March 2013
www.cedmag.com
Don’t Let Them
Crumble
Exploring America’s inattention to highway maintenance
Plus:
n Ontario’s rhetoric versus action n n
Kobelco’s comeback The dreaded performance review
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Contents
Winner 2012 Journalism Award Construction Writers Association
march 2013 Vol. 79, No. 3
Editorial Team
Executive Editor and Director of Programs Kim Phelan kphelan@aednet.org
Features
from the cover
Culture of safety also means it’s safe to speak up.
Contributing Editor Joanne Costin pr@aednet.org
Editor’s Note 7
How will the industry untangle T-4’s used market mess?
Graphic Production eva Belmonte design@aednet.org eva@neggie.net
Columnists
Garry Bartecki AED Vice President of Finance Christian Klein AED Vice President of Government Affairs and Washington Counsel Eli Lustgarten ESL Consultants
Ontario Infrastructure Engine Chugging, But Feebly 26 Is the provincial government too busy talking to hear the evidence supporting public infrastructure investments?
Jerry Randecker & Chris Sitter Jordan-Sitter Associates
Aftermarket 49
What to do for an all-out market capture blitz
Washington Insider 57
New report shows user fees can’t be ignored in highway funding debate.
departments
Inside AED 8 Groundwork 12 Industry Beat 14 Advertisers’ Index 63 Dealer Data 64
Advertising Sales Manager Albert J. Ramirez 800-388-0650 ext. 311 aramirez@aednet.org
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Business Outlook 53
Politics aside, 2013 will pave the way to future growth.
Vice President–Sales/ Publisher David W. Gordon 800-388-0650 ext. 334 dgordon@aednet.org
600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 www.aednet.org
Getting everyone comfortable with realistic rental rates
One expert says the U.S. is playing a dangerous game of deferred maintenance – it’s a game that has no winners.
Advertising Contacts
President’s Message 20
Dark highway picture has a new ray of light.
On the Numbers 51
U.S. Keeps Building New Highways While Letting Old Ones Crumble 34
Ron Slee R.J. Slee & Associates
Production Manager martin cabral 800-388-0650 ext. 313 mcabral@aednet.org
Columns
From the Chairman 5
Kobelco’s Plan of Attack? Getting the Management ‘Band’ Back Together 40 Mysteries revealed – people and plans emerge from suspenseful silence and Kobelco comes out swinging.
It’s Time for Your... Performance Evaluation! 44
Plus: A Closer Look 48
12 ways to make this tool work, and permanently shake off the dread shared by reviewers and reviewees alike
BOKF Equipment Finance keeps focus on relationships.
Overwhelming Your Customers With the Wow Factor 22
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From the Chairman President & CEO - TOBY MACK Associated Equipment Distributors Oak Brook, Ill.
Embedding a Safety Culture In Your Business
Executive Vice President & COO Robert Henderson Associated Equipment Distributors Oak Brook, Ill.
Officers
Chairman - mike quirk Wagner Equipment Co. Aurora, Colo.
Put some measures (and money) where your mouth is, and show employees you mean it.
Vice Chairman - Tim Watters Hoffman Equipment Co., Piscataway, N.J. Sr. Vice President - Don Shilling General Equipment & Supplies, Inc. Fargo, N.D. Vice President - Rick van exan Toromont Industries Inc. Concord, Ontario Vice President - whit perryman Vermeer of Texas Inc. Irving, Texas Vice President of Finance Michael D. Brennan Brandeis Machinery & Supply Co., Louisville, Ky. Past Chairman - Larry Glynn CMW Equipment St. Louis, Mo.
At-Large Directors ron barlet Bejac Corp. Placentia, Calif.
Paula Benard C.N. Wood Co., Inc. Woburn, Mass. Gregg R. Erb Erb Equipment Company, Inc. Fenton, Mo. Dennis J. heller Stephenson Equipment Inc. Harrisburg, Pa. Mike Rooney Thompson Tractor Co., Inc. Tarrant, Ala. Michael J. Savastio Groff Tractor & Equipment, Inc. Mechanicsburg, Pa.
Regional Directors Bruce A. Bowman Upper Midwest Reg. Star Equipment, Ltd Des Moines, Iowa
gary frelick Western Canada Reg. Douglas Lake Equipment Langley, BC Patrick McConnell, West Reg. Clyde/West, Inc. Portland, Ore. christopher palmer Northeast Reg. Wood’s CRW Corp. Williston, Vt. Mark Romer, Southeast Reg. James River Equipment, Inc. Ashland, Va. Jeffrey Scott Rocky Mountain Reg. Intermountain Bobcat Salt Lake City, Utah Rick Van Exan Eastern Canada Reg. Toromont Industries Ltd. Concord, ON gary D. Vaughn South Central Reg. OCT Equipment, Inc. Oklahoma City, Okla.
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By Mike Quirk
One of the benefits of being the AED Chairman is the editorial freedom to choose the subject matter for my monthly column. At first it seems challenging to identify topics that are relevant and important across the broad ranks of our membership but, given the inherent risks associated with working on or around heavy equipment, few of us would argue that first and foremost we should always start with safety. Successfully embedding a culture of safety simultaneously reduces risk, generates cost savings, and creates opportunities in many ways. There are tangible financial incentives associated with a combination of reduced insurance rates and lowering financial losses associated with recordable incidents. The fewer incidents experienced means lower legal fees and administrative costs associated with reporting responsibilities and lost time by the workforce. Fewer incidents equal greater productivity and less energy drain that is so prevalent in today’s highly regulated environment. And in the eyes of our customers safety is a growing competitive advantage. To an increasing degree it is mandatory to demonstrate an uncompromising commitment to safety or we simply will not be allowed on their site or be considered a responsible source of supply. Safety is also a significant employee satisfaction issue. When our people see that we place a high priority on their health and safety, we have higher morale and greater retention. Embedding a culture of safety at work creates a heightened awareness that carries over to our homes and families as well. There is no question that our behavior around the woodpile, our workshop, and behind the wheel of our cars is safer because of the emphasis we place on safety at work. It is one thing to say that we are committed to safety in our operations and it’s something else to actually set out to embed a culture of safety in them. In today’s work environment every company has examples that they can point to where we emphasize the importance
of safety. Slogans, signs, and “toolbox” meetings are extremely important. There are many new and very creative ideas that emerge every day. One fact that is undeniable, however, is that in order to embed a culture of safety we must have a highly visible commitment from the leaders of the organization. All employees need to see that the actions of the leaders are consistent with the message being delivered. We need the entire workforce to recognize their responsibilities, and we want them to feel comfortable providing their input and reporting potentially adverse situations without fear of reprisal. And when they do, they should also see a tangible response from the company, providing the resources they need to ensure a safe work environment. In our company we know how hard it can be to stay on task and balance the growing number of priorities in today’s challenging business environment. We believe that all the leaders of our various work groups need to share the same priority for growing a true culture of safety. We also know that you get the behavior you measure and reward. With this in mind, we include a safety category in our annual employee opinion survey that allows our workforce to weigh in on how we are performing. The results roll up to each individual work group and team leader. In 2012 we had a survey participation rate of 92 percent and we got good marks. In 2013 we have added Safety to the highest level of our Corporate Goals as measured by our Total Recordable Incident Rate (TRIR). For all of our managers we have tied additional compensation to the successful achievement of our 2013 goal. We’ve never had an incentive that was more important to achieve. I hope we hit this one out of the park!
Mike Quirk (mquirk@wagnerequipment.com) is vice president of Operations at Wagner Equipment Co., Aurora, Colo.
March 2013 | Construction Equipment Distribution | www.cedmag.com | 5
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Editor’s Note
Sending Tier-4 Back to the Future As used machines they may be made saleable, but what’s going to happen to the oh-so-primo value of those mean, clean digging machines? By kIM pHELAN
Is it just me or does anyone market, can they possibly hold their else see the supreme irony (or idiocy?) T-4 value – for which the owner paid in the total and costly overhaul of a premium – when T-4 is not valued equipment as we’ve known it, transor even useable by most countries of formed for the purpose of eliminating the world?” emissions that are bad for our lungs “I’ll give you my view,” he replied. and climate, when most of the rest of “I don’t think anybody knows.” the world will continue using all the And it’s going to be one gnarly “bad” equipment and emitting pollut- knot to sort out, we inferred, as he ants into the Earth’s atmosphere? Did held up a jumble of cords and cables anyone stop to consider that maybe lying on the table nearby to illustrate. some international diplomacy and Nevertheless, Mackay is optimistic consensus on the subject might have that there will be a solution to the ensured a more successful global outmyriad questions and problems that come before inflicting so great an R&D lie ahead – he just doesn’t know what burden upon U.S. manufacturing? that will be yet. A sign of how the Tier-4 engines are of course going thinking is evolving, however, is that to eventually bring about some meawhereas no one was talking about sure of cleaner air, but you can probde-rating or de-tiering machinery ably think of lots of things that stink a year ago, today, he said, most about North America’s mandated manufacturers are indicating they are metamorphosis of the construction working on some kind of de-tiering equipment industry. A big issue on mechanism. The ability to undo the my mind (and probably yours) is goT-4 functionality would, of course, ing to be the ability, or lack thereof, solve the No. 1 dilemma of North for a T-4 equipped machine to hold American owners of used T-4 equipits value once the original owner is ment being barred from the global ready to sell it. So for kicks, I lobbed used equipment market – in other that question to a guy who knows words, de-tiering would enable these the used machine market about as machines to continue their useful life well as anyone I can think of – elsewhere in the world where low-sulRob Mackay, president of Ritchie fur fuel and the know-how to repair Bros. Auctioneers (RBA). T-4 engines is likely to be absent. The setting for the conversation The big caveat to this remedy is was RBA’s monster-sized Orlando that once you de-tier an engine, says auction the third week of February. Mackay, you can’t reverse it back to Mackay was laying out facts and figT-4, and it won’t come back to the U.S. ures about the company, the industry, What’s more, one manufacturer global demand and so forth for a told Mackay this possible approach: group of editors, and when he was “We’ll create a de-tiering mechanism, finished I said something like: “Tier-4 but we won’t allow anybody in the final machines are going to carry a exporting country to put it on; only hefty price tag, Rob, but when they the dealer of the receiving country enter the global used equipment can put it on.”
If that sounds like a recipe for a fight to you, you’re probably right. Suppose U.S. Dealer A sells a used excavator to, say, a contractor in Argentina, and, because A isn’t allowed to de-tier it, he picks up the phone and calls Argentina Dealer B and says, ‘Hola Señor, I just sold a machine to your customer so please de-tier it when it arrives to your country.’ That’s when the mierda will really hit the fan, because B didn’t make a dime on the deal and now he’s supposed to alter the T-4 equipment that comes chugging down into his territory? Cover your ears when he calls the “mothership” about this one. Another fundamental speed bump in the de-tiering path to freedom is the fact that some machines have been designed in such a way that their very frames are different from those on pre-T-4 machines – “so that’s even a bigger problem,“ said Mackay. So, what was the question again? Ah yes, can used T-4 equipment hold its primo value when it ultimately hits the used market? “The reality is,” Mackay mused, “a buyer is going to pay [more] upfront today to own a T-4 engine, and the typical valuation of it at some point in time is a significant unknown.” As always, I’m happy to clear things up for you! And as always, thanks for reading. (Do let me know if you’ve got some thoughts on this issue.) Kim Phelan (kphelan@aednet.org) is the executive editor of Construction Equipment Distribution and director of programs for AED.
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Inside AED
Meet the Family
AED’s Oak Brook, Ill., staff are a close-knit, friendly tribe of professionals who serve the membership both front-and-center and behind the scenes. When you call or e-mail the AED office, you’re sure to be assisted by someone who is committed to finding what you need. We thought it might be nice to help you put a face with those names and voices, so here’s our lighthearted introduction of the “inmates” (in alphabetical order) displaying their best mugs and their years of service.
Vice President of Finance by Day; “The G-Man” by Night I’ve been studying the dealer distribution model for lift trucks and construction equipment for over 40 years – also have a specialty in equipment rental and leasing. I can’t stay away from this very fascinating business model that seems to survive through thick and thin. In fact, I am addicted – 24/7 – to finding ways to increase dealer profits and thus shareholder value. And I am pretty good at it, too. Have doubts? Try me. gbartecki@aednet.org CONDEX Manager and Executive Assistant by Day; “Florence Nightingale” by Night My strongest assets at AED are my ability to organize and juggle, and take on new responsibilities without hesitation. Since I’m patting myself on the back, let me continue by saying I am also very dependable, reliable, honest, hardworking and very much dedicated to AED. Heck, I even came to work while having a heart attack last year! sbrassel@aednet.org Production Manager by Day; “Tequila Ambassador” by Night I do my best trying to save AED money. Printing projects in-house and laying them out to get the most cost effect output. I also try to find the fastest and most economical way to ship and deliver AED’s mail, as well. I save an average of $25,000 a year in postage discounts without affecting delivery. mcabral@aednet.org
Director of Meetings & Conferences by Day; “Head Dirt Dike” by Night I am very organized. Being at AED as long as I have, I know quite a bit about the association, how it works and what we offer. I love talking to people and seeing them every year at Summit. jdixon@aednet.org Senior Systems Engineer by Day; “Motorcycle Mom” by Night I design, support and maintain all of AED’s technology. That includes servers, desktops, printers, connectivity, e-mail and data. I try to bring patience and compassion to everything I do. ggiannelli@aednet.org Vice President of Sales by Day; “Senior Scotch Supervisor” by Night I have the privilege of forming long-term, close relationships for a living – which is the definition of sales, as our members well know! I wouldn’t trade the friends and experiences I’ve gained in the equipment industry for anything. My responsibilities include advertising sales for CED and our electronic news outlets, and also selling CONDEX booth space and sponsorships for our numerous events throughout the year. If there’s one thing I am known for saying it’s “Pick up the phone and call!” There’s no substitute for just having a conversation. dgordon@aednet.org
Executive Vice President & COO by Day; “The Golfing Grandpop”by Night AED has had a tradition of having a former Director of Communications by Day; industry person on staff – and that person “Obsessive Compulsive Organizer” has been me since 2008. The concept by Night makes sense from a number of perspectives Whether it’s managing a publication project but mainly to keep the association grounded or organizing an aspect of the Summit in member needs and thus continually gauging the “AED or Executive Forum, I enjoy seeing plans Value Proposition.” rhenderson@aednet.org come together as planned – and jumping in with creative solutions when plans don’t come together as (continued on page 10) planned. jchoe@aednet.org
Proposed New Members Quality Chain Canada Surrey, B.C.
INTEGRAL dx Montevideo, Minn.
FABCO Equipment Inc. Milwaukee, Wis.
This list is published each month as required by AED bylaws. Comments on the applicants should be directed to AED President Toby Mack at 800-388-0650 ext. 326 or jtm@aednet.org.
