August 2015
CED
Construction Equipment Distribution Published by AED: Business Fuel for a More ProďŹ table Dealership
Mid-year Business Outlook Find out how your business may be affected in the months to come
n Problem Solved Is it worth paying for a customer’s extended warranty?
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n Regional Report
Lawmaker discusses highway bill with Kelbe Bros.
n View from the Hill Find out the state of manufacturing across the country
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Create Fast, Professional Quotes with Optimal Margins Margin Worksheet provides a customizable approach to managing and approving equipment quotes before presenting them to the customer. • Manufacturer incentives are taken into consideration when determining the margin • Specify the amount of money your dealership needs to set aside (reserve) to make the deal happen • Programs and reserves are defined by the Type (New, Used or Both) as well as the class of the equipment • Integration with IntelliDealer™ allows for customer and equipment data to import automatically to your quotes and invoices With Margin Worksheet, your equipment quoting process can have the margins you desire. cdkglobal.com/heavyequipment | sales.heavyequipment@cdk.com | 519.474.5212
Heavy Equipment © 2015 CDK Global, LLC / CDK Global is a trademark of CDK Global, LLC.
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>> EDITORIAL TEAM CED Magazine Director SARA SMITH ssmith@aednet.org Graphic Production ANGELA OGDEN a.ogdenfcs@gmail.com
>> COLUMNISTS Brian Rehg CEO, Blue Stingray Erinn Hutkin Journalist Peter J. Gallanis Journalist Steve Calechman Journalist Brett Levanto AED Senior Manager of Government Affairs
contents CED Magazine | August 2015
>>COLUMNS
07 >> From the Chairman
Slicing and dicing data is educational and rewarding.
42 >> A View From the Hill
Manufacturing matters - Better policy means better labor market.
44 >> Problem Solved
Is it worth paying for a customer’s extended warranty?
Joanne Costin Co-Founder of Content for Biz Inc.
50 >> Workforce Solutions
Troy Otterman Doggett Heavy Industries
Dan Harkins Journalist
54 >> Easy Wins
>> ADVERTISING CONTACTS Vice President of Sales/Publisher DAVID W. GORDON 800-388-0650 ext. 334 dgordon@aednet.org Advertising Sales Manager ALBERT J. RAMIREZ 800-388-0650, ext. 311 aramirez@aednet.org Production Manager MARTIN CABRAL 800-388-0650 ext. 313 mcabral@aednet.org Since 1920 Official Publication of
vol. 81 no. 8
Back to school: how to learn to stop worrying and love technical education
Employee reviews can be constructive - when they’re done right.
>> PLUS
46 >> Mid-Year Business Outlook Growth slows, while some energy-department dealers face declining sales.
52 >> Family Business Another generation of Vermeer leaders are coming up.
600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132
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contents CED Magazine | August 2015
vol. 81 no. 8
www.cedmag.com
>> FEATURES
26
Lawmakers Visit Construction Supplier to Discuss Highway Bill U.S. rep. reid ribble visited the kelbe Bros. equipment co. and shared his expertise.
32
First Meeting of the Financial Special Interest Group (SIG) Will Focus on Advocacy financial meeting will kick off in Washington, D.c., this october.
34
Cloud Customization and Your Business learn how to best manage the cloud with advice from Blue Stingray’s ceo, Brian rehg.
>> DEPARTMENT
10 >> AED hp 14 >> Industry Beat 24 >> Data Trends 28 >> Ready to Order 56 >> Ad Index
40
Equipment Distributors and Others Disappointed with Congress for Allowing Ex-Im Bank to Expire President of hoffman equipment Tim Watters weighs in on ex-im Bank expiration.
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SECONDS A mile-wide EF4 tornado leveled Grossenburg Implement.
1
3
HOUR
DAYS
A Sentry Insurance associate submits the claim for processing.
Dealership sales and service operations resumed.
A dealership’s survival after a tornado can be determined by the actions it takes well before the storm hits.
Endorsed by
Grossenburg Implement suffered $19 million in damages from a tornado that lasted seconds. Sentry Insurance helped them get back in business in 3 days. In less than 12 months, they celebrated a grand re-opening of an all-new facility, well before some neighbors began rebuilding. Sentry offers pro-active risk management solutions to help prevent losses, and post-event assistance to help your dealership recover quickly. We’re more than insurance. Call 1-800-447-0633, option 1, to find out how you can get started with Sentry. This is a paid endorsement. Property and casualty coverages are underwritten by a member of the Sentry Insurance Group, Stevens Point, WI. Individual life insurance, group and individual annuities and group products are issued and administered by Sentry Life Insurance Company, Stevens Point, WI. For a complete listing of companies, visit sentry.com. Policies, coverages, benefits and discounts are not available in all states. See policy for complete coverage details. 73-659A
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>> from the chairman
Don Shilling
Slicing and Dicing Data is Educational and Rewarding in AED’s World In the AED world, our company is one of the rare exceptions to the rule.
I
n the Association of Equipment Distributors’ (AED) world, our company is one of the rare exceptions to the rule. We are a participant in an AED Twenty Group, and we participate in the AED Cost of Doing Business Survey. Not many of us do both! The Profit and Planning Group of Boulder, Colo., actually provides the financial reporting services for both the AED Twenty Group and the AED Cost of Doing Business Survey. Although the reports are different, the comparison of the data and the fruit we bare from reviewing both is important as we slice and dice the data to understand our businesses better. The AED Cost of Doing Business Survey provides a unique method to compare all dealers participating in the survey. You can see the hard numbers comparing your business with the model of a typical AED dealer and separately the high-profit AED dealers. We gauge our success on how the group of typical
dealers is doing. Of course, it is the highprofit dealers’ numbers we are drawn to, and we want to emulate those dealers to be as successful as possible. The financial ratios, asset management and sales growth are compared in the data. Sometimes we are relieved that we are doing the right thing and sometimes we question why we are not doing better in a given performance area. This is all good stuff. But the AED Cost of Doing Business Survey lacks best practices. You can share the numbers all you like, but until you ask the high-profit dealer how he achieved success, you are struggling to find the answer on your own. That is the beauty of the AED Twenty Groups. When 10 or more distributor companies get in the same room and compare financial data in detail, then the wonder of “best practices” begins to surface. Ideas start to flow, and dealers get excited about the possibility of going home and changing their businesses.
Brian McGuire | AED President & CEO
Our AED Twenty Group spent the first several meetings getting the financial reporting the way we wanted it. Now as we get together two to three times per year, we are challenged to improve and show our peers in the group how we intend to improve our business operations. If you are not involved in a Twenty Group, you should consider it. Some of the larger manufacturers have sponsored Twenty Groups for their dealers. For the average-sized AED dealer, some manufacturer-sponsored Twenty Groups are not available, so you should take a chance and seek out a generic Twenty Group like the ones provided by AED. Then join in. The cost is inexpensive and all it takes is a little “slicing and dicing” with a network of dealer peers to gain some knowledge from each meeting and take home an idea. It’s well worth the investment. n
Bob Henderson | AED Executive Vice President & COO
>> officers
>> at-large directors
Don Shilling Chairman General Equipment & Supplies, Inc. whit perryman Vice Chairman Vermeer Texas-Louisiana Wes Stowers Sr. Vice President Stowers Machinery Corp. Diane Benck Vice President West Side Tractor Sales Co. Todd Hystad Vice President Vimar Equipment Ltd. Dennis J. Heller VP of Finance Stephenson Equipment, Inc. Tim Watters Immediate Past Chairman Hoffman Equipment Co. A. Roy Kern, Jr. Foundation President Equipment Corporation of America
Todd Bachman Florida Coast Equipment, Inc. James P. Cowin Cowin Equipment Co., Inc. Larry R. Miller Kelbe Bros. Equipment Co. Inc. Mitch Nevins Bell Trucks America Kenneth E. Taylor Ohio CAT Corey Vander Molen Vermeer MidSouth, Inc.
>> regional directors Ron Barlet West Reg. Bejac Corp. Craig Drury Eastern Canada Reg. Vermeer Canada Inc. Ryan Greenawalt Midwest Reg. Alta Equipment Co. Todd Hystad Western Canada Reg. Vimar Equipment Ltd. Christopher Palmer Northeast Reg. Wood’s CRW Corp. Giles Poulson Rocky Mountain Reg. Faris Machinery Co. John Riggs, IV South Central Reg. J A Riggs Tractor Co. Jay Rodes Southeast Reg. Wilson Equipment Co., LLC
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Sell More Equipment Increase Your Profits Grow Business EPG Offers Total Dealer Fleet Protection Component failures can result in large capital expenses and can wreck a profitable sale. Protect your dealer fleet from these potential added costs with EPG Extended Service Protection Plans.
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Learn more about EPG at www.epginsurance.com or call 901-685-3100
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Happening
www.cedmag.com
Save the Date!
AED’s Executive Forum is right around the corner. Renaissance Convention Center Hotel Schaumburg, Ill. Register today at bit.ly/executiveforum15
Mark your calendars for Sept. 23-25.
current events and news for the equipment distribution industry Please follow us on facebook at facebook.com/aednet and Twitter at @aednet
10 » AED hp 16 » Industry Beat 21 » Data Trends 27 » Ready to Order
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>> AED hp Join AED in Washington, D.C. for Our New Financial Special Interest Group (SIG) Don’t miss this opportunity to network and learn strategy with finance experts in the heavy equipment industry.
M
ake plans to attend this special interest group tailored specifically towards the financial professionals in the equipment industry. During this day and a half training program, you will gain exclusive insight and tactical strategies for financial executives.
What is AED’s Financial Special Interest Group? This group of individuals will meet three to four times a year at AED functions. Participation in the SIG is open to any AED member with responsibility or interest in dealer financial operation issues, including CFOs, credit & finance managers, CPAs and tax professionals. This inaugural meeting will focus on public policy, tax issues and current topics that are affecting our industry and your dealership’s profitability.
Event Highlights: Christian A. Klein and Brett Levanto from AED’s Government Affairs office will teach you the best practices when meeting with members of Congress. Discover tools that AED has to facilitate your engagement and political intelligence on key equipment industry issues. Rep. Reid Ribble of Wisconsin, a member of the Transportation and Infrastructure Committee will discuss key infrastructure issues. There will be a highly anticipated panel discussion on major political issues affecting financial specialists and their decision-making process. Rep. Peter Roskam of Illinois and chairman of the Ways and Means Oversight Subcommittee, will discuss tax issues impacting equipment dealer operations.
The Historical Willard InterContinental This event will be held at the historical Willard Washington D.C. Often called the Crown Jewel of Pennsylvania Avenue, the Willard InterContinental is conveniently located just one block from the White House. Internationally known as one of the best hotels in Washington, D.C. The Willard’s unique blend of contemporary luxury, historic charm and sustainable hospitality subtly reflects the spirit of the city.
Sign up now and book your travel.
