June 2015
CED Construction Equipment Distribution Published by AED: Business Fuel for a More Profitable Dealership
Owning Tier 4 Benchmark Study Uncovers Industry Facts, Moods and Expectations
n Accreditation Works
Keep it growing
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n Selling to the Military
Finding opportunity in a tough market
n Join the “40/40 Club�
Improve profitability
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contents CED Magazine | June 2015
www.cedmag.com
vol. 81, No. 6
>> FEATURES
28 Living Proof –
AED Accreditation Works!
Central Arizona College proudly thrives with its accreditation status and strong local industry support, as well as plenty of internal encouragement from the top down.
32 Selling to the Military: Built for a Fight
Dealers and manufacturers hunt down opportunities despite budget cuts and downsizing.
36
>> DEPARTMENTS
11 » AED hp 16 » Industry Beat 22 » Data Trends 26 » Ready to Order 55 » Ad Index
Tier 4 and the True Cost of Ownership
Cover Story:
Equipment Watch and the Association of Equipment Management Professionals (AEMP) present the heavy equipment industry’s most comprehensive report.
40 Reflections on
Rental and the Tier 4 Revolution
Joe Mastunduno at John Deere, industry consultant and analyst Frank Manfredi, and Southeastern Equipment Regional Manager Heath Watton discuss the ups, the downs, and the question marks that today’s emissions technology has placed upon the industry.
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>> EDITORIAL TEAM Contributing Editor JOANNE COSTIN pr@aednet.org Graphic Production EVA BELMONTE eva@neggie.net
>> COLUMNISTS
contents CED Magazine | June 2015
>> COLUMNS
07 » From the Chairman
GARRY BARTECKI Financial Consultant Dealer-Rental Succes LLC
47 » CFO 411
AL BATES Profit Planning Group
Can Construction Drive the U.S. Economic Machine?
How To Partner With Customers and Vendors To Grow Your Business
53 » Washington Insider
ELI LUSTGARTEN ESL Consultants
TROY OTTMER Doggett Heavy Industries
America’s Crude Oil Export Ban: An Ancient Artifact That Should Be Buried
56 » Easy Wins
>> ADVERTISING CONTACTS
Since 1920 Official Publication of
No More Surprises at Tax Time
51 » Problem Solved
CHRISTIAN KLEIN AED Vice President of Government Affairs
Production Manager MARTIN CABRAL 800-388-0650 ext. 313 mcabral@aednet.org
49 » In the Market
RON HODGEMAN WTP Exchange
Advertising Sales Manager ALBERT J. RAMIREZ 800-388-0650 ext. 311 aramirez@aednet.org
It’s Time To Make Some New Friends
25 » Money$$$Man Follow The Big Three
STEVE CALECHMAN Journalist
Vice President–Sales/Publisher DAVID W. GORDON 800-388-0650 ext. 334 dgordon@aednet.org
vol. 81, No. 6
Throwing the Only Customer Event that Matters
>> PLUS
42 » Joining
the 40/40 Club
44 » Good Company:
Blow Away Snow Plow Problems
www.aednet.org 600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 4 | www.cedmag.com | Construction Equipment Distribution | June 2015
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>> FROM THE CHAIRMAN
DON SHILLING
It’s Time To Make Some New Friends You will never regret your personal involvement with your local diesel technical school.
W
hen I was asked to get involved on the AED Board of Directors and work my way through the Executive Chairs to becoming AED Chairman, I knew it was a great opportunity for me to share my experiences with my fellow dealers in the area of workforce development. But even before that, an earlier important opportunity came my way in the early 1990s when the chairman of the North Dakota State College of Science Diesel Technology Program asked me if I would be interested in coming down for their Diesel Advisory Council Meeting that fall. I was a bit hesitant because I am not technically trained. Even though I worked in service the first couple of years in this industry, the technical side was not my strong suit. But I decided to go and see what it was like. Prior to the meeting, I spent some time jotting down notes, notes on “things” I felt I could contribute and bring the sales and marketing perspective into the technical committee. I was a bit “cocky” thinking I had developed a list of topics they really never talk about at these meetings. It would be good for them to hear from us guys in sales.
At the meeting my cockiness quickly turned into listening intently and joining in with spirited discussion and eventually collaboration. Turns out many of the items I brought to the table they had discussed before or were working on already. Not only was the meeting educational, but everyone there benefitted. However, I feel it was I who benefitted the most. I started down a path of building a friendship with each administration and faculty person at the school. For the first time, my company was connected to what has turned out to be an invaluable source for current and future employees of General Equipment & Supplies, Inc. Yes, the current Diesel Advisory Board has service managers on it, but it also has factory service people and people from industry who hire the graduates of their program. The things our Diesel Advisory Group has accomplished would amaze you. Annually, our local AED group sponsors a lunch, a meet and greet with new students and a mini “rodeo of equipment,” where these new students are introduced to what the local AED dealers sell. We have helped develop a school-to-work co-op program where
BRIAN MCGUIRE | AED President & CEO
>> OFFICERS
BOB HENDERSON | AED Executive Vice President & COO
>> AT-LARGE DIRECTORS
DON SHILLING Chairman General Equipment & Supplies, Inc.
TODD BACHMAN Florida Coast Equipment, Inc.
WHIT PERRYMAN Vice Chairman Vermeer Texas-Louisiana
JAMES P. COWIN Cowin Equipment Co., Inc.
WES STOWERS Sr. Vice President Stowers Machinery Corp. DIANE BENCK Vice President West Side Tractor Sales Co.
LARRY R. MILLER Kelbe Bros. Equipment Co. Inc.
TODD HYSTAD Vice President Vimar Equipment Ltd.
MITCH NEVINS Bell Trucks America
DENNIS J. HELLER VP of Finance Stephenson Equipment, Inc. TIM WATTERS Immediate Past Chairman Hoffman Equipment Co.
KENNETH E. TAYLOR Ohio CAT
A. ROY KERN, JR. Foundation President Equipment Corporation of America
first year students work at the dealership during the summer. We helped develop recruiting material to draw young people into the program. Our Board was instrumental in helping get a grant for a Counselor Awareness and Career Awareness Program that brings about 30 to 40 high school counselors to the campus each June and introduces them to the Diesel Technology Program. Our AED group also supports the annual career/ job fair each February where second year students interview for potential positions and first year students interview for co-op school-to-work positions. My company’s success in hiring and filling positions in our service department is a direct result of my initial involvement with the Diesel Advisory Board. Now what about you, my fellow dealer principal reading this article? The ball is squarely in your court to get involved at your local school. Do not leave it up to your service manager or someone else. Take the steps necessary to make your service department of the future successful and fully staffed. It is a very wise investment of your time. Trust me, you will make friends there. n
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 June 2015 | Construction Equipment Distribution | www.cedmag.com | 7
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Happening
www.cedmag.com
Time to sign up for Leadership Academy Aug. 25-27 at the Meritage Resort in Napa Valley, Calif. www.aednet.org/leadership
Current events and news for the equipment distribution industry 11 » AED hp
16 » Industry Beat 22 » Data Trends 25 » MoneyMan 26 » Ready to Order
June 2015 | Construction Equipment Distribution | www.cedmag.com | 9
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>> AED hp
Now Available – Live Product Support Training Train your parts and service mangers to become top performers.
Y
ou asked. We listened. More live training for product support is coming to Charlotte, N.C., Denver, Colo. Nashville, Tenn. and San Antonio, Texas in 2015. Removed from the day-to-day work environment, participants can give greater focus to the topics and benefit from peer-to-peer networking. “Our programs are custom-designed for AED members, so everything your parts and service mangers learn here will be useful on the job,” said Rebecca Lintow, manager of sales and development for The AED Foundation. The two-day programs are geared toward development of parts managers, service mangers, rental and branch managers. The cost is $895 per attendee. Top Performer Parts Manager Development Program- Level 1 July 14–15, Renaissance Charlotte Suites, Charlotte, N.C. Top Performer Service Manager Development Program- Level 1 July 16–17, Renaissance Charlotte Suites, Charlotte, N.C. Top Performer Parts Manager Development Program- Level 2 Sept. 14–15, Omni Interlocken Resort, Denver, Colo. Top Performer Service Manager Development Program- Level 2 Sept. 16–17, Omni Interlocken Resort, Denver, Colo. Rental Manager Seminar Oct. 22–23, Nashville Airport Marriott, Nashville, Tenn. Branch Manager Seminar Nov. 18–19, Hotel Valencia Riverwalk, San Antonio, Texas Capistar Group, a founding member of the Machinery Advisors Consortium (MAC) will be facilitating the Parts, Service and Branch Manager programs along with other MAC members. MAC is a group of independent industry consultants who have been focused on providing training and consulting to construction equipment, lift truck, and agricultural equipment manufacturers and their dealer networks. For detailed agendas, visit www.aednet.org, or call Rebecca Lintow at 630-468-5113.
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>> AED hp AED Executive Forum Keynote Speaker Announced
S
eptember will be here before you know it. This year, jump start your 2016 planning with insights and data from AED’s 2015 Executive Forum. This year’s event will be held Sept. 23-25 at the Renaissance Hotel in Schaumburg, Ill. Among the topics to be addressed are communicating with Gen Y employees, public policy, new facility construction and the economic outlook for 2016. John McDonough Forum’s keynote speaker is John McDonough, president and CEO of the Chicago Blackhawks. He joined the Blackhawks in 2007 as President and was named President and Chief Executive Officer on June 1, 2011. Under his guidance, in what Forbes Magazine has called the “The Greatest Sports-Business Turnaround Ever,” the Blackhawks have revitalized the team’s profile and re-energized its fan base. Since McDonough joined the Blackhawks, the team has won Stanley Cup titles in 2010 and 2013, becoming the first organization in the NHL’s salary cap era to capture two championships. With McDonough’s leadership, the Blackhawks have become one of professional sports’ biggest success stories. The Blackhawks have entertained over 300 consecutive capacity crowds at the United Center and have grown a season ticketholder base from 3,400 to more than 14,000. In addition, the Blackhawks have led the NHL in attendance for seven consecutive seasons. The Blackhawks’ success was recognized by SportsBusiness Journal in 2009 and 2014, when the team earned coveted nominations for the publication’s Professional Sports Team of the Year, in addition to being named The Hockey News’ choice for “Best Franchise” in their 2014 “Franchise Ranking” issue. McDonough is a frequent lecturer at the University of Notre Dame’s Mendoza College of Business and Northwestern University. He serves as a Sustaining Board Member for the Juvenile Diabetes Research Foundation Illinois Board, and also sits on the Athletic Advisory Board of St. Mary’s University in Winona, Minn., the Special Olympics Illinois Foundation Board, Chicago Blackhawks Charities Board of Directors, the NHL Club Business Advisory Board and the NHL Board of Governors. A Chicago native, McDonough is a graduate of Notre Dame High School in Niles, Ill., and St. Mary’s University. He currently resides in the northwest suburbs with his wife, Karen.
Proposed New Members
East Beat – On the Road with Ben Yates
Gateway Tractor & Equipment Co. Inc. Upper Marlboro, Md. Global Construction Equipment Collierville, Tenn. Ironhide Equipment Grand Forks, N.D.
Working with David Hosch at Ruffridge-Johnson Equipment in Minneapolis, Minn., AED Regional Manager Ben Yates helped organize a visit at the dealership in April with Rep. Erik Paulsen. Hosch, who has been named vice president/secretary, explained how their yard is empty because machines are out on rent, which isn’t ideal because they are in sales, not rentals. This is especially true in Minnesota, which has a very short operating season. The majority of their conversation revolved around the highway bill. Hosch explained how the lack of a highway bill impacts his business tremendously. Rep. Paulsen stated that a glimmer of hope lies in the fact they recently passed a healthcare records bill quickly, with bipartisan support, which could serve as a blueprint for doing the same with a highway bill.