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Inside AED
Staff Vice President, E-Commerce and Technology by Day; Master Biscuit Distributor (for my two mutts) by Night I build and maintain the AED and AED Foundation’s websites and support our e-commerce and online initiatives. I also work closely with AED member companies developing their online marketing efforts through our AED Web Services division. I launched AED’s member used equipment portal, MachineMart (http://www.machinemart.com) - which I still maintain. I aim to bring the best out of everyone and expect each person I work with to contribute in a positive manner to make for a successful effort. wch@aednet.org
Executive Editor and Director of Programs by Day; “Dancing Queen” by Night Hark, a dangling modifier I see cometh softly from yonder paragraph – yes, I’m an English major (and Shakespeare admirer) who turned to the dark side of (gasp) journalism. Thankfully my editorial soul was restored when I returned to my first love, association publishing, by rejoining AED and CED magazine in 2007. My mission: Dial in to the core dealer issues du jour and tap the best sources I can find to provide news, views, and (sorry) hues of the industry landscape that will assist dealer executives in their quest for profitability. kphelan@aednet.org
Executive Director, AED Foundation, by Day; “Blues Brother” by Night I most enjoy Foundation workforce development initiatives – it’s all about students and meeting essential dealer needs. As Foundation staff can attest, I’m always asking ”what can we do to make it happen?” sjohnson@aednet.org
Manager of Sales and Development, AED Foundation, by Day; “Kingpin” by Night I choose to believe the philosophy: Treat others the way you want to be treated. I try to keep this in mind for all aspects of my life. And when all else fails, just smile. Everyone can always appreciate a smiling face. rrakers@aednet.org
President and CEO by Day; “Web Junkie” and “Gizmo Geek” by Night I’m the guy who works with the board to identify the issues and opportunities, and then gathers together the people and the resources to pursue them. I’m also the guy who reminds members that putting people to work on industry issues and opportunities costs money, which folks are invariably reluctant to part with, but without which we can’t deliver the results. jtm@aednet.org
Advertising Sales Manager by Day; “Chickin Pickin’ Guitar Slickin’ Son of a Gun” by Night I like to think that along with the highest level of professionalism, I create long-lasting friendships with my clients with my quirky sense of humor and my neverending quest for fun. aramirez@aednet.org
Workforce and Education Program Manager, AED Foundation, by Day; “Manager of Retired Guy (MRG)” by Night Over the years I have been able to utilize my talent of being a multitasker for AED. I am a doer – learn as I go and avoid the written instruction at all cost! I can visualize how to do something and take on the challenge to learn. As a mother of three grown kids, I was able to apply my nurturing ability to my job in customer service. I wear and have worn more hats here and have enjoyed the challenges and the people I come in contact with on a daily basis. pnovak@aednet.org
Director of Finance by Day; “Sofa Comfort Inspector” by Night I head up the accounting functions for AED and The AED Foundation. I am involved in the daily accounting work, account analysis, budgeting, month-end closings, and preparation of financial statements, and I work closely with the auditors at year-end. I also administer our employees’ payroll and benefits. pstetter@aednet.org Membership Services Manager by Day; “Bomb Squad Technician, Pampers Division” by Night I learned from an old coach that players with “big ears and little mouths” learn the most. So heeding that advice, I’ve become an active listener, which has helped me understand the challenges facing our members. byates@aednet.org
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Inside AED
mark your
calendar
For information on any upcoming AED events, visit www.aednet.org or call 800-388-0650. Mar. 5 - Webinar: SELL Process – Your Offense 10-11:30 a.m. CST | Presented by Don Buttrey Mar. 6 - Webinar: ‘Expose Yourself’ – Aftermarket Marketing and Sales 10-11 a.m. CST | Presented by Rich Jilek Mar. 11-12 - Seminar: Parts Management Unit I: When It’s Right Presented by Ron Slee |Dallas, Texas Mar. 13-14 - Seminar: Service Management Unit I: When It’s Right Presented by Ron Slee |Dallas, Texas Mar. 19 - Webinar: Purchasing and Expediting 2-3 p.m. CDT | Presented by Ron Slee
Mar. 20 - Webinar: Best Practices 11-Noon CDT | Presented by Ron Slee Mar. 20 - Webinar: Standards of Performance 2-3 p.m. CDT | Presented by Ron Slee Mar. 26 - Webinar: Labor Efficiency 11-Noon CDT | Presented by Ron Slee Mar. 27 - Webinar: Shop Floor Scheduling 11-Noon CDT | Presented by Ron Slee Mar. 27 - Webinar: Standards of Performance 2-3 p.m. CDT | Presented by Ron Slee Apr. 2-4 - The Four Pillars of the Sales Profession Dayton, Ohio | Presented by Don Buttrey
Apr. 11 - Webinar: Report on the Current State of the Industry and the Economy 2 p.m. CST | Presented by Eli Lustgarten Apr. 11 - Webinar: Targeting Customers Digitally 2-3 p.m. CDT | Presented by Ed Steenman and Dave Pavlu Apr. 16 - Product Liability 10-11:30 a.m. CST | Presented by James Waite Apr. 23 - Market Driven Strategy: Practical Solutions for Today’s Distribution Challenges 10-11:30 a.m. CDT | Presented by Mike Marks
COMMITTED TO MOVING YOUR BUSINESS FORWARD Covering more than 26 states, we’re more committed to the construction equipment industry than ever before. With more than $350 million in equipment-related commitments, our team of industry experts can tailor nationally competitive products to meet your specific needs. Whether it’s fleet rental/wholesale inventory, working capital or larger, multi-bank syndications, we’re ready to invest in your business. When it’s time to move your business forward, give us a call, or better yet, let us come see you.
Lending | Syndication 214.736.1054 | www.bok.com /construction
©2013 BOK Financial Equipment Finance, Inc. is a subsidiary of BOK Financial Corporation. Member FDIC. Equal Housing Lender
March 2013 | Construction Equipment Distribution | www.cedmag.com | 11
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Groundwork Officers
Chairman Chris Pera Eastern HighReach Company, Inc. Horsham, Pa.
Vice Chairman A. Roy Kern Equipment Corporation of America Coraopolis, Pa.
Smiles All Around at Successful Summit Benefit Events Generous sponsors and participants generated fun and funds for the Foundation.
President Bob Henderson The AED Foundation Oak Brook, Ill. John Crum Treasurer Wells Fargo Equipment Finance, Inc. Pittsburgh, Pa. Immediate Past Chairman Walter Berry Berry Companies, Inc. Wichita, Kan. AED Board Representative Whit Perryman Vermeer Equipment of Texas Irving, Texas Executive Director Steve Johnson The AED Foundation Oak Brook Ill.
Directors
Gary Bridwell Ditch Witch of Oklahoma Edmond, Okla. Mike Festing-Smith NORTRAX, Inc. Tampa, Fla. Mike Hayes Komatsu America Corporation Rolling Meadows, Ill. Timothy Kramer Kramer Ltd. Regina, SK Dr. Wayne Longbrake Former Dean, Penn. College of Technology Williamsport, Pa. Sonja Metzler Ohio CAT Broadview Heights, Ohio Kenneth Silverman Volvo Construction Equipment Shippensburg, PA Mark teel Caterpillar, Inc. Peoria, Ill. Keith Tippett Kirby-Smith Machinery, Inc. Oklahoma City, Okla. Duane Wilder Liebherr Construction Equipment Co. Newport News, Va.
Denny Vander Molen, Vermeer MidSouth, celebrates his bidding victory at the Live Auction
The Scintas perform at Cabaret Night
The Cabaret Night and the Sixth Annual Live Auction at the AED Summit in Las Vegas not only injected a dose of fun and laughter into AED’s biggest event of the year, but both benefits raised money to support The AED Foundation’s Workforce Development initiatives. Many Summit attendees kicked off their convention week at the Foundation’s Cabaret Night Benefit featuring the musical impersonations and hilarious comedy of The Scintas. A special thank you to the main Cabaret Night Sponsor, Sentry Insurance, as well as all the table sponsors: Berry Companies, Inc; Caterpillar, Inc; CNH Capital Insurance
Agency Inc.; Komatsu America Corp; Liebherr Construction Equipment; R. B. Everett & Company; Ritchie Bros. Auctioneers; Tag Manufacturing, Inc., and Wells Fargo Equipment Finance. The Sixth Annual Live Auction, held in conjunction with the Viva Las Vegas Party Jan. 17, raised $50,000 for The AED Foundation. Thank you to Ritchie Bros. Auctioneers and all the sponsors and bidders who made this event such a great success. For more information about sponsorship of an auction item for the 2014 Live Auction in Houston, Texas, please contact Rebecca Rakers at 630-468-5113, rrakers@aednet.org.
AED Board Chairman Mike Quirk was one of the big winners of the night, out bidding everyone for the Hunting at Big Oak Plantation (sponsored by Iron Planet) and a Kingsmill Golf Weekend in Historic Williamsburg, Va. (sponsored by Liebherr Construction Equipment Co.) Dennis Kruepke, McCann Industries, Inc. – Napa Valley VIP Weekend Experience sponsored by EPG Dennis Vander Molen, Vermeer MidSouth – NCAA Men’s Final Four, sponsored by Caterpillar Inc., and CAT Financial Don Shilling, General Equipment & Supplies – the IronHorse 1000, High Back Executive Chair sponsored by United Group, Industrial Seats Div., and The Masters Golf Tournament at Augusta sponsored by Komatsu America Corp. Joe Phelan, Ritchie Bros. Auctioneers – iPAD 4 and iPod Touch sponsored by Bagela Asphalt Recyclers/Pavement Recyclers LLC Jonathan Tarpey, Bobcat of Houston
– Canadian Fishing at Warms Springs fishing resort sponsored by Ritchie Bros. Auctioneers Mark Yang, Sevalo Construction Machinery Group – South Sea Pearl Pendant Necklace sponsored BLS Enterprises Inc., and His/Her Movado Swiss Watches sponsored by LiuGong Construction Machinery/Dressta North America Matt Di Iorio, Ditch Witch of Ohio, W. PA & W. NY – Golf at Firestone Country Club sponsored by Paladin Construction Group Pierre Bernard, R.P.M Tech Inc. – NASCAR Package at the 2013 Brickyard 400 sponsored by Vermeer Corp. Rob Mackay, Richie Bros. Auctioneers – a Case of Exquisite 2008 Château La Dominique Wine, and the Wine Locker Stuffer sponsored by Ajax Tool Works, Inc. Thomas Blackburn, LVH – Florida Retreat at Legends Golf & Country Club sponsored by Gorilla Hammers, Inc. Todd Mix, JOB Rentals & Sales – Scottsdale Golf Retreat sponsored by WTP Advisors
A u c t i o n W i n n e r s
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Industry Beat
Nortrax Opens New Miami Facility Nortrax recently celebrated the grand opening of their new state-ofthe-art 26,000-square-foot facility in Miami. The $7-million project includes eight service bays and a track press area, tripling the size of the service department. A two-story rack system, doubles the dealership’s parts storage capacity. Shown from left to right:
Eny Sanchez, general manager, Nortrax Miami; Robert G. Miller, facilities engineer, John Deere; Kevin Karlix, director of Sales U.S. and Canada, John Deere; Tom Fennelly, senior vice president, Russell Construction; Ryan Andresen, project manager, Russell Construction;
Bill Pyles, vice president, Service North America, Nortrax; Mike Festing-Smith, regional vice president, Nortrax.
BOMAG (FAYAT GROUP) to Acquire Certain Roadbuilding Assets and Operations from Terex BOMAG (FAYAT GROUP) announced it has entered into a purchase agreement with Terex to acquire certain product lines in North America, and the Roadbuilding operations of Latin America (ex-Cifali). “The addition of these product lines enhances the position of FAYAT GROUP as the only full liner in road building equipment, for long-term success and significant growth potential in the industry. Moreover, it accelerates our footprint in emerging countries,” said Jean-Claude Fayat, FAYAT GROUP
executive managing director. “We are pleased to announce the agreement and are proud to welcome the Cedarapids and CMI products (asphalt pavers, reclaimer/stabilizer and material transfer vehicles/devices) and reputable brand images into the BOMAG America’s offerings,” stated Rob Mueckler, vice-president of Sales & Marketing. “We intend to fully leverage our collective strengths to more efficiently serve road building customers.”* The acquisition will position BOMAG to offer a broad range of road building products and solutions
to customers, and reinforce the global leadership of MARINI-ERMONT (FAYAT GROUP) in the mixing plant segment in Latin America. The aging infrastructure of the North American transit system and the development of infrastructure in South America are expected to continue to drive an increasing demand for road building and compaction equipment. * CMI and Cedarapids are registered trademarks of Terex Corporation or its affiliates licensed for use to FAYAT GROUP under the terms of the purchase agreement.
IRS Seeks Comments on Dual Use Equipment
Canadian Distributors Press Ministers for Infrastructure Investment
The IRS is seeking comments on dual-use property as it considers issuing new guidance to reduce disputes between equipment dealers and the agency. Specifically, the IRS wants to know “whether construction and agricultural equipment held simultaneously for sale or lease to customers (“dual use property”) by a dealer in such equipment is properly treated as inventoriable property or as a depreciable property.” The notice also asks for comments about when dual-use property may be eligible for like-kind exchange (LKE) treatment. All comments are due June 16. AED will be analyzing the IRS notice and reaching out to industry leaders for help developing our position. Contact AED Vice President of Government Affairs Christian Klein at caklein@aednet.org if you are interested in participating.
AED is ramping up its pressure in Ottawa as Building Canada, the $8.8 billion fund for construction projects, is set to expire in 2014. Working with its members in Canada and with the Canadian Chamber of Commerce (CCC), AED hopes to raise visibility on the critical need for sustaining the country’s infrastructure networks. The association recently committed $5,000 to a new CCC infrastructure initiative to press the Canadian government for long-term, stable infrastructure investment. In a January letter, 34 Canadian AED members asked Transport, Infrastructure & Communities Minister Denis Lebel and Finance Minister James Flaherty to renew and expand the country’s commitment to infrastructure. (continued on page 16)
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Industry Beat
Sany Partners with NASCAR and Tommy Baldwin Racing
SANY America announced its first-ever primary sponsorship of a car in the NASCAR Sprint Cup Series. The company is partnering with Tommy Baldwin Racing (TBR) to serve as the primary sponsor of driver Dave Blaney’s No. 7 Chevrolet SS for 14 NASCAR Sprint Cup Series events, and as the associate partner for 22 races.
Two-thirds of Aerial Platform Deaths Occurred in U.S., Reports IPAF There were 31 Causation – and machine type fatalities worldwide 10 involving aerial work 9 platforms in 2012, 8 7 according to prelimi6 nary results of the 5 4 International Powered 3 Access Foundation’s 2 accident database. The 1 0 Fall from Mechanical main causes of these Electrocution Entrapment Overturn platform technical 1b static boom 4 0 2 1 4 fatalities were: falls from 3a mobile vertical 0 1 1 2 0 3b mobile boom 4 3 6 3 0 platform (9), electrocution (8), overturn (6), to improve training programs and entrapment (4) and safety campaigns. A new dashboard mechanical/technical related (4). facility allows companies that report About two-thirds of the fatalimonthly to track and monitor ties (20) occurred in the U.S., the accidents related to their staff. All largest market for powered access manufacturers, rental companies, equipment in the world. The data contractors and users are encouris based on accidents reported aged to report fatal and serious directly to IPAF and through information collated from various accidents involving aerial work platforms at www.ipaf.org/accident. news media. IPAF will use the data
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Industry Beat
Dick Wavro Retires
In the News
Dick Wavro, retiring president of 1st Source Bank – Construction Equipment Finance, was presented with AED’s Distinguished Service Award in February in recognition of his many years of service to the industry. Pictured left to right: Larry Chute, He joined the bank in Dick Wavro, and AED Executive Vice 1990 (the same year they President and COO Bob Henderson. became AED members) to launch its equipment finance division, and previously worked for Associates Commercial Corp. Larry Chute replaces Wavro as president – he has been with 1st Source for six years and has been the president of two Specialty Finance Group Divisions, Medium and Heavy Duty Trucks (MHDT) and Environmental Equipment Finance (EEF). Prior to joining the bank, he spent 27 years in the commercial finance business beginning as a management trainee with the Associates Commercial Corporation’s Transportation Division.
Strongco Corporation purchased six acres of land for its new branch in Fort McMurray, Alberta. Construction on the 23,000 square-foot facility is scheduled to begin this spring and is slated for completion in the spring of 2014. Nortrax has purchased the assets of John Deere Construction and Forestry equipment dealer Holt Equipment Company and began leasing Holt’s dealership sites. Runnion Equipment has named Michael F. Prochot as its new president. Prochot, most recently vice president and general manager, will succeed Patrick Runnion, who is now the chief executive officer of the company.
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The G.W. Van Keppel Company has been named the SANY America crane dealer for Arkansas and southern Illinois. (continued on next page)
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March 2013 | Construction Equipment Distribution | www.cedmag.com | 17
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Industry Beat
Infor, a leading provider of business application software serving more than 70,000 customers, announced that Zahid Tractor & Heavy Machinery Co. Ltd., the Saudi Arabian Caterpillar dealer as well as the Volvo and Renault Truck dealer, will be the first Zahid Group company to implement Infor M3 for Equipment in a twoyear roll out. The Infor M3 solution, composed of scalable applications critical to the equipment industry including Supply Chain Execution, Warehouse Mobility, Sales Management and Financial Accounting, is expected to help Zahid increase visibility of critical business information, support the smooth flow of data between departments and streamline business processes across 40 sites. Additionally, Infor announced that JCB, one of the world’s leading manufacturers of construction and agricultural equipment, has implemented Infor Enterprise Performance Management (EPM). The application is designed to create greater cohesion of financial data across JCB’s business units, making it easier to report on and share business critical information in a timely manner. Sonsray Machinery acquired 11 Case Power and Equipment locations in California, Nevada, Oregon, and Washington, from CNH Construction Equipment. Sonsray Machinery President Mathew Hoelscher is excited about entering the construction equipment business. “For nearly 30 years our family has operated Sonsray, offering refrigerated trailers and containers in many of the same towns where Case Power facilities were located. We see many opportunities for applying our knowledge from one business to the other, and we’re looking forward to enhancing services for construction equipment owners throughout our territory.” Mathew’s father Herb Hoelscher, serves as chairman, and his brother, Nicholas Hoelscher, is vice president.