If you have questions, please call 630-468-5126. Visit bit.ly/aedfinancesig to register today Members: $550/$450 before Sept. 21 Nonmembers: $1,100/$900 before Sept. 21
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>> AED hp Are You In the Competition For Service Technicians? The shortage of technicians in a variety of industries related to construction equipment is rapidly growing. The numbers are rather astonishing and paint the picture of what we as an industry face to get our fair share of entry-level technicians. In many ways, the facts behind why the numbers are so low include such reasons as an aging technician workforce; technical colleges are not producing the numbers of graduates needed; and industry image. For example: 1. The trucking industry’s estimated recruitment needs are 200,000 new techs, or 20,000 annually, over the next 10 years. 2. ASE estimates the U.S. automobile industry needs an estimated 60,000 new technicians annually. There are over 800,000 auto service technicians in the U.S. 3. The collision repair industry employs roughly 175,000 technicians. Annual turnover is estimated at 14 percent, with 6.5 percent of those retiring or leaving the trade (over 11,000 techs). The competition is fierce. If equipment dealers are going to effectively recruit new technicians, it’s going to require the investment of time and resources into college programs that train technicians of the
future. For more information, contact Steve Johnson, vice president of Foundation Operations, at sjohnson@aednet.org. In the meantime, here are some suggestions to get started working on your own technician pipeline:
Top 10 Ways Dealers Can Grow Their Own Technicians 1. Start a student recruitment program now; the tech shortage is just getting worse. 2. Work with other local dealers in a collective effort to address the tech shortage. 3. Develop relationships with local middle schools and high schools. 4. Develop relationships with local post-secondary schools. 5. Volunteer to serve on equipment program advisory boards with local schools. 6. Provide equipment, parts, technical information and other resources for local schools. 7. Develop career-influencing relationships with students. 8. Communicate career opportunities to parents; other influencers. 9. Assist students to reach their equipment technician career goals. 10. Commit to the long-term.
New Rental-Focused Training Opportunities Available!
R
ental is a major of part your business strategy and at the same time is becoming more complex in different ways. To provide you with access to industry-specific training AED is offering a series of new webinars and a live seminar(s) specific to rental. Add these training opportunities to your calendar and register your team today. Webinar: Determining the Right Size Rental Fleet For You 10-11 a.m. Aug. 20 This webinar will give you some key insight into right-sizing your fleet and measurement guidelines to accurately project your future results. Webinar: The Maintenance of Maintaining your Rental Fleet 10-11 a.m. Sept. 10 Maintaining a rental fleet is more than creating a work order and moving the equipment through the shop whenever you get around to it. You will learn how to set up processes that will facilitate better turnover in your rental department.
Seminar: Rental Manager Development Program Nashville Airport Marriott, Nashville, Tenn. Oct. 22-23 This program is designed to provide you with the business tools to take your rental operations to the highest level of performance in achieving optimum fleet utilization, work flow processes and profitability for your rental department. Webinar: Selling Rental: More Involved than you Think 10-11 a.m. Dec. 3 In this webinar, you will learn strategies for getting a laser focus on the rental market. All rental programs are presented by Larry Kaye, of Script International Inc. You can register for all of these programs and more at bit.ly/aededucation.
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>> AED hp
Don’t Miss It
Mark Your Calendar
For details and to register, visit the AED Events Page at aednet.org or call 800-388-0650. Sept. 14-15 Top Performer Parts Manager Development Program- Level 2 | Omni Interlocken Resort, Denver, Colo.
Oct. 21-23 Finance Special Interest Group Willard InterContinental Washington, D.C.
Jan. 19-22 Summit & CONDEX Gaylord National Resort, Washington, D.C.
Sept. 16-17 Top Performer Service Manager Development Program- Level 2 | Omni Interlocken Resort, Denver, Colo.
Oct. 22-23 Rental Manager Seminar Nashville Airport Marriott, Nashville, Tenn.
April 27-29 2016 Financial Symposium Loews Hotel, New Orleans, La.
Sept. 23-25 AED/CDK Global Executive Forum Renaissance Convention Center & Hotel, Schaumburg, Ill.
Nov. 17-19 The Four Pillars of the Sales Profession Drury Inn & Suites Dayton North, Dayton, Ohio
Oct. 7-8 Equipment Dealer Business War Games DoubleTree, Phoenix, Ariz.
Nov. 18-19 Branch Manager Seminar Hotel Valencia Riverwalk, San Antonio, Texas
Join AED for the Leading Educational and Networking Event for Executives in the Industry — AED/CDK Global Executive Forum! Sept. 23-25 | Schaumburg, Ill. | Register now at bit.ly/executiveforum15.
A
t this year’s Forum, we’re diving into the most dynamic issues that affect the equipment industry in today’s market. Executives, you do not want miss this conference. With an outstanding new lineup of speakers, some of our major topics of conversation will be market analysis and economic forecast, public policy for executives, regional reports from AED board members and advice on recruiting executives in the 21st century. Register today at bit.ly/executiveforum15.
Proposed New Member Yes Equipment Menomoee Falls, Wis.
Introducing a New Makeover to AED & The Foundation Websites
W
e are excited to present our unique upgraded websites at www.aednet. org and www.aedfoundation. org. Our website’s new look, user-friendly navigation and probe search functionality are some of the features you will enjoy. The new websites have several easy-to-use drop-down menus with convenient access to industry specific resources like bookmark reports, easy access to event registration, AED technical standards and technician recruitment brochures. One of the main goals this year for both AED and the Foundation was to build a solid user-friendly website that allows our members to easily locate everything they need. Head on over and check them out today. We hope you enjoy our new features!
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>> industry beat Jim and Chris Santarpio Named Master Distributors of RMT Equipment Brothers Jim and Chris Santarpio, of family-owned and operated Advance Scale Company, were recently named master distributors of RMT Equipment products in New Jersey and the Long Island region of New York. Vick Maintenance Inc. also added RMT Equipment’s full product line of the TRACK-VISION backup safety cameras for heavy equipment and VEI loader scales to its offerings. Vick Maintenance is a family-owned and operated full-service heavy equipment maintenance and repair company serving Raleigh, N.C. and surrounding areas.
Chairman of the Board at Arnold Machinery Receives Honorary Doctorate
Al Richer
Al Richer, chairman of the board at Arnold Machinery Company, recently received an honorary doctorate from Westminster College in Salt Lake City, Utah.
Founded in 1875, Westminster College is a nationally recognized, private comprehensive liberal arts college.
Western Pacific Crane & Equipment Opens Complete In-House Location in Arlington, Wash.
Western Pacific Crane & Equipment opened a new location in Arlington, Wash. The new facility is 23,000 square feet, sits on four acres and includes an upgraded warehouse. The warehouse features complete in-house capabilities, including blasting and painting, and is elite-status certified by Manitowoc for its replacement parts inventory levels, modern tooling and the ability to perform complicated repairs.
NWSA and NCCCO to Develop and Administer Certification Programs The National Wireless Safety Alliance (NWSA) and the National Commission for the Certification of Crane Operators (NCCCO) have entered into a professional partnership for the development and administration of nationally accredited certification programs. NCCCO will provide professional consult-
ing assistance in further developing NWSA’s various worker certification programs to the ANSI/ISO 17024 accreditation standard, the premier accreditation for personnel certification bodies. NCCCO also will provide test development and administrative services to the NWSA as part of the agreement.
Komatsu to Provide Conversion Kits for ULSD Komatsu America Corp. soon will offer a conversion kit that removes exhaust gas after-treatment components in countries where ultra-low sulfur diesel (ULSD) fuel is not available. This
will allow Tier 4 machines to run properly, while achieving emissions levels that can be equal to new machines sold by Komatsu.
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>> industry beat John Wall Retires From Cummins After Nearly 30 Years
John Wall
John Wall, vice president/chief technical officer, recently retired from Cummins after nearly 30 years with the company. Wall was personally involved in developing the most critical emission control technologies and integrating them into the company’s products. Jennifer Rumsey, vice president of engineering
for Cummins’ Engine Business, will take Wall’s place. She is the first woman to serve as the company’s top technical leader. Rumsey joined Cummins in 2000. On July 1, 2014, she succeeded Steve Charlton as the engineering leader of the Engine Business Unit, the largest business segment at the company.
Komatsu’s New Oyama Technical Center Aims to Reduce the Time it Takes to Get Products to Market Komatsu Ltd. recently opened the Oyama Technical Center on the premises of the Oyama Plant, one of the company’s main plants in Japan. In a new virtual reality room at the center, Komatsu has introduced a system that enables virtual evaluations during the design stage, ease of assembling, serviceability, visibility (including upper direction), design ability, fabrication and other factors. The new system allows Komatsu to shorten its lead time for designing key components and vehicle bodies, and to improve
its design quality. Komatsu also has expanded the functions of the Parts HANSEI Operation Center. By monitoring the spare parts systems at distribution centers worldwide, Komatsu has improved the accuracy of predicting demand for parts and sales, production, and inventory planning. Komatsu has thus enhanced the quality of customer service through optimal allocation of parts and strengthened its operations designed to cut down parts inventories.
Multiquip App Available for iPhone, iPad and Android
Multiquip is offering a free MQ Hub smartphone app, available on iPhone, iPad and most Android devices. One step allows the app user to track the order. Input your order’s destination postal code and one of the following: order number, invoice number or P.O. number. The combination of this information gives you the tracking information you need 24 hours a day, seven days a week. The Multiquip MQ Hub app is available as a free download on the App Store and Google Play Store.
John Deere Extends JDLink Subscription to Five Years John Deere is extending its JDLink Ultimate service in base subscription from three to five years. The move is in response to requests from production-scale customers who are utilizing their equipment for longer periods of time. Equipment covered in this extension includes the 250DII, 300D-II, 370E, 410E and 460E articulated dump trucks; 1050K crawler dozer; 470G, 670G and 870G excavators; and 744K-II, 824K-II, 844K-II and 944K wheel loaders. JDLink is a telematics system designed to remotely connect owners and managers to their equipment. It provides alerts and machine information including location, utilization, performance and maintenance data to manage where and how equipment is used.
CNH Industrial Now Offers Data Solutions to North America CNH Industrial recently expanded its connectivity products to provide greater coverage of data technology to agricultural and construction equipment owners. This has been made possible by combining CDMA and 3G GSM cellular network technologies into a single device. Offered by CNH Industrial’s Precision Solutions and Telematics group, the technology offers customers in North America a solution to coverage issues, especially in rural areas where many customers operate their machines. Adding this combined connectivity to the technology stack ensures customers have superior coverage and fast data transfer speeds by seamlessly switching between networks without any interaction from the operator, especially in areas served by CDMA-based networks. This data solution is available through all of CNH’s North American brands, including Case IH, New Holland Agriculture, CASE Construction Equipment and New Holland Construction. August 2015 | Construction Equipment Distribution | www.cedmag.com | 15
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>> industry beat In Memory: Craig Travis Sidney Clark Craig Travis Sidney Clark of Crossville, Tenn., succumbed to cancer on July 11. He was 48. Clark was a long-time employee at TAP Publishing’s Rock & Dirt and was a member of the Main Street Church of Christ. He began working at Rock & Dirt in May 2000, starting out doing UCC sales and in 2005, moved to full-time advertising sales, where he became sales manager. “He was very well known and very well liked in the industry,” said Mike Stone, publisher of Rock & Dirt. “There were three important things about Travis: He was a very talented worker manager, he was completely devoted to his faith and he adored his family. He was just one of the best guys ever and one of those people you ask, ‘Why did this person have to go?’” Stone said that while the sales business may seem to have changed with digital media, Clark never forgot what selling is really about.