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>> AED hp
Don’t Miss It Mark Your Calendar For details and to register, visit the AED online store at aednet.org or call 800-388-0650. July 14-15 Parts Manager Development Seminar- Level 1 | Renaissance Charlotte Suites, Charlotte, N.C.
September 16-17 Top Performer Service Manager Development Program- Level 2 Omni Interlocken Resort, Denver, Colo.
November 18-19 Branch Manager Seminar Hotel Valencia Riverwalk, San Antonio, Texas
July 16-17 Service Manager Development Seminar- Level 1 | Renaissance Charlotte Suites, Charlotte, N.C.
September 23-25 AED Executive Forum | Renaissance Hotel, Schaumburg, Ill.
January 19-22 Summit & CONDEX Gaylord National Resort, Washington, D.C.
August 25-27 AED Leadership Academy Meritage Resort, Napa, Calif. September 14-15 Top Performer Parts Manager Development ProgramLevel 2 | Omni Interlocken Resort, Denver, Colo.
October 7-8 Equipment Dealer Business War Game | DoubleTree, Phoenix, Ariz. October 22-23 Rental Manager Seminar Nashville Airport Marriott, Nashville, Tenn.
(Left) Ben Yates arranged congressional visits from Rep. Dave Brat (R-Va.) to James River Equipment in Ashland, Va., and to Carter Machinery in Mechanicsville.
Regional Manager Ben Yates (left) met with Jay Nelson, president of Heavy Machines in Memphis, Tenn. “He was trying to sell me the Letourneau Log Loader in the background!” joked Yates. “We were also discussing how important forestry was to his business and how much territory he covers (all the way to Maine) for LeTourneau.”
Yates also travelled recently to Florence-Darlington Technical College, Florence, S.C., where he presented scholarships to Matt Jones (center right) and Avery Dover, Jr. (not pictured) on behalf of The AED Foundation and the Mike Rowe Works Foundation. Also pictured are FDTC’s Jill Lewis (left) vice president of Institutional Advancement and Special Projects and Stephen Murphey (far right) director of the Caterpillar ThinkBIG Program. Yates gave a 10-minute talk about AED and The Foundation, where we fit into the workforce picture, the current state of the industry, the importance of their role in the dealership’s profit center, and where they might see us in the future as they begin work at the dealership.
June 2015 | Construction Equipment Distribution | www.cedmag.com | 13
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>> AED hp The Riggs Report
A
ED Western Regional Manager Phil Riggs, coordinated a visit with Rep. Cresent Hardy (middle) to APCO Equipment in Las Vegas, Nev. where he was greeted by Dallas Moyer, president, and approximately 20 APCO employees. The congressman discussed his previous relationship with APCO prior to his current political career when he was a contractor and a customer of Moyer’s. Today Hardy is a member the Committee of Transportation and Infrastructure and is assigned to the Highways and Transit subcommittee. He mentioned Clark County’s fuel tax indexing and said if it is working as it appears to be, it could Pictured from Left to Right: Phil Riggs, Rep.-elect Cresent Hardy (R-NV4), and be used as a model for a source of funding Dallas Moyer for more local projects. “These events bring together the industry for an hour to educate members of Congress about the impact their actions and inaction has on small businesses and America’s infrastructure,” said Riggs, “If you aren’t doing your part and voicing your concerns to Congress, then you can’t expect things to change in your favor.” Riggs also planned the first meeting of the newest AED Local Group on April 10 – the Southern California Equipment Dealer Association (SCEDA) met at Quinn Company in City of Industry, Calif., on the agenda were future plans, meeting structure, and listen to an economic outlook and emissions regulations. The morning started with a presentation by California Air Resource Board representative, Joseph Gormely, who discussed current off-road and portable equipment emissions regulations in California. Steven Gardner, president of Premier Pacific Bancorp provided an economic outlook and discussed the health and current trends of California and the nation. Jeff Painter provided the group with a tour of Quinn Company’s brand new facility, and the meeting concluded with an update from AED President Brian McGuire. Richard Scott from Scott Equipment was named president of the new group, which plans to meet twice a year. Thirteen companies attended the meeting, 12 of which were AED members and one (Sonsray Machinery) who decided to become an AED member after the meeting. Those who attended include, Ron Barlet, Bejac Corporation; George Davis, Heavy Equipment Rental & Sales; Matt Hoelscher, Sonsray Machinery; Greg Saari, Associated Power; Mike Lalonde, Westrax Machinery; Mike Mathews and Jeff Lusk, Volvo Construction Equipment & Services; James Nixon, NixonEgli Equipment; Jeff Painter and Bob Shepherd, Quinn Company; Richard Scott, Scott Equipment; Andru Small, Terry Equipment; and Eric Tusler, RDO Equipment. Riggs says he plans to start a similar group in Northern California. For further information, contact him at priggs@ aednet.org or 630-465-3622. Finally, Riggs restarted the Colorado Equipment Dealer Association (CEDA) in Denver on April 20 at Bobcat of the Rockies. Recognizing the shortage of service technicians in Colorado, and a need for a construction equipment technical program in the state, eight AED members came together for a day of discussion with administrators from Colorado Community College System and the AED Foundation’s Steve Johnson. The group discussed the process of accrediting a technical program in Colorado and the challenges that they will face moving forward. “A lack of technicians is one of, if not the, biggest problem facing the industry and I hear it everywhere I go,” Riggs said. “But the truth is, if you aren’t willing to invest the time and resources it takes to overcome this shortage, then it will continue to be a major issue that costs your business money. That’s where the AED Foundation comes in.” Riggs said that the willingness of the school system to pursue accreditation presents a great opportunity to CEDA members and a potential avenue to new employees if they stick with it, even when times are trying. The group will continue to meet on a quarterly basis and the next meeting is set for July. A President and Secretary will be chosen at the next meeting and group members will discuss future events and meeting topics. AED members who attended the meeting include Jeff Brown, Global Machinery; Alan Coffman, Bobcat of the Rockies; Gregg Herdina, Power Equipment Company; Mark Honnen and Steve Malloy, Honnen Equipment; Giles Poulson, Marty Winters, and Mark Shelton, Faris Machinery; Mike Quirk, Wagner Equipment; John Shearer, 4 Rivers Equipment; Duayne Truax, Sunstate Equipment. 14 | www.cedmag.com | Construction Equipment Distribution | June 2015
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Your Leadership Possibilities Leadership Academy 2015
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>> INDUSTRY BEAT
JCB Named Preferred Equipment Supplier For Baker Motocross Training Facility The new Baker Factory Professional Motocross Training Facility in Clermont, Fla. has partnered with JCB North America to build and maintain its one-of-a-kind, world-class training facility for the sport’s most elite riders. JCB heavy equipment will be used to maintain, condition and evolve five different purpose-built motocross and supercross tracks spread over the 90+ acre facility. JCB will be an integral part of the training facility’s continued construction and rigorous facility maintenance program. Local JCB dealership MacKinnon JCB will offer ongoing equipment maintenance and service.
AED Calls for Flexibility in Government Regulation of Drones AED submitted comments on the Federal Aviation Administration’s proposed rule “Operation and Certification of Small Unmanned Aircraft Systems, which would update the regulations that govern general aircraft operations to incorporate the use of the vehicles commonly referred to as “drones.” Many unmanned aircraft systems (UAS) are in sectors served by AED members, and FAA regulations will have a significant impact on the market while dictating their use. While supportive of the proposed rule, AED suggested
two key improvements: 1) Provide a clear definition of “direct participation” that includes a range of employees who might be operating at a construction site. 2) Provide more flexibility to the rule’s restriction to visual line of sight (VLOS) operations to allow for UAS to operate beyond line of sight (BLOS). AED will remain engaged in the process to ensure this technology can become a readily-accessible resource for the industry.
Distributors’ Highest Priorities Reflected in Canada’s 2015 Budget Budget proposal supports workforce development, infrastructure and pro-growth tax policy
The 2015 budget proposed by Prime Minster Stephen Harper’s government on April 21 reflects many of the policy priorities Canadian distributors have said matter most to the equipment industry: workforce development, infrastructure and progrowth tax policy. Economic Action Plan 2015 (EAP 2015) promises to balance the federal budget within the next year. The government has reduced Canada’s budget deficit from $55.6 billion half a decade ago to a projected surplus of $1.4 billion for 2015-16. EAP 2015 includes several new and continuing workforce development initiatives including 1) supporting provinces and territories to facilitate the harmonization of apprenticeship training and certification requirements in targeted Red Seal trades 2) Making a one-time investment of $65 million to business and industry associations to allow them to work with willing post-secondary institutions to better align curricula with the needs of employers. 3) Expanding eligibility for the Low-and-Middle Income Canada Student Grants to short duration programs with a quick transition from education to employment. Transportation infrastructure is a perennial challenge for Canada and increasing investment is a top AED priority. The McKinsey Global Institute has estimated that Canada must invest $66 billion through 2023 to maintain and repair urban roads and bridges. In recent years, the government has sought to address these challenges by providing $33 billion through the 2007 Building Canada Plan and $53 billion over 10 years through the New Building Canada Plan, which was launched in 2014. EAP 2015 continues that commitment by providing
roughly $5.35 billion per year on average for provincial, territorial and municipal infrastructure under the New Building Canada Plan and investing $750 million over two years starting in 2017–18, and $1 billion per year thereafter, in the new Public Transit Fund. In our recent Canadian member survey, reducing the tax code’s complexity and shortening cost recovery periods to encourage equipment purchasing ranked just behind workforce development as top dealer priorities. EAP 2015 seeks to encourage business investment and entrepreneurship by providing manufacturers with a 10-year accelerated capital cost allowance to encourage productivity-enhancing investment in machinery and equipment and reducing the small business tax rate to 9 percent by 2019. EAP 2015 also includes a handful of policy initiatives designed to encourage growth of natural resource sectors. The 15 percent Mineral Exploration Tax Credit for flowthrough share investors would be extended for an additional year. Natural Resources Canada would receive $23 million over five years, starting in 2015–16, to renew the Targeted Geoscience Initiative. Additionally, the forest sector would receive $86 million over two years, starting in 2016-17, to extend the Forest Innovation Program and the Expanding Market Opportunities Program. While Prime Minister Harper and his team are to be commended for fulfilling their promise to bring Canada’s budget back into balance and continuing to invest in infrastructure and the workforce, The EAP 2015 is not as big a step in the right direction as AED would like to see.
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>> INDUSTRY BEAT
Vermeer Texas-Louisiana Honored with Pinnacle Award Vermeer Texas-Louisiana was recently awarded the 2014 Pinnacle designation, a top dealership honor presented by Vermeer Corporation. Vermeer Corporation leaders visited branch locations in San Antonio [pictured} and Irving in March to present the award to company employees.
Caterpillar Announces New Analytics & Innovation Division Caterpillar Inc. announced the formation of a new division, Analytics & Innovation (AI), which will be led by Caterpillar Vice President Greg Folley. According to the company, the division will bring together the people and resources that will foster a culture with innovation at the core, form a broad and connected analytics ecosystem and manage strategic third party relationships with providers like Chicago, Ill.-based Uptake, a start-up with which the company recently announced a technology and predictive analytics agreement. Caterpillar will co-locate key employees with the Uptake team in Chicago to accelerate the work needed to create
a platform that takes massive amounts of data, combines it with data science to understand patterns and quickly deploys information to save customers money, optimize performance and prevent unplanned downtime. The company is also placing resources in the Silicon Valley and has seeded money in a venture capital fund with the goal of investing in emerging technologies that could further enhance Caterpillar’s product and service development. With Folley leading AI, Doug Hoerr will now become the vice president with responsibility for the RCWT Division, Hoerr is currently the vice president of the Strategic Services Division (SSD).
