INDEX Ajax Tool Works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 ARGO - Extreme Terrain Vehicles . . . . . . . . . . . . . . . . . . . . .33 B4 Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Bell Trucks of America. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 BOKF Equipment Finance Inc. . . . . . . . . . . . . . . . . . . . . . . 44 Direct Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . .25 DIS Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 e-Emphasys Technologies, Inc. . . . . . . . . . . . . . . . . . . . 28-29 EPG Insurance, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 GE Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 Glynn General Corporation . . . . . . . . . . . . . . . . . . . . . . . . .20 HKX, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Hyundai Const. Equip. USA Inc. . . . . . . . . . . . . . . . . . . . . 48 Infor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 LayMor Sweepers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Lowe Manufacturing Company, Inc. . . . . . . . . . . . . . . . . . .15 Manitex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC PFW Systems Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Pierce-Pacific Manufacturing Co. Inc. . . . . . . . . . . . . . . . . 39 Ritchie Bros. Auctioneers . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SANY Heavy Industry Co., LTD . . . . . . . . . . . . . . . . . . . . . IFC Sentry Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . 6 Toku America, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Towmaster Trailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Woods Equipment Company. . . . . . . . . . . . . . . . . . . . . . . .17 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., Suite 220, Oak Brook, Ill. Phone: 630574-0650. 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

PFW previewed its powerful new dealer management system at CONDEX 2014. Available in June, IntelliDealerInsight is an enhanced version of its dealer management software, which features new tools designed to increase productivity and deliver more in-depth analysis across a dealer’s entire operation. The system is complemented by PFW business tools designed to help dealers increase business efficiency. Users can also pair the system with ID MobileAccess 2.0, a mobile dealership management application. IntelliDealer Insight’s new Advanced Analytics application will be integrated with the dealer management system’s current performance to monitor dashboards and existing analytic tools. It will add customizable reporting across business functions; cross tabulation and a range of graphing features allowing dealers to access department specific data through new interfaces built into existing departmental listing screens. Users will have the option of adding a mobile application that enables customers to access their account and communicate with the dealership via mobile devices. The service will be available as part of a bundled offering with PFW’s current eServices application, a web-based portal. For more information visit www.pfw.com

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March 2014 | Construction Equipment Distribution | www.cedmag.com | 55

Dealer Data

New Construction Starts in December Improve 5 Percent; Annual Total for 2013 Climbs 6 Percent to $516.8 Billion Year-To-Date Construction Starts Unadjusted Totals, In Millions $

Monthly Construction Starts Seasonally Adjusted Annual Rates, In Millions $ December 2013

November 2013

% Change

-7

$554,486

$526,803

+5

Nonresidential Building Residential Building Nonbuilding Construction TOTAL Construction

Source: McGraw-Hill Construction, www.construction.com

Nonresidential Building Residential Building Nonbuilding Construction TOTAL Construction

12 Mo. 2013

12 Mo. 2012

% Change

+7

$516,802

$487,204

+6

Source: McGraw-Hill Construction, www.construction.com

Monthly Sales Volume by Original Equipment Cost with Recovery %

This graph 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 2012 representing 100 percent, (e.g. total OEC sold in February 2013 was approximately 80% of total OEC sold in December 2012). 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. February 2013 sales $ recovery was 47.8% of total OEC sold).

Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520

The Dirty Dozen - 8&& ÀOLQJV RQ HDUWKPRYLQJ XQLWV Equipment Description Articulated Dump Trucks

DEC 12

JAN 13

FEB 13

MAR 13

APR 13

MAY 13

JUN 13

JUL 13

AUG 13

SEP 13

OCT 13

NOV 13

Grand Total

86

33

24

40

57

86

72

91

111

82

68

69

819

375

340

184

291

269

307

267

355

365

352

362

308

3,775

10

7

9

3

6

11

4

9

15

13

7

4

98

741

624

408

529

662

719

733

700

847

780

766

600

8,109

47

31

10

22

20

20

27

14

26

35

39

16

307

Mini Excavators

717

825

435

615

749

925

775

888

809

815

908

700

9,161

Motor Graders

133

89

44

54

96

104

112

110

88

105

121

97

1,153

7

5

6

2

2

13

15

6

7

6

6

1

76

1,677

1,393

752

994

960

1,074

897

916

797

912

1,236

384

335

246

231

361

356

294

400

383

366

369

284

Wheel Loaders < 80 HP

96

78

50

61

44

66

64

58

84

78

86

92

857

Wheel Loaders > 80 HP

625

608

330

335

489

484

440

522

467

518

584

559

5,961

4,898 4,368 2,498

3,177

3,715

4,165

Crawler Dozers Crawler Loaders Excavators - Crawler, Hydraulic Excavators - Wheeled, Hydraulic

Scrapers - Conventional Skid-Steer Loaders Tractor Loader Backhoes

Grand Total

Supplied by Equipment Data Associates, Charlotte, N.C.

56 | www.cedmag.com | Construction Equipment Distribution | March 2014

3,700 4,069 3,999 4,062

1,316 12,924 4,009

4,552 4,046 47,249

NEXT GENERATION

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Email:

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Web:

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