“When you talk to equipment people, regardless of all the online aspects, it’s still a relationship business,” Stone said. “And Travis was a relationship person.” Memorial donations can be made to Hospice of Cumberland County, 30 E. Adams St., Crossville, TN 38555; or at www.cumberlandhospice.com.
LBX Capital to Provide Financing for Link-Belt Excavators LBX Company LLC recently formed LBX Capital, a financial services organization that will provide retail and wholesale financing exclusively for Link-Belt excavators, material handlers and forestry machines in the U.S. LBX Capital will offer a comprehensive financing program, including more competitive lease residuals with 24-month term options.
The company said dealers can expect higher approval rates of weaker credit customers and faster processing speeds, supported by a field sales support team dedicated exclusively to the LBX Capital program. LBX Capital is an alliance between LBX Company and Sumitomo Mitsui Finance and Leasing Company, Ltd., based in Tokyo, Japan, with offices in New York and San Francisco.
Appointments ALLU Stamix recently appointed Ville Niutanen president of the company. Atlas Copco Mining and Rock Excavation has appointed David Sullenberger to the position of product specialist for Surface and Exploration Drilling equipment. George M. Denny has joined Vacuworx as the Gulf Coast sales director. He will be based out of Houston, Texas. Shay Linahon joined Iowa Mold Tooling as an inside sales representative for fleet accounts. Schad Westhas joined the company as lean specialist. He will lead initiatives and training of continuous improvement events for operations, while working to integrate the Oshkosh operating oystem. Bridget Wolf has been hired as a senior customer service associate. Wolf will join the IMT customer service and aftermarket support teams.
Shay Linahon
Schad West
Bridget Wolf
Southeastern Equipment Co. announced several new hires. Dane Moore has joined the company as sales representative for the Brunswick, Ohio, branch. TJ Gleason joined the company as sales representative at the Perrysburg, Ohio, branch. Dylan Hines also joined the company as parts associate at the Cambridge, Ohio, branch. Matt Nash joined Southeastern Equipment as fleet coordinator for the Dublin, Ohio, branch. His responsibilities include monitoring construction equipment through CASE SiteWatch to identify performance issues.
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Raising the Mark
SMFL has now extended their global reach from Tokyo, Japan, its corporate headquarters, to the United States. We can help you and your customers with retail financing, capital and FMV leases, rental fleet financing and coming soon inventory floorplan products. TO LEARN HOW WE CAN HELP YOU RAISE THE MARK, PLEASE CONTACT Construction and Transportation Finance Group 277 Park Avenue, New York, NY 10172 Jeffrey Whitcomb, Executive Director | 212.224.5478 Bill Mattocks, Director, Program Manager | 212.224.4636
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>> industry beat LiuGong Opens New Global R&D Center in Liuzhou, China LiuGong Group recently inaugurated its new global Research and Development Center in Liuzhou, China. ‘‘R&D is the nucleus of the future, and the ability to be innovative is an uppermost priority for the future,” Zeng Guang’an, chairman of LiuGong Group, said. “At LiuGong, R&D has always been major focus. The new center is a significant commitment to future technology, with many more scientific and technological advances being made. We are confident it will provide all the tools we need to become the game-changing company in the construction equipment industry.” The modern facility spans 1,184,030 square feet and includes a 236,806-squarefoot office complex, a global test center covering an area of 1,076,391 square feet, a prototype center, seven laboratories and a large outdoor experimental field. It can house up to 1,200 engineers.
Groff Tractor & Equipment Expands with Purchase of Trico Equipment
Groff Tractor & Equipment Inc. recently acquired Trico Equipment Services LLC, a CASE Construction dealer with locations in Vineland, Totowa and Freehold, N.J. Trico will operate as a division of Groff Tractor New Jersey during the transition period. With the addition of the Trico branches, Groff Tractor now has six locations throughout central and western Pennsylvania; one in Frederick, Md.; three in New Jersey; and a rental and service branch in Newcomerstown, Ohio. All of the Groff Tractor locations, except Ohio, will feature the full CASE CE equipment line. Groff has been serving the construction equipment market since 1958 when its first dealership opened in Highspire, Pa. That dealership later moved to Mechanicsburg, Pa. Trico Equipment Services began operating in 1952 from a two-bay garage in Vineland.
JLG Industries Goes Online with JLGUsed.com JLG Industries Inc., an Oshkosh Corp. company, recently introduced www.JLGUsed.com, a website where users can find, inspect and buy quality pre-owned construction equipment from JLG. The website, which will initially support equipment sales in the U.S. and Canada, will feature a wide variety of brands and machine types, as well as exclusive JLG factory-reconditioned machines and JLG-certified pre-owned machines. Some machines will carry warranties of up to three years, depending on their condition.
Manitou Group Introduces New Line of Parts Manitou Group recently introduced XPRT Genuine Parts, an exclusive brand for genuine maintenance and replacement parts for Gehl and Mustang equipment. XPRT Genuine Parts can be purchased exclusively from authorized Gehl or Mustang equipment dealers.
John Fabick Tractor Co., Fabco Equipment Finalize Their Merger Doug Fabick, dealer principal of John Fabick Tractor Company (Fabick CAT) in Fenton, Mo., and Jeré Fabick, dealer principal of FABCO Equipment, Inc., in Milwaukee, Wis., successfully finalized combining their two family-owned, independently operated companies on July 1. Bringing the two CAT dealerships together continues a shared heritage that dates back to 1917 when John Fabick Sr. founded the first Fabick Company in St. Louis. The expanded organization is being led by Doug Fabick as CEO and dealer principal, along with Jeré Fabick serving as president and co-dealer principal. Headquartered in St. Louis, Mo., the combined enterprise operates in a six-state region including major portions of Missouri, Illinois, Kansas, Oklahoma, the Upper Peninsula of Michigan and the entire state of Wisconsin. Concurrent with this change, the entire enterprise comes together under a common logo that features the Fabick CAT name. Fabick CAT now has 1,100 employees including 550 professional service technicians, 37 locations with 200 service bays and a fleet of more than 200 service vehicles.
18 | www.cedmag.com | Construction Equipment Distribution | August 2015
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“Having a lender that understands this industry is important — to me and my customers.”
EqUipmENT FiNaNCE Inventory and fleet rental finance programs
Loans and leases for capital asset acquisition
The right equipment finance programs are critical to helping you sell equipment. So talk to an equipment finance company that has experience in and a commitment to the construction industry — one that has the stability and flexibility to support you through all economic cycles. Not only do we know the difference between a dozer and a grader, but we understand that making the purchase process quick and easy for your customers is essential. Whether you sell equipment in the U.S., Canada, or both, we can help.
Manufacturer subsidy programs
To learn more about what the Wells Fargo Equipment Finance team can do for you, start a conversation with us today by calling Sidney Sexson at 480-724-3407.
Retail finance programs
wellsfargo.com/construction
© 2015 Wells Fargo Bank, N.A. All rights reserved. All transactions are subject to credit approval. Some restrictions may apply. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada by Wells Fargo Equipment Finance Company. Wells Fargo Equipment Finance Company is associated with Wells Fargo & Company, a company that is not regulated as a financial institution, a bank holding company or an insurance company in Canada. WCS-1237914
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>> industry beat Volvo CE Launches SmartCare Volvo Construction Equipment recently launched Volvo SmartCare to help customers increase uptime and simplify fleet management. Customers can choose from three programs — SmartCare Basic, SmartCare Plus and SmartCare Complete — each of which is customizable with customer service agreements and a wide range of support options built to suit customers’ individual needs. The services will help customers simplify fleet management by evaluating machine and operator data, and provide recommendations for maintenance and operations to increase uptime and improve the bottom line. SmartCare Basic coverage comes standard with the purchase of a broad range of new Volvo machines. It includes regular Volvo Care inspections; a one-year, 2,500-hour warranty; a fuel efficiency guarantee on select earth-moving equipment; 24-hour access to parts online; and a free six-year subscription to Volvo CareTrack telematics. In addition to all the perks of SmartCare Basic, SmartCare Plus provides additional support in the form of a threeyear, 5,000-hour drivetrain warranty; a lifetime frame and structure warranty; a six-year subscription to advanced-level CareTrack telematics; dealer-provided report analysis using MATRIS (Machine Tracking Information System); a customizable Customer Support Agreement; and Volvo oil analysis. With SmartCare Plus, the dealer and customer work together to develop a customized Customer Support Agreement involving on-site visits, inspections, preventive maintenance and repairs. SmartCare Complete customers get all the benefits of SmartCare Plus, but with some significant additions, including a three-year, 5,000-hour bumper-to-bumper full machine warranty; ActiveCare dealer-supported machine monitoring services; operator training; and Volvo Uptime, which guarantees that unplanned downtime will be quickly rectified
by the dealer. With SmartCare Complete coverage, Volvo will go as far as to provide a comparable loaner machine to the customer if downtime exceeds 72 hours.
Dealers Must Provide Consent for Information From AED PAC The 2016 election cycle might seem like the distant future, but U.S. distributors must be prepared. By granting solicitation consent to the Association of Equipment Distributors’ Political Action Committee (AED PAC), association members can help the equipment industry become an even more powerful voice in the policymaking process. The PAC is a special fund to pool campaign contributions from the construction equipment distribution community to support congressional candidates and incumbents who favor the Association’s legislative goals. AED PAC supports pragmatic lawmakers, regardless of political party, who are committed to strong federal infrastructure programs and pro-growth tax, labor,
workforce development and energy policies. To learn more, you must provide solicitation consent to AED PAC. Only executives and owners of member companies who have given solicitation consent may receive information about AED’s political program and contribute to AED PAC. Offering this consent does not obligate anyone to support the program, it merely grants the Association the right to provide further detail. To give AED PAC your consent to be solicited for contributions, visit aedaction.org/aed-pac, or contact AED’s Senior Director of Government Affairs Daniel Fisher at 703-7399513 or dfisher@aednet.org.
20 | www.cedmag.com | Construction Equipment Distribution | August 2015
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Financial Special Interest Group Meeting (SIG) The Willard Washington D.C. | Oct. 21-23 Make plans to attend one of the best and advanced special interest group tailored specifically towards the heavy equipment industry. Discover exclusive insight and tactical strategies for financial executives. Register your team today online bit.ly/aedfinancesig or call your regional manager at 630-574-0650
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>> data trends
The Dodge Momentum Index Rebounds in July The Dodge Momentum Index rose to 125.3 (2000=100) in July, up 5.4% from its June reading of 118.9 according to Dodge Data & Analytics. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. July’s increase returns the Index to its generally rising trend over the past four years. The increase in July relative to June was led by strong gains for both institutional planning, up 6%, and commercial planning, up 4.9%. For more information, visit Dodge Data & Analytics at www.construction.com.
Physical Utilization of Four Rental Units The charts below show physical utilization by equipment category. Physical utilization is the percentage of fleet cost which is on-rent during a given period. Physical utilization is cost weighted. “On Rent” and “In Fleet” status are determined on a nightly basis seven days a week, 365 days a year. A unit is “On Rent” if it is at a job site earning rental revenue. A unit is “In Fleet” if it is a rental asset owned by the client. Units out for repair and refurbishment are considered “In Fleet.” Supplied by EDA, Charlotte, N.C.
Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520
The Dirty Dozen - UCC filings on 12 earthmoving units. Equipment Description
JUN 14
JUL 14
AUG 14
SEP 14
OCT 14
NOV 14
DEC 14
JAN 14
FEB 15
MAR 15
APR 15
MAY 15
Grand Total
Articulated Dump Trucks
134
118
118
111
123
107
145
98
123
142
164
145
1,528
Crawler Dozers
495
403
366
369
466
346
460
472
251
347
503
363
4,841
27
40
11
10
13
4
19
17
15
20
40
25
241
1,009
839
820
745
933
707
988
1,052
614
871
1,054
32
28
40
34
20
25
49
31
13
25
21
1,246
1,090
976
974
1,072
769
1,214
1,421
794
993
1,315
125
89
114
71
100
78
128
101
96
98
120
Crawler Loaders Excavators - Crawler, Hydraulic Excavators - Wheeled, Hydraulic Mini Excavators Motor Graders Scrapers - Conventional Skid-Steer Loaders Tractor Loader Backhoes Wheel Loaders < 80 HP Wheel Loaders > 80 HP Grand Total
824 10,456 31
349
1,351 13,215 104
1,224
1
8
14
5
10
4
12
9
4
6
6
12
91
1,088
792
736
997
1,180
1,186
1,872
1,414
878
1,005
1,130
1,139
13,417
401
461
334
372
450
355
471
411
402
358
349
339
4,703
96
103
94
85
129
158
173
223
103
130
168
138
1,600
790
599
559
635
830
750
1,004
701
518
630
714
562
8,292
6,535 5,950
3,811
4,625
5,210 5,444 4,570
4,182 5,326 4,489
5,584 5,033 59,957
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>> data trends
Source: Equipment Watch, www.equipmentwatch.com
EquipmentWatch INDEX TM | July 2015 in Review | Monthly Heavy Equipment Intelligence
www
EquipmentWatch INDEX TM | July 2015 in Review | Monthly Heavy Equipment Intelligence TM
www
EquipmentWatch INDEX
| July 2015 in Review | Monthly Heavy Equipment Intelli
EquipmentWatch INDEX TM | July 2015 in Review | Monthly Heavy Equipment Intelligence
EquipmentWatch INDEX TM | July 2015 in Review | Monthly Heavy Equipment Intelligence
www.Equipm
www.EquipmentWatch.com
August 2015 | Construction Equipment Distribution | www.cedmag.com | 25
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>> REGIONAL REPORT Erinn Hutkin
Lawmaker Visits Construction Supplier to Discuss Highway Bill
U.S. Rep. Reid Ribble visits AED member, Kelbe Bros. and shares his expertise
U
sually, when a member of Congress comes to visit an equipment dealer, the purpose is two-fold — a mix of trying to educate the elected official about issues impacting the industry, in addition to showing off the site itself. But when U.S. Rep. Reid Ribble of Wisconsin stopped by equipment dealer Kelbe Bros. Equipment Co. in Butler, Wis., in June, it was an instance in which the congressman was well-versed and in a position you want him to be in, said Ben Yates, Eastern regional manager for AED, which is based in Oak Brook, Ill. “We can’t say that for all members of Congress; it was more of a friendly visit,” Yates said. Ribble spent about 90 minutes on site meeting with dealers and customers. Yates said the congressman let those he met know they have strong partners on Capitol Hill who understand the issues they face and are working to solve them. One of the topics of discussion, Yates said, was the highway bill. Yates called the bill – which was set to expire at the end
U.S. Rep. Reid Ribble (center) visited the Kelbe Bros. Equipment Co. in Butler, Wis., in June. Here, he’s pictured with Ben Yates, (left) Eastern regional manager for AED, and Kelbe Bros. President Larry Miller (right.)
Pictured: U.S. Rep. Reid Ribble (left) toured the Kelbe Bros. site in Butler, Wis., in June with Keble Bros. President Larry Miller.
of July – the “primary issue in the industry.” He said Ribble is very familiar with the issue and that it’s one he’s passionate about. He’s been a spokesperson for trying to get it funded permanently after rounds of temporary extensions that often last no longer than six months to a year. Before recessing in August, House leaders voted to use an assortment of funds to stretch the bill to late December. While states play a small part in funding surfacetransportation projects, the rest, Yates said, comes from the federal Highway Trust Fund. The federal program that pays for bridges, road and mass-transit projects was due to run out of money, meaning that if Congress didn’t extend the bill, projects nationwide could have been put on hold during the peak of summer road construction season. That could have resulted in numerous job losses.
Meanwhile, Yates said the temporary extensions the bill has received over the years have made it hard to plan ahead. For instance, he said companies need to know there’s work waiting for them before making large investments in road construction equipment. “He’s intimately familiar with the issues and the Association,” Yates said of Ribble. For instance, in early July, Ribble and U.S. Rep. Peter Welch of Vermont held a bipartisan press conference announcing their effort to break the impasse over long-term funding for the Highway Trust Fund. A letter to House Speaker John Boehner of Ohio, and Minority Leader Nancy Pelosi of California was released at the press conference, in which lawmakers recommended the use of a “Queen of the Hill” rule that would allow the House to vote on several options to fund the federal highway program. Under this rule, the
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>> REGIONAL REPORT
Pictured: Rep. Reid Ribble (right) meets with Kelbe Bros. Vice President Jeff Miller (left) and President Larry Miller (center) during a visit to the Butler, Wis. site.
proposal that gets the most votes would become the House of Representatives position. “Our roads and bridges are vitally important, but they aren’t free, and for the past seven years, the bill has gone unpaid,” Ribble said in a statement. “Right now, we are $16 billion short every year in paying for our roads and bridges, which simply creates a future tax on our children and grandchildren. “If something is important enough to buy, it is important enough to pay for. After kicking the can down the road over a dozen times, it is time for us to get to work on a fiscally sustainable long-term plan.” Yates said during Ribble’s visit that it was mentioned that the reason for the impasse stems from disagreements among
lawmakers on funding and resistance to raise the gas tax. The Association’s stance, Yates said, is that raising the gas tax is the only fiscally responsible way to fund the bill because that way, those using the roads are the ones funding them. The tax has not increased since 1993, but since that time, vehicles have started getting better gas mileage, and inflation has gone up, but the gas tax was never indexed to shift with inflation. The good news, Yates said, is that Ribble is also a supporter of the gas tax, but as he explained during his visit, the real issue is that some kind of consensus must be reached among his House peers. While Ribble didn’t have any predictions about the highway bill during his
visit, he said he was optimistic that an extension would carry over to the next legislative session, which may have the potential to lead to passage of a comprehensive and robust highway bill. Yates reported that Ribble said if the bill is good enough to extend several times in a row, it’s good enough to enact permanently. The visit was made possible because Ribble was attending a fundraiser in Milwaukee, so he was able to combine both events into one visit. “He’s been a good friend to the Association,” Yates said. n
Erinn Hutkin is a freelance writer.
August 2015 | Construction Equipment Distribution | www.cedmag.com | 27
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>> READY TO ORDER New BH65 and BH75 Groundbreaker Backhoes Combine Proven Woods Ruggedness with Affordability Woods Equipment’s all new BH65 and BH75 Groundbreaker models deliver proven Woods durability and reliability at an affordable price. The BH65 Backhoe is the ideal choice for compact tractors with 15-30 PTO hp, while the BH75 is best for utility tractors with 20-40 PTO hp. A range of bucket sizes is available for both models. The BH65 is available with buckets in 9-inch, 12-inch, and 16-inch widths, while the BH75 is available in all three sizes plus additional 18-inch and 24-inch widths. All buckets include bolt-on teeth that are durable and easy to replace. The BH65 and BH75 do not just dig; an optional mechanical thumb enables these backhoes to lift, pull and load large and heavy objects such as rocks, logs, stumps and other landscaping materials. The optional thumb easily adjusts with a single pin for different jobs. Both models include a high ramp angle and ample ground clearance for ease of transport. Sub-frame or three-point mounts are compatible with most loaders and undermount mowers. For more information visit www.woodsequipment.com.
CDK Global’s New IntelliDealer Insight 2.0 DMS Streamlines Tasks, Functions
JCB Unveils 90Z-1 Zero Tailswing Compact Excavator
JCB’s new 90Z-1 Zero Tailswing Compact Excavator weighs 9.9 tons and is powered by a 74-horsepower JCB by Kohler Tier 4 final diesel engine that drives CDK Global recently released its new Dealer Management with Bosch Rexroth hydraulic valves, Nachi slew System (DMS), IntelliDealer Insight 2.0, which is designed for motors and track drives. construction and agriculture dealers of all sizes. Its maximum digging depth is 13 feet, 7 inches, New integrated features include Rental Management, which makes with a 17-foot, 9-inch dump height and 24-foot, it easier for managers to complete daily tasks faster. CDK Heavy Equipment 3-inch reach at ground level. The excavator also has used focus groups to collaborate with and gain feedback has greater bucket tear-out and dipper-arm tearfrom dealership employees, leading to 13 new enhancements, out forces, thanks to the increased hydraulic including the ability to return a unit to a different branch, view the pump capacity and larger hydraulic cylinders. return screen as a tab within a contract and print a rental utilization With the reduced-loss design of the report. hydraulic system, the excavator has fewer Alert Management allows dealership staff to configure and send parasitic losses, placing less demand on the automated emails, IntelliDealer messages and text messages directly to engine and saving fuel. customers from the DMS. Now dealers can stay better prepared with Other features include both ECO and 21 new alerts, along with the ability to alert multiple contacts within a Heavy modes for digging; a revised single customer account. H-design undercarriage; 100 percent Technician Scheduling helps improve service-department profitsteel bodywork; spacious operator ability. This innovative application allows managers to use drag-andenvironment; a swing-bracket design drop segments and includes many other user-interface improvements with slewing boom for improved to help streamline decision-making and raise a dealership’s level of confined site access; an auto-idle customer service. feature that can be set for between two For more information, visit seconds and 30 seconds to initiate; a www.cdkglobal.com/ 30-degree tilting cab; and a graphiteheavyequipment. based pin-and-push design for 500-hour greasing intervals. For more information visit www.jcbna.com.