Finning to Acquire Kramer CAT Finning International Inc., Caterpillar’s largest heavy equipment dealership, has reached an agreement to purchase the operating assets of the Cat dealership of Kramer Ltd. for approximately $230 million, subject to working capital adjustments. In 2014, the acquired dealership business generated approximately $275 million in revenue. Finning will become the approved Cat dealer in Saskatchewan in July. After 70 years of service in Saskatchewan, the Kramer family has decided to retire from the equipment dealership business. This acquisition combines complementary capabilities, customer
bases and highly skilled employees across Finning’s territory in British Columbia, Alberta, Yukon, Northwest Territories and part of Nunavut with Kramer’s presence in Saskatchewan. Tony de Sousa, a 39-year veteran of Finning, will lead Finning Saskatchewan. He will be based in the Saskatchewan headquarters, which will remain Tony de Sousa in Regina. “It’s been an honor to lead the Kramer Cat dealership for the past
23 years and I am proud of our organization’s many accomplishments,” said Tim Kramer, president of Kramer Ltd. “Having spent considerable time with members of the Finning team, I am confident Finning will be Tim Kramer a great addition to the province of Saskatchewan and our employees are joining a successful Canadian business that cares about its employees, customers and the community.” (continued on next page)
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in the news Case Construction Equipment has brought together under the name Case SiteSolutions all its services and technologies designed to complement the brand’s equipment to help customers manage their job sites and construction activities efficiently. Case SiteSolutions presently include the CaseSiteControl machine control solutions and Case SiteWatch telematics. New developments include Case dozers and now graders available with factory ready Leica control systems. The number of machine parameters transmitted by the Case SiteWatch telematics system has been increased from 12 to 40, enabling the fleet manager to monitor a much more comprehensive range of health and performance indicators of his equipment. In addition, Case is introducing a hardware update with the new AM53 modem that includes 3G connectivity to increase the communication speed and coverage and backup battery to improve the security features. The Department of Transportation published a final rule in the Federal Register regarding the use of electronic versions of the Federal Drug Testing Custody and Control Form
(eCCF). Effective April 13, 2015, the final rule allows employers, collectors, laboratories, and the medical review officer to use the electronic version of the Federal Drug Testing Custody and Control Form (eCCF) in the DOT-regulated drug testing program. For questions about the new rule you can contact Karla Dobbeck at the AED HR Help Desk, at 888-412-8079 or kdobbeck@askhrt.com. Caterpillar Inc. has entered into an agreement with Yard Club, a startup company that has developed an online peer-to-peer equipment rental platform. Caterpillar has provided strategic financing to Yard Club, based in San Francisco, Calif., and will launch the online ordering platform in specific metropolitan markets in conjunction with U.S. and Canadian Caterpillar dealers. The peer-to-peer rental platform will include both Cat products and non-Cat branded products. Since its founding in 2013, Yard Club has focused on construction contractors in the San Francisco area. With Caterpillar’s investment, Yard Club will further develop the platform and expand club member coverage. Yard Club expects to have dealer and customer fleets installed
on the platform and ready for rental midyear 2015. John Deere was honored by United Way Worldwide for their strategies to engage employees in volunteering and donating to United Way-related initiatives. United Way reported that Deere had more than 2,000 U.S. employees spend a day volunteering as part of the United Way’s Day of Caring in 2014. In addition, Deere’s “dollars for doers” program lets employees earn a $1,000 grant for approved charities if they volunteer at the agency for more than 40 hours in a year. John Deere was also named to the “Forbes” magazine list of America’s Best Employers. Deere was 38th among 500 companies included in the recently-announced ranking based on independent research of American employees working for large U.S. organizations or U.S. divisions of international firms. Caterpillar and First Solar, Inc. announced a strategic alliance to develop an integrated photovoltaic (PV) solar solution for microgrid applications. Under the agreement, First Solar will design and
Industry Remembers Former Cat Dealer and AED Volunteer Bill Pullen Bill Pullen, former president and CEO of Whayne Supply from 1985 to his retirement in 2005, passed away on Friday, April 17. He was 75 years old. Pullen worked as a district sales rep at Caterpillar before joining Whayne Supply in 1971 and served in various management positions before becoming president. Under his leadership as president, Whayne grew and expanded by entering new markets, increasing industry presence, retooling the management structure and identifying increased performance expectations. Realizing that Whayne needed change to keep its competitive edge in the market place, Pullen revamped the organizational philosophy of the company. His management style focused on responsiveness to the customer and marketplace via a decentralized culture within the company. Bill was born in Bloomfield, Ind., the second son of Donald and Belle Louise Smiley Pullen. After graduation as president of his high school class, he went on to
Wabash College and then to the University of Chicago, where he received his MBA. Pullen became a district sales rep in southern Texas for Caterpillar Tractor Company, then in 1971 he moved into sales management at Whayne Supply Company, a Caterpillar equipment distributor based in Louisville. He was an actively engaged volunteer leader with AED, serving on the Board of Directors from 1992 to Bill Pullen 1996 and on the Board of The AED Foundation from 2002 to 2005. After retirement in 2005, Bill became a devoted family man, played decent golf at Hunting Creek Country Club, served as president of the Prospect Goshen Rotary Club, and joined art classes and small group studies at St. John United Methodist Church.
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in the news Screen Machine Hosts Congressman Pat Tiberi On May 11, 2015 Central Ohio Congressman Pat Tiberi toured Screen Machine Industries based in Etna to gauge the impact of upcoming international trade legislation on Ohio jobs. Screen Machine Industries has experienced tremendous growth from exports over the past few years. Lifting trade barriers will create new opportunities to establish dealer relationships in markets otherwise unapproachable. Two trade agreements that the U.S. is currently negotiating would give American exporters access to one billion new customers. Trade supports one in five jobs in Ohio and trade-related jobs are growing rapidly. While overall employment declined in Ohio between 2004 and 2013, trade-related jobs grew by 19 percent. While Ohio companies export to more than 200 countries, over half of all exports go to our trade partners. The United States has trade agreements with only 20 nations. “If we grow our amount of trade partners, we’ll expand our exports,” stated a company press release. manufacture a pre-engineered turnkey package for use in remote microgrid applications, such as small communities and mine sites. The package will feature Cat-branded solar panels manufactured by First Solar and will include a balance of system components. Caterpillar expects to first market the new microgrid solution in the Asia Pacific, Africa, and Latin America regions. LiuGong will launch its new Global Research and Development Centre this month to accelerate the technological proficiency in its machines. LiuGong currently inputs close to 5 percent of its total sales revenue into R&D year-on-year, with an investment of over €61 million in 2014. Located in Liuzhou, China, the complex will be the new hub that influences LiuGong’s three other world-class R&D facilities in India, Poland and the United Kingdom. Its initial focus will be to undertake major research, development and testing for LiuGong’s lines of wheel loaders, excavators and graders. Astec Industries, Inc. launched Astec Bulk Handling Solutions (ABHS) to focus on providing complete customized solutions to the sea ports and inland river terminals industry. The new initiative creates a platform to
combine the existing resources in material handling of Astec companies, such as KPI-JCI and Telsmith, with the expertise in sea ports and inland river terminals from the acquisition of Telestack Limited in April of 2014. Atlas Copco named the Atlantic division of Stewart & Stevenson as a distributor of its construction equipment. Stewart & Stevenson will now carry Atlas Copco equipment, including light towers, generators, pumps and compressors, at its locations in Lodi, N.J.; Piscataway, N.J.; Middletown, Conn.; Latham, N.Y.; and Marlborough, Mass. Iowa Mold Tooling Co. Inc. (IMT), an Oshkosh Corporation company, recently added Kahn Truck Equipment Company to its distributor network. Located in St. Louis, Mo., Kahn Truck Equipment serves IMT customers in eastern Missouri and southern Illinois. Separately, IMT has hired Holly McCoy-Nelson as Holly customer support McCoy-Nelson manager.
From Left: Doug Cohen, Pat Tiberi, and Steve Cohen
Webasto Thermo & Comfort North America, an engine-off vehicle heating equipment, and Diesel Emissions Service, a retailer of Diesel Particulate Filters (DPF) in North America have collaborated to increase DPF’s service interval when used to replace engine idle time. Independent testing has shown that the use of Webasto engine heaters drastically increases the performance of DPFs when used to replace engine idle time. Doosan and Bobcat Company have continued their support of STEM-related education and research by donating nine $1,000 scholarships to students enrolled at North Dakota and Minnesota colleges and technical schools. Infor announced that Wagner Equipment Co. has selected Infor M3 Equipment and Infor Implementation Accelerator for Equipment Rental to help streamline business processes across its Heavy and Power Rental Fleets. By selecting Infor, the organization hopes to simplify process efficiencies through automation and improve reporting by delivering better access to rental coordinators. SmartEquip and Point-of-Rental Software have announced a strategic partnership to integrate their respective (continued on next page)
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in the news software platforms. This integration enables Point-of-Rental Software users to receive real-time, accurate parts and service support for more than 150 brands of equipment currently on the SmartEquip Network, while automating electronic parts ordering from both manufacturers and their dealers. According to the company, the partnership is expected to provide
Point-of-Rental users a significant reduction in equipment operating costs, while increasing fleet financial utilization and rental revenue. Hoffman Equipment, Piscataway, N.J. , has accepted dealer sales and service responsibility for the full line of Liebherr earthmoving and material handling equipment.
Scania will supply engines for nextgeneration large excavators and wheel loaders made by Hyundai Heavy Industries’ Construction Equipment division, under a new partnership. Essex Rental Corp. has retained RBC Capital Markets, LLC, to evaluate strategic alternatives for Essex Crane Rental Corp., one of the company’s two operating subsidiaries. Jill Berg, owner of the Spherion Staffing franchise in Fargo, N.D., was honored with the 2014 Spherion Owner of the Year Award at the Spherion annual meeting held in Hilton Head, S.C. Spherion has 150 franchises nationwide and the award is Jill Berg the company’s highest honor. Equipment Corporation of America (ECA), a distributor of foundation construction equipment, recently acquired the assets and merged with sister company New England Construction Products, LLC (NECP). The company will continue serving Massachusetts, New Hampshire, Vermont, Connecticut, Maine, and Rhode Island as ECA Boston. ECA is retaining the core team from NECP. David Sciortino will continue his service as vice president and Boston branch manager. Anthony Sciortino will assume the position of sales engineer, and Bob Martinelli will remain service manager.