XAPT Corporation, a global Microsoft Dynamics partner, is pleased to announce the ERP Implementation project kick-off with Whayne Supply/Walker Machinery. XAPT will implement Microsoft Dynamics AX2012 for Equipment Dealers, which will allow the company to plan and manage business operations throughout its 27 locations. Ryan Morrissette rejoined Faris Machinery as a district manager in the Grand Junction branch, serving the Asphalt, ConstrucRyan Morrissette tion, Solid Waste, and Municipal markets in Colorado. Morrissette has served contractors and municipalities in Colorado for 12 years. Steve Brooks joined Steve Brooks Faris Machinery as a district manager in the Commerce City branch. Fecon added Komatsu Equipment Company, Salt Lake City, Utah, as a stocking dealer and service, parts provider in Utah, Wyoming and much of Nevada. John Deere is now a trustee of The First Tee, a non-profit youth organization that provides life skills and character education programs to young people using golf as a platform. John Deere will donate $1 million over five years to The First Tee. Terex Woodsman changed its name to Terex Environmental Equipment (TEE), reflecting an expanding market and customer base and aggressive product development program for 2013. TEE will be the single provider of wood processing and environmental equipment within Terex. The arborist product line will
continue to reflect an element of the woodsman name and legacy in its product nomenclature, but all other products previously offered by the Terex Woodsman name will change to Terex Environmental Equipment. Ritchie Bros. Auctioneers held the world’s largest heavy equipment auction for 2013 in Orlando, Fla., Feb. 18-23, selling 9,400+ items for more than US$176 million. Close to 8,300 bidders registered for the six-day, unreserved public auction from 80 countries, which featured equipment from more than 780 sellers. Every item in the auction was sold to the highest bidder, regardless of price – without minimum bids or reserve prices. Volvo Construction Equipment (Volvo CE) announced that regional production of backhoe loaders will move from its current production facility, in Tultitlán, Mexico, to a newly enlarged facility in Pederneiras, Brazil. In addition, backhoes produced in Pederneiras will be exported to North America and other markets. Thompson Pump’s new social media program utilizing Facebook, Twitter and YouTube is designed to create a greater online presence, as well as improve stakeholder communications and corporate branding. Sandvik Mining has selected Volvo Penta engines for its underground trucks and loaders for the global mining industry. The Volvo Penta engines used in the Sandvik trucks and loaders meet the stringent Tier 4i/Stage IIIB emission standards for nitrogen oxides (NOx) and diesel particulate matter (DPM). Rich Haberkamp has been named vice president of Strategic Sourcing for the PALFINGER North America Group (PNAG). Haberkamp will report directly to Michael Berger, managing director of PNAG.
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Industry Beat
Barlow Strategic Sales & Marketing appointed Doug Amerman, vice president of the Fort Wayne, Ind.-based sales development, research and marketing firm, specializing in the North American and global construction and relatedequipment industries.
Doug Amerman
K-Tec Earthmovers Inc. has achieved ISO 9001:2008 Certification. K-Tec is a supplier of heavy-duty earthmoving scrapers for the construction, mining, and agricultural industries.
Mike Caldwell
KPI-JCI and Astec Mobile Screens welcomed Mike Caldwell to its sales and marketing team as a Regional Sales Manager for the western United States. Caldwell will cover the states of Arizona, New Mexico, Oregon, Washington, Alaska and Hawaii and will sell crushing and screening equipment.
JLG Industries announced the promotion of Marcio Cardoso to the position of vice president of sales and aftermarket, South America.
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Former Oracle executive, Matthew Baginski, has joined Infor’s Equipment Manufacturing team as the vice president of Sales for North American Equipment Manufacturing. Matthew Baginski
Atlas Copco ranks 18th among the 2013 Global 100 Most Sustainable Companies. This is the seventh time that Atlas Copco has appeared in the Global 100 rankings.
Wheeler Machinery Matriarch Dies
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#1 Business Management Software All on a Single, Fully-integrated Dealer Management System B4 Consulting helps you lay the foundation for success with SAP software. Integrating and optimizing all your business Marjorie Jane Jones Campbell operations, SAP gives you access 1926 ~ 2013 Marjorie Jane Jones Campbell died real-time information – anytime, peacefully after a to brief illness on January 31, 2013, surrounded by her family. Marjorie was born on November 6, 1926, anywhere, and on any device. in Salt Lake City to Walter Maughan Jones
Marjorie Jane Jones Campbell died and Jane Adamson Leishman. She was peacefully after a brief illness on Jan. 31, blessed with five older brothers whom she adored. Marjorie attended East High 2013, surrounded by her family. She was School, graduating in 1944, and received Bein English thefrom #1theDealer with B4 Consulting a Bachelor’s degree University of Utah in 1949. She affiliated the wife of Lyle Campbell, former owner with the Chi Omega sorority at the University, and loved to spend afternoons riding her horse, Stony, For along thea Free Consultation, of Wheeler Machinery Co. and a past AED chairman foothills east of Salt Lake City. Following graduation, Marjorie worked as a reporter for the Deseret News. who passed away in 2000. Married in 1949,Marjorie Marjorie hem@b4-consulting.com met her future husband, Lyle, while attending theEmail: University of Utah. Lyle was an engineering and business student who had completed his service and Lyle had five sons and a daughter; son Rob Campbell in the Navy during World War II and was affiliated with the Beta Theta Pi Lyle joined the LDS church as a result of Marjorie’s influence, and is president of Wheeler today, and son Paul fraternity. Campbell they were married inis Salt Lake City on September 2, 1949. During the ensuing years, Marjorie and Lyle had five sons and a daughter. executive vice president and also a past AEDMarjorie’s chairman. life focused on her family. She was an attentive and untiring mother, even when it came to herding five small boys through the busy activities of their lives. Marjorie A loving grandmother to her 24 grandchildren and 10 served as her ward Primary President, a member of the Stake Primary Presidency, and as PTA President during these years, and helped ensure that each of her five boys received his Eagle Scout award, served great-grandchildren, Marjorie is remembered as a woman a mission, and married in the temple. Marjorie’s only daughter, Elizabeth, was born with Downs Syndrome, and has been a treasure and inspiration who devoted herself completely to her family. B4of Consulting, Inc. +1 877 777 9480 to her family. Marjorie was a member of the Junior League Salt Lake, the Assistance League, and Daughters of the Utah Pioneers. She loved interior design, and kept an immaculate house throughout her life. When her children www.b4-consulting.com were older, Marjorie found time to travel with Lyle in his business activities
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and to pursue her love of cooking at the Greenbrier School in Virginia. Following Lyle’s death in 2000, Marjorie’s life was quieter, spending time with family, engaging in charitable activities, and reading. She was a loving March 2013of| her Construction grandmother to her 24 grandchildren and was thrilled with the arrival 10 great-grandchildren. The family is particularly grateful for the loving care provided to Marjorie by Marianne Waldrum, Lucy Beck, and Peggy Hill during more recent health challenges. Marjorie is survived by her sons Scott Campbell (Susan), David Campbell (Stacey), Robert Campbell (Lisa), Patrick Campbell (Erin), and Paul Campbell (Debbie), by her daughter Elizabeth Campbell, and by her twin brother and best friend, Maurice D. Jones. She is beloved by her children, grandchildren, great-grandchildren, nieces and nephews, and will be remembered as a woman who gave her life completely to her family. We will miss her dearly.
Equipment Distribution | www.cedmag.com | 19
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President’s Message
Here We Go Again Although the flow of funds will likely shrink to match declining gas-tax revenue, highways do have some hope – and so do the businesses that support them. By Toby Mack
But away from the spotlight, some encouraging activity is developing that may bode well for highways. To review the bidding, the current highway bill funds the program at about $42 billion per year through September 2014. With gas tax revenue, which theoretically pays for the program, running $10-$15 billion a year short of the necessary $42 billion, the current law filled the gap with one-time offsets and transfers from other parts of the federal budget and by further drawing down the shrinking positive balance in the Highway Trust Fund (HTF) so that it goes broke about when the current law expires. Then what? If nothing is done to increase the money flowing into the HTF, federal spending on highways will shrink to match declining gas tax revenues. This would mean a program in the $25-$30 billion range annually – a rough number but in the ballpark. What will this mean for equipment dealers? Based on recent research, we know that each dollar of highway spending generates about 6.4 cents of revenue at the dealer level. We also know that each $1 of federal spending results in about $2 of actual spending on highway projects. So if the federal share shrinks from $42 billion to, say, $27 billion annually, the $15 billion reduction produces a market that will have about $30 billion per year less worth of projects. This results in a loss of $2 billion per year in dealer business in the U.S. Thus if the total dealer market is roughly $40 billion annually, the average dealer can expect to lose about 5 percent of its revenue base; presumably more if you specialize in the highway market. And if this happens, the smaller contractors will be hurt the worst; so if your business relies on these customers, the picture is even darker. But now to the brighter side. The House Transportation and Infrastructure Committee, which traditionally leads the highway bill process, has a new Chairman, Bill Shuster (R-Pa.). We recently had the pleasure of joining Chairman Shuster on a visit to AED-member Cleveland Brothers Equipment Co., which operates in Rep. Bill Shuster, fourth from right, heard firsthand Shuster’s district. In a nearly one-hour conversation with from Cleveland Bros. CEO Jay Cleveland, fourth from myself, our Vice President of Government Affairs Christian Klein and Cleveland’s CEO Jay Cleveland, Shuster left, how important sound infrastructure funding is exhibited a clear passion for infrastructure investment, to the equipment industry.
It seems like those of us who advocate for federal highway investment have just caught our breaths after the grueling, grinding battle for the last program renewal was finally won, almost three years late, in June 2012. Then came the 2012 elections, which brought all legislating to a halt through mid-November, followed by the fur fight over the fiscal cliff that was partially resolved, sort of, just before the end of 2012. Now the new Congress has settled in, and an emboldened President Obama is leading his troops back to the fight for still higher taxes on the “rich” and on those tax-dodging corporations, while showing no inclination to tackle the real sources of our fiscal pain: (1.) excessive regulation which is retarding growth, and (2.) out-of-control entitlement spending. With a few more trip-wires still ahead in the form of the debt limit and sequester, we are sure to see more brinksmanship on taxes and spending in the coming months.
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President’s Message
If you see or speak with them in the meantime, send a strong message of the importance of highways to the national economy and future growth, not to mention your ability to employ workers who vote in his or her district. And please plan to attend the AED Spring Government Affairs Fly-in in
Rep. Bill Shuster along with a commitment to a strong federal role, which he noted was enshrined in the U.S. Constitution, alongside national defense, as a core federal responsibility. And he clearly indicated that all funding options, including an increase in the gas tax (which we believe will be key to a solution), will be on the table. This is a marked change in stance from Shuster’s predecessor as T&I Chairman, Rep. John Mica, who was unalterably opposed to any increase in the gas tax. In fact, very recently Chairman Shuster held the first Committee hearing on the highway program, with one of the witnesses being U.S. Chamber CEO Tom Donohue, a man not known to mince words. Tom called for increasing the gas tax as part of the solution, whereupon Mica bolted from the hearing room and released a statement declaring that Donohue has lost touch with the business community he represents, and should look for another line of work. Tom, true to character, calmly and publicly responded: “I thought that’s what Mr. Mica was doing.” So just when you thought you could stop worrying about the highway program for a while, the new battle is joined. AED remains on the front line – that’s what we do. You’ll be hearing from us often on the subject, and we’ll be calling on you for support in contacting your lawmakers at important points in the process.
Washington D.C., May 22-23, the details of which are currently being developed and posted at www.aednet.org/fly-in. n Toby mack is president and CEO of Associated Equipment Distributors. He can be reached at jtm@aednet.org.
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Sales
Overwhelming Your Customers With...
The Wow Factor
By Jeffrey Gitomer
What is Wow? Maybe the easiest way to describe it is to answer the question: Who Wowed you? If you can recall that story – and recall how many times you have re-told it – you’re on your way to understanding the process of Wow. Here are the elements that can set the stage for Wow in your dealership business: Everyone is friendly. It seems too simple to just say, “Everyone needs to be friendly.” What it really means is there is good enough morale inside the company to make friendly possible. If attitudes are down, friendly is impossible. If customers are angry, attitude is challenged. If you are not training attitude proactively, then attitude will be sporadic and friendly will follow
suit. If you teach your people to be defensive and allow them to hang up on an angry customer (rather than learn from an angry customer), your reputation will suffer. For the past decade I have proclaimed, “It costs no extra money to be friendly.” It’s still true. Everyone is helpful. Here’s the help strategy that will work 100 percent of the time: “Tell me what you can do, not what you can’t do.” Most companies take pleasure in telling you what is not possible, telling you what their policy is, and giving some lame excuse for what cannot be done. Every time you tell a customer what you can’t do, it drives them closer to the competition. Eventually they will jump. It’s
important to understand that just because you can’t do it doesn’t mean they no longer need it. When I’m in a hotel and I call room service at 10:30 in the evening because I’m working on my next day’s project and I’m a little hungry, and they say room service closed at 10, I respond with, “Oh, I guess that means I’m not hungry anymore.” It’s no different with your customers. Get them what they want, when they want it. That’s your definition of help. Everyone is available. My company has no voicemail, on purpose. If someone is on a call, someone else helps the customer. No one in my company or in your company is too busy to help a (continued on page 24)
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(“Overwhelming Your Customers With The Wow Factor” continued from page 22)
customer, including you. No one in my company is either on their phone or away from their desk, and no one in your company should be either. Having a voicemail greeting that says, “Your call is important to me” is an oxymoron. If it’s so darned important, pick up the phone! Ease of doing business. 24-7365 is the new 9-5. The easier it is to do business with you, the more of your customer’s available dollars you will gain. Please don’t take my word for it – just ask Borders about Amazon. (Oops, you can’t ask them because they’re gone.) Amazon has all but taken over the book world (and the product world) because they made it easy to do business: Click. Buy!
Delivery beyond expectation. Whatever you promise for delivery, you must exceed the promise. Fast delivery is no longer an option; it’s an expectation. Everyone knows Zappos. What everyone doesn’t understand is that Zappos overnights your first order to gain your attention, your respect, and to begin earning your loyalty. (Macy’s does not.) Call ahead to warn of backorder. It never ceases to amaze me that companies will still backorder without prior notification. You know you are out of it and you know the customer needs it. Go buy it from a competitor and ship it if you have to! Backorders with no proactive communication makes your customers angry – angry enough to leave you and shop someplace else where they will tell you in advance whether the part is in stock or not and e-mail you the status of your order.
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Getting leads and referrals for your customers. This may come as a shocker, but customers don’t want to buy your stuff; they want to sell their stuff. Giving them business will help you earn theirs. It sounds simple, but it is not easy. It requires knowing them better and knowing their marketplace better. But once you do it, they will never stop talking about it – ever. Provide value messages to help them. Big question: What are you tweeting? Bigger question: Are you tweeting? Biggest question: Why the h#!! are you not tweeting? One value message per day (something that will help, improve, or inspire your customers) will breed loyalty, not just Wow. Sign up now and ask your best customers to follow you. And then others will. (just be consistent and authentic – no salesspeak) (continued on page 62)
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Ontario Infrastructure Engine Chugging, But Feebly Deficits, unemployment, and politics plague Canada’s most populous province, which badly wants a return to glory days. By Tom Van Dusen Jr.
The words that anybody involved in construction and equipment sales wanted to hear were contained in the Speech from the Throne presented by Ontario’s new government Feb. 19: Positive words about infrastructure – but no numbers attached. If there are any, they’ll come later in the provincial budget. In the formal speech delivered in the provincial legislature, new Liberal Premier Kathleen Wynne and her colleagues presented their governmental game plan. It’s the long-term vision of a minority government requiring cooperation from at least one of two opposition parties to retain power. “Your government understands that infrastructure is the underpinning of our economy and that if we continue to lag behind, then we’ll never leap forward,” the speech intoned.
The document went on to suggest it’s time for a “serious conversation” rather than major action about infrastructure, whether it be about better roads or stronger bridges, repaired underpasses or accelerated, integrated transit. With rhetorical flourish, the speech stated: “Your government believes that smart infrastructure investment can no longer be mired in political rhetoric.” It emphasized that the issue adds up to a “race against time for Canada as a whole,” requiring cooperation from all governments in advocating a national strategy on infrastructure. It’s all music to the ears of lobby groups such as the Federation of Canadian Municipalities (FCM) that recently expressed satisfaction with the federal government in working towards infrastructure renewal.