28 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> READY TO ORDER Atlas Copco’s Diamondback Drilling Rig Offers Added Safety, Versatility The new Atlas Copco Diamondback drilling rig offers an optional sliding-angle mast and enhanced safety features. The rig’s bolt-on modular components – a new concept in rig design – shortens lead time while making it a truly multipurpose rig. The modular design means Diamondback owners will be able to reconfigure their rig in response to changes in market opportunities without special kits, makeshift fabrications or having to purchase another rig. Safety enhancements include features and options such as hands-free pipe handling and breakout, enlarged operator and helper stands, a table-safety cage and catwalks that meet or exceed industry safety standards. Powered by the truck’s 600-hp engine, drilling operations of the Diamondback are PTO-driven, like the Atlas Copco T2W and Atlas Copco TH60. An optional deck-engine module is available for those who prefer a separate engine for drilling operations. The first series of Diamondback rigs is being introduced in the 40,000-pound pullback class. Pulldown is rated at 30,000 pounds. Future additions will range from 25,000-pound to 100,000-pound rigs. Customers specify air and mud package, rod carousel or box, automated rod-handling systems (or none), rotary head type, spindle size, 34- or 38-foot tubular tower and carrier-mounted or tower-mounted table. Only the tower-mounted-table configuration can be used for angle drilling, however. Two tables are available, offering either a 24-inch or 17-inch opening. In the U.S., the Diamondback is built on a 600-hp Peterbilt carrier. The Diamondback modular design concept arose in response to recent rapid-market changes Atlas Copco saw customers experiencing. The Diamondback allows owners to switch from one specialty to another without intensive after-purchase modifications. For more information, visit www.atlascopco.com.
August 2015 | Construction Equipment Distribution | www.cedmag.com | 29
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>> ready to order Liebherr Unveils New 500-Metric-Ton LR 1500 Crawler Crane Liebherr’s newly developed LR 1500 500-metric-ton crawler crane delivers the load capacities of the 500-metric-ton crawler crane class throughout its complete operating range, while upholding the dimensions and component weights, which have previously been standard in the 400-metric-ton class. With a transport weight of just 45 metric tons, it can be transported around the world without restrictions. The overall concept of the new crane is designed for simplicity in all areas and great economy. The travel drives on the new LR 1500 have plenty of power. They have been taken from the LR 1600/2. The engine develops 350 kW, which is around the same level as engines on 600-metric-ton class cranes. The 6-cylinder inline engine used on the LR 1500 meets the emissions regulations of Stage IV/Tier 4. The new 500-metric-ton crawler crane from Liebherr delivers enormous hoist heights since the 84 meter luffing jib can be installed on a main boom up to 84
meters in length. The 250-metric-ton jib head on the luffing jib is also used for SL main boom operation. A 400-metric-ton head is available as standard for the S main boom for heavyweight jobs. This
has the advantage of being more lightweight than the optional 500-metric-ton head. For more information visit www.liebherr.us.
Knapheide Develops Service Bodies for Half-Ton and Compact Trucks Knapheide Manufacturing Co. announced the release of EC Series Service Bodies. EC Service Bodies feature an optimized understructure for superior strength-to-weight ratio and possess many of the same standard series features customers have come to expect in Knapheide Service Bodies. Traditionally confined to utilizing only cross-or side-mounted toolboxes or toppers, half-ton and compact truck owners now have the ability to transition into a dedicated service body that promotes forced organization to drive increased efficiency and productivity. Loaded with innovative standard features like automotive-quality rotary latches, stainless-steel continuous hinges and E-Coat prime paint protection, the EC Series Service Bodies are built to provide years of dependable service. For more information visit www.knapheide.com.
New! Financial Special Interest Group Meeting Join AED in Washington, D.C. for our new Financial Special Interest Group (SIG). Make plans to attend one of the best and advanced special interest group tailored specifically towards the heavy equipment industry. Over this day and a half training program, you will have exclusive insight and tactical strategies for financial executives.
Register Online Today » bit.ly/aedfinancesig
SAVE THE DATE October 21-23 Hotel: The Willard InterContinental Location: Washington, D.C. Register online today at bit.ly/aedfinancesig or call your regional manager at 630-574-0650.
30 | www.cedmag.com | Construction Equipment Distribution | August 2015
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DEBT CAPITAL | SYNDICATIONS | WHOLESALE LEASING | TREASURY SOLUTIONS | RETIREMENT PLANS
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>> FINANCIAL CONNECTIONS
Erinn Hutkin
New AED Financial Special Interest Group (SIG)Scheduled to Meet in October
Finance professionals set to collaborate and discuss industry-related issues Jason Blake, senior vice president and CFO at AED
I really want to build a venue where financial leaders of dealerships can come together and collaborate...
C
ollaboration is one of the keys to staying ahead of the competition in various industries, especially in finance with its ever-changing landscape in governmental regulation. That is a major reason why Jason Blake, senior vice president and CFO of Associated Equipment Distributors (AED), decided to create a finance special interest group that would meet and convene every quarter. “The financial leader is often the next person in line, but there’s no venue to collaborate,” Blake said. “I really want to build a venue where financial leaders of dealerships can come together and collaborate on three or four key elements they can take home and utilize in their work. “Even when I go to conferences, it’s really important to come away with something I can implement in the everyday work process,” he said. Blake got the idea to create the group after AED’s Financial Symposium was held in Memphis in April in which there were breakout sessions of around 50 individuals who work in the finance industry. They engaged in an open conversation that covered a range of topics and addressed many of the daily struggles they have encountered on the job. The new special interest group is open to any AED member with responsibility or interest in dealer financial operation issues including CFOs, CPAs, credit and finance managers and tax professionals. It will meet three to four times a year at AED
functions and during special meetings established by AED. The first meeting, which will revolve around advocacy and current topics effecting the industry, will be held in Washington, D.C., at the Willard InterContinental from Oct. 21-23. Attendees will learn about the best ways to meet with members of Congress and obtain information on important infrastructure issues, tax issues impacting equipment dealer operations, major political issues affecting the decisionmaking process of financial specialists as well as how to secure company assets in the digital age. Speakers that will be participating in the event include U.S. Rep. Reid Ribble of Wisconsin, and U.S. Rep. Peter Roskam of Illinois and representatives from AED’s Government Affairs office. The inaugural meeting will include several networking events as another goal of the group is to encourage AED members to develop relationships with others to share insight on their experiences in the industry, as well as assist each other when it comes to dealing with difficult scenarios. “When a group of finance people are together, they can talk the same talk,” Blake said. “A lot of times, we learn by collaboration, working together, building relationships and bonds.” n Kasey Schefflin-Emrich contributed to this story.
Erinn Hutkin and Kasey Schefflin-Emrich are freelance writers.
32 | www.cedmag.com | Construction Equipment Distribution | August 2015
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12/18/2014 2:11:27 PMAM 9/8/15 9:19
>> TECHNOLOGY 101
Brian Rehg
Cloud Customization and Your Business Learn the best practices to manage your business’s cloud.
Big data, SEO, the “cloud”: what do all these buzzwords have in common? Well, for one thing, people sure like to talk about them a lot! The difference between buzzwords and “bull” words is that people are talking about them for a legitimate reason. Modern cloud computing has been used for more than 15 years by large corporate entities, in both the private and government sector, to enhance services and increase profits. It’s safe to say that cloudbased applications and cloud storage have become an integral part of how businesses across industries use technology to their advantage. Even in the industrial and construction world, offices are no longer just brick and mortar. Employees, as well as executives, need access to their projects and relevant industry data
wherever they go in order to stay well-informed and ahead of the competition. Thanks to the popular usage of smartphones, laptops and mobile devices, we’re no longer limited to a single location for business. Every development site, car, coffee shop and any place we have Wi-Fi should be as functional as our work desk. While this mobility gives us freedom, it also presents new challenges. This is where cloud applications are resolving a lot of modern data problems. Keeping data in the cloud allows for increased collaboration, data security when computers fail, automatic software updates, a competitive edge and a lower environmental impact, along with much more. Modern executives demand these kinds of standards for their businesses. I know this because for the past 10 years, I have
34 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> TECHNOLOGY 101 PANTHER – GOES WHERE YOU WORK AND WORKS WHERE YOU GO!
Third-Party Solutions Third-party solutions are applications known as “off-the-shelf” soft ware. They offer no customization or specialized features. But
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been assisting many industrial businesses with cloud solutions specifically tailored for their industry and their business model. It’s no longer just a company’s IT team wanting a custom cloud solution. Departments traditionally outside the more tech-savvy realm see the advantage of these data solutions as well. Salespeople want mobile apps to quickly retrieve content out in the field for a pitch. Operation teams need solutions to create custom data dashboards from their multitude of existing legacy systems. Modern managers do not want print-outs. They do not want to lug around briefcases bursting with documents and brochures. Simply put, data needs to be accessible at all times and from any device. Because of this demand, cloud-based computing has become a company standard. “The initial resistance to the public cloud has begun to subside, and customers are beginning to realize its efficiencies as the solutions mature,” said Ian Marriott, vice president for IT leadership group Gartner. Cloud applications also can significantly decrease the heft y price of system hardware or the large IT team needed for such installations. People are finally accepting web-based applications as the answer. But what exactly is a cloud solution? Well, a cloud application can either be a third-party (off-the-shelf) application or a custom application built specifically for your company’s needs. Both offer benefits and disadvantages for the company. Because of this, I advocate using an Application Programming Interface (API) to create a mash-up of the two options. This way, your business can easily incorporate existing legacy systems to help aggregate and consolidate data from various systems into one, easy-to-use tool. But don’t just take my word for it! Research is key when deciding what’s best for your business. Let’s break down the different cloud solutions available in today’s market.
August 2015 | Construction Equipment Distribution | www.cedmag.com | 35
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>> TECHNOLOGY 101 to be fair, they can be the correct fit for many companies. It’s an instant data solution for a quick switch if your IT department is able to adapt. They offer sophisticated soft ware for document storage and sharing. Companies such as Google and Microsoft both offer such services, which can be implemented easily into existing systems. The initial purchase may even be cheaper, so they work well for startup companies that don’t boast a large computing budget. These third-party solutions also include private cloud computing and Enterprise Resource Planning Soft ware (ERPs). These sit behind your firewall and are maintained by your IT staff. Many of these are open source or have an API so that a company can easily modify the code. The best thing about third-party cloud apps is that there is no custom development time. A company can get up in running with this new soft ware in a couple of days.
Custom Solutions Third-party soft ware is a quick fi x, but it only comes in one standard package, expecting every company’s needs to be universally similar. But when are two companies ever alike? More than that, when do two companies have the exact same IT structure? “Off-the-shelf” solutions can work, but they don’t always work best. If a company requires a solution to fit a very specific need within their business, a custom application is the most beneficial. An internal or external development
team works closely with management to build a cloud application that has the exact functionality that the company needs to reach its goals. The app also can tie into the company’s existing legacy systems to help consolidate and aggregate data into one easy-to-use interface. It also could be configured to work with current accounting, project management or enterprise resource soft ware. If the custom application is a success within the company that developed it, then that company actually has the option to sell subscriptions to other companies. In fact, I’m currently assisting two companies in building applications whose long-term goal is to sell subscriptions. Custom solutions also have the benefit of quick fi xes when bugs are found. The company is not forced to submit a support ticket to a third-party company and then say a prayer that someone will actually review the issue. Another outstanding benefit is the ability to quickly add features or enhancements as the company’s needs change. If the app is built correctly, then developers can quickly generate new modules and drop them into existing framework.