BlueLine Rental has acquired Area Equipment LLC, a rental company in Cheasapeake, Va. that serves customers in the industrial and non-residential construction markets. Sean Jennings and JT Sutton, who founded Area in 2006, are expected to stay on with BlueLine in regional management roles. BlueLine is owned by Platinum Equity, which acquired the business in January 2014. 20 | www.cedmag.com | Construction Equipment Distribution | June 2015
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PHYSICAL UTILI PHYSICAL UTILI PHYSICAL UTILIZATION
AWP AWP - TELESCOPIC BOOMS − -4.6% - TELESCOPIC BOOMS − -4.6%
BACKHOES − -3.1% BACKHOES − -3.1%
Planning activity for 80% both the commercial and institutional sectors posted modest gains April, with 80% 80% 80% 80% in 80% commercial up80% 0.5% 80% and institutional up 1.2%. The slight increase for the commercial 80% 80% 80% sector 80% was supported 80% 80% by three sizeable projects that entered planning – a $500 million expansion of the 80% JW Marriott & Ritz 80% 70% 70% 70% 80% 70% 80% 70% 80% 80% 80% Carlton Hotel in Los 70% Angeles CA, a $300 million Loews Sapphire Falls Resort in 80% Orlando FL, and a $100 80% 80% 70% 70% 70% 70% 70% 70% million warehouse and office building project in Santa Fe Springs CA. For the institutional sector, there 80% 80% 80% 70% 80% 64.5%64.5% 70% 80% 70% 80% 70% 70% 70% 60% 60% 60% million 62.2%62.2% 62.2% 60%valued at $100 million or more that entered planning 60% were also64.5% three60% projects – a 62.2% $150 70% 70% 70% 70% 70% high school 64.5% 70% 60% 60% 60% 60% 60% 60%Center in Los 62.2%62.2% 62.2% renovation in Beverly Hills CA, the $100 million AltaSea Marine Research62.2% and Interpretive 64.5%64.5% 70% 70% 70% 60% 62.2%62.2% 60% 60% 70% 62.2% 60% 60% 60% 62.2% 50% 70% 50%the 70% 50% 50% 50% 50% Angeles CA, and $100 million Seattle Children’s Research Institute in Seattle WA. 64.5%64.5% 2014 2014 62.2% 201562.2% 2011 2012 2012 2013 2013 2014 2014 2015 2015 2011 2011 2012 2012 2013 2013 2014 2014 62.2% 2015 2011 2012 2012 60% 60% 60% 2015 2015 2011 April 2015 60%2011 60% 62.2% 50% 50% 60% 50% 50% 50% 50% 2014 2014 2015 50% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2012 2015 50%2011 2012 2013 2014 64.5%64.5% 2015 2011 2012 2013 2014 2015 2011 50% 50% 50% 50% 60% 60% 60% 60% 60% 60% 62.2% 62.2%62.2% The Dodge rose2013 0.8 percent in April2014 to 122.6 2014 2014 201562.2% 2011Momentum 2012Index 2014 2015 2015 2011 The*Dodge*Momentum*Index 2012 2013 2014 2015 2011 2012 2012 2015 2011 2012 2013 2011 2012 2013 2014 2015 2011 50% 50% 50% 50% 50% 50% STEERS − 2013 -2.5% FORKLIFTS - HI-REACH −to Dodge -3.2% − -2.5% FORKLIFTS -2013 HI-REACH − -3.2% 2014 2014 2015 2015 2011 from 2012 121.6, 2014 2015 2015 2011 2011 SKID 2012 SKID 2013 2014 2015 2015 2011 2012 2012 (2000=100) March’s according Data & Analyt2012 2013 2014 2012 STEERS 2014 (Year*2000=100) 80% 80% 85% 85%2011 85% 85%2011 50% 50% 50% 50% 50% 50% ics. Momentum Index is a monthly measure of the first (or initial) 2014 2014 2015The 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2012 80% 85% 85% 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 80% 85% Apr$15 Mar$15 %*Change 85% 85% 80% 80% 85% 85% 85% report for nonresidential building projects in planning, which have been 70% 70% Dodge Momentum Index 75% 75% 75% 75% 122.6 121.6 0.8% 80% 85% 85% 85% 85% 73.8%73.8% 75% 75% 75% shown to lead by a70% 80% 70% 75% construction spending for nonresidential buildings Commercial Building 134.0 133.3 0.5% 73.8%73.8% 80% 85% 85% 75% 85% 70% 75% 85% 80% 75% 70% full year. slight rise shows planning activity beginning to edge up 60% 65% April’s 65% 75% 60% 65% 65% 73.8%73.8% 108.5 107.2 1.2% 70% 70% Institutional Building 75% 75% 75% 75% 60% 60% 65% 65% 65% once56.0% again65% after retreating 2.5 percent in March, continuing the up-and73.8% 73.8% 56.0% 56.0% 56.0% !!Source:!Dodge!Data!&!Analytics 70% 75% 75% 65% 75% 60% 70% 65% 75% 65% 65% 50% 60% 55% 55% 55% down pattern so2013 far in2013 2015. Although planning 50% 55% that’s been 73.8% 2014 2014 56.0% 201556.0% 2011 2012 present 2014 2014 the 2015 2012 2012 2013 2013 2014 2014 56.0% 201556.0% 2011 2012 2012 73.8% 60%2011 65% 65% 2015 2012 2015 2011 2015 65%2011 65%2011 50% 60% 56.0% 55% 55% 50% 56.0% 56.0% 55% 55% 56.0% statistics have2011 essentially in early the level of activity continues to be higher enabling latest 2015 month’s 2014 2014 2015 2015 2011 2012 plateaued 2013 2014 20152015 2011 2011 2012 than 2013ago, 2014 the 2011 2011 2012 2012 April 2012 20132015, 2014 2015 2012 a year 2013 2014 2015 60% 65% 65% 50% 55% 56.0%56.0% 55% 55% 60% 65% 65% 50% 55% 2014 2014 56.0% 201556.0% 2011 2013 compared 2014 2015 2011 2012 2013 2014 occupancies 2015 and 2011 2012 2012 2015 2011 to2012 2012 2013 & 2012 2014 2014. 2015 2011 2012 2013 2014 2015 2011 2011 2012 & 2013 Jul 2013 / Jun 2013 Momentum Index be up 8.5 percent to April With the commercial sector still helped by improving Jan 2015 / Dec 2014 50% 50% 55% 55% 55% 55% 2014 2014 56.0% 201556.0% 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2011 2012 2012 2013 2013 2014 2014 56.0% 201556.0% 2011 2011 2012 2012 2015 2011 2015 80% 80% 80% 80% 80% rents, while the institutional sector is benefitting from the passage of recent bond measures, it’s expected that the Momentum Index will 80% 50% 50% 55% 55% 55% 55% 2014 2014 2015 80% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2012 80% 80% AWP ARTICULATING BOOMS − -6.0% FORKLIFTS WAREHOUSE/INDUSTRIAL − -0.1% 2015 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 80%2011 80% 80% AWP ARTICULATING BOOMS − -6.0% FORKLIFTS WAREHOUSE/INDUSTRIAL − -0.1% AWP - TELESCOPIC BOOMS − For -4.6% BACKHOES − at www.construction.com. -3.1% see a80% more sustained upward trend as 2015 progresses. more information, visit Dodge Data & Analytics 80% 80% 80% 80% 80% 70% 70% 70% 70% 70% 70% 80% 80% 80% 80% 80% 80% 80% 80% 80% 70% 70% 70% 70% 70% 70% 67.5%67.5% 67.5%67.5% 80% 80% 80% 80% 80% 80% 70% 80% 70% 80% 70% 80% 70% 67.5%67.5% 67.5%67.5% 80% 80% 80% 60% 60% 60% 70% 60% 70% 61.8% 60% 60% 61.8% 70% 70% utilization is the percentage of fleet cost which 70% The67.5% charts70% below show physical utilization by equipment category. Physical is 70% 70% 70% 70% 70% 67.5% 67.5%67.5% 80% 80% 80% 60% 60% 60% 60% 61.8%61.8%60% 60% 70% 70% 70% 67.5% 67.5% on-rent during a given period. Physical utilization is cost weighted. “On Rent” and “In Fleet” status are determined on a nightly 67.5% 67.5% 70% 70% 70% 60% 60% 60% 61.8%61.8% 70% 70% 70% 60% 60% 60% 50% 50% 50% 50% 50% 50% 80% 80% 80% 70% 64.5% 70% 70% 2014 2014 67.5% 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 60% 60% 60% 62.2% 62.2% 60% 60% 60% 2015 60% 2011 a week, 365 2012days a year. 2013A unit is 2014 2011 2013 A unit is 2014 basis seven days “On 61.8% Rent”61.8% if2015 it 50% is at a60% job site earning2012 rental revenue. “In67.5% Fleet”67.5% if2015 it is60% a 2011 2012 2012 50% 50% 67.5% 50% 50% 50% 70% 70% 70% 64.5% 2014 2014 201562.2% 2011 2012 2012 2013 2013 2014 2014 2015 2015 2011 2012 2012 2013 2013 2014 2014 201562.2% 2011 2012 2012 60%2011 60% 60% 2015 2011 2015 2011 50% 50% 60% 50% 60% 50% 64.5% 50% 50% 60% 60% 60% rental asset owned by the client.2013 Units2013 out for2014 repair and refurbishment are considered “In Fleet.” 