However, despite the encouraging Throne Speech words, provincial government disarray and financial despondency are likely to preclude many big new shovels in the ground in Ontario. There’s no getting away from the fact that successful national infrastructure expansion needs Ontario at the core. FCM president Karen Leibovici has referred to potential long-term solutions in meeting Canada’s “infrastructure challenge.” These solutions were discussed, Leibovici said, during consultations between the federal, provincial, territorial and municipal government levels – including a 20-year rehabilitation plan – which she says must be included in the next national budget, paving the main road to new jobs and economic growth. Meanwhile, 34 Canadian members of Associated Equipment Distributors (continued on page 28)
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have written to federal Finance Minister James Flaherty and Transport, Infrastructure and Communities Minister Denis Label requesting a renewed commitment to national infrastructure upgrades. Failure to do so, the AED members stated, will harm the nation’s long-term economic vitality and competitiveness. AED has suggested laying a federal foundation for an annual investment of at least $5.75 billion, along with indexing the gas tax to keep pace with inflation. AED’s latest intervention comes with announced expiry of Building Canada, an $8.8 billion fund for construction projects, looming in 2014. Working with the Canadian Chamber of Commerce, AED hopes to raise visibility of the “critical need” for sustaining Canada’s infrastructure networks. The FCM and AED are both drawing attention to a new study from the Canadian Centre for Policy Alternatives, pointing out that infrastructure in the country is chronically underinvested. The cumulative effect is that $145 billion worth of infrastructure hasn’t been designated, says study author Hugh Mackenzie, a CCPA research associate. “That’s a lot of new roads, bridges and buildings we’re missing… not to mention missing maintenance on our existing infrastructure.” Contentions of the three organizations are affirmed by a Canada West Foundation study demonstrating the strong link between sound public infrastructure spending and long-term economic growth. The foundation recommends sustained and strategic infrastructure investments that enhance economic performance; innovative approaches to infrastructure design; and existing infrastructure renewal given equal consideration to new projects.
Out of Touch? The rosy picture painted by the Throne Speech inside the confines of the legislature contrasted to turmoil in the streets where building contractors have been protesting the latest provincial irritant destined to increase their expenses. It’s Ontario’s new Bill 119 permitting the Workplace Safety and Insurance Board (WSIB) to levy mandatory worker coverage and monthly premiums on 90,000 independent contractors involved in various aspects of residential and commercial construction. In a soft economy, the measure, introduced Jan. 1, has been greeted with outright hostility and – rare for the Canadian construction industry – protest marches. Contractors have taken to the streets to condemn the bill they claim could cost them up to $15,000 a year per worker. There have been protests in Ottawa, Canada’s capital city, with more to follow in Toronto and in other parts of the province. Opponents see mandatory coverage as a “tax grab” to help the WSIB climb out of a $14 billion spending hole – larger than the entire current provincial government deficit. Wynne’s new Labor Minister Yasir Naqvi has been asked to repeal the law; his quick reply was that Bill 119 protects workers, which is his primary mandate. Building contractors say they’ll have no choice but to raise the cost of services, impacting the price of new homes, with consumers forced to pay the difference in an already flat real estate market. It seems setbacks to the construction industry never end in the province once known as Canada’s engine of economic growth, the instigator of massive projects creating jobs and opportunities for suppliers of equipment and other goods and services. While some infrastructure and other projects are underway, over the past decade that engine has sputtered, due primarily to the real and perceived repercussions of what is now a $12
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Markets
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Ontario Premier Kathleen Wynne
billion deficit the provincial government has appeared helpless to wind down. It’s another key issue touched on by the Throne Speech that has Wynne and crew recommitting to deficit elimination by 2017-18 – a time when her government will probably be a distant memory. At the same time it’s trying to meet the deficit target, the government will also be driven by a clashing concept, “the quest for innovation and growth.” There’s plenty of evidence to support the position that Ontario’s economy is moribund, most obviously the fact that it has become under the federal government’s cash transfer criteria a “have-not province” seen to be incapable of fully supporting itself while half a million residents can’t find work. It doesn’t help that the legislature was out of service from October, when former Ontario Premier Dalton McGuinty announced his retirement and prorogued, or suspended, the legislative assembly until his successor could be picked in the New Year. McGuinty claimed to be declaring a time-out because the opposition parties were behaving badly and no serious work was getting done in the legislature. Proroguing for that purpose was previously unheard of and more astute observers understood McGuinty and his Liberal Party cohorts – sometimes referred to as the Dalton Gang – were pulling a political stunt in order to clear the way to their leadership convention.
That was then and this is now, and successor Wynne has the unenviable task of trying to return Ontario to its former economic glory. For the moment, Wynne is buoyed by a skyhigh profile as Ontario’s first female premier and Canada’s first openly gay government leader who’s been living with another woman for more than 25 years. That’s not likely to help her, however, in maintaining government beyond the next six months. She alienated opposition members right from the get-go by adding five positions to the 22-member cabinet that McGuinty had in place. The move was labeled an unnecessary “shopping spree” at a time when any good premier should show restraint. One thing Wynne has going for her is the public mood, with a recent poll showing the number of voters favoring a quick election just about even to the number who don’t want one any time soon. The same poll showed the economy and jobs as the top priorities for respondents. To help allay fears of an industry suspicious that she’ll be unmotivated in attacking the crippling deficit, Wynne has placed a right-leaning former banker in charge of the finance portfolio. He is Charles Sousa, who left-of-centre Wynne hopes can craft a budget that’ll satisfy the opposition parties and perhaps earn her some support among more conservative constituents. With five years in the legislature and previous ministerial experience, Sousa worked for the Royal Bank of Canada Financial Group for more than 20 years. Nevertheless, neither Sousa nor Wynne are likely to be of much help to the floundering Ontario economy, at least in 2013. As they may not be around beyond this year, oftendiscussed major projects, particularly restoring urban infrastructure, may stagnate despite any offers of renewed or increased federal financial participation. Speaking of projects that could have boosted equipment sales, (continued on next page)
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Markets
(“Ontario Infrastructure Engine Chugging, But Feebly” continued from page 29)
Wynne remains haunted by the ghosts of actions perpetrated by the Dalton Gang, namely two gas plants cancelled in what opposition parties claim was a calculated move to save Liberal seats in ridings opposed to hosting such installations. The cancellations will cost taxpayers at least $230 million. Wynne has pledged to work with the opposition at the committee level to review demise of the gas plants and the province’s auditor general is now probing the politically expedient cancellations. Negative effects of this jumbled economic state of affairs in Ontario continue to radiate, with Statistics Canada reporting a decline in the province’s population growth to the advantage primarily of Alberta. At 13.5 billion people, Ontario remains Canada’s most populous province by far. But the rate of growth has slowed; in the first nine months of last year, it rose by only 107,000, the lowest increase in the past decade. The New People Magnets Meanwhile, immigrants are less likely to select Ontario as their destination within Canada; since 2001, annual immigration to the province has declined by one third. And international migrants aren’t much different than national ones: They continue to view Alberta and more recently Saskatchewan as the regions of Canada where opportunity knocks, partly because of intensive worker recruitment campaigns into the oil and gas industries in those provinces. Once anointed as Ontario’s economic heir apparent, Alberta has itself not been faring too well lately. With a population less than a third of Ontario’s, Alberta’s deficit numbers are closing in on $4 billion. Successive Conservative Alberta governments have been unable over five budgets to hold the line on spending and tame the mounting
deficit. The situation has been blamed by the Alberta government on global economic uncertainty and on a growing discount on the province’s bitumen prices. Meanwhile, a recent study by the Fraser Institute’s Calgary director, Mark Milke, states that if the Alberta government had held spending increases to the rate of inflation and population growth, it would have run a surplus in every budget year since 2005. Led by Premier Alison Redford, the provincial government is now trying to put on the breaks, including discovering nearly $300 million in net savings so far this year. That doesn’t stop one critic from calling it the government “hopelessly addicted to the highest levels of public spending in the country.” Watching the Ontario and Alberta slides closely are such organizations as Wells Fargo Equipment Finance, which feels there are enough positive indicators to keep 2013 from being a total bust for light and heavy equipment. In a recent AED presentation, Wells Fargo’s Senior Vice President John Crum said sales should continue to improve thanks to a few key projects expected to move forward such as potash development in Saskatchewan, the new Detroit-Windsor bridge, and preparations for the 2015 PanAmerican Games in Toronto. Rick Van Exan, Toromont vice president of Marketing and AED’s volunteer vice president and regional director for Eastern Canada, joined Crum in looking forward to the market for construction equipment with “cautious optimism” despite debt-laden governments, a weak global environment, high Canadian dollar, and sub-par housing starts, economic growth and job creation. “Governments continue to be committed to infrastructure,” Van Exan said in his CED magazine regional report. “They understand that it’s both an immediate stimulus, but more important, they see it as the kind of investment that pays dividends for years to come.”
Tim Hudak Progresive Conservative Party
As analysis and speculation swirl, one person in particular is capitalizing on Ontario’s widespread financial slump. He’s Tim Hudak, leader of the Progressive Conservative Party and the man many believe is most likely to form the next provincial government. Hudak has begun positioning himself almost as a caped crusader, promising to create a new Ontario the world will marvel at. In a recent speech, he warned Ontarians to “buckle in” because the road back to prosperity will be tough and painful. The Ontario Hudak envisages is one with – among other things – the best roads, bridges and transit systems. He urged business owners who are struggling to hang on a little longer and those who’ve packed up and moved away from the province to come back home. “To the provinces that have taken our skilled workers and entrepreneurs, to the States that have taken our factories and biggest employers, to the countries that have taken our investors and debt, hear me when I say: We’re on our way back.” Hudak’s Economic Club of Ottawa audience stopped short of uttering a heart-felt “hallelujah.” n Tom Van Dusen Jr. has written for daily and weekly newspapers in Canada for more than 40 years. A freelancer based near Ottawa, Ont., his specialties include the general economy, politics, agriculture and the environment. He can be reached at 613-445-3407, tomvandusen@sympatico.ca.
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U.S. Keeps Building New Highways
Infrastructure
While Letting Old Ones Crumble Funding to properly maintain roads and bridges is but one slice of the bigger, national funding conundrum. By Curtis Tate and Greg Gordon | McClatchy Newspapers
Oil-rich Texas has built more highways and bridges than any other state, but over the next two decades it will fall $170 billion short of what it needs to keep the sprawling network in good repair. In California, transportation officials estimate that 60 percent of the state’s roads and a quarter of its bridges need to be repaired or replaced, at a projected cost of $70 billion over a decade, some $52 billion more than the available funds. North Carolina anticipates that it will fall short of keeping its highways in current condition by $22 billion over the next 30 years, and would need more than twice that amount to improve them. America’s highway system, once a symbol of freedom and mobility envied the world over, is crumbling physically and financially, the potentially disastrous consequence of a politically driven road-building binge. President Barack Obama, state transportation officials, civil engineers, road builders and business groups all say that the country needs to invest trillions of dollars in its infrastructure, yet there’s little consensus on how to finance it or what the most pressing needs are.
The Congressional Budget Office estimates that the country needs $14 billion in additional federal funds each year just to maintain highways and $50 billion more to improve them. There’s no single cause of the financial squeeze, and federal data reveal only part of it. Some states have raised their own gasoline taxes to pay for highway construction and maintenance and to depend less on federal funding. Others haven’t changed their gas taxes in years and rely on federal money to make up for it. But federal government analysts, taxpayer advocates and transportation experts have warned for at least a decade that many states were spending too much on building highways and too little on fixing them, and that their maintenance costs would skyrocket if they didn’t change course. “We’ve engaged in a dangerous game of deferred maintenance,” said Brian Taylor, a professor of urban planning and the director of the Institute of Transportation Studies at the University of California, Los Angeles. Five years after an interstate highway bridge collapsed in Minnesota, killing 13 people and injuring 145, the (continued on page 36)
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Infrastructure
(“U.S. Keeps Building New Highways While Letting Old Ones Crumble” continued from page 34)
country still has a bridge repair backlog of $65 billion, according to the Federal Highway Administration. At a time when Congress is proposing significant budget cuts and tax increases have little support, states
are canceling or scaling back highway projects. They’re looking for private partners to help finance construction, and still coming up short. Motorists are discovering that the roads they thought were free are anything but. Over the past four months, McClatchy traced the extent and causes of yet another financial crisis that’s developed below the radar of
most Americans. A review of government reports, an analysis of thousands of state and federal campaign donations, and interviews with dozens of current and former elected officials, watchdogs and transportation officials showed that there were a lot of hands on the wheel as the system veered off course.
Excerpts from the AED-commissioned report, “The Impact of Fuel Use Trends on the Highway Trust Fund’s Present and Future,” authored by researchers at the College of William and Mary, http://bit.ly/htf2013.
Gas Tax Pushback
Vehicle Miles Trials
Understanding the objections to raising fuel taxes to fund the HTF
Understanding the objections to implementing a vehicle mileage-based user fee (VMBUF) to fund the HTF.
...A generic opposition to increased tax revenue complicates [the] entire [HTF insolvency] discussion. When one considers, though, that motorists are paying less federally per mile of highway use than at any point since the Federal-Aid Interstate Highway Act despite a massively more complicated highway infrastructure, perhaps the opposition would become less fervent. It’s also the case that fuel taxes are among the few taxes that are not registered as percentages but rather as cent/unit (gallon) taxes, which leads to a loss in purchasing power if rates are not adjusted regularly. Given that gas prices have risen dramatically since the last gas tax rate revision, the federal gas tax is a dramatically lower percentage of gasoline sales than it was in 1993. Opposition to increases in fuel tax rates might also subside when such a policy is presented as lifting future debt burdens off the General Fund and as making the HTF more self-sustaining.
Opposition to a VMBUF system may be more potent. The basic infrastructure of a VMBUF usually involves some kind of in-car monitoring technology, which may provoke genuine concerns about governmental intrusion of privacy. We have outlined potential ways for policy officials to alleviate these concerns within the VMBUF framework that have been tested at the state level. Other concerns include the fear of a VMBUF being socio-economically regressive, how a VMBUF might be implemented at the state and local level, and whether a VMBUF removes a powerful incentive to purchase more fuel-efficient automobiles...These are all concerns that must be addressed but importantly can be addressed within the eight- to 10-year phase-in period that we allow for in our projections modeling. The critical point is that, for a VMBUF to be most effective, the planning and conversations need to start now. Because of the phase-in period and the more general mathematical logic, we recommend that inflation-indexed fuel tax rates be implemented as soon as possible – either as part of contemporary tax reform or for the next federal highway reauthorization in 2014. Furthermore, the starting point for these rates should be the rates that would have occurred if fuel taxes had been indexed to inflation in 1993. Gains from such a policy would be immediate and would allow for the discussion and potential implementation of a VMBUF to be planned. In eight to 10 years, the country may feel less angst with a VMBUF system, but if not, at least the HTF would be on the way toward greater fiscal solvency than is currently projected. While many transportation policy experts are understandably focused on the year-to-year actions of Congress, our report hopes to begin a conversation about longer-term financial viability. The Highway Trust Fund was designed to be a fiscally self-sustaining way to fund federal aid for highway projects, and with some key institutional reforms, it can remain so into the future.