The Mash-Up “Off-the-shelf” soft ware can be an easy fi x and custom applications are delightfully tailored for your business needs, but both have disadvantages. What if you could create a hybrid of the two for the ultimate solution? Well, actually, you can. By combining all the functionality that comes with a third-party soft ware solution with a custom application, the end-user can obtain a robust system to fit all their needs. A “mash-up” solution also can pull data from multiple systems to create one simple user interface, 36 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> TECHNOLOGY 101
allowing the same easy integration with existing legacy software. A great benefit of mash-up solutions are the security possibilities. A common concern many people have with cloud computing is whether stored data is really secure or not. The good news is that most cloud companies naturally make a huge investment in security in order to keep their business economically
viable, sometimes even more so than companies tasked with storing information locally. New solutions are constantly developed to provide firewalls, encrypted communication and access management policies. Even with increasing cloud security, different types of cloud storage are typically offered for peace of mind. The cloud data can be stored in public,
private or a combination of the two. With a public cloud, the whole computing infrastructure is on the premises of the service company, while a private cloud network is used solely by the company that owns it. With a mash-up software solution, a company can have complete and total control over their data storage. They can use their own private cloud, utilize a company’s public cloud or use a hybrid cloud to retain control of critical information, while still sending workload data to a scalable public cloud. I’ve worked with many companies over the last few years who have benefited from cloud-based mash-up solutions. The executive staff gets a simple dashboard view of all the various legacy systems and current software solutions. They can easily spot issues and track negative and positive trends on a yearly, monthly or daily basis. The people in the field can access relative data on their phone or tablet. Sales teams can give on-the-fly demos or easily close deals from a mobile device. The possibilities are endless. Cloud solutions can increase efficiency, reduce cost, increase sales and offer a competitive edge, but no matter what solution you decide is best for your company, I advise everyone to carefully research their options and discuss their specific needs with the experts. Salespeople working for third-party software companies might promise the world, but they probably don’t understand your technical needs. On the other hand, custom solutions and mash-up software can take months to develop and require team assistance in building technical documents for the outside developers. No matter how you decide to advance your business, smart research will keep you from getting lost in the clouds. Brian Rehg, CEO, Blue Stingray Digital Agency
38 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> MARkET CHECk PeTer J. gAllAniS
Construction Equipment Distributors and Manufacturers Disappointed Congress Allows Ex-Im Bank to Expire
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n allowing the charter for the Export-Import Bank to expire last month, Congress has hurt the ability of small businesses to stay competitive in a global market, members of the construction equipment distribution and manufacturing industry. The Export-Import Bank, also called Ex-Im Bank, is an independent, self-sustaining federal agency providing financing tools to international buyers of U.S. exports, particularly when commercial lenders are unwilling to accept risks inherent in the deal. It supported $27.5 billion worth of U.S. exports in fiscal year 2014 with $10.7 billion representing products from small businesses, including the equipment distribution sector. Tim Watters, president of Hoffman Equipment and past chairman of Associated Equipment Distributors, said Congress’ failure to reauthorize the bank is reprehensible. “Congress is skirting its responsibility. They’re allowing a minority in Congress to shut down the bank. It’s an abomination,” he said in an interview with EquipmentReporter.com. Dennis Slater, president of the Association of Equipment Manufacturers, agreed. “The irony is, if you put this to a vote, it will pass. Congress should bring it to a vote instead of letting it sit,” he said. Watters said Hoff man Equipment currently has an $85 million deal in the works with the bank. “We have a contract for a deal in Africa and that deal is now severely jeopardized. It will impact our profitability and have a negative impact on our ability to grow and hire more people. And our suppliers throughout the country will be affected, as well. If the deal fails, we know it’ll go to a Chinese competitor.” Watters said failure to reauthorize the bank would severely hamper small companies. “GE and CAT might fi nd a way to compete because they’re (fi nancially) strong but small companies and their employees will suffer. The Europeans and other countries have banks similar to Ex-Im.” Failure to reauthorize the bank has a ripple effect throughout the industry. “The construction industry is one of the largest industries in the United States,” Slater said. “If companies can’t get the assistance they need then they might not be able to bid competitively on a project. And no bid means no project, no
project means less jobs, and a negative impact on the economy. One in three U.S. manufacturing jobs depends on doing business worldwide.” Watters said the irony is the Ex-Im bank makes money. “The Ex-Im bank doesn’t lend money, they guarantee loans,” Watters said. “Its default rate is only 3 percent a year. You have to pay Ex-Im a fee to guarantee your loan – that’s how they make their money. And that’s on top of interest you pay to the bank you borrow from. Last year alone Ex-Im contributed $650 million to the U.S. Treasury.” In order to succeed in a global market, companies must keep up with the competition, Slater said. “Loans are not a drain on our government’s coffers. We need to be in the same game as our competition. Without the Ex-Im Bank, we’re at a huge disadvantage.” n PEtER J. gAllAnIS is a freelance writer and former editor-in-chief of two construction equipment magazines.
40 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> VIEW FROM THE HILL Jennifer M. McNelly
Manufacturing Matters – Better Policy Means Better Labor Manufacturing Institute working to address labor shortages.
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anufacturing matters in the United States. The manufacturing industry has the largest multiplier effect of any sector, with every dollar in manufacturing supporting $1.37 in other sectors. If given an opportunity to create 1,000 new jobs in their community, Americans ranked manufacturing first, according to our most recent public perception report. At the same time, only about one third of these respondents said they would encourage their own children to pursue a career in manufacturing. The manufacturing industry is well aware of the image issue we are facing when trying to attract new talent. The Manufacturing Institute has worked to address this through three key pillars: changing the perception of careers in manufacturing, re-establishing the United States as the global leader of manufacturing education and advocating for education and job training policies that strengthen the U.S. manufacturing workforce. The Manufacturing Institute is focusing on the following best practices to strengthen career and technical education (CTE), and science, technology, engineering and math (STEM) careers and education pathways in order to make them more attractive to students: 1. Increase the number of industry-recognized credentials awarded at the secondary and postsecondary levels. 2. Increase industry partnerships to better align curriculum, apprenticeship, internship and work-based learning opportunities. 3. Better articulate credit transfers from high school to community colleges and from community colleges to four-year institutions. 4. Increase access and incentives for dual enrollment. 5. Develop Comprehensive State Strategies to include each of these elements. States such as Kansas have taken steps to utilize existing resources to better align incentives to attract students into
manufacturing education pathways by providing incentives to enroll in college-level CTE courses while still in high school. Tennessee has gone a step further by better aligning its College of Applied Technologies (T-CAT) system to bring better course equivalencies to its CTE programs when compared to collegelevel programs. These state-led fixes using existing resources can be brought to federal policy as well, and the upcoming reauthorization of the Higher Education Act (HEA) and the Carl D. Perkins Career and Technical Education Act (Perkins) are perfect opportunities for manufacturers and their partners to push for change. The Higher Education Act is the largest federally funded training program in the United States, yet our community and technical colleges’ workforce training programs aren’t able to fully access the $130 billion in federal financial aid and Pell grants because of policy limitations. With the recent reauthorization of the Workforce Innovation and Opportunity Act (WIOA), we have seen that bipartisan support exists for recognizing the value of industry-recognized credentials and high-quality job training. A disconnect remains, however, between policies being promoted by the labor market and those in place in education. In the United States, only 30 percent of the population holds a bachelor’s degree, yet we have continued to frame our higher education policies around that small population. Policies at the state and federal level that control higher education funding are largely out of line with what is needed at our nation’s community and technical colleges to prepare our future workforce. The unemployment rate is at a seven-year low, yet about 29 million “middle-skills jobs” – positions require more than a high school diploma but less than a bachelor’s degree – remain unfilled. Of these 29 million jobs, 14 million of them have a starting pay of at least $50,000 a year, with 4 million paying a starting salary of $75,000 or more a year. These job vacancies put a strain on
42 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> VIEW FROM THE HILL American competitiveness and our nation’s manufacturers. The most frustrating part of this scenario is that it doesn’t have to be the case. Community and technical colleges provide the bulk of the training to fill these job vacancies, yet headline after headline seek to condemn these schools for not hitting metrics designed without their programs in mind. It’s time for the conversation around higher education to change. The way today’s education policy is constructed, a student graduating from a four-year institution with an average of just under $30,000 in debt and uncertain job prospects is a better education outcome than a student who receives an industryrecognized certification but no degree, and leaves with one of those middle-skill jobs paying upwards of $50,000 -- and no debt. In many states, the latter scenario would be a blight on an institution’s completion rates, despite the student completing the necessary courses and credentials needed to gain a middle-wage job. Policies such as these need to better reflect both student and employer expectations. Students are entering postsecondary education expecting to receive the education and training needed to thrive in today’s job market, yet only 11 percent of employers say that recent graduates
are well prepared for the labor market. This is unacceptable and unsustainable for the future of our economy. We need to revisit the purpose of higher education in the United States, and to make it a priority to improve quality education pathways and incorporate work-based learning opportunities. Manufacturers and their partners need to be more active in this conversation because building a high-quality talent pipeline is critical for both the future of manufacturing as well as the broad economic needs in the United States. The Manufacturing Institute is the authority on the qualification and development of world-class manufacturing talent. As president of the institute, McNelly is driving an agenda to research and support manufacturing excellence, innovation and talent, and delivering solutions to make manufacturers in America globally competitive. n
Jennifer M. McNelly, President, The Manufacturing Institute
August 2015 | Construction Equipment Distribution | www.cedmag.com | 43
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>> PROBLEM SOLVED
TROY OTTERMAN
Is it Worth Paying for a Customer’s Extended Warranty?
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Warranties come in a various forms and can make or break a deal.
hat is a warranty? As defined by Merriam-Webster, “warranty is a usually written guarantee of the integrity of a product and of the maker’s responsibility for the repair or replacement of defective parts.” To the dealership, warranty is how the original equipment manufacturer supports its product after it is delivered to the dealership, and ultimately to the customer. Warranty comes in many forms, from basic coverage to bumper to bumper, to component or category extended warranty. Customers today require more warranty on their purchases. In addition to what customers are asking for, nearly all distributors of construction products are offering customers machines with enhanced warranty for a specific period of time. In a perfect world, when closing a deal with the customer, you would have them sign all the related documents pertaining to the machine purchase, including the machine warranty. This is actually the best time for you to discuss what the warranty actually covers. The customer must be made aware of the warranty limitations. This process must be documented and if the customer chooses not to purchase the extended warranty, then you must document this as well. Now let’s consider a scenario where the customer does not buy the extended warranty. What is your plan if there is a failure the customer believes should be covered under warranty and the machine is no longer covered? By this I mean, what will your after-sale expense (ASE) exposure be if you chose to sell the machine without an extended warranty? This exposure must be considered, because at some point the machine will have a failure that will be outside of the basic warranty, therefore requiring the customer to pay for the repair. The problem is the customer will not want to pay because they will believe it should be covered by a warranty. This will force you to consider the value of the customer, which, in this case, causes you, the dealer, to pay for this repair as an ASE. So how will you handle this expense?