61.8% 60% 61.8% 2014 2014 201562.2% 2011 2012 2012 2015 70% 70% 70% 60% 2012 2012 2013 2013 2014 2014 201562.2% 2011 2012 2012 60% 60% 2015 2014 2015 2015 2011 50%2011 50%2011 50% 50% 50%2011 50% 2011 & 2012 2012 & 2013 Jul 2013 / Jun 2012 201 50% 50% 50% 64.5% Jan 2015 / Dec 2014 2014 2015 2011Jul 2012 2013 2014 2015 2011 2011 2012 2013 2014 2015 2011 Source: Rouse Asset Services. Contact Gary at gmcardle@rouseservices.com, (310) 363-7520 2014 2014 2015 2011 2012 2013 2014 2014 2015 2015 2012 2012 2013 2013 2014 2014 201562.2% 2011 2012 2012 60% 60% 60% 62.2% 2015 2011 2012 2013 2015 2012 & 2013 2013 /McArdle Jun 2013 50% 50%2011 50%2011 Jan 2015 / Dec 2014 80% 70% 70% 80% 80% 80% 50% 50% 50%2011 50% 2014 201550% 2011 2012 2013 2014 2015 2012 2013 2014 2015 2011 2012 50% 64.5% 50% 50% 50% 2014 2014 201562.2% 2011 2012 2012 2013 2013 2014 2014 2015 2015 2012 2012 2013 2013 2014 2014 201562.2% 2011 2012 80% 70%2011 80% 60% 60%2011 60%2011 2015 2015 70% 80% 2014 201580%2011 2011 2012 2013 2014 2015 2012 − 2013 2014 2015 50%2011 2012 AWP - TELESCOPIC BOOMS -4.6% BACKHOES2012 − 50%AWP AWP 50%2011 GENERATORS 80% 80% 70% 70% 80% 80% SCISSOR LIFTS − -2.1% − -2.9% # # # SCISSOR LIFTS − -2.1% GENERATORS − -2.9% -4.6% 2014 BACKHOES − -3.1% SKID STEERS -2.5% FORKLIFTS HI-REACH − -3.2% 201570%2011 2012 2013 2014 2015 2012 2013 2014 201570%2011 2012 70% 60% 60%2011 70% 80% 85% 85% 80% 80% 70% 80% 70% 80% 80% 80% 80% 50% 50% 50% 70% 70% 60% 60% 70% 70% 80% 80% 2014 2015 85%2011 2012 2013 2014 2015 2012 2013 2014 80% 2015 85%2011 2012 80%2011 66.5%66.5% 80% 80% 80% 70% 80% 70% 80% 60% 60% 70% 70% 70% 80% 70% 80% 80% 85% 80% 85% 60% 60% 60% 60% 66.5%66.5%50% 50% 80% 80% 80% 70% 75% 75% 70% 70% 60% 60% 70% 70% 70% 70% 70% 80% 80% 80% 85% 85% 66.5%66.5% 60% 60% 50% 50% 60% 60% 80% 80% 80% 73.8% 70% 70% 70% 75% 46.4%46.4% 46.4%46.4% 75% 70% 70% 70% 80% 80% 50% 70% 60% 70% 60% 66.5% 60% 70% 60% 60% 66.5% 50% 60% 50% 50% 40% 40% 50% 70% 73.8% 80% 85% 85% 50% 70% 70% 75% 70% 75% 46.4% 46.4% 80% 80% 70% 201546.4% 70% 2015 2015 70% 2014 2014 2011 2012 2012 2013 2013 2014 2014 2011 2012 2012 2013 2013 64.5% 2014 2014 80% 201546.4% 2011 2012 2012 60%2011 65%2011 65%2011 60% 50% 60% 2015 2015 60% 50% 60% 73.8% 50% 40% 40% 50% 80% 80% 60% 60% 62.2% 60% 64.5% 64.5% 50% 50% 70% 70% 70% 75% 75% 66.5%66.5% 46.4%46.4% 46.4% 46.4% 70% 70% 70% 64.5% 60% 62.2% 2014 2014 201560% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2012 60% 65% 2015 50%2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 65%2011 50% 73.8% 40% 50% 70% 70% 60% 60% 60% 64.5% 64.5% 62.2% 40% 50% 56.0% 56.0% 60% 60% 50% 50% 60% 60% 46.4%46.4% 2014 2014 46.4% 201546.4% 2011 2012 2012 2013 2013 2014 2014 62.2% 201560% 70% 75% 75% 60% 65%2011 2011 2012 2012 2013 2013 64.5% 2014 2014 2015 50% 2011 2012 2012 60% 65% 2015 2015 2011 2015 2011 50% 40% 70% 70% 70% 60% 60% 64.5% 50% 62.2% 50% 50% 40% 50% 64.5% 60% 56.0% 55% 55% 56.0% 50% 73.8% 2014 2015 2011 2012 2013 201462.2% 2015 2011 2011 2012 2013 64.5% 2014 50% 2015 2011 2012 2014 2014 201570% 2011 2012 2012 2013 2013 2014 2014 201570% 2012 2012 2013 2013 2014 2014 201546.4% 2011 2012 2012 60% 60%2011 65% 65%2011 2015 2011 2015 2015 46.4% 46.4% 50% 50% 2011 46.4% 2012 2013 2014 2015 60% 2011 60% 2012 2013 2014 201564.5% 2011 2012 201 80% 75% 75% 64.5% 50% 60% 60% 62.2% 56.0% 55% 55% 80% 75% 75% 56.0% 50% 50% 50% 50% 40% 40%2011 50% 014 2015 201150%2011 2012 2012 2013 2013 2014 2014 2015 60% 2011 2012 2013 2014 2015 2014 2015 2015 2012 2013 2014 201550%2011 2012 60% 62.2% 50% 50% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 201 2014 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 64.5% 80% 75% 75% 60% 65% 65% 50% 55% 56.0% 56.0% 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 55% 80% 75% 75% 50% 50%2015 2015 50% 014 2015 2011 2011 2012 2012 2013 2013 2014 2011 2012 2013 2014 2015 2014 2015 2014 64.5% 64.5% 2011 2012 2013 2014 2015 2011 2012 60% 60% 60% 62.2% 50% 50% 80% 2012 2011 60% 2012 2013 2014 2015 62.2% 2011 60% 2013 2014 2015 75% 55% 50% 201175% 55% 2012 201 75% 80% 75%2011 50% 50% 50% 014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2012 70% 65% 65% 56.0% 56.0% 65% 70% 65% 50% SKID − FORKLIFTS − 2014 -3.2% 80% 80% - HI-REACH 80% 2011 70.5% 2012 2013 2014 2015 2011 50% 2013 2015 2011 2012 STEERS 201 70.5% 70.5% 80% 2012 75% 75% 75% 75% 70.5% 80% SKID STEERS − -2.5% -3.2% EXCAVATORS − -6.5% WHEEL LOADERS − -0.1% 014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 80% 80% 85% 50% EXCAVATORS − -6.5% WHEEL LOADERS − -0.1% 70% 70% 65% 55% 65% 55% 50% 50% 50% 80% 85% 2014 201565% 2012 2013 2014 2015 2011 2012 2013 2014 201565% 2012 80%2011 80% 80%2011 AWP ARTICULATING BOOMS − -6.0% FORKLIFTS WAREHOUSE/INDUSTRIAL − -0.1% 70.5%70.5% 70.5% 70.5% 50% 50% 80% 2012 2013 2014 2015 85%2011 2014 2015 2012 201 65% 75% 80%2011 75% 80%201175% 70% 2012 65% 75% 80% 2012 2013 014 2015 201165% 2012 2013 2014 2015 85%2011 2013 2014 2015 80% 80% 70.5%70.5% 80% 80% 60% 70% 55% 55% 65% 70.5%70.5% 60% 55% 55% 70% 70% 70% 80% 85% 70% 70% 65% 65% 65% 65% 80% 80% 85% 80% 80% 80% 70.5%70.5% 70.5% 70% 70% 75% 60% 55% 55% 70.5% 70% 60% 55% 70% 75% 70% 70% 51.5%51.5% 80% 80% 67.5% 55% 85% 67.5% 80% 85% 70% 73.8% 73.8% 65% 65% 55% 65% 70% 70% 75% 55% 65% 55% 60% 73.8% 50% 70% 80% 80% 80% 50% 70% 75% 60% 70% 70.5%70.5% 70.5%70.5% 70% 70% 51.5%51.5% 45% 45% 45% 55% 45% 67.5% 2014 2014 2011 2012 2012 2013 2013 2014 2014 2012 2012 2013 2013 2014 2014 201567.5% 2011 2012 2012 73.8% 60%2011 60%2011 60%2011 80% 80% 85% 60%2011 55% 55% 2015 2015 2015 70% 201580% 75% 201561.8% 70% 55% 55% 73.8% 73.8% 85% 50% 70% 75% 50% 60% 70% 70% 70% 51.5%51.5% 45% 45% 60% 60% 65% 67.5% 45% 45% 67.5% 73.8% 60% 65% 2014 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2012 60% 60% 60%2011 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 61.8% 70% 70% 75% 73.8% 73.8% 50% 70% 75% 50% 60% 55% 55% 51.5% 45% 45% 60% 55% 55% 51.5% 45% 60% 60% 65% 45% 2014 2014 201567.5% 2011 2012 2012 2013 2013 2014 201561.8% 70% 70% 70% 60% 65% 60% 73.8% 2011 2012 2012 2013 2013 2014 2014 201567.5% 2011 2012 2012 60% 60% 2015 2011 2014 2015 2011 2015 2011 56.0% 50% 50% 50% 73.8% 73.8% 50% 80% 80% 50% 56.0% 80% 80% 45% 45% 70% 70% 75% 60% 201560% 65% 201565% 45% 45% 2014 2015 2011 2012 2013 2014 2015 2011 2011 2012 2013 2014 60% 2015 2011 2012 70% 75% 2014 2014 2011 2012 2012 2013 2013 2014 2012 2012 2013 2013 2014 2014 201567.5% 2011 2012 2012 60% 60% 60% 51.5%51.5% 2015 2011 2014 2015 2011 2015 2011 61.8% 50% 50% 55% 67.5% 56.0% 50% 50% 50% 50% 80% 80% 55% 50% 2012 56.0% 80%2012 2011 60% 2012 2015 2011 20152014 201 60% 60%201145% 65% 73.8% 73.8% 014 2015 201180% 2015 65% 2011 2012 2013 2012 2013 2014 2013 2014 73.8% 2015 2014 2015 2011 2012 2013 2012 2013 2014 2013 2014 2014 2015 201545%2011 2012 50%2011 45% 50% 50% 45% 56.0% 55% 50% 50% 50% 80% 2014 2014 2011 201550% 2011 2012 2012 2013 2013 2014 2014 56.0% 201555% 2011 2012 2013 2014 2015 2011 60% 60% 60%2011 2015 2011 2015 2015 80% 2012 2011 201180% 2012 2012 2012 201 014 2015 201180% 201561.8% 2011 2012 2011 2012 2013 2012 2013 2014 2013 2014 20152014 2015 2014 2015 2011 2012 2013 2012 2013 2014 2013 2014 2015 2014 2015 70% 70% 2011 2012 2013 2014 2015 2011 2012 70% 70% 50% 60% 60% 65% 50% 55% 56.0% 50% 50% 50% 65% 80% 80% 50% 56.0% 55% 80% 2011 60% 2012 2013 2014 2015 2011 2012 2013 2012 2014 2013 20152014 201180% 2012 201 014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2014 2015 2011 2012 2013 2014 2015 2011 2015 2011 2012 70% 70% 70% 70% 50% 50% 55% 80% 70% 80%2012 55% 2011 50% 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 201 50% 50% 50% 56.0% 014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 80% 80% 70% 56.0% 70% 80% 80% 80% 80% UCC 80% 80% filings70% on2011 12 earthmoving units. 