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Infrastructure
For example: n The oldest parts of the interstate highway system have reached the end of their life cycle, including thousands of bridges dating to the 1960s, a potential threat to public safety and commerce demonstrated by the Minnesota bridge collapse. n The federal gasoline tax no longer covers the country’s annual highway spending, but few leaders in Washington are willing to take on the political risk of increasing it, which forces states to borrow more money, raise tolls or ask their residents to approve new taxes. n Despite a ban on members of Congress “earmarking,” or skimming money for pet projects back home, lawmakers and the special interests that bankroll their campaigns still exert outsized influence on where federal highway funding goes. n The Department of Transportation long ago ceded control over most highway decision-making to the states without well-defined national transportation goals, leaving a large portion of federal money up for grabs for those with the most clout. Like the Roman Empire, “civilizations fall because they don’t maintain their infrastructure,” said David Burwell, the director of the climate and energy program at the Carnegie Endowment for International Peace in Washington. “Everybody likes to build things, but nobody likes to maintain them,” he said. “We paid for them once. Why should we pay for them again?” Falling Apart When Al Biehler became Pennsylvania’s transportation secretary a decade ago, he found that the state had been spending more on expanding its highway system than it had on keeping it in good repair. “If you don’t put money into fixing things,” Biehler said, “there will be more things to fix.” So he did the unthinkable: He put the brakes on some projects, risking
the wrath of highway contractors and the state lawmakers who supported them. “Projects that we knocked off the program, some of them weren’t terrible projects,” he said. “I just felt we couldn’t afford them.” According to the National Center for Pavement Preservation, a research lab for road-building materials at the Michigan State University engineering school, every dollar spent to maintain a road in the first 15 years of its life saves $6 to $14 in maintenance costs after 20 years. The Federal Highway Administration doesn’t require states to put money into repairing roads before building new ones. Pennsylvania was spending about as much of its federal funding on expansion as it was on maintenance in 2004, according to federal data reviewed by McClatchy. By 2011, the state was spending about four times as much on repairs, and it was still struggling to keep up. The Pennsylvania State Transportation Advisory Committee reported in 2010 that the state needed an additional $2.1 billion a year to properly maintain its highways and bridges. “More than half of our bridges have reached their intended lifespan date,” said Barry LePatner, a New York construction lawyer who’s cataloged nearly 8,000 of the nation’s most troublesome spans. “Without maintenance money, cost of repair equals cost of replacement after a certain period of time.” Some budget watchdogs were encouraged that the most recent federal transportation bill, MAP-21, which Congress approved last summer, pushes states to develop performance standards for federal highway spending that result in the greatest improvement to roads and bridges. But it’s too soon to know whether the measures will have any impact, and the legislation expires at the end of next year. Meanwhile, states face
tough choices. Emil Frankel, who was assistant secretary for transportation policy under President George W. Bush and is a former Connecticut transportation commissioner, said the country needed to establish priorities. “Thirty years ago, ‘like it’ might have been good enough,” said Frankel, who’s now a visiting scholar at the Bipartisan Policy Center, a research center in Washington. “ ‘We’ll do it because we like it.’ We can’t afford to do that anymore.” Running on Empty It’s been 20 years since Congress raised the gasoline tax. The 18.4-cents-a-gallon tax has lost a third of its buying power to inflation and rising construction costs. The tax feeds the federal Highway Trust Fund, which long has paid for a portion of highway construction and repairs in all 50 states. The fund used to carry a surplus, but lawmakers have bailed it out since 2008 by tapping the Treasury for $50 billion. “That can’t continue indefinitely,” said John Horsley, who retired in January as the executive director of the American Association of State Highway and Transportation Officials. “Congress is going to have to find a way to restore funding.” Simply increasing the gas tax may not be the best option. Americans have been driving less since 2007, partly because of the recession and higher gas prices and partly because of a generational shift away from car ownership. Rising fuel economy in cars and trucks also has contributed to the decline in gas tax revenues. Horsley proposed replacing the per-gallon gasoline tax with a percentage-based sales tax. Sen. Barbara Boxer, D-Calif., the chairwoman of the Senate committee that drafts transportation legislation, said she’d consider the idea along with other alternatives, including a (continued on next page)
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(“U.S. Keeps Building New Highways While Letting Old Ones Crumble” continued from page 37)
carbon tax and a tax based on the number of miles people drive. Congressional gridlock has left the states to find other sources of revenue, with mixed success. States have taken on more debt, and some have about as much as they can support. According to Federal Highway Administration data, all states carried a combined $56 billion in road bond debt at the end of 1995, in current dollars. By 2010, they owed $154 billion. State and local governments have asked voters to approve sales-tax increases, and about two-thirds of such measures pass. States also have turned to the private sector for infrastructure money, an arrangement that’s common in countries around the globe. Indiana and Illinois leased toll roads in exchange for money they used to bankroll highway projects. Virginia and California have sought private partners to build bridges and highways. Most of the interstate highway system has been free of tolls for its 57-year history, but that might end as states face the challenge of rebuilding the aging roads. Missouri, North Carolina and Virginia are planning to add tolls to portions of major interstate highways to pay for repairs. Other states, such as Florida and Texas, have been building their own toll roads for years. But tolls are unpopular with the public. The trucking industry opposes them, and truckers will go miles out of their way to avoid them. “Every time you have a free good, people don’t want to pay for it,” said John Fischer, a transportation consultant who worked on federal policy for three decades at the Congressional Research Service.
Paved By Politics Highway supporters frequently characterize their foes as anti-road, anti-jobs or anti-progress. However, even the most ardent highway proponents agree privately on what they’re reluctant to admit publicly: Some road projects are better than others. In some state transportation plans, it’s hard to tell the difference. And in the absence of clear national priorities, politics drives where the funding goes. “Instead of making hard decisions, we’re going to make sure everybody gets something,” Fischer said. For years, some states complained that they were “donors” who got back less than a dollar in federal highway funding for every dollar in gasoline taxes they contributed. Congress fixed that by baking in extra funding, so that nearly every state gets back at least a dollar, and some much more. The formula favors small states or those with low population densities and shortchanges more populous states, said Donna Cooper, a senior fellow at the liberal Center for American Progress in Washington. “We just created a nightmare for ourselves by creating a system that sends money to places with the least need,” she said. According to the Government Accountability Office, Alaska gets back $5 for every dollar it sends to Washington. Texas gets only a dollar. “States that have been well represented on key congressional committees have tended to do very well compared to other states,” said Jeffrey Brown, an associate professor of urban and regional planning at Florida State University. For years, powerful members of Congress dressed up highway projects that wouldn’t have been at the top of anyone else’s list with names such as “High Priority Corridors” or “Projects of Regional and National Significance” to get hundreds of
millions of dollars in federal money. While some lawmakers railed against spending millions of federal dollars on bike paths, flower beds and train museums, others brought home vastly more money to cast their legacies in concrete, even if just to construct an interchange or a few miles of pavement. “You can always come up with a rationale,” Fischer said. “A lot of them are quite tenuous.” Highway projects generate work for engineering and construction firms, and the industry is a top political donor. Wealthy landowners, developers and business interests who benefit from new highways also write big checks to lawmakers who deliver fresh pavement. “It’s a free-for-all where the most well-organized and well-financed political interests are driving our transportation policy,” Cooper said. Most members of Congress defend their efforts to secure highway funds for what they regard as crucial projects in their states. Few oppose road projects, regardless of party. They get two photo opportunities: one to throw the first shovelful of dirt and the other to cut the ribbon. “There’s a huge difference between spending on things that benefit the national system and spending on things that benefit a local developer,” Fischer said. Losing the Way The Federal Highway Administration pays as much as 80 percent of the cost of states’ major road projects but it has little say over how they spend the money. Cathy St. Denis, a spokeswoman for the agency, said it determined whether projects were eligible for federal reimbursement, and oversaw and monitored them. “Ultimately, state departments of transportation and local planning organizations make decisions about which projects to advance based
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Infrastructure
on the needs and priorities of local communities and the state,” she said. It’s difficult to know how efficiently the states are spending funds, because the agency releases little data that’s useful for making state-by-state comparisons. The GAO and the U.S. Transportation Department’s inspector general have repeatedly faulted the agency’s data-collection methods. Law requires the department to submit detailed annual reports to Congress on how the states invest federal highway funds. The reports categorize about one-quarter, or $10 billion of the total spending by the states each year as “other.” The obscure report has received little attention on Capitol Hill, and in spite of the law’s additional requirement that the reports be made available to the public, the agency
posted the eight most recent reports on its website only after McClatchy requested them. The agency developed computer software more than a decade ago to help states determine which projects would generate the most return on investment by meeting goals such as reducing congestion and improving the mobility of people and goods. But most states don’t use it, and those that do may simply ignore the recommendations. When the GAO asked state transportation departments in 2010 what factors they considered in their transportation plans, only 11 states said economic analysis was “very important.” Taylor, the UCLA professor, said transportation decisions had to consider geographic needs as well as economic ones.
“It’s difficult to come up with objective criteria,” he said. “It’s just a very complex terrain.” Half a century ago, America had a shared vision and policy around the Interstate Highway System, a massive national public-works project that drove economic growth for decades. “Those days are gone,” said Earl Swift, the author of “The Big Roads,” a history of interstates. “We are a long way away from that unity of purpose we had in 1956.” n Chris Adams contributed to this article. © McClatchy-Tribune Information Services. All rights reserved. Reprinted with permission. Contact the authors, Curtis Tate and Greg Gordon at: ctate@mcclatchydc.com, ggordon@ mcclatchydc.com; Twitter: @tatecurtis, @greggordon2in
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Manufacturing
Kobelco’s Plan of Attack? Getting the Management ‘Band’ Back Together Then ramping up a strong dealer network this year, which the manufacturer says it is committed to supporting By Joanne Costin
While Kobelco dealers were home sipping libations and enjoying their Christmas dinners, big changes were brewing at the manufacturer’s headquarters in Tokyo. On Dec. 26, 2012, it was announced the 10-year alliance that paired Kobelco Construction Machinery and CNH Global N.V. would abruptly end by mutual decision. Just days later on Jan. 1, Kobelco took control of its own destiny in the U.S. as well as in Europe, Latin America, the Middle East and Russia, where they had previously partnered with CNH. The agreement assured Kobelco customers a continuous supply of parts for 10 years, but left
dealers looking for answers as their dealership agreements effectively expired overnight. As CED began searching for clues about what Kobelco’s next moves would be, dealers didn’t have much information in January. With some digging, however, we discovered that the company is determined to grow its dealer network and market share this year, and that in fact Kobelco plans an aggressive comeback for the North American market. No Blue in North America The recruiting process for new dealers began Jan. 1. The company declared “True Blue Kobelco
returns to the America’s, Europe, Latin America, the Middle East and Russia,” in a letter to prospective dealers on its website (www. kobelco-kenki.co). As it turns out, the distinctive blue-green color found on Kobelco machinery in other parts of the world, will be traded for traditional yellow in the U.S. and Canada. Latin American machines will be blue-green. Ron Hargrave, a former Kobelco executive – who, in recent years had helped Liugong build its North American dealership network – recently accepted the role vice president of Sales and Marketing for Kobelco Construction Machinery
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USA. “We tried blue and green when Kobelco first came to North America and it was not well received by the contractors,” he said. “Most of them want yellow. Rather than fight that curve we made it that way. Most of the North American dealers also prefer it.” Dealers who represented Kobelco in the past are confident the management change will be a positive for their operations. Among eight Case, Kobelco and New Holland dealers who responded to a CED questionnaire, most felt the brand would be successful under the new regime. “There’s an undertow of excitement and enthusiasm that has been missing the last few years,” said Scott Collins, vice president of sales for Tracey Road Equipment, a Kobelco dealer since 1982. “Most of our customers are repeat buyers and they are very excited. I have had numerous customers e-mail me and call me, excited that Kobelco will be responsible for their own brand,” he added.
Both Kobelco and its dealers acknowledge the brand had lost market share during the 10-year alliance with CNH. Tom Reynolds, president of Highway Equipment, who has represented the brand since 1986, recalled times when his dealership had 20 percent market share in his territory with Kobelco excavators. “That was phenomenal back then. That is not where we are today.” Collins believes short-line brands such as Kobelco do better when they are represented by individuals with a sole focus. “I think a lot of other short-line manufacturers seem to do well when they can focus on the strength of the brand,“ said Collins. “You start adding products to a district manager and he is no longer a specialist, and we need a specialist. Having a Kobelco-only district manager will assist us in growing market share.” Strengths of the Brand According to dealers, technology is one of Kobelco’s strength. Focused
Current dealers say that Kobelco technology has always been a major advantage in the market, and the company says it intends to maintain that reputation. Photo courtesy of Kobelco management.
Kobelco’s North American Management Team President and CEO Morita (Pete) Katsuhiko Vice President, Sales & Marketing Ron Hargrave Product Development George Lumpkins Parts Eric Hoffman Technical Publications/IT Jordan Lumpkins solely on excavators, the product line consists of eight models ranging in size from 12,000 to 180,000 pounds, plus mini excavators. Product development teams comprised of individuals in engineering, sales and service gather information then use sophisticated simulation technology to develop a prototype that undergoes exhaustive testing. To ensure that will continue, Kobelco has brought back product developer George Lumpkins, who, prior to his recent five years with Liugong in the Houston area, also formerly worked for Kobelco for more than 20 years. Kobelco has assured North American dealers that the excavator line manufactured in Japan will meet the needs of the North American market. New machines coming from Japan will be equipped with popular American market features such as onboard GPS, and will offer lower fuel consumption and lower noise. Machines built in Japan will be built to the same exacting standards as those built in Calhoun, Ga., under CNH. The only difference is the engine – now a Tier-4 Hino engine. Kobelco has made a significant commitment to the North American market. The company has signed a two-year lease on new headquarters offices in Houston, and, says their management, is also embarking on the design and construction of (continued on next page)
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Manufacturing
(“Kobelco’s Plan of Attack? Getting the Management ‘Band’ Back Together” continued from page 41)
a new dedicated, Houston-based headquarters facility. More than 150 machines specifically built for North America are scheduled to arrive before the company headquarters opens in June. Kobelco will have $2 million dollars in parts inventory by mid-April and by year-end the company plans to have $5 million in
parts inventory. Kobelco also plans to employ about 50 people. But their strategy goes far beyond making a better product. With many quality Kobelco excavators on the market, Hargrave knows it’s going to take a total package to gain market share – that includes pricing, product support, performance and quality of the machine. “Differentiation will come from the people we have, and the level of support we provide our dealers,”
Next Steps
In an end-of-February communication to the manufacturer’s dealers, Ron Hargrave, vice president Marketing and Sales, Kobelco Construction Machinery USA, recently outlined the following facts and priorities: n Company
legal name is Kobelco Construction Machinery USA Inc. address is 4690 World Houston Parkway, Houston, Texas 77032. Note this facility is leased while we construct our new office warehouse in Houston. The new facility will be approximately 94,000 square feet in size. n Our company president and CEO is Mr. Morita (Pete) Katsuhiko. n There has been some confusion on the color of the machines coming in. The units sold into the North American market, will be (drum roll please) yellow with the traditional black lettering. The South American marketplace prefers the blue and green that is standard in Japan, so that is what we will provide to them. n We have $2 million worth of Kobelco parts on the way to Houston now. An additional $3 million of parts will be arriving in a few more months. n 150 Kobelco excavators are being finished up and will start arriving into the various ports around the U.S. in the middle of May. We presently have a total of 474 machines scheduled to ship into North America and 80 units assigned to South America. We do have the ability to expand these shipment levels if business requires it. n We will be supplying the complete line of Kobelco excavators to our dealer network – along with the support and assistance that the original Kobelco organization was known for. n We are presently hiring staff for our company and many of the names will be familiar to you if you were a part of the original Kobelco dealer network. n It is our intention to aggressively seek to expand our market share, and we will be looking for dealers with that same objective. n We will provide you with the tools to get the job done: aggressive pricing, retail and wholesale finance programs, advertising both on a national basis and local as well. n Service and parts are always important to a dealer network, and we are assembling a truly outstanding staff to handle these issues for you and your customers. George Lumpkins, Eric Hoffman and other talented individuals will work with you to keep your customers working with the Kobelco products. n Our
said Hargrave. To that end, Kobelco is intent on responding to what dealers need, such as the request from Collins. “I told them that having safety stock for their dealers is critical to take advantage of unforecasted opportunity,” said Collins. “New inventory available for safety stock will help increase our market share.” “The old Kobelco was able to offer a product that had an edge with quality and technology at a very competitive price,” said Reynolds. “I think they are going to bring that combination back. If you can bring a better product at a better price, you will get market share.” Parts support is not a concern for the dealers we spoke with. With a 10-year parts commitment from CNH and a central parts distribution center for new Kobelco dealers, expectations are high. “We had great parts and service before, but now it will be even better,” said Collins. Kobelco has enlisted the aid of 15-year Kobelco parts veteran, Eric Hoffman, to head up the parts operation. Back to Their Roots Kobelco’s comeback strategy has its roots in the company’s previous success. With a 30-year history in North America, Kobelco isn’t exactly the new kid on the block. They know what it’s going to take to build a dealership network and improve market share. “When we marketed Kobelco before, we were aggressive both in pursuing new business and in the performance of our machines. We intend to do the same things,” said Hargrave. The company plans on more sales and service training for dealers, as well as aggressive marketing that will include trade advertising and a CONEXP-CON/AGG exhibit. “I think you are going to see simpler, easier to understand sales programs and financing programs,” Hargrave said. “We have a very high quality, a good performing product, priced where we
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Manufacturing
can offer a real value proposition to contractors,” he added. “We made that decision, and we are going to be aggressive in performance, support, and marketing. This will enable our dealers to penetrate the market and make a profit at the same time.” Dealers would welcome a return to the aggressive marketing and tactics of the old Kobelco. Richard Scott, president of Scott Equipment, a Kobelco dealer located in Los Angeles, Calif., hopes to see stronger marketing and an aggressive approach on the pricing to start with. “They were always aggressive on pricing,” said Scott. Looking for a Few Good Dealers Hargrave indicated dealer signings would start March 1, with the bulk of dealers signed in 120-150 days. Collins at Tracey Road predicted, “I would expect 100 percent of the old dealer network to stay on.”