First, we must consider the cost of the warranty as compared to the cost of the repair being handled as an ASE. In short, is it worth rolling the dice and not adding a warranty? I would say in most cases it’s not, and adding the warranty cost, if structured properly, is probably the more cost-effective way to mitigate your ASE. By adding the additional warranty into the machine cost, you will obviously raise the selling price. If you don’t raise the selling price, then it will increase your cost and ultimately reduce your gross profit potential. Every machine you sell will be sold at different retail levels, as well as cost to you. Your gross profit will vary from deal to deal. So how should you handle adding a warranty? In my opinion, adding one should be a no-brainer. Why would anyone sell a machine without an extended warranty? Most machines now include at least one year of basic warranty, with options to extend it for multiple years and hours. In some cases, you also have options to extend a warranty with a comprehensive plan, power train, hydraulic, and/or power train and hydraulic combination plan. So again I ask, why sell a machine without an extended warranty and risk so much exposure on the backside? Now let’s consider the following transaction, which will be with and without warranty. Our selling price will be $250,000, with a cost of $225,000. The extended warranty price will be $5,000. Without warranty – before ASE - gross profit will be $25,000 or 10 percent gross. With an ASE of $40,000, the new gross profit after the ASE will be -$15,000, or -6 percent gross profit. With the purchase of a extended warranty for $5,000, the gross profit will be $20,000 or 8 percent gross profit ASE. Now as you can see, the cost of the warranty actually saved about $35,000 overall. Plus, some manufactures allow you to make a reasonable margin on the actual warranty repair. So selling or bundling the warranty in the correct configuration is certainly a better option all the way around, not to mention, this will certainly keep your customer happy and your business more profitable. n
Troy Ottmer is vice president of Fixed Operations at Doggett Heavy Machinery Services LLC, in Houston, Texas, a John Deere construction equipment dealership serving the greater Houston metro area including Beaumont and the surrounding market. Doggett Machinery Group also serves South Texas and Louisiana. Ottmer has worked in the equipment and automotive industry for 24 years. He can be reached at troy.ottmer@doggettmachinery.com. 44 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> MID-YEAR BUSINESS OUTLOOk JoAnne coSTin
Growth Slows, While Some Energy-Dependent Dealers Face Declining Sales
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t the halfway mark of 2015, most construction equipment markets continue to grow, but not at the robust pace of last year, according to a newly completed Mid-Year Business Outlook Survey conducted among AED dealers. This is despite the fact that construction spending is having its second
Compared to Spring 2014, your current midyear TOTAL REVENUES for 2015 are:
New Equipment Sales New Equipment Sales Used Equipment Sales Used Equipment Sales Rental Rental Parts Sales Parts Sales Service Sales Service Sales
1%-10% 1%-10% higher higher 17% 17% 28% 28% 31% 31% 38% 38% 47% 47%
More than Morehigher than 10% 10% higher 50% 50% 17% 17% 38% 38% 28% 28% 43% 43%
The same The same 7% 7% 21% 21% 10% 10% 17% 17% 3% 3%
1%-10% 1%-10% lower lower 13% 13% 21% 21% 10% 10% 17% 17% 7% 7%
More than More than 10% lower 10% lower 13% 13% 14% 14% 10% 10% 0% 0% 0% 0%
Knowing what you know half-way into 2015, how do you expect Q3 and Q4 2015 GROSS REVENUES to perform in these areas compared to the last half of 2014?
New Equipment Sales New Equipment Sales Used Equipment Sales Used Equipment Sales Rental Rental Parts Sales Parts Sales Service Sales Service Sales
Expected Increase Expected Increase
Same as 2014 Same as 2014
Expected Decrease Expected Decrease
55% 55% 48% 48% 65% 65% 66% 66% 76% 76%
21% 21% 35% 35% 24% 24% 31% 31% 21% 21%
24% 24% 16% 16% 10% 10% 3% 3% 3% 3%
best year since the Census Bureau began tracking the metric in 2002. Through May 2015, public construction spending was up 2.8 percent year-over-year, while private construction spending increased 10.3 percent. At this time last year, more than half of all dealers surveyed (53 percent) were reporting revenue gains in excess of 10 percent. This year, that number is down to 39 percent. Significantly more dealers reported declines in the first half of 2015 as well. Last year just 9 percent of dealers surveyed reported any kind of revenue decline; this year 29 percent of dealers surveyed reported lost revenue. Dramatically reduced oil and gas activity is likely one of the key drivers for those dealers experiencing a decline.
Eighty-four percent of dealers surveyed said they were not benefiting from the energy sector in 2015, as they did in 2014. Dealerships reported revenue declines from 3 to 50 percent in this sector. According to the U.S. Census Bureau, construction spending in the power sector (including oil and gas) was down 23 percent year-over-year in May 2014. ASCO, based in Texas, felt the impact on rental and sales activity in the first half, with revenues declining. “We have two of the major oil plays in the U.S. in our territory in the Permian Basin and the Eagle Ford,” said Brax Wright, CEO. “The Eagle Ford has gone ghost town quiet; the Permian is still surprisingly busy but no one is buying or renting any equipment. I fear as soon as hedge
46 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> Mid-Year Business Outlook contracts run out on the oil pledged at $100+ per barrel we will see 1982 all over again in the Permian.” Other dealers continued on a growth track. Jonathan Tarpey, president of Bobcat of Houston (Berry Companies) expected to see a downturn in business as a result of lower gas prices, but work on downstream oil and gas-related projects continued at a healthy pace in 2015. Sales are up by more than 20 percent. Projects such as petrochemical plants and natural gas processing plants have been stronger than expected, along with overall construction activity in the Houston market. Wes Stowers, CEO of Stowers Machinery, the Caterpillar dealer in Tennessee, says the company’s market is now back to about 80 percent of where it was, despite the continued decline of coal mining under the current administration. Improvements have come due to increased activity in housing, commercial construction and some federal government spending. “It’s a different mix,” said Stowers. “Very few large machines. Most of them are small and medium-size machines — different competition, different customer base, different projects. You go to where the ball is going, not where it has been, and that is where our business is today.” Slow growth in the equipment-intensive highway market could be another factor holding the market back. The highway market was up just 2 percent year-overyear in May, with many states delaying projects until a new federal highway bill is passed. “If we get a federal highway bill, within six months it will have an impact,” said
Stowers. “If you have a state bill on top of that I think things would boom.”
Have Rental Markets Reached their Tipping Point?
Service Leads in Sales Growth
Rental continued to expand in the first half of 2015 with 69 percent of dealers reporting an increase in rental sales, a level on par with 2014 (67 percent). More than a third of dealers (34 percent) report changing their strategy with respect to rental in the past 12 months. Changes mentioned by dealers include adding a dedicated rental fleet, adding specialized equipment, focusing more on the rent-torent business and adding dedicated rental fleet managers. One dealer located in the Southeast wrote that “rental is taking over sales.” In fact the percentage of dealerships responding that use all or mostly
At this time last year, sales growth was most robust in the new equipment sales category – 78 percent of dealers reported an increase. This year, while growth in new equipment sales is still strong (67 percent of dealers reporting an increase); it is being outpaced by growth in the service area. Eighty-nine percent of dealers reported an increase in service sales, with 43 percent reporting growth of more than 10 percent. Staff additions are undoubtedly helping dealers increase revenue in this area of the business.
Compared with this time last year, how are your midyear 2015 GROSS MARGINS doing?
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>> Mid-Year Business Outlook rent-to-sell or rental purchase option (RPO), dropped considerably from the year prior — from 26 percent in 2014 to 8 percent in 2015. Those dealers who defined their rental business as half rent-to-rent (RTR) and half RPO increased from 52 to 65 percent. Seven in 10 respondents say that rental represents from 1-20 percent of their business – consistent with the prior year. Despite more dealers participating in rental, there are signs that the rental market is starting to cool. Twenty-one percent of dealers saw rental sales decline in the first half and 16 percent said they would reduce their rental fleet by 10 percent or more in the second half of the year, compared to zero percent in 2014. Another 13 percent plan a reduction of 1-10 percent. The percentage of dealers expecting to increase their rental fleets dropped from 59.4 percent in 2014 to 42 percent in 2015. One dealer responded that they cut rental rates for the first time this year in order to keep utilization above 60 percent. “If bonus depreciation is not passed this year, we will greatly reduce investment in our rental fleet.” Bobcat of Houston has invested heavily in rental in the past two years. “We have doubled the size of the rental fleet from $3 million to $6 million and still have been able to maintain a good ROI.” Tarpey believes managing the risk of rental has become easier. As long as interest rates are low they plan to add to their rental fleet. “We have much better reporting and software the operating systems are more nimble. It’s a lot easier to extract the data to make the right decision.”
Stowers believes the economy is still fragile, with the risk of machine ownership shifted to the dealer. “Everyone wants to rent today instead of buying, “ said Stowers. “We are in a better position today to manage risk. We have sophisticated tools and metrics and better equipment.” Still, the dealership pays attention to who they are working with. Stowers cautions that “there are some deals you just can’t go after.” About two-thirds of dealers experienced an increase in parts sales in the first half of 2015, compare to 72 percent
in 2014. About 16 percent of dealers reported a decrease in parts sales, compared to 12 percent in 2014. Used equipment sales also experienced somewhat less robust growth in the first half. Forty-five percent of dealers experienced an increase in used equipment sales through the first half of the year, compared to 56 percent of firms responding in 2014. Thirty-five percent of dealers experienced a decline in used sales, compared to 28 percent of dealers surveyed last year. n
JOANNE COSTIN (jcostin@costincustom.com) is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at 847-340-4075.
For the duration of 2015, how much will you invest in NEW EQUIPMENT INVENTORY compared to the second half of 2014?
48 | www.cedmag.com | Construction Equipment Distribution | August 2015
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>> WORKFORCE SOLUTIONS
BRETT LEVANTO
Back to School: How to Learn to Stop Worrying and Love Technical Education
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recently visited an Associated Equipment Distributors (AED) member facility and asked my host about the challenge of finding and keeping skilled workers. “If you’d have been holding a wrench when you came in the door, you’d have had a job,” he said. If our members are so desperate for technical labor, and having the right people with the right skills is so central to business success, how can we create a better and more informed market for developing the workforce of the future? Whether it is reading comprehension or college readiness, there is no shortage of data or speculation about the educational health of the United States. As Americans debate the value of Common Core and whether or not the federal system has left children behind, industry experts are beginning to understand academic skills alone cannot support a vibrant economy. Skilled workers — mechanics, welders, machinists and repair technicians — form the backbone of American commitment to healthy and secure national infrastructure.
Where are they? The Bachelor’s Degree Bind For years, the perceived pathway to personal success in the U.S. has been almost exclusively through four-year bachelor’s degrees. Stories celebrating first generations of Americans to attend college or sensationalizing the undergraduate experience often drive high school graduates to enter a university dorm instead of the work force. U.S. Department of Education data showed that the number of bachelor’s degrees awarded on an annual basis more than doubled between 1970 and 2012. For higher-level credentials, the increase was more dramatic: The number of master’s and doctoral degrees awarded each year grew by more than 200 percent over the
same period. Students have taken “stay in school” to heart. The result: a type of academic inflation that overvalues advanced credentials. As students sought higher levels of education, employers began to demand degrees even for jobs that may not have required them. This new incentive from the labor market created continued demand for education, and the problem spun out of control. While students have responded by spending more years in the protected halls of academic institutions, industry is waking up to the problems created by over-emphasis on college-track learning. The skills gap created by the absence of qualified technical workers has become a constant challenge for American businesses. Many employers plan to expand businesses and add workers over the coming years. Manufacturing companies alone expect to create more than 3 million jobs over the next decade, an annual report co-published by Deloitte and the Manufacturing Institute said. Growth aspirations, however, are dampened by the lack of qualified personnel. Nearly two-thirds of those jobs will go unfilled unless the gap in needed technical skills is closed. Construction-equipment distributors also are being tested. Nine out of 10 respondents to AED’s 2014 Business Outlook Survey indicated they were actively trying to fill mechanic positions, and nearly 80 percent expected to expand their overall workforce in the coming year. Considering these plans for expansion, survey participants rated “finding new talent” as the most important challenge in terms of impact on their business – ahead of taxes, Obamacare and regulatory burdens. Finding the right people matters. The value of technical skills is beginning to resonate. In January, the Wall Street Journal chronicled the early career of a Texas man who chose technical training over a university after graduating high
school in 2010. With a two-year welding degree in hand, the 24-year-old earned $140,000 in 2014. His mother, a retired biology lecturer with a doctoral degree, was quoted as acknowledging four years of college was not a universal necessity.