2014 201570% 2012 2013 2014 2015 2012 2013 2014 80% 201570% 2012 80%2011 80%2011 60% 60% 60% 60% 50% 50% 55% 50% 55% 70% 70% 70% 70% 59.8% 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 201 80% 80% 59.8% AWP ARTICULATING BOOMS − -6.0% FORKLIFTS WAREHOUSE/IN 014 -6.0%w80% 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 80% 80% 80% FORKLIFTS -0.1% w w .wr w o uw60% s. er o au n 60% ctAWP 70% 80% LIFTS − − -2.1% GENERATORS − -2.9% 60% 60% sa el yatni ca -sl y.WAREHOUSE/INDUSTRIAL iocm s . c-oSCISSOR m 70% 70% 59.8% MAR APR MAY80% JUN59.8% JUL 60% AUG SEP OCT NOV DEC JAN 80%FEB 70% Grand 80% 80% 80% 80% 70% 80% 70% 60% 60% 70% 70% 60% 60% Description 70% Equipment 70% 70% 50% 50% 50% 50% 70% 70% 70% 60% 70% 59.8% 59.8% 80% 1480% 1466.5% 14 14 14 14 14 15 80% 15 60%2011 Total 80% 80% 2011 2011 2012 2012 2013142013 14 2014 2014 2015 2012 2012 60% 201514 2011 70% 70% 50% 60% 50% 60% 80% 70% 80% 70% 70% 50% 50% 70% 60% 70% 67.5% 70% 59.8% 67.5% 59.8% 2011 2012 2013 2014 2015 2011 2012 2012 60% 50% 60%2011 66.5% 2011 Trucks2012 2013 160 2014 2015 80% 80% 80% Dump 121 143 134 118 118 111 123 107 145 97 120 1,497 50% 70% Articulated 70% 50% 70% 80% 80% 50% 70% 70% 50% 70% 60% 70% 60% 60% 60% 60% 67.5% 60% 67.5% 60% 60% 2012 2012 2013 2013 2014 201566.5% 60%2011 60% 61.8% 61.8% 2011 2012 2012 60%2011 50% 60%2011 61.8% 2014 2015 59.8% 59.8% 50% 50% 70% Crawler 70% 70% 70% Dozers 70% 403 50% 50% 46.4% 67.5% 3292013 404 433 495 366 369 466 346 459 4,772 67.5% 60% 60% 60%23946.4% 2012 2012 2013 2014 201566.5% 2011 2012 2012 70% 60% 70% 60%2011 60% 60%2011 61.8% 463 50% 60%2011 61.8% 61.8% 2014 2015 50% 40% 50% 46.4% 46.4% 67.5% 67.5% 50% 70% 70% 70% 60% Crawler 60% 2770% 2014 2015 2011 2012 2013 2014 2015 2011 2014 2015 2011 2012 70% 50% 50% 60% 14 50% 61.8% 61.8% 60% 60% 60% 60% 61.8% Loaders 950% 40 50% 11 10 2012 13 42013 19 17 50% 189 50% 50% 50% 50%2011 40% 50%2011 2011 2012 2012 2013 62013 19 2014 2014 201566.5% 2011 2012 2012 46.4% 2015 46.4% 2011 60% 2015 2011 201561.8% 2011 2015 2012 201 014 2015 2011 2012 2015 60% 2011 2012 2011 2012 2013 2012 2013 2014 2013 201461.8% 2015 2014 2015 2011 2012 2013 2012 2013 2014 2013 2014 2014 2015 2014 2011 2012 60% 60% 60% 61.8% 67.5% 67.5% 50% Excavators 50% 50% 50% 50% 50% 40% 50% 60% 50% 60% 46.4% - Crawler, Hydraulic 938 1,009 839 2012820 933 7072013 984 2015 1,048 10,267 2011 46.4% 2013 2014 2011 2013 2012 2011 2012 201 014 2015 2011 2012 2014 2015 2015 2015 2011 2012 745 2013 2014 2014 2015 587 2014 2015 2011 2012 2012 2013671 2013 986 2014 2011 2014 2015 50%2011 2012 50% 50% 50% 50% 50% 50% 40% 60% 60% 60% 60% 60% 61.8% 61.8% 014 2015 2011 46.4% 2013 2014 2011 2012 2011 2013 2012 2014 2013 201561.8% 2011 2012 2012Hydraulic 2014 2015 2015 2011 2012 34 2013 2014 2015 2014 2015 2011 2012 2013 20 2013 25 2014 2015 2014 2015 2011 2012 2011 2012 201 46.4% 50% 50% Wheeled, 26 32 28 40 20 25 48 31 13 342 50% Excavators 50% 50% 80% 75% 75% 40% 2012 2013 50%2012 014 2015 201150% 2012 2013 2013 2014 2014 2015 2015 2011 2012 2013 2014 2014 2015 2015 2011 2011 2012 2011 201 70% 80% 70% 80% 70% 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 80% 75% 75% 50% 50% Mini Excavators 731 1,137 1,22650% 1,24650% 1,090 976 974 1,072 769 1,213 1,406 50%756 12,596 014 2015 2012 2013 2013 2014 2014 2015 80%2011 2015 80%2011 2012 2013 2014 2014 2015 2015 2011 70%201175% 2012 201 70% 70%2011 80% 2012 2013 75%2012 70% 65% 65% 134 -2.9% 107-6.5% 13480% 12580% 89 - SCISSOR 114 71 100 78 127 -0.1% 100 70% 9470.5% 1,273 70.5% 70% Graders 80% 75% 75% 2.1% GENERATORS − 70% Motor AWP LIFTS − -2.1% GENERATORS − EXCAVATORS − WHEEL LOADERS − 60% 70% 70% 65% 65% 60% 70% 60% 70% 80% 70.5% 70% Scrapers -75% Conventional 3 16 1380% 170% 8 80% 14 5 10 4 12 9 70% 470.5% 75% 99 60% 65% 70% 65% 60% 70% 60% 66.5% 70.5% 55% 60% 70.5% 55% 66.5% 66.5% 70% 60% 70% 792 70% 65% 65% 70% 70% 60% Skid-Steer 70% 60%85970.5% Loaders 884 1,112 1,12780% 1,08880% 736 997 1,180 1,186 1,867 1,406 13,234 50% 60% 66.5% 66.5% 70.5% 60% 55% 55% 50% 60% 50% 66.5% 60% 70% 51.5% 60% 70% 60% 66.5% 70% 65% 65% 50% 60% 66.5% 55% 60% 55% 66.5% 399 50% 50% Tractor 60% Loader Backhoes 413 401 390 401 461 334 372 450 355 471 384 4,831 50% 70.5% 70.5% 46.4% 51.5% 45% 45% 46.4% 2014 2015 55%2011 2012 2013 2014 2015 2012 2013 66.5% 66.5% 2014 50% 2015 55%2011 2012 60% 70% 66.5% 50% 60% 60%2011 60% 70% 60% 50% 60% 40% 50% 50% 40% Wheel Loaders 50% 40%102 51.5% 46.4% 45% 45% < 80 HP 105 108 109 96 103 94 85 129 158 173 222 1,484 46.4% 014 2015 2011 2012 2015 60% 2011 2012 2011 2012 2013 2012 2013 2014 2013 2014 20152014 2015 2014 2015 2011 2012 2013 2012 2013 2014 2013 2014 2015 2014 2015 2015 2011 2012 50% 2011 2011 2011 2012 201 50% 60% 50% 40% 50% 50% 66.5% 40% 50% 40% 60% 55% 55% 51.5% 45% 45% 66.5% 66.5% 46.4% 014 2015 2011 2012 2012 2014 2015 2011 2012 635 2013 2014 2014 2015 495 2014 2015 2011 2012 2013515 2013 682 201446.4% 2015 2011 2014 2011 2012 2011 2014 2015 2011 2013 2012 2011 2015 2012 201 Wheel > 80 HP 2013 662 79060% 559 830 7502013 1,001 2015694 8,212 40% Loaders 50% 599 2012 50% 80% 80% 50% 40% 50% 46.4% 40% 45% 45% 50% 60%201551.5% 50% 46.4% 014 2015 2011 2012 2011 2012 2011 2012 2013 2012 2013 2014 2013 2014 20152014 2015 2014 2015 2011 2012 2013 2012 2013 2014 2013 2014 2014 2015 2015 2011 2012 2011 40% 2015 2011 50% 2011 2012 201 80% 80% 40% 50% 40% Grand2011 Total 3,932 5,157 5,444 4,182 4,408 5,326 6,519 5,8922015 3,667 58,796 50% 2012 014 2015 2012 2013 2013 20145,210 2015 4,570 2011 2013 4,489 2014 46.4% 45% 2011 80% 2012 2014 2015 2011 2013 2012 2014 2013 20152014 2011 2015 45% 2012 201 46.4% 75% 2014 2015 80% 2011 2012 2013 2014 2015 2012 2011 2012 80%2011 80% Supplied 80% 75% 40% 50% 70% 70% by EDA, Charlotte, N.C. 40% 40% 014 2015 2012 2013 2013 2014 2014 2015 50% 2015 75%2011 2012 2012 2013 2013 2014 2014 2015 2015 80%2012 2011 80%201180% 2012 2011 2011 201 80% 80% 75% 70% 70% 80% 75% 80% 75% 80% 80% 80% 70% 65% 70% 22 | www.cedmag.com | Construction Equipment Distribution | June 2015 70% 70% 70% 65% 70.5% 75% 80% 60% WHEEL LOADERS − 60% 70.5% 75% 80% 80% % -0.1% 70% 65% 70% 70% -6.5% WHEEL LOADERS 70% w w w 70% 65% 70.5% 59.8% EXCAVATORS − . r o u 60% seanalytics.com 60% 70.5% 80% 75% 70% 65% 59.8% 80% 80% 75% 70% 65% 70% 70% 70% 60% 55% 60% 70.5% 60% 50% 50% 70.5% 60% 60% 55% 70% 65% 59.8% 70% 70% 65% 2011 2012 2013 2014 2015 2011 2012 70.5% 55% 60% 60% 60% 50% 50% 70.5% 55% 60% 60% 51.5% 51.5% 59.8% 51.5% 70% 65% 2011 2012 2013 2014 2015 2012 22_Data_Trends.indd 22 6/10/152011 10:09 AM 60% 55% 50% 50% 50% 70% 70% 65% 60% 55% 70.5% 60% 60% 60% 51.5% 51.5% 45% 50% 50% 70.5% 014 2015 2011 2011 2012 2012 2013 2013 2014 2011 2012 2013 201451.5% 2015 2014 2015 45%2015 55% 2012 50% 50% 50%2011 2011 60% 2012 2013 2014 2015 2011 59.8% 2012 2013 2014 2015 2011 2012 201
>> DATA TRENDS
ROUSE ANALYTICS Dodge Momentum Index Moves Higher in April
Physical Utilization
PHYSICAL UTILIZATION
The charts below shows 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 7 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” ROUSE ANALYTICS if it is a rental asset owned by the client. Units out for repair and refurbishment are considered “In Fleet.”
Utilization Physical
charts below shows physical utilization by equipment category. Physical utilization is the Physical Utilization Four The Rental y equipment category. Physical utilization is theof percentage of fleet costUnits which is on-rent during a given period. Physical utilization is cost weighted. “On Rent” and “In Fle ization is cost weighted. “On Rent” and “In Fleet” status are determined on a nightly basis 7 days a week, 365 days a year. A unit is “On Rent” if it is at a job site earning ren 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 out for repair and refurbishment are considered “In Fleet.”
The Dirty Dozen -
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>> DATA TRENDS
Source: Equipment Watch, www.equipmentwatch.com
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June 2015 | Construction Equipment Distribution | www.cedmag.com | 23 TM EquipmentWatch INDEX | April 2015 in in Review | Monthly Heavy Equipment Intelligence EquipmentWatch INDEX TM | April 2015 Review | Monthly Heavy Equipment Intelligence
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www.EquipmentWatch.com www.EquipmentWatch.com 6/10/15 10:09 AM
WTP Exchange is honored to be selected as the
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The benefits of our LKE Program solution include: • No up-front implementation fee • Fully-integrated solution • Favorable IRS ruling When structured correctly, an LKE Program will reduce your current tax liability and increase cash flow. Contact us today. Ron Hodgeman, LKE Practice Leader at (513) 721-6333 or ron.hodgeman@wtpexchange.com Visit us at www.wtpexchange.com Preferred Provider
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>> MONEY$$$MAN
GARRY BARTECKI
Follow The Big Three Your customer demands rent-to-rent, but the business risks are high — understand the role of equipment cost on ROI.
L
The ROI is compared to other units of equipment classes to determine if the ROI is satisfactory or not.