New Holland dealers will no longer be restricted to certain machine sizes as they were under CNH. The company’s goal is to have approximately 45 dealers signed in North America by year’s end – but perhaps as many as 65. According to Hargrave, more than 60 prospective dealers have completed an online form on the company’s website. Given the consolidation in the market, one of the biggest challenges for Kobelco may be finding the kinds of dealers they are looking for: companies that are financially sound with good sales and service staff, top quality facilities, and an aggressive mind set. “We want people who want to grow their market share,” said Hargrave. “We are not interested in dealers that have gotten to a certain point and just want to hover there. We are looking for good solid, aggressive dealers to market the product,” said Hargrave. At the same
time, Kobelco won’t automatically rule out single-location dealers. The first task for Kobelco is building their operation and getting the staff and dealer network in place. “A large portion of the people being hired are former Kobelco America employees,” said Hargrave. Getting the old band back together isn’t a bad strategy for an organization that wants to quickly move into full swing. And the fans are clearly excited for the comeback. Dealers interested in representing Kobelco should contact Ron Hargrave, 281-797-2574, ronald.hargrave@kobelco.com n Joanne Costin is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at (847) 358-1413 or jcostin@costincustom.com.
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It’s Time for Your... Pe r f orm ance Ev al u ation! 12 tips for transforming bad or nonexistent review processes into effective tools that help people reach their full potential. By Bobby Weber
Articles in the Wall Street Journal and other publications have questioned the validity of “The Annual Performance Review.” Some businesses have stopped using evaluations altogether because managers cannot see any value being added through the process. While many companies still require managers to complete yearly performance evaluations, most managers see the process as a fruitless exercise. However, performance evaluation can be a useful tool for developing great people and driving performance. The problem is that most managers approach performance evaluation from an outdated, “old world” perspective. Nearly everyone has had some kind of negative performance evaluation experience. Neither supervisors nor employees really feel positive about or look forward to this process. Employees end up feeling scrutinized
while supervisors tend to feel uncomfortable about passing judgment. The issue is that supervisors often do not understand how to make use of this tool to create lasting change in employee behavior and performance. The inherent flaws within traditional approach include: n Negative feedback often comes as an unpleasant surprise to employees who thought they were doing a good job. n Supervisors sometimes over-appraise poor performers and then lack any corroborating evidence if the need to terminate later arises. n Supervisors dedicate too little time to evaluation so employees write off the experience as a meaningless exercise of corporate compliance. n Supervisors focus too much on recent infractions and too little on the employee’s overall performance during the rest of the year.
It’s a Process, Not an Event There is, however a more effective 21st Century approach that emphasizes performance evaluation as a vital communication and coaching opportunity. Evaluation can be a basis for clarification and coaching to maximize performance. Bosses can also gather feedback and see the business through the eyes of employees, too. Very few one-time events are ever successful in transforming behavior and performance. Initiatives that create lasting change are process orientated. Most organizations approach performance evaluation as a once-a-year event. Research and common sense indicate, however, that in order for evaluations to have a meaningful impact they should happen at two critical levels. First, formal structured performance evaluations should occur at least biannually and preferably on a quarterly basis. (continued on page 46)
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Employees
(“It’s Time for Your ...Performance Evaluation!” continued from page 44)
Put Your Calendar Where Your Mouth Is The No. 1 leadership skill is the ability to develop others – that’s not a new idea. But, Boss, check your calendar: How much time are you devoting directly to people development? One manager I know formally dedicates 100 days a year to what, with a smile, he calls, performance reviews. Twenty-five people report to him, and twice a year they spend two days, one on one, reviewing where they’ve been together and where they’re going next. Talk about putting your calendar where your mouth is!” – Tom Peters Second, regular ongoing informal conversations about performance should occur monthly or even weekly. What is a “Time Out” Really Worth? Taking time for meaningful communication with employees is incredibly important to your business. Performance evaluation provides a rare opportunity for a time-out. Think about it: A time-out can be a precious commodity in the world of professional sports. The recent blackout at the 2013 Super Bowl between the Baltimore Ravens and the San Francisco 49ers provided such a time-out. This time-out produced an undeniable game-changing influence on the 49er’s performance, much to the Ravens’ chagrin, enabling them to come very close to victory in what at first seemed to be a certain defeat. Employees certainly need a time-out, as well, to help them refocus and perform to their full potential. Everyone needs – and deserves – occasional private and uninterrupted access to their boss to talk about important performance issues. Course Correction Course correction is a navigational principle and a business reality.
Employees require regular feedback just like an aircraft requires frequent course correction to stay on track. Evaluation helps employees stay on course and focus their efforts on important goals. They need help anticipating obstacles and contingency planning. They need affirmation and recognition for their outstanding effort. Employees need to know that the boss is genuinely interested in their performance and development. Studies prove that performance evaluations – done correctly – actually reduce absenteeism and turnover. Evaluation also provides opportunity to identify training needs and make sure people are in positions where they can excel. Following are 12 tips for developing effective performance evaluations: 1) A performance evaluation is not supposed to be punitive. This is not the opportunity to release an avalanche of retribution for a year’s worth of accumulated frustrating infractions. If an employee needs disciplinary action then it should have already occurred. Discipline should always occur independently of a performance evaluation. 2) No surprises. No one wants to hear, “Surprise! Your performance stinks!” An important rule of business is, “No Surprises.” This is just as vitally true for employees as it is for customers. People do not like being surprised by bad news. Surprising negative news does not typically produce positive results. If an employee is surprised by news of underperformance, it is usually an indication that the manager has not done not been doing a very good job communicating. 3) Be objective. Subjectivity devalues this process. Use documentation to support conclusions about employees’ performance. If you want to influence performance in a positive way then you must be able to reference measurable metrics and definable behaviors. Opinions are easy to refute but documentable data speaks for itself and leaves little room for debate. 4) Broaden your field of vision.
Find out what customers, coworkers in other departments, and even vendors have to say about the employee’s performance. Ask nonthreatening questions to facilitate this discovery process and other people will usually help you discover areas for improvement. Caution: discretion, privacy and tact are imperative here – no employee who is the subject of your inquiries should find out from a colleague that (s)he was the topic of conversation between the manager and his or her peers. If you speak with co-workers about each other, it should be an openly communicated part of the pre-evaluation process so that it’s not misconstrued as gossip behind someone’s back. 5) Use self-auditing. Let the employee fill out his own performance evaluation and then use your own evaluation as a comparison. Selfdiscovery enables employees to find the courage to confront themselves. Hard truth can be easier to accept if we come to that realization on our own. Self-auditing helps employees assume ownership and responsibility for themselves. When it comes to selfevaluation, high performers tend to be harder on themselves while average and below average performers tend to be more generous with themselves. Stephen Covey (of FranklinCovey fame) has said, “When you think about it, who should evaluate a person’s progress and achievements? That person should. Traditional performance evaluation is clearly one of the bloodletting management practices of our day...this is where the boss uses the sandwich technique: say a few nice words, slip in the knife, twist it a few times – “area for improvement” – and then pat them on their way. When you have a high-trust culture, helpful systems, and people on the same page, then people are in a far better position to evaluate themselves...in most cases, self-evaluation is tougher than anyone else’s evaluation.” 6) Make sure employees are clear about their performance goals. Establishing challenging goals
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Employees
is a major motivator for high performing employees. Goals should meet the SMART criteria. n Specific n Measurable n Attainable n Realistic n Time Bound 7) Document performance issues immediately and frequently. Do not try to maintain an accurate record in your head. If an evaluation is going to affect a future adjustment in compensation then the employee should be alerted as soon as possible. 8) Ask questions. Rather than directly confronting employees with criticism, ask questions that cause the evidence of poor performance to become blatantly obvious through the course of a discussion. 9) Do not be biased when evaluating family members or friend. Nothing will compromise your leadership credibility faster than an unfair double standard. 10) Employees need the opportunity to discuss and disagree with their evaluation. It is critically important that you be aware of any disagreement your employee may have with the evaluation of his or her performance. An employee is not likely to give much effort to change unless he or she is personally convinced that a change needs to occur. 11) Evaluating the evaluator. Each leader’s own performance evaluation should include consideration of the accuracy of his or her employee evaluations and the impact that leader has on team performance. 12) Give people hope. It is important that you deal with negative evaluation feedback in a positive and constructive manner that leaves the employee with hope for the future. Use diplomacy – you can be truthful yet still tactful. Bottom Line The old-world traditional approach to performance evaluation is ineffective and counterproductive. However, by putting the emphasis on coaching and
communication, evaluation can help engage employees, better align their behavior goals with your business goals, and equip them to perform to their full potential. You can use performance evaluation to inspire genuine employee commitment, build better people, and enable them to take ownership of their results, their careers, and their future. n
Bobby Weber is president of Maximum Performance International, Frisco, Texas. Since 1998, he has worked with equipment dealerships to improve sales and service performance. He can be reached at 214-618-3059, bweber@team-mpi.com. Visit his website at www.team-mpi.com
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A Closer Look
A Financial Partner in Good Times – and Bad
The Equipment Finance Group of BOK Financial understands the equipment industry’s ups and downs, which makes all the difference for dealers. By Joanne Costin
When it comes to partnerships between dealers and lenders, some dealers discovered during the recession that their lenders were not in it for the long haul. As business declined and the dealer’s collateral dropped in value, some lenders sought a quick exit. Overnight, terms were changed, credit lines reduced, and adjustments made to reduce the value of dealer fleets dramatically, leaving dealer partners scrambling. Bill Lathrop, president of B-C Equipment Sales in Corpus Christi, Texas, faced a similar scenario three years ago. “You thought you had a deal with your lender but they said, ‘We’re not doing that anymore.’ You had about 30 days notice that things weren’t going to be the same,” he recalled. In April 2010, Lathrop moved his business to BOK Financial (BOKF). Since then, Lathrop has been happy with his banking relationship. “They understand the construction equipment business. They understand you can have hidden value in your equipment. They know there are swings in the value of the equipment over the long term – that it’s not just today’s value,” he explained. BOKF Equipment Finance is a relationship lender, focused on establishing long-term relationships with customers. Regional Bank with a Community Bank Feel Senior Vice President Mark Killpack heads BOK Financial’s tight-knit, specialty equipment group that provides funding exclusively for construction dealers and rental dealers. BOKF Equipment Finance is a successful subsidiary of BOK Financial, a $28 billion, publicly traded (NASDAQ: BOKF) regional financial services company headquartered in Tulsa, Okla. When he joined the company in 2007 after more than 20 years with CIT, Killpack was impressed by BOK Financial’s stability and culture. “We get to know people extremely well,” said Killpack. “We also do what we understand. That combination will generally make you very successful.” SNL Financial ranks BOK Financial as the 21st largest U.S.-based publicly
traded bank holding company. It has been profitable for 20 consecutive years and was the largest commercial bank in the U.S. that elected not to participate in the U.S. Treasury’s Capital Purchase Plan, an element of the Troubled Asset Relief Plan (TARP). A focus on relationships sets the Equipment Finance Group at BOK Financial apart from other lenders. It is an approach that resonates with dealers. “They understand the importance of relationships,” said Lathrop. “It is the same with my customers. I don’t want a deal, I want a relationship so I can get multiple deals.” Whit Perryman has relationships with BOK Financial employees that go back 25 years. The former banker is now CEO of Vermeer Equipment of Texas and has been a customer since 2008. He offers a unique perspective on what sets BOK Financial apart from other banks. “They have surrounded themselves with talented people who have a focus on the industry, and through those people they have developed good relationships,” said Perryman. “Big banks tend to have a lot of turnover. They don’t have that.” The relationship approach has paid off for BOK Financial. The Equipment Finance Group has increased the value of loan commitments every year since 2007, and came through the recession unscathed by bad loans. Relationships and Lending “When we put a customer on the books we view them as a partner,” said Killpack. “Before we enter into the relationship, we make sure we are the right fit for the prospect as our focus is to maintain the relationship longterm. We may drive you crazy with questions, but by the time we get the loan on the books there are at least three of us who know your business on multiple levels.” Keeping customers is a source of pride for BOKF Equipment Finance. “We lost only one customer through 2008, 2009 and 2010. We found a way to work with everybody [else],” said Killpack. “That is what sets us apart.”
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A Closer Look
When an issue arises with a dealer, the BOKF Equipment Finance team seeks to first understand why something is happening and then work proactively with the dealer to find the best way to approach the problem. Another lender might look at a loan in a vacuum and say “this loan does not conform to our policies. We want it off our books.” However, in the end, loans have to make sense for the bank and the customer. “Anybody can make loans when times are good,” said Killpack. “It’s keeping your customers healthy when times are bad that separates investors from lenders. A good lender tries to find a way to continue to do business; an investor just wants his money back.” While the construction equipment market has improved, challenges remain. According to Killpack, the biggest challenge is uncertainty. “Contractors don’t want to buy, they want to rent,” he said. “Dealers are essentially becoming the bank for their customers.” This makes it even more important to have a lender who understands your business and the market trends. According to Killpack, it is imperative for both dealers and lenders to understand the drivers of the emerging rental market. Staying Out of the Dealer’s Way One thing that BOK Financial does not want to do is get in the dealer’s way with excessive reporting requirements. “The reporting we ask for is consistent with what dealers should be doing,” said Killpack. With some lenders, dealers can find themselves burdened with reporting; for example, a dealer that BOKF Equipment Finance worked with had nine different lenders, with most of them coming out four times a year for audits. As a relationship lender, BOKF Equipment Finance helps dealers avoid that burden and spend more time on running the business. Killpack recommends that dealers consolidate finance sources to reduce disruptions to the business caused by reporting requirements and audits. Killpack makes it clear that BOK Financial seeks to work with dealer clients in good times and bad. Historically, he says, when loan covenants have been broken, banks have been quick to react, and at times make adjustments to the loan structure which does not sit well with dealers. BOKF Equipment Finance will work with dealers Mark Killpack, senior vice president, BOKF Equipment Finance Group says: “Anybody can make loans when times are good. It’s keeping your customers healthy when times are bad that separates investors from lenders.”
At a Glance:
BOK Financial Equipment Finance Parent Company: BOK Financial, (NASDAQ:BOKF) Assets: $28 Billion Equipment Financing Solutions: n Inventory floor plan lending n Working capital loans n Support equipment lending n Aircraft lending Full Service Banking Solutions: n Term credit facilities n Revolving lines of credit n Leasing n Letters of credit n Cash management n Corporate trust services n Investment services n Retirement plan services n Wealth management Ideal Customer Profile: Multilocation construction equipment dealers with multiple revenue streams operating in diverse markets. to understand first why covenants were broken and second, to work toward an agreeable solution. Why the difference? BOKF Equipment Finance does not look at covenants as a revenue source or as a way to trap dealers and then find ways to escape when times are tough; rather, the company views a covenant as a tool to ensure the liquidity and leverage of the business. What They Look for in a Dealer The BOKF Equipment Finance Group was formed in 2004 with Texas and surrounding states as its original territory. As a direct result of the success of the group over its nine-year history, that territory has expanded to include 26 states. However, the group is not seeking to grow its business by partnering with every dealership. Ideal customers are construction equipment dealers with multiple locations and multiple sources of income. They are diversified into multiple market segments such as forestry, highway, aggregate and oil and gas, with AED membership viewed as a positive. If your dealership meets this profile and you are looking for competitive financing from a partner that truly understands your business, it may be time to start a dialogue with BOK Financial. Call Mark Killpack at 602-808-5341, or e-mail him at mkillpack@bokf.com n
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On the Numbers
Selling Rental – to Ourselves And selling realistic rates to customers may not be as tough as it’s been in recent years.