The New American Dream For Americans, the pathway to highgrowth, high-demand careers is no longer exclusively through four-year bachelor’s degrees. Through career and technical education (CTE) programs and the expansion of science, technology, engineering and math (STEM) initiatives beyond traditional academic disciplines, policymakers can create robust talent pipelines to support the core construction, manufacturing and industrial jobs that are the foundation of the economy. The STEM example is powerful. The interest in supporting education in these fields has been gathering momentum for years, but the national understanding of what STEM really represents is misaligned with reality. In 2014, the Brookings Institution said half of the 26 million STEM jobs in the U.S. are available to workers without a four-year degree. Despite this, the report said, “policymakers have mainly focused on supporting workers with at least a bachelor’s degree, overlooking a strong potential workforce of those with less education, but substantial STEM skills.” In reality, the “middle skill” jobs captured by the Brookings study – those that require training beyond high school, but not a bachelor’s degree – will power the economy for the foreseeable future. The Georgetown University Center on Education and the Workforce reported in 2013 that nearly one third of all jobs created by 2020 will require some secondary-skills training, but not a four-year degree. That’s more than 16 million jobs in (continued on page 56)
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>> FAMILY BUSINESS
Dan Harkins
Third Generation of Vermeer Leadership Coming Up
F
ew companies have achieved what Vermeer Corporation will boast on Nov. 1. With only 11 percent of family-owned businesses making it to their third generation of family leadership, Vermeer looks forward to Jason Andringa’s upcoming transition. Since 1948, Vermeer has grown this global agricultural, industrial and environmental equipment giant firmly in the family and headquartered right at home in Pella, Iowa. The company was founded by Gary Vermeer on his farm that still stands across the street from Vermeer Corporation headquarters and serves as a reminder of the legacy of innovation and hard work. Andringa will become president and chief executive officer, officially taking over the company from his mother, Mary Vermeer Andringa, who will transition to her exclusive role as chair of the board. His uncle, Robert (Bob) L. Vermeer, transitioned to chair emeritus November 2014. Both Bob and Mary served as second-generation family leadership. Mindi Andringa Vanden Bosch, daughter of Mary and sister of Jason, joined Vermeer in 2008 and is focused on manufacturing processes in her role as continuous improvement manager. “Gary Vermeer, my grandfather and Vermeer founder, was very influential for me personally and professionally,” said Jason Andringa. “Since a young age, I had a passion to follow in his footsteps and I feel humbled and honored with the opportunity to continue to provide strong family leadership for this great company.” Andringa received his Bachelor of Science in Mechanical Engineering from Calvin College in Grand Rapids, Mich. He later completed advanced degrees including a Master of Science in Aeronautics and Astronautics from Massachusetts Institute of Technology in Cambridge, Mass., and a Master’s of Business Administration from the University of Southern California in Los Angeles, Calif. Before coming to Vermeer in 2005, Andringa worked as a staff engineer at NASA’s Jet Propulsion Laboratory at the California Institute of Technology. As part of the family succession planning policy, family
members must gain experience outside Vermeer Corporation. “The work being done in the space industry is important, innovative work. Space exploration is a fascinating field and it was truly a great experience to be able to be a part of it,” said Andringa. Upon Andringa’s return Andringa, president and COO of Verto Vermeer, he assumed the Jason meer Corporation roles of segment manager – new products and markets in the environmental segment; managing director of Vermeer Europe, the Middle East and Africa (VEMEA), based in the Netherlands; vice president – distribution and global accounts; and president – Forage and Environmental Solutions. In November, Andringa was named president and chief operating officer. Over the course of this year, Jason and Mary have worked closely together in preparation for the transition. “As an entire family, we are proud of the third-generation leadership who we know with confidence can propel us to new heights,” said second-generation family member Mary Andringa. With determined competition and volatile markets, keeping a steady flow of innovation in many markets is one of the key factors to weathering any storms. Andringa will continue to drive innovation at Vermeer Corporation. “Diversification is very important,” he said, “for instance, when we see things dipping in, say, oil or natural gas, they’ll probably be up in our solar or wind farm sector. It’s very exciting to see how we can help so many industries.” Vermeer equipment serves 10 markets to help nourish a vibrant food supply, manage natural resources and connect people to the necessities of life. Now and into the future, with the Vermeer family leadership, Vermeer Corporation and the products they design, manufacture and support will continue to make an impact in the world.. n
DAN HARKINS is a freelance writer for LocalLabs.
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>> Easy Wins
Steve Calechman
When The Review is Up for Review Employee reviews can be constructive when they are done right.
T Performance reviews are helpful, but must be done right.
here’s a reason that employees hate performance reviews. It’s because they’re completely awful. What’s supposed to be about career development becomes management’s opportunity to bring up every shortcoming and mistake, do it in the least constructive way, and have it all be part of a permanent record. Could it be done differently? Of course. But it requires some discipline, focus and an approach that takes a long-term perspective. Sharon Armstrong, human resources consultant and author of “The Essential Performance Review Handbook,” advises on how to make it a positive experience. Stretch it out. If the review is the only time that you’re talking with your staff, you’ve already lost. You need to be having short, weekly conversations, giving quick praise and addressing any concerns. This way, nothing becomes too big and unwieldy. The formal review – if you still think it’s necessary – is merely a continuation of what’s already been discussed. Set the expectations. The day before, tell your staffer that you want him talking 70 percent of the time. You don’t have to hit that goal, but you’ve given two messages: Come prepared and it’s going to be collaborative. On the day of, start the review by saying that you have a lot of good things to talk about – further lessening the anxiety – followed by an outline of what you’ll cover to take away uncertainty. Target the message. In order to be thorough and fair, take notes throughout the year.
Mention specific high points, e.g., the project she took on in March, even if you gave credit at the time. If you have an issue that you’ve never brought up, don’t debut it in the review – let your employee have a chance to address it before it becomes official. Then keep the review to 2-3 big impact issues with specific goals and timelines for hitting them. The process now isn’t about circular, theoretical talk, but taking productive actions. Turn it around. Ask your employee to give two to three things that you’ve done in the last 6 months that have helped and two to three things that would help. As long as you mean it and use the information, you’re showing yourself to be someone who’s open and wants to develop talent. If you want to increase the feeling of fairness, allow her to put a letter into the file, including anything that was missed or providing a contrary view. Adding this watchdog element maximizes the chance that a manager will be reasoned and constructive. Let your words flow. Don’t leave praise or difficult feedback for the yearly sit-down. Follow the mantra: When you see it, say it. With praise, think FAST – frequent, accurate, specific and timely. It’ll become a habit and build a strong working relationship. For tough conversations, think BEER – talk about: the behavior, the effect of the behavior, your expectation and the desired result. By focusing on a specific behavior, you’re keeping things small and doable and avoiding drama and tension that can build and linger when things go unsaid. n
Steve Calechman is a freelance journalist in the Boston area. He’s a contributing editor for Men’s Health, and his work has appeared in The Boston Globe Magazine, The Old Farmer’s Almanac and Delta’s Sky magazine.
54 | www.cedmag.com | Construction Equipment Distribution | June 2015
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(continued from page 50)
the next five years.
Think Nationally, Apply Locally
Washington is slowly coming around to this new work-force reality. In January, the White House unveiled a proposal to make two years of community college free for many students. The announcement included a proposal for a new American Technical Training Fund to connect skills development to the needs of employers. Regardless of the fate of the Obama Administration’s proposal, it represents a renewed focus on employer needs as the policy foundation for building the next generation of American workers. Congress already has laid that foundation. In 2014, the Workforce Innovation and Opportunity Act (WIOA) became law. The first legislative reform of the public work-force system in 15 years, WIOA is designed to provide resources to help prepare workers for available jobs by responding to the needs of employers. Development programs are administered by state-level workforce boards that implement programs best suited to the local employment market. (To learn more about
how these initiatives are taking shape and how to comment on the government’s proposals, visit www.doleta.gov/wioa.) Though a bipartisan majority was able to move on WIOA last year, the Carl D. Perkins Career and Technical Education Act (Perkins) continues to languish. Perkins funds do not provide direct assistance to individuals, but instead form grants to states for the development and implementation of CTE programs at the secondary and postsecondary levels. The primary mechanism for federal investment in CTE, Perkins has not had a full reauthorization in nearly a decade. Responsive federal work-force policy should provide states and communities with the tools necessary to stimulate the growth of skills that put students into jobs. Congress must prioritize technical education and utilize Perkins as a tool to further empower states to support needed skills. To make it all work, solutions must connect local business with local talent. For construction equipment distributors, this means engaging with Washington, developing local partnerships, supporting community organizations and seeking out
the mechanisms at work in each state.
AED’s Curriculum for Change
At this year’s Washington Fly-In, I moderated a panel of education policy experts who were joined by U.S. Rep. Bradley Byrne of Alabama, former chancellor of the Alabama Department of Postsecondary Education and a member of the state’s Board of Education who is now a member of the House Committee on Education and the Workforce. At the end of a long, content-filled day, our discussion held the close attention of participants who already had been inserting workforce-related questions into every one of the day’s sessions. The group’s interest in the topic is an important indicator of how real the workforce development crisis has become for association members. For its part, AED has heard this call to action and is working to establish a strong advocacy position to supplement the focused effort the AED Foundation has been applying to the issue for years. n
Brett Levanto is AED’s senior manager of Government Affairs.
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As the official magazine of Associated Equipment Distributors, this publication carries authoritative notices and articles in regard to the activities of the association. In all other respects, the association cannot be responsible for the contents thereof or the opinions of contributors. Copyright © 2013 by ASsociated Equipment Distributors. Construction Equipment Distribution (ISSN0010-7655) is published monthly as the official journal of Associated Equipment Distributors. Subscription rate – $39 per year for members; $79 per year for nonmembers. Office of publication: 600 W. 22nd St., Suite 220, Oak Brook, Ill. Phone: 630-574-0650. Periodicals postage at Hinsdale, Ill. 60521 and other post offices. Additional entry, Pontiac, Ill. POSTMASTER: Send address changes to Construction Equipment Distribution, 600 W. 22nd St., Suite 220, Oak Brook, Ill. 60523
56 | www.cedmag.com | Construction Equipment Distribution | August 2015
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