ately, a lot of dealers are being forced into providing rent-to-rent services due to customer demand, whether they want to or not and without a plan to make it successful. To make matters worse, none of the management team knows what to do with it either. Nor do they realize the serious risks. If I get called in to help, we normally spend time separating the rental business from the dealer business following the revenue segmentation from AED’s CODB report: Sales, Parts, Service and Rental. Sales include the sale of new and used equipment, as well as all Rent-to-Sell transactions (RTS), including the RTS rental revenues and equipment sale upon conversion. The Rental silo contains the Rent-to-Rent (RTR) transactions – the daily, weekly and monthly equipment rentals. We also recommend that RTR units be separated on the balance sheet and titled as your rental fleet. Depending on the owner’s personal circumstances and financial status there are cases where you may want to stay out of the rental business and focus on what you do best. But if you decide you’re in the game, we spend quite a bit of time talking about the Big Three. 1. Time Utilization 2. Dollar Utilization 3. Equipment Cost Surprised at No. 3? Read on. When all is said and done, we arrive at an edict that states what time and dollar utilization results we need to provide the dealer with adequate cash flow to fund the cost of the equipment as well as any operating expenses related to keep the rental units in rent-ready condition. There is a separate goal for each type of equipment in the rental fleet; all will be measured and reported on. All rent-to-rent metrics are based on the original equipment cost of the rental unit. Rental rates are determined using equipment cost; dollar utilization measures rental
revenue as a percentage of equipment cost; ROI is based on equipment cost, and many other rental metrics are cost weighted to give the results more transparency in terms of equipment cost. Equipment cost means a lot in the rental business. The residual value of the rental unit is where you make your money in the rental business, and thus you have to plan out five to seven years to estimate when to sell rental units to maximize the ROI on the unit and the fleet in general. The bigger the ROI, the more cash flow generated. In the end, it is the sum of all rental revenues plus the residual sale measured against the cost of the rental unit and all direct expenses that provides the “profit” on the rental unit, which is then used to calculate the ROI. And the ROI is compared to other units of equipment classes to determine if the ROI is satisfactory or not. Now you know why No. 3 is so important in your rental business – equipment cost and the related residual values have so much to do with your ROI on your fleet investment. It is not unusual for public rental companies to do studies on which brands of equipment can be had for the lowest front-end cost and deliver the highest back-end cost, and those are the brands they purchase. When you consider that most rental companies only like to carry no more than two brands for specific equipment types, this is a big deal. A properly run rent-to-rent program can improve gross margin dollars and percentage, increase EBITDA, improve cash flow, provide tax benefits and increase the value of the company. You don’t want to hear the other side of that story. Management has to be confident that they understand the rental business well enough before risking the company capital by purchasing rental units along with a significant debt service requirement. n
GARRY BARTECKI (gbartecki@comcast.net), founder of Dealer-Rental Success LLC, is a financial consultant to the equipment industry. He can be reached at 708-347-9109. June 2015 | Construction Equipment Distribution | www.cedmag.com | 25
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>> READY TO ORDER
Doosan Introduces Two New Tier 4-Compliant Wheel Excavators with Improved Fuel Efficiency Doosan expanded its Tier-4 excavator lineup with two new wheel models – the DX140W-5 and DX190W-5. The “dash-5” excavators replace the “dash-3” (Interim Tier-4) models. In addition to a Tier-4 diesel engine, these models feature improved fuel efficiency from a new Smart Power Control (SPC) selectable engine mode and multiple product enhancements. In the 132-net-horsepower DX140W-5 and 168-net-horsepower DX190W-5 wheel excavators Variable Speed Control and Pump Torque Control work together to improve machine efficiency while maintaining productivity and reducing fuel consumption. The engine control unit automatically manages SPC when SPC is engaged. Each of the four power modes will function with SPC engaged or disengaged; however, SPC can be active only in the Digging work mode. Variable Speed Control reduces engine rpm during low workload requirements such as during the swing portion of a dig cycle. This reduces the total energy required to perform a task and improves fuel efficiency by up to 3 to 7 percent. Pump Torque Control efficiently matches hydraulic pump torque and engine response to the task, preventing engine overload and excess fuel consumption, Fecon’s New improving efficiency. Depth Control The Doosan DX140W-5 and DX190W-5 wheel excavators comply with Tier-4 emission standards. Both models are fitted with Doosan DL06 diesel engines and Rotor for Excavators aftertreatment technologies, and do not require a diesel particulate filter (DPF). Other improvements include an ergonomic joystick, relocated rear camera, camera monitor, floor pedal, alternator upgrade and a relocated emergency stop. Doosan excavators come with a standard three-year subscription to Doosan Telematics. For more information visit www.doosonequipment.com
CM Bandit Ratchet Lever Hoist Adds Three and Six Ton Capacities The CM Bandit Ratchet is now available in three and six ton capacities. New 3 and 6 ton models of the CM Bandit feature the Tri-Point Hook Inspection System, which consists of three distinct raised points on the hook that the operator can use to detect any indication of overload or deformation. In addition to these new benefits, the CM Bandit continues to feature: American-made gold chromate chain, zinc plating on major components for extra protection against corrosion, and forged upper and lower hooks that are bolted on and swivel for easy inspection and removal. For more information, visit www.cmworks.com
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The Fecon Depth Control Rotor system (DCR) is now available on all six excavator Bull Hog models. This brings a new level of performance and value to mulching, controlling the depth of bite and efficiently directing material flow so that energy is reserved for production. DCR cuts faster, delivering better fuel economy and more uniform particle size. The DCR system is an evolution that builds on Fecon’s reversible Samurai Knife Tool. Depth control rings of the DCR system work in harmony with the Samurai Knife to enable more cutting with less horsepower. The shape of the Samurai knife edge efficiently slices as it chips, providing greater forgiveness on rock than straight-edged tools or saw teeth. Depth control rings lend further impact protection to the tool body, and reduce shock loading to the mechanical or hydraulic drive line. For more info visit www.fecon.com 6/10/15 10:16 AM
>> READY TO ORDER Metso’s New HP5 Cone Crusher Offers Tailored Performance Metso’s new HP5 cone crusher was designed with safety, simplicity and eco-efficiency in mind. The Nordberg HP5 follows the HP3, HP4 and HP6 as the fourth model in an all-new range of high-performance cone crushers. The design of new Nordberg HP5 includes a 5 percent larger feed size versus the HP400 and higher capacity than the HP500 in tertiary applications. In addition, a higher cavity density improves interparticle crushing action for end products with more consistent gradation and superior shape. An advanced fastening system for the mantle and bowl liner eliminates the need for backing material, and makes liner changes safer and faster. Thicker liners result in more material to wear. The HP5 cone crusher is also easy to disassemble, and all components are accessible from the top or side. The bowl and head are easily and safely removed with no interference. A new motor support allows the belts to be stretched hydraulically, and lifting points have been redesigned to easily and safely lift the HP5. Platform guards help to ensure operator safety and protection. The HP5 features Metso’s innovative IC70C crusher automation system. The IC70C is precisely designed to meet customer expectations and crushing plant requirements for consistent production, safety and easy control of crusher parameters. Feed and discharge conveyors control, wear compensation, auto setting adjustment and computer remote control are just a few of the many benefits the IC70C system offers. For more information visit www.metso.com
XL Introduces Low-Profile Hydraulic Detachable Gooseneck Trailer XL Specialized Trailers introduced the XL 120 Low-Profile Hydraulic Detachable Gooseneck (HDG). This model is rated at 110,000 pounds in 10 feet and 120,000 pounds in 16 feet in the center of the deck. Engineered for heavier construction equipment, the newly designed trailer features a low-profile neck construction that contractors need to load their equipment over the neck. The 13-foot long gooseneck has a 36-inch long flip neck attachment for use with a four-axle truck. This set-up offers a 146-inch swing clearance, allowing weight to be distributed to the steer axle of the truck. The five-position variable ride height allows users to adjust the neck height to fit their various loads. The XL 120 Low-Profile HDG comes in the standard 53-foot overall length, or a 55-foot version. With 54-1Ž2 inch axle spacing, the 53-foot long trailer has a main deck that offers a full 26 feet in the well and 60-inch axle spacing is also available. The last three cross members in the main deck are recessed to make a bucket well for an excavator while the open boom trough in the rear bridge provides a place for the arm to ride safely. The 32 degree rear bridge transition features traction aids for loading. The rear deck is preppewwwd for a 2-axle booster, resulting in an extremely flexible trailer, allowing for more varied loads that are able to go through more areas. The 3-axle trailer can be set up as a straight 4-axle using a pin-on or as a 3 + 2 using a spreader bar with two axles at the end. For more information visit www.xlspecializedtrailer.com
Atlas Copco Small Range EC Hydraulic Breakers Deliver Exceptional Power in Small Spaces Atlas Copco has expanded its Essential Case-Mounted (EC) range of hydraulic breaker attachments by adding five Small Range breakers to the lineup that are small enough to fit in limited-access work environments, such as pipe trenches. The new breakers fit 1- to 12-ton carriers and according to the company, give rental centers and contractors a fast ROI by simplifying maintenance and operation. The new, Small Range breaker attachments - the EC 40 T, EC 50 T, EC 60 T, EC 70 T and EC 80 T – are designed for day-to-day breaking tasks for small-scale construction and demolition applications. The EC breaker attachments feature Atlas Copco’s box-style mounting systems, which eliminate the need for removing external fasteners to access components, such as wear bushings and seals, for maintenance. The results are expedited turnaround times for maintenance, which boosts utilization rates. For more information visit www. atlascopco.com June 2015 | Construction Equipment Distribution | www.cedmag.com
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6/10/15 10:16 AM
>> WORKFORCE SOLUTIONS
KIM PHELAN
Living Proof – AED Accreditation Works! So Don’t Let This Workforce Engine Sputter and Die
N
o one thought the president of the college would show up at the very moment she did. They had done it; the dozen or so diesel students at Central Arizona College (CAC) had dismantled an engine and put the whole thing back together – and now, huddled around their masterpiece, this was their moment of truth. Would it start? Then in walks President Doris Helmich, on one of her spontaneous tours around the campus. “Well, you better show the president that all the work you did is worth it and that it’s going to start,” said their instructor. Helmich tells the rest of the story: “Not only did they start it, they revved it up till my ears hurt, but it was really
cool to see their faces, because they were so proud of themselves, to be able to take something that wasn’t working to a state where it was not only working, it was purring. My husband [a diesel mechanic] taught me how to listen to an engine and I can pretty much tell if it’s running well or not – and they did a great job.” CAC’s diesel program achieved AED accreditation in 2012 – after several years of false starts due to needed equipment and changing standards – and both Helmich and program director Garrett Hurt are very proud of what they’ve got going there in Coolidge, Ariz. They’re also clearly grateful for the enormous support and benefit they receive from The AED Foundation and their local equipment dealerships. Four days before the school’s May 15 Commencement – where 12 diesel students were going to graduate – the two leaders sat together around a conference table in Helmich’s office to share with CED what national accreditation means to them – and their story parlays perfectly into a symbol of Doris Helmich became president of CAC in 2012. “I what AEDF is accomplishremember the announcement and I was really impressed ing around the U.S. that one of our career and technical programs had By connecting reached national accreditation status,” she said. dealers and manufacturers
with their local technical schools, the curriculum bar is being lifted to the high AED industry standards written and regularly updated by The Foundation’s Technical Training Committee (TTC), which is comprised of experts from dealerships, OEMs, and educators. In fact, Hurt himself was asked to join the committee last year, and he has enjoyed both listening and contributing to the discussions and debates about the most important things to teach today’s up-andcoming technicians.
This would be a terrible time for a setback Keep a Good Thing Going – Act Now
And the whole thing works, beautifully! Because of these microcosms of industry-education partnership – currently 39 programs at 29 accredited schools – hundreds of students around the country are graduating with the skills and knowledge needed on the shop floors of AED member service departments. And a fresh generation of highly trained technicians is just what this industry needs most as Baby Boomers retire, taking all their experience with them. But instead of ramping up for accelerated growth of the AED accreditation model, The Foundation
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6/9/15 4:56 PM
Central Arizona College proudly thrives with its accreditation status and strong local industry support, as well as plenty of internal encouragement from the top down.
is scrambling just to make sure the current programs can remain intact. A shortfall of more than $50,000 for the 2015 annual fundraising campaign is threatening to halt the spread of accredited schools like CAC. AED member action is urgently needed to keep The Foundation’s powerful workforce development in full acceleration mode – and that action is the immediate, generous financial support from every AED member company, whether distributors, manufacturers or industry service providers. Making AED accreditation work is definitely a team sport.