By Garry bartecki
Rental is kind of a mysterious business. There are very few sources from which to learn it. You will never find a “rental” course in your business curriculum. I was first exposed to rental through the Clark Equipment lift truck dealers. Clark kind of pioneered lift-truck leasing (as they called it), and they had a menu for short-term rental, long-term rental, long-term rental with maintenance, finance type leases, purchase contracts, etc. No matter how you needed the deal structured they had a program to fill your need. What was interesting was that most of these lift trucks were on the dealer’s balance sheet, normally for at least a 60-month schedule and were financed for the same term with either a full pay-out or down to a 20 percent residual. Life was a bit simpler then with the dealer having new and used inventory along with short- and long-term rental fleets. It wasn’t unusual then to move retired rental units to used inventory for sale. These dealers fully endorsed internal billing and the negotiating between the rental department and the used equipment department over pricing was always entertaining. Probably the most interesting part of this scenario was how much management protected the rental units from being removed from the rental department to make a sale. I remember a few dealer meetings where CEOs would get up on the podium and demonstrate how “expensive” it was to remove a rental unit to make a sale. They measured the “loss” by the number of months of rental activity they would lose before they
could replace the unit, and according to them it was very extensive. Do we have this respect for rental today that they had 30 or 40 years ago? I don’t think so. Oh sure, AED members realize that rental has become part of the industry – a big part and getting bigger. But I don’t sense a widespread understanding that rental provides margins in excess of what is attainable from both new and used unit sale margins. I know there are a number of AED members that have a lift-truck division and are still running their short- and long-term fleets along with the maintenance. So these dealers know what the profit potential is from rental and how to measure operating results. The construction transactions may take a different form because the long-term rentals are not readily available, but the short-term profits and sales of retired rental units should be similar to the short-term lift-truck rentals. Recent experience is telling me dealers are more interested in selling the unit than renting it. Maybe that is coming from the OEMs and their floor plan options, or the inherent sales roots of the dealer organization. The number of rent-to-sell transactions seems to support this conclusion. Length of time in the fleet also supports the sales mentality. A number of dealers keep units in the fleet for less than two years (which is one issue the IRS has with our rental transactions). My personal opinion is there is more money to be made in the rental business. Getting those profits suggests that rental sales personnel need more education and support to close rental transactions at prices
that represent 2013 time and dollar utilization. In other words, how do rental personnel educate customers as to the current state of rental rates, especially after the “discount” mentality of the last four years? We re-educate customers by sharing various publications with them that reflect real and current rental activity. I, for one, like to use the Rouse Report, which reflects the historical time and dollar utilization, as well as changes in historical rental rates. The “Rouse Report” covers most types of construction equipment and is a great publication to share with customers to demonstrate a rental rate increase is in order. There are a ton of rental publications to support a change for higher rates, and I believe contractors know they are coming. Again, my experience is that contractors are asking for the new rates so they can properly bid 2013 work – pretty nice. Where do we go from here? We educate management as to profits available from rental. We educate rental personnel how to measure rental versus sales results. We supply our sales staff with data they can use in the field to generate more profitable business. You’ll find this education at AED’s CFO Conference in May. Whether you’re the CFO, CEO, rental manager or sales manager, this is the equipment rental business course you won’t find online, on campus, or in the bookstores. I suggest you sign up early: www.aedu.org. Garry bartecki (gbartecki@ aednet.org) is AED’s vice president of Finance.
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Join other AED members and Keep More Money. AED and Veritas partner to deliver health insurance that helps control costs. Rising healthcare costs are not news. But a new health insurance program available exclusively to AED members is big news. The AED group medical captive program can deliver real savings to employer bottom lines. How do employers save? • Premium credits in good-performing years • National network of providers • Better decisions through access to medical claims information • Low administrative expense and complete transparency • Employee wellness program
Get more information about the AED health insurance solution and request a quote today. Call Doug Truax at 630.601.1502 or email doug_truax@veritasrs.com. Take control of your company’s health insurance costs starting now – and keep more money.
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Knowledge. Delivery. Truth.
6/15/12 1:05 PM
Business Outlook
2013: Transition Year for Construction on the Way to Recovery If only politics would get out of the way. Eli Lustgarten
The substantial recovery of U.S. construction equipment sales from 2010 to 2012 has been far stronger than underlying activity. While overall construction spending remained challenged, the step-up in demand represented a recovery of sales back to a level more consistent with current construction activity after the dramatic two-thirds decline from its peak in 2006 – sales that were helped by favorable tax policy to help offset regulation-driven price increases. North America (NA) was by far the strength in global demand for construction equipment last year. According to CNH, worldwide demand softened in 2012, falling 6 percent year over year; this is compared to a 27 percent gain in overall equipment demand in 2011 after a dramatic 50 percent gain in 2010. Also, worldwide light equipment demand rose 8 percent last year, led by a 29 percent increase in NA compared to plus or minus 1-2 percent in the rest of the world; heavy equipment demand actually fell 18 percent globally, but was up 24 percent in NA, up 5 percent in Europe/Middle East/Africa. Latin America saw a 6 percent decline, and APAC countries withstood a 32 percent decline driven by very weak conditions in China. While the NA retail sales statistics last year were impressive, the market for construction equipment actually ran out of gas midyear under the pressure of slowing economic growth in NA and the rest of the world. Global politics paralyzed corporate activity in virtually every major end market, especially in the U.S. where the presidential elections, fears about a 2013 budget fight, sequestering and massive tax
hikes, and a potential debt ceiling fight all took their toll on corporate confidence and spending. Consequently, most construction equipment manufacturers approached the end of 2012 with a high degree of caution. With manufacturing activity slowing in the U.S. and flat to down in most regions of the world, most construction equipment producers initiated an inventory correction in the second half of calendar 2012 led by a $3 billion reduction at Caterpillar. This reduced activity level will spill over at least into the first quarter of 2013 if not the full first half of the year – particularly in China where material inventory liquidation will follow the February Chinese New Year celebration. There is, however, growing optimism for 2013 and beyond. Most of the crisis issues in the U.S. have passed or have been kicked down the road for a while. More important, the U.S. economy is on the mend. n Housing is bouncing back with starts in 2013 headed for 950,000 or more compared to 780,000 in 2012; home prices are on the rise. n Household debt levels are lower, though combined net worth of U.S. holds still 12 percent below its prerecession peak. n Job growth has somewhat stabilized at 150,000 per month or more. n Energy prices are falling; America is enjoying an oil boom; the natural gas boom is also on the horizon. n The corporate sector is healing. In addition, Europe is addressing its problems, sort of, and China now has clarity over its transition in power, which takes place formally in March. Most forecasts for 2013 construction equipment demand call for flat sales
plus or minus 5 percent in virtually every region of the world including NA. Our surveys indicate that in the U.S., rental companies, which bought more than 50 percent of the equipment in 2012, are planning flat expenditures for 2013 with a shift from earthmoving equipment to other products. The only sector facing a difficult outlook for 2013 is mining; our latest surveys suggest that mining capital expenditures will fall at least 10 to 20 percent this year compared to prior estimates of a 5- to 10-percent decline, with NA coal by far being the most pressured. While equipment demand during the first half of 2013 may soften moderately, the key to further increases in equipment demand is growth in underlying construction spending. While the outlook for housing has strengthened and private nonresidential markets show signs of modest improvement – led by increased spending in health care and data centers – public spending is suspect as the outlook for construction and infrastructure outlays are deeply entwined in the discussions on federal spending and cost reduction. Currently, water infrastructure looks to be the most promising for stronger activity in 2013, but the most that pundits hope for is flat spending in the transportation sector for 2013. If sequestering were indeed to occur, the blow of the cuts would be felt more in 2014. We’re in a transition year for the construction sector. Push the politics aside, and the construction industry is poised for several years of moderate growth. Eli Lustgarten (elustgarten@aol. com) is president of ESL Consultants, an industrial consulting firm.
March 2013 | Construction Equipment Distribution | www.cedmag.com | 53
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2/25/13 4:24 PM 2/14/13 3:37 PM
Aftermarket
Market Capture Rates Are we stuck in a rut or settling for inferior levels of product support revenue?
By Ron Slee
For decades we have been given a pass on our performance in the market when we consider Parts and Service. There is not a universally accepted market share calculator. This means that parts and service management is given a pass on performance. I understand that market share today is more about opinion than science but let me wade into the middle of it and make some suggestions about our performance. I don’t think there are many OEM-authorized dealers that obtain 40 percent or more of their parts market share. Similarly I don’t think there are many OEM-authorized dealers that obtain 15 percent or more of their labor market share. I am open to debate on this but I feel I am on very solid ground. If we assume that I am close, then we have a truly unbelievable opportunity for revenue growth in both departments. So let’s do some rough arithmetic and talk about the profit opportunity. Over the next three years, if you increase your parts business by 20 percent above your currently projected growth you can calculate for your business what that would mean in the gross profit area. How much does the gross profit increase? Now go through the same exercise on the service business. How much does the gross profit increase? Add the two numbers together and that is the gross profit opportunity. Now look at your equipment business. What is the gross margin from the sale of new and used equipment? From that percentage you can calculate the sales revenue that would be required to generate the same gross profit as highlighted above. Now here is the magic question: How likely do you think it is
that you can increase your equipment sales by that amount? I agree with you that it is not very likely. Don’t forget, though, that I don’t want you to change your determination and successes in equipment sales. I want you to grow those sales as much as you can. However, I hope this is a call to arms for you. We need to become much more adept and aggressive in the pursuit of our parts and service business. We need to act on a series of things. Market coverage n Touch, phone or in person, every customer who purchases parts and service annually n Have a purpose for each touch More product support sales people n Strive to have the same number of parts and service sales people as equipment sales people n Develop purchase goals for each assigned customer n Maintain 100 percent retention of each assigned customer Use the telephone to sell n Assign the customers that do not have coverage from a parts and service sales person to an “instore” employee Customer retention n Call every customer after each parts and service and rental transaction n Call every customer with a change in buying habits Create the maintenance business n Get serious about this half of the labor business n Create a separate department for maintenance n Assign a manager to maintenance – someone whose life depends on the success of maintenance Enhance in-store merchandising n Create “retail:” stores rather than equipment dealer branches
n We are in the retail business – aren’t we? Create a “mobile hardware” sales business n If competitors can have a “box” truck deliver nuts and bolts to our customers (sometimes even our service department) why can’t we? Review fast-moving convenience stores n Look at the success of NAPA stores n Look at the distribution of your customer jobs and business locations n How convenient are we to those locations? Install and comprehensively use a CRM system n We need to be able to look at every contact we have had and what we talked about n This means every communication we have with the customer There is obviously much more that could be listed here. But every item on this list has three attributes in common: n Each will take a lot of work. n Each will increase sales revenue. n Each OEM-authorized dealer can improve their performance on every single item. So, will we continue to be in the rut and settle, or will we act? 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.
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2/28/13 10:46 AM
If government makes your head pound, Don’t get mad –
get active. AED Fly-In May 22-23 Washington, D.C.
Discuss issues impacting your dealership
Gain political insider perspectives
Join AED on the front line of advocacy by attending the two-day AED Fly-In in Washington, D.C. Day 1 Learn what’s going on Day 2 Meet with your members of Congress one on one
Develop your own advocacy skills
Network with dealers and members of Congress
www.aednet.org/fly-in AED Fly In ad.indd 1
2/25/13 10:18 AM
Washington Insider
U.S. Surface Infrastructure: Looking Beyond the Data What AED’s new study really tells us about the future of the federal highway program. By Christian Klein
A new AED-sponsored study by researchers at the College of William and Mary has painted a clearer picture of the fiscal problems facing the federal highway program. Among other things, our research team predicts the Highway Trust Fund (HTF) – the primary surface transportation funding mechanism – will be hundreds of billions of dollars in the red over the next two decades. Here are some of the most important conclusions I’ve drawn from the report: First, the challenges facing the federal highway program are not temporary; they are long-term structural problems resulting from multiple policy decisions that presidents and Congress have made over three decades. For example, in 1993, lawmakers decided to increase the gas tax to 18.4 cents per gallon, but not to index it for inflation. Our researchers found that had they done so, the HTF would have picked up an additional $64 billion over the past two decades and be on solid fiscal footing going forward. Our team also looked at the impact of another policy choice: higher automobile fuel efficiency standards, which are set by the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) pursuant to congressional mandates. Not surprisingly, the researchers found that as Corporate Average Fuel Economy (CAFE) standards rise, gasoline consumption will decline, which will lead to a drop in gas tax payments to the HTF. If Congress fails to change the existing highway user fee structure while maintaining current investment levels, the HTF
will incur a staggering $365.5 billion deficit over the next 23 years. The second key takeaway from the report is that the highway program’s problems are bigger than most people knew. For the past several years, Congress has been able to patch annual HTF shortfalls on a piecemeal basis with small (if you consider a few billion dollars per year small) transfers from the general fund. That will be a less tenable solution going forward because highway user fee revenues will continue to decline at the same time lawmakers are trying to balance the budget and facing an array of additional fiscal pressures resulting from the retirement of the Baby Boom generation. Put another way, if Congress does not fix the HTF, it will be that much harder to reduce the federal budget deficit. But the study is not all doom and gloom. The third major takeaway is that there are solutions. One is to restore the purchasing power the gas tax had in 1993 by increasing it to 25 cents per gallon and indexing it for inflation going forward. Not only would that eliminate the projected deficit, it would bring in $167 billion in additional revenue over the next two decades that could be used to address our staggering infrastructure needs. Our researchers also looked at ways to replace the gas tax with a vehicle mileage-based user fee. But solving the HTF’s problems will take bipartisanship, political courage, and creativity, all of which are in short supply in Washington, D.C., at the moment. AED is pushing lawmakers to deal with the user fee issue in the context of the broader tax and budget
reform debate, but there’s no guarantee we’ll be successful. This leads us to the fourth takeaway – if Congress can’t get the job done, states and localities are going to have step up and increase their own spending to fill the infrastructure gap. If they do not, our transportation system will continue to deteriorate and further undermine our economic competitiveness. The Texas Transportation Institute reported this month that congestion now costs the U.S. economy $130 billion per year in wasted time and fuel. The American Society of Civil Engineers has reported that “if present trends continue, by 2020 the annual costs imposed on the U.S. economy by deteriorating infrastructure will increase by 82 percent to $210 billion, and by 2040 the costs will have increased by 351 percent to $520 billion.” Time for Action The time is now for bold, decisive action to rebuild our crumbling roads and bridges. Our new report is an important tool to help educate policymakers at all levels of government. Download it at http://bit.ly/htf2013. Help AED spread the word about this important new highway data. Go to AEDaction.org today to send an e-mail about the report to your congressional representatives. Tell them now is the time to fix the Highway Trust Fund. Christian klein (caklein@aednet.org) AED’s vice president of Government Affairs and Washington counsel. He can be reached at 703-739-9513.
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New & Improved
New Multi-Ripper Talon Bucket Great for Utility Pipeline Applications Customers save money avoiding rock trenchers, hammers and blasting. Leading Edge Attachments, Inc., (LEA) now offers the patented Multi-Ripper Talon Bucket as the new addition to the Multi-Ripper SHARC Product line. LEA Multi-Ripper Products have shown to replace hammers, blasting and rock trenchers, for a fraction of the cost. Designed mainly for utility pipeline contractors, the new Multi-Ripper Talon Bucket works on the same principal as the award winning Multi-Ripper Bucket, except the bucket is very narrow, and the leading edges have been redesigned so that the center rib can be eliminated, thus
improving capacity fill and dumping for a narrow bucket. The performance of this style of maximum breakout “one tooth at a time” bucket greatly exceeds all other designs of rock bucket ripper combinations and has saved hundreds of thousands of dollars by avoiding the use of rock trenchers, hammers and blasting. The made-in-America Multi-Ripper Talon Bucket is the newest addition to the highest quality and most productive rock ripper bucket combinations available on the market. For more information visit www.digrock.com
Atlas Copco’s New Electric Scooptram is a Diesel Alternative With the new carbon emission-free LHD loader, Atlas Copco lives up to its brand promise “Sustainable Productivity.” The latest addition to Atlas Copco’s range of Scooptram underground loaders – the Scooptram EST1030 – is an attractive alternative to diesel equipment in underground mining. Due to the electric motors high efficiency, this electric loader consumes less energy, produces less heat and has a lower noise level, than a diesel equivalent machine. In underground mining, ventilation has always been an issue. An electric machine requires very little ventilation; only a minimum must be kept to keep the dust
and heat at acceptable levels as well as air for the operator. The EST1030 introduces a new and patented cable control system that minimizes the cable tension as well as cable wear. Key safety features include spring-applied, hydraulically released (SAHR) brakes. The electric Scooptram EST1030 shares 90 percent of its components with the proven and very successful diesel Scooptram ST1030. The diesel version is sold in large numbers all over the world. This ensures spare part availability as well as product support in even the most remote places. For more information visit www.atlascopco.com
Ritchie Bros. Launches Online Equipment Marketplace Ritchie Bros. Auctioneers has launched a new online equipment marketplace called Ritchie Bros. EquipmentOne. Complementary to the company’s flagship unreserved auction business, Ritchie Bros. EquipmentOne is a secure online marketplace for equipment and materials, with user-friendly functions similar to e-Bay, Craig’s List and Amazon. Buyers and sellers can use Ritchie Bros. EquipmentOne to negotiate, complete and settle their transactions in a safe and transparent environment. A full commercial launch is scheduled in April. The company estimates that about half of all equipment transactions take place on a private treaty basis. Ritchie Bros. says it has great expectations for the new venture, which is completely different from its auction business model. For more information visit www.EquipmentOne.com
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New & Improved
Fecon Introduces Self-Contained Drilling Support Trailer Boasting an efficient workstation for grout, mud mixing and pumping operations, the new Fecon GL14 Support Trailer is a self-contained drilling support system for drilling applications. Featuring hydraulic lift assist ramps to allow easy access, the GL14 includes a 200gallon water supply tank for back flushing and cleaning; a 58-gallon hopper for grout mixing and 500 feet of grout line hose reel capacity. With lockable storage for tools and drill rods, the unit has a 6-foot by 14-foot flatbed trailer and can be towed by truck or by the Fecon GL300 Drill Rig. The GL14 has four-wheel brakes allowing
for safe highway towing. Together, the Fecon GL300 Drill and GL14 Support Trailer provide geothermal ground loop installation. For more information visit www.fecon.com
New 70 Mechanical Full-width Gooseneck Offers CustomerFriendly Features XL Specialized Trailers’ XL 70 Mechanical Full-width Gooseneck is equipped with exciting new standard features including: manual ride height and double donuts for varying deck heights, and a fully equipped main deck with 14 chain drops per side, 8 bent D-rings per side, and removable swingout outrigger brackets on 24-inch centers (for use with swingout outriggers for over-width loads). Traction aids on the rear bridge transition assist when loading onto the rear bridge, while four pan-style D-rings on the rear deck and gooseneck add tie-down versatility. The trailer comes
prepped for a flip axle. Other new customer-friendly features include an angled control panel for easier access to the air, electric and raise/lower valves, and the lockable toolbox in the gooseneck with aluminum cover, chain rack, and a light for finding items at night with ease. The XL 70 MFG still includes all the favorite features that have made it one of the most used mechanical trailers on the market. For more information visit www.xlspecializedtrailer.com
Shadows Vanish on Bridgework with Terex Bid-Well LED Lighting Terex now offers a patent-pending LED light system for its full line of Terex Bid-Well concrete bridge, flatwork, highway, airport and canal pavers and powered work bridges and texture/curing machines. The new Terex Bid-Well LED light package mounts directly to the machine’s frame and paving carriage to reduce harsh shadows cast by tower lights, allowing crew members to more easily see the concrete slab and improve surface finishing when paving at night. This new integrated light system is powered directly by the machine’s engine, so no generator is required. These sealed 5-in (12.7-cm), 12-volt utility lights draw only one amp of power yet contain 13 LED lights that flood a broad area with bright light. Up to 12 lights can be positioned on the machine’s frame and are easily removed and repositioned to direct the light where needed. Up to four lights can be mounted directly to the paving carriage, which travels along the paver’s frame. Powered directly by the paving carriage’s engine, the system does not require lengthy and expensive cables to position the lights for illuminating the strike-off augers, Rota-Vibe system, dual paving rollers and adjustable finished pans. This helps to make positioning of the paving carriage more noticeable at night for safer operation. For more information visit www.terex/roadbuilding (continued on next page)
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New & Improved
Cummins Qsb4.5 Powers Up To 173 Hp for Tier-4 Final Cummins Inc. has announced that the next-generation QSB4.5 engine will meet Tier-4 Final near-zero emissions standards with top-rated power increased to 173 hp (129 kW) and a higher peak torque of 520 lb-ft (705 N•m). The 4-cylinder, 4.5-liter engine is performance-enhanced with a Cummins VGT(TM) Variable Geometry Turbocharger, enabling the higher ratings of the QSB4.5 to reach performance levels previously associated with a larger 6-cylinder engine. For the QSB4.5 lower ratings – down to 121 hp (90 kW) – the VGT technology improves transient response on a fuel-efficient basis. For equipment operation, this means a stronger, faster response to increasing load demands compared with Tier-4 Interim engines. For more information visit www.cummins.com
Bobcat Rebar Bender Adds Versatility to Attachment Lineup Bobcat Company has added versatility to its attachment lineup with a new rebar bender. Featuring five mandrels to bend rebar into a variety of angles and for repeating bends, the rebar bender is mounted on the left Bob-Tach mount. In addition, operators can start and stop their idled loader or Toolcat utility work machine from outside the cab. Allowing for easy, safe operation of the rebar bender from outside the cab via a remote attachment control (RAC), the rebar bender is capable of bending rebar up to a No. 6 grade to 200 degrees. A wired remote control starts and stops the rotation of the bend pin with an optional bar stop that can be set at almost any angle for an automatic stop and a repeatable angle setting. The unit weighs 330 pounds with a height of 20.1 inches, width of 23.5 inches and depth of 16.7 inches. It is ideal in ground conditions that
are soft, rough or muddy. The rebar bender is compatible with Bobcat skid-steer loaders, compact track loaders, allwheel steer loaders and Toolcat utility work machines. For more information visit www.bobcat.com
Wirtgen Introduces Full-LaneWidth Concrete Slipform Paver With a maximum paving width of 26 feet and a modular design that offers a variety of configurations, Wirtgen’s new SP 80i is the company’s first North American market entry into the full-lane width concrete slipform paver category. The modular design allows configuration as a two-track (SP 82i) or four-track inset paver (SP 84i), or offset for large sections (SP 81i). A modular inset mold system allows for paving slabs with a central crown of 12 to 26 foot width. Steering modes, which are computer controlled, are available for back-straight, rotate, crab and coordinated positions. In addition, the AutoPilot stringless control system enhances Wirtgen’s paver line as it can be used
with Wirtgen’s SP 15 and SP 25 concrete slipform pavers and the SP 81i offset machine. For more information visit www.wirtgenamerica.com
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New & Improved
New Vermeer Drill Offers Impressive Power in Modest Footprint Vermeer’s D60x90 Navigator horizontal directional drill (HDD), provides impressive power in a small footprint; it’s the cost-effective choice for tackling difficult trenchless installations in challenging ground conditions. The D60x90 is powered by a 185 hp (John Deere Tier 4i diesel engine, which delivers 9000 foot-pound of rotational torque and 60,000 pound of thrust/pullback. A climate-controlled cab enhances operator comfort and offers protection from the weather. The optional front-mounted stakedown system can reduce the amount of time and materials needed to set up the drill, enhancing jobsite efficiency. In addition, customers can choose from two diameters of 15-foot Firestick drill rod: 2.875-inch or 3.5-inch diameter. The D60x90 is available with additional, quick-change rod boxes containing up to 300 feet (91.4 m) of drill rod each. The new rod box design is removable by releasing two pins and a single latch, the quick-change rod box reduces the need to manually load drill rod. The D60x90 is equipped with a 7-inch (17.8 cm) TFT-LCD color monitor that offers visibility to key drilling function parameters, as well as DCI locator information. For more information visit www.vermeer.com
Coming to World of Asphalt
New Technology for Vibratory Rollers and Milling Machines Bomag’s BW190AD-4AM Tandem Vibratory Roller improves compactor performance. BOMAG’s exclusive Asphalt Manager II technology enables the new BW190AD-4 AM tandem vibratory roller to deliver continuously optimized compaction performance, regardless of operator experience. A special front drum designed to work with the new Asphalt Manager II system automatically measures and controls compaction performance. As the material becomes stiffer, Asphalt Manager II begins to adjust the angle/vector of the drum’s output energy from fully vertical to fully horizontal. This helps ensure that optimum surface quality results are achieved, while avoiding asphaltdamaging over-compaction. The BW190AD-4 AM offers 79-inch-wide drums and features slanted drum support legs, high curb clearance and a clear view of the entire drum surface. Two new models of milling machines, the BM500/15 and the BM600/15, both feature innovative rotor geometry to reduce vibration, increase service life and greatly simplify drum replacement. The new rotor geometry features optimally arranged teeth and a thick shell for uniform, low-vibration and very precise cutting. The edge cutter is also designed to produce a smooth edge with minimum damage, which helps reduce extra costs and ancillary work for the contractor. To minimize downtime, the diagonal cutters protect the rotor when driving around bends, and they prevent abrasion to the bracket edges. In an industry-exclusive rotor mount design, the cutting width of the Bomag milling machines can be adjusted with the removal of just a few bolts. For more information visit www.bomag.com/us Visit Booth 1534
Terex Finlay Jaw Crusher Combines Crushing with Low Transport Cost With high performance crushing built around a Terex 44-inch by 28-inch jaw crusher, Terex Finlay introduces its new J-1170. Weighing in at 99,600 pounds and with compact dims for lower transport costs between and within crushing sites, the J-1170 features an intelligent chassis design offering clearance on both ends. This feature enables safe and easy loading onto transport trailers. For more information visit www.terex.com Visit Booth 2407
(continued on next page)
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New & Improved
(“Overwhelming Your Customers With The Wow Factor” continued from page 24)
All things proactive. I never have to worry about servicing my car. Hendrick Lexus calls me when it’s time. I never have to worry about servicing my copy machine. Technocom just shows up. Dr. Menaker tells me when it’s time to have my teeth cleaned and Signature Healthcare tells me when it’s time for my yearly physical. Maybe that’s why I’ve been a loyal customer for the past 10 years or more to each of these companies, price notwithstanding.
What’s Wow to me? In case it’s not abundantly clear, let me give you a few more examples that you can parlay into the dealer universe in which you live: n It’s being at an event in Wichita, Kan., and having my hometown “Philadelphia Daily News” slid under my door in the morning. Wow! n It’s having a flat tire and Hendrick Lexus driving to my home, fixing the tire, and refusing to charge me. Wow! n It’s going to my hotel room and instead of the traditional bowl of fruit, finding an autographed baseball – signed by the staff of the hotel. Wow!
Wow is wonderful original work that leads to W-O-M (word-of mouth advertising) – for years. n Jeffrey Gitomer is the author of The Little Red Book of Selling. President of Charlotte-based Buy Gitomer, he gives seminars, runs annual sales meetings, and conducts Internet training programs on selling and customer service at www.trainone.com. He can be reached at 704-333-1112 or salesman@gitomer.com
Coming to World of Asphalt
STRIKER HYDRAULIC BREAKERS America, INC 3900 Ben Hur Ave # 3 Willoughby, Ohio 44094 Office: 440-954-9923 Fax: 440-954-9929 Toll Free: 1-877-954-9923
For more information: WWW.toku.america.com
Presents their new TNB series hydraulic breakers; Striker Hydraulic Breakers has a complete product offering of 17 breakers ranging from 100 Ft./lb. class breaker to a 12,000 Ft./lb. class breaker. The TNB Series breakers are ideally suited for applications from primary/ secondary breaker, road and bridge construction, airport construction, demolition, mining, quarry, rental, landscaping and recycling. Striker Hydraulic breakers (1) or (3)year warranty allows you, the customer more “up-time” and controls your cost of operation while maintaining maximum performance.
Untitled-1 1
Design Focuses on Performance in New Volvo P7000 Series Paver One of the many “green products” to be displayed at the 2013 World of Asphalt is the new 10-foot P7000 series asphalt paver from Volvo. The P7000 uses a Volvo Tier-4 certified engine featuring low operating noise levels. The machine has improved visibility and several standard features not found on other pavers, as well as enhanced ride-ability, smoothness and density. With a new design focusing on performance and operator comfort, the P7000 has improved overall reliability, durability and serviceability in addition to performance enhancements, which focus on smooth and consistent delivery of all HMA mixes. For more information visit www.volvoce.com
Visit Booth 903
LeeBoy’s New Legend 815 Heavy Duty Electric Screed LeeBoy will introduce its Legend 815 Heavy Duty Electric Screed option for its 8515 and 8510 paver models at the 2013 World of Asphalt. The 815HD features a power crown, structure, slide bracings, cylinders, extensions; fiber bushings, chrome rods, wear plates; bullnose, flight screws and heating system. The machine also has V grove slides, locking bars, easy removable access covers and an adjustable screed pre strike off. 12/19/2012 9:58:23 AM
For more information visit www.leeboy.com
Visit Booth 2435
62 | www.cedmag.com | Construction Equipment Distribution | March 2013
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New & Improved
Advertisers’ Index Ajax Tool Works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Leading Edge Attachments. . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARGO - Extreme Terrain Vehicles. . . . . . . . . . . . . . . . . . . . . IFC
Lowe Manufacturing Company, Inc.. . . . . . . . . . . . . . . . . . . 39
B4 Consulting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PFW Systems Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BLS Enterprises, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Ritchie Bros. Auctioneers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
BOKF Equipment Finance Inc.. . . . . . . . . . . . . . . . . . . . . . . . 11
SANY Heavy Industry Co., LTD . . . . . . . . . . . . . . . . . . . . . . . . 9
DIS Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Dispatching Solutions, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . 16 e-Emphasys Technologies, Inc.. . . . . . . . . . . . . . . . . . . . 32-33 EPG Insurance, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Federated Insurance Companies. . . . . . . . . . . . . . . . . . . . . . 35 GE Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Glynn General Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Sentry Insurance Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Sullivan-Palatek. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Toku America, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Towmaster Trailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Vacuworx International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Veritas Risk Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
HKX, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Wacker Neuson Corporation. . . . . . . . . . . . . . . . . . . . . . . . . 23
Hydrema Exports A/S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Wedgelock North America. . . . . . . . . . . . . . . . . . . . . . . . OBC
Infor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Werk-Brau Company, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . IBC
John Deere Power Systems. . . . . . . . . . . . . . . . . . . . . . . . . . 54
WTP Advisors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
LayMor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
XAPT Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 © 2011 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 non-members. Office of publication: 600 W. 22nd St., 220, Oak Brook, Ill. Phone: 630-574-0650. Periodicals postage at Hinsdale, Ill. 60521 and other post offices. Additional entry, Pontiac, Ill. POSTMASTER: send address changes to Construction Equipment Distribution, 600 W. 22nd St., Suite 220, Oak Brook, Ill. 60523
March 2013 | Construction Equipment Distribution | www.cedmag.com | 63
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Dealer Data
New Construction Starts in December Jump 23 Percent; Annual Total for 2012 Advances 6 Percent to $463.6 Billion
New construction starts in December climbed 23 percent to a seasonally adjusted annual rate of $530.0 billion, according to McGraw-Hill Construction. Year-To-Date Construction Starts Unadjusted Totals, In Millions $
Monthly Construction Starts Seasonally Adjusted Annual Rates, In Millions $ December 2012
November 2012
% Change
$189,024
$141,805
+33
198,534
187,144
+6
142,483
100,582
+42
$530,041
$429,531
+23
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. 2012
12 Mo. 2011
% Change
$149,704
$165,048
-9
163,399
126,299
+29
150,522
147,851
+2
$463,625
$439,198
+6
Source: McGraw-Hill Construction, www.construction.com
Monthly Sales Volume by Original Equipment Cost with Recovery %
Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520
The graph to the left illustrates sales of used rental fleet by the major North American rental equipment companies for the last 24 months. Each month’s equipment sale volumes are expressed as a percentage of the total original equipment cost (“OEC”) sold in the highest volume month, with December ’11 representing 100%, (e.g. total OEC sold in March ’11 was approximately 80% of total OEC sold in December ’11). Actual sale $ volume is illustrated as the blue component of each bar in the graph. The recovery (i.e. sales $ as a percentage of OEC sold) is indicated within the bar for each month (e.g. March ’11 sales $ recovery was 44.0% of total OEC sold). *Measured by OEC $
The Dirty Dozen - UCC filings on 12 earthmoving units. Equipment Description Articulated Dump Trucks Crawler Dozers Crawler Loaders Excavators - Crawler, Hydraulic Excavators - Wheeled, Hydraulic
DEC 11
JAN 12
FEB 12
MAR 12
APR 12
MAY 12
JUN 12
JUL 12
AUG 12
SEP 12
OCT 12
NOV 12
Grand Total
54
50
35
44
63
86
58
48
108
50
57
64
717
313
279
159
213
278
247
269
240
255
246
367
291
3,157
3
6
5
4
12
4
1
4
3
2
1
6
51
554
564
286
418
494
563
568
471
556
476
689
522
6,161
44
35
14
21
21
17
31
19
35
23
22
30
312
Mini Excavators
506
648
386
458
662
714
635
554
621
554
680
588
7,006
Motor Graders
100
102
79
88
85
105
108
95
78
59
99
113
1,111
6
5
3
10
3
13
4
8
3
7
4
66
1,457
1,198
729
808
867
976
868
826
811
833
1,120
351
387
222
282
294
300
326
295
351
351
422
Scrapers - Conventional Skid-Steer Loaders Tractor Loader Backhoes
1,464 11,957 363
3,944
Wheel Loaders < 80 HP
82
55
43
33
36
56
43
38
38
48
68
69
609
Wheel Loaders > 80 HP
573
542
292
345
393
447
348
362
434
366
536
612
5,250
4,043 3,871 2,253
2,714
3,215
3,518
3,268 2,956 3,298
3,011
4,068
Grand Total
4,126 40,341
Supplied by Equipment Data Associates, Charlotte, N.C.
64 | www.cedmag.com | Construction Equipment Distribution | March 2013
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