“Please contact us right away and pledge your tax-deductible investment in the work we’re doing,” said Steve Johnson, vice president of Foundation Operations. “We’ve come so far and made so much progress with our local emphasis on empowering Instructor Donald Flewelling (right) and Scott industry and schools within the Robertson, who was honored as CAC’s outstanding community and actually reversstudent in the Diesel Technology program ing the technician shortage. This would be a terrible time for contribute back to institutions and a setback, or worse, a pullback programs, because it’s your contribufrom the programs with which we tions that make a big difference to the have already established accreditation sustainability of a program,” was her relationships.” message for AED members. “Even Call Rebecca Lintow giving of your time. Maybe you have or e-mail rlintow@ an employee who would make a good aednet.org to pledge instructor – reach out and let’s have your support for The a conversation about how they might Foundation and help contribute. Maybe they can just come them reach their 2015 in and do a workshop for [the school], goal of $300,000. on emissions [Tier 4], for example. What Schools Empire Cat in Mesa, Ariz., has been Long For right beside Hurt and his team, and While monetary had just dropped off 11 engines for support is vital to green the program when CED was visiting lighting more accredin May. “They invite us to go to any ited schools nationally, Empire training we want to go to as Helmich at CAC urged instructors, and this summer they a concurrent commitopened it up to some students, too,” ment from industry to added Hurt. CAC students Eliseo Herrera (left) and Trevor Aranda participate deeply at the Another prime example of in-thereceived the Mike Rowe tool scholarships – in affiliation local level with diesel/ trenches distributor support is Vermeer with The AED Foundation – for achieving highest GPAs at technical programs. Southwest in the Chandler-Gilbert this AED accredited technical postsecondary program, led “Keep thinking area. Dealer Principal Bo Adams has (continued next on page) by Garrett Hurt (center). about ways you can June 2015 | Construction Equipment Distribution | www.cedmag.com | 29
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>> WORKFORCE SOLUTIONS
(“Living Proof – AED Accreditation Works!” continued from page 29)
people are making minimum wage,” she said. “And so that’s a very important thing to me personally because unless we can prove to our taxpayers that students are getting good jobs, and are going to help with the burden of the tax to the college, then they’re not interested in supporting it. “It’s just a complete circle,” she continued. “And the higher you can raise your standards in the national accreditation means that there’s more benefit for the student. The student can go anywhere. I hope they stay here in Pinal County, but they could go anywhere in the country and use their skills.” As the wife of a John Deere light-equipment mechanic and the daughter of a former plumber, Helmich has a special
sponsored the program since Garrett Hurt was a student at CAC in 1993. “Bo has donated equipment over the years and provided scholarships; and he’s hired from our program. “Vermeer Southwest has been on our team since Day 1 basically,” said Hurt. Hurt also has an Advisory Board in place that meets every spring and also less formally in the fall. Helmich says the benefits of having these business partners is that the school is regularly plugged in to what skills the local industry is seeking. “We need to know what they’re looking for in future employees and make sure that our curriculum is lined up with what they need,” she said. In fact, from her executive perspective, being an AED accredited school all boils down to jobs, good jobs. CAC is a tax-supported community college, so Helmich answers to a publicly elected board – and even as Commencement neared, she was preparing detailed rationales for increased funding requests. “My goal is that I’m trying to create an educated “Ever since we became accredited out workforce in Pinal enrollment is starting to increase,” said County, and these Garrett Hurt, who’s proudly standing are high paying jobs, not jobs where beneath CAC’s AED accreditation signage. 30 | www.cedmag.com | Construction Equipment Distribution | June 2015
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>> WORKFORCE SOLUTIONS
appreciation for the skilled trades, one that makes her responsive to the budget needs of capital-intensive programs like the diesel technology department. Together with internal cooperation and support from the top, and bolstered by the moniker of national accreditation by AED, CAC’s program is attracting record numbers of students – 28 freshmen are already signed up for next fall, says Hurt. “I’ve never had so many signed up this early in the spring semester. He also wrote a new curriculum for a high school diesel program that students petitioned to start. Four of the first six kids have enrolled at CAC for fall 2015 – and a few juniors at the high school have signed up for CAC diesel summer classes. Word of the program’s growing popularity and the caliber of its graduates is spreading like wildfire, Hurt says, drawing more young adults into
Adan Salcido (left) and Steve Brady (right), both employees at Empire Machinery, received the Outstanding Advisory Board member award for the Diesel Technology Program. “They are the ones who make it possible to receive new machines that we can operate and use as training aids,” said Garrett Hurt. “They also donated a couple of equipment simulators and several engines.”
the school and also capturing the attention of local employers. Thanks to The Foundation’s pioneering work that links diesel program faculty with the construction equipment industry, your dealership could be one of the next to reap a new crop of
sharp, well trained students like those emerging from CAC. So, get out that checkbook and write a generous one to The Foundation, and then roll up your sleeves over at the local technical school and get busy steering them toward AED accreditation. n
June 2015 | Construction Equipment Distribution | www.cedmag.com | 31
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>> SELLING TO THE MILITARY
JOANNE COSTIN
Built for a Fight Dealers and manufacturers hunt down opportunities despite budget cuts and downsizing
T
hreats from terrorist groups and hostile nations aren’t the only challenges facing the Department of Defense (DOD) these days. Beginning with FY 2013 budget, the DOD began implementing a $487 billion, 10-year cut in spending consistent with caps instituted by the Budget Control Act of 2011. Defense officials requested $534 billion in 2016, an increase from $495 billion in 2015, but a long way from the peak expenditures of $687 billion in 2011. For construction equipment manufacturers and dealers serving the U.S. Army, Navy, Marines and Coast Guard, the downsizing is likely to mean fewer sales of construction equipment, maintenance services, parts and specialized vehicles, with considerably more competition among suppliers. Here’s how several suppliers are trying to find opportunity in a tough market.
JCB Looks to Build on HMEE Success
JCB first made inroads into the military market with a U.S. Army contract awarded in 2005 that resulted in the sale of more than 800 JCB HMEE-I vehicles (High Mobility Engineer Excavator Type I), including over 60 vehicles sold to the military forces of seven allied nations. A new contract was released recently to produce additional HMEEs for the U.S. Army through 2018, with approximately 90 vehicles currently on order for production into 2016. Custom built for the U.S. Army, the HMEE-I can self-deploy and support fast moving forces on long-range operations without the need for a trailer and prime mover. It can travel at speeds of up to 56 miles-perhour, lift 2.25 tons, dig to a depth of 13 feet and can be transported in the military’s C-130 Hercules aircraft. According to Chris Giorgianni, vice president of Product Support & Government & Defense for JCB, one of the more unique requirements of the machine was the ability to be delivered by a low velocity airdrop. This The JCB HMEE-I can travel at speeds of up to 56 miles-perallows the vehicle to be hour, lift more than 2 tons, and dig to a depth of 13 feet. inserted by parachute More than half of support staff for this machine is comprised into combat zones or of veterans, including Chris Giorgianni, vice president of other hazardous areas. Product Support & Government & Defense for JCB. The vehicle can also be
fitted with an armored cab, to provide protection against small arms fire and other hazards.
They rank you poor, fair, good or excellent in product support, logistics, technical, price and sometimes other factors Giorgianni believes the military market represents a growth opportunity for JCB both within the U.S. and with other NATO aligned governments. “There isn’t a single product offered within the JCB portfolio that the defense, military, and federal sectors may not need,” said Giorgianni. He believes the unique needs and applications of military projects are a good match for an innovative company like JCB. For the HMEE-I project, JCB had an Interim Contractor Logistics Support (ICLS) contract that included maintenance and service to the vehicles in the field worldwide, including in a theater. During the contract, JCB field service representatives (FSRs) also provided training to military service personnel with the goal that support of the HMEE-I fleet would become ‘organic’ - meaning that military personnel would be able to provide in-house support for their HMEE-I vehicles. That contract has been completed successfully,
32 | www.cedmag.com | Construction Equipment Distribution | June 2015
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A John Deere 850JR crawler dozer for the military market might be specified with special paint, an armored cab and other options to protect against an extreme environment.
Figure 1-2. Department of Defense Topline Since September 11 Attacks
($ in billions)
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006
FY 2007 FY 2008
Base
287.4
328.2
364.9
376.5
400.1
410.6
431.5
479.0
OCO
22.9
16.9
72.5
90.8
75.6
115.8
166.3
186.9
Other
5.8
--
--
0.3
3.2
8.2
3.1
--
Total
316.2
345.1
437.5
467.6
478.9
534.5
600.9
665.9
however JCB continues to supply parts, warranty service and technical support to the U.S. military for the HMEE-I. Large Fleet Buys Require Patience
John Deere has served the military market since 1945. “The military is a very important market to us,” said Sandra Bridge-Case, manager, government sales, John Deere Construction & Forestry. Construction equipment can be purchased through an existing contract with the Defense Logistics Agency or as part of a large bulk purchase. The role of winning large fleet equipment orders from the
military falls upon its governmental sales team. Large military fleet purchases are completed infrequently, perhaps every 10-15 years based on the lifecycle of the machine. The contract itself might cover 10-years. “Once the Army decides it wants to do a buy it takes a year or two years for them to get their proposal together,” said Bridge-Case. The request for proposal might be 200 pages long and vendors typically have about three months to put a proposal together, responding to buying criteria such as product support, technical specifications, logistics support and price. Selections will be made a few months after that.
“The Army and Marines use the Automated Best Value System as the selection criteria, not necessarily low bid,” said Bridge-Case. “They rank you poor, fair, good or excellent in product support, logistics, technical, price and sometimes other factors and put those in matrix according to what is most important.” Off-the-shelf construction machines used by the military are likely to be specified with an armored cab, special paint for extreme environments, or a weapons mount for the cab. Once a contract is awarded, a prototype has to be built and military manuals need to be developed. Machines also go (continued next on page)
June 2015 | Construction Equipment Distribution | www.cedmag.com | 33
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>> SELLING TO THE MILITARY
(“Built for a Fight” continued from page 33)
through specialized testing at a proving ground, which can take several months. “From contract award to first machine in the field can be two years,” said Bridge-Case. “Just like any customer, they expect the dealer to do warranty work with certified technicians for a five-year period of extended warranty,” said Keith Menke, program manager, military accounts, John Deere Construction & Forestry. Other maintenance work is typically done in-house. “Military customers place the same value on reliability, quality and cost as other customers. They want to know that John Deere will be there after the sale,” added Menke. Dealer Dilemmas with the Military Market
While manufacturers typically take a lead role with military customers, dealers can also be actively involved in serving military customers as well. West Side Tractor, the John Deere dealer based in Naperville, Ill., has supplied John Deere parts around the world for 20 years. According to Vice President Diane Benck, that business has changed dramatically over the past three-four years. “It has gotten incredibly competitive,” she said. “Today the military is much more focused on cost versus speed of delivery.” During the war, West Side Tractor was getting parts to Afghanistan and Iraq in 48 hours, which was what they needed. But with the shift in focus to cost rather than service, Benck says the business today is not as lucrative.
“There are all kinds of companies who supply just the military and do it at very low margins,” she added. Doug Wiles, general manager for Sonsray Machinery, worked on a reman of 20 Case military backhoe loaders in 2014. The low-hour machines were returning from Iraq in need of repair related to damage from abusive use and exposure to the elements. The contract was awarded to Sonsray by Case corporate. The military market isn’t one they typically pursue, although the reman work did lead to a few The armored deployment platform on the Rook provides room for up to four fully dressed officers and is other opportunities. equipped with four locking gun ports, four bulletproof “It is very difficult to do glass sight ports and three infrared video cameras. business with the federal government,” explained a CAT Model 287D, the vehicle comes Wiles. “We have made a equipped with an armored deployment few attempts to win other military platform, a hydraulic breaching ram, a contracts but there are so many other vehicle extraction tool, a grapple claw requirements. It’s very difficult to become a direct vendor. Instead we rely and a trailer for $275,000. “There is no other vehicle that does on the manufacturer’s expertise.” this,” said Shaun Mitchell, assistant Ring Power’s Rook Could be a vice president for the Tactical SoluSolution for the Military tions division of Ring Power CAT. One dealer that isn’t shying away from The versatile unit allows officers to opportunities with the military is Ring approach a structure without covering Power Corp., the Caterpillar dealer for open exposed ground on foot. It can North and Central Florida. Its Tactical lift officers more safely into second Solutions division manufactures and story entries. It can be used in hostage markets the Rook, an armored critical rescues, to deal with barricaded incident vehicle custom designed with suspects, in riot situations, or to remove mission specific attachments. debris when natural disasters strike. The dealer custom built its first Its low ground pressure (5 psi), small Rook for a SWAT team member seven footprint and rubber tracks allow it to years ago, and the company purchased be used in tight areas without damaging (continued on page 54) the business three years ago. Built on
Figure 1-2. Department of Defense Topline Since September 11 Attacks
($ in billions)
FY 2009 FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
Base
513.2
527.9
528.2
530.4
495.5
496.3
496.1
534.3
OCO
145.7
162.4
158.8
115.1
82.0
84.9
64.2
50.9
Other*
7.4
0.7
--
--
0.1
0.2
0.1
--
Total
666.3
691.0
687.0
645.5
577.6
581.4
560.4
585.3
*The Department of Defense budget peaked in 2010, but was decreased in 2011, 2012, 2013 and 2015. 34 | www.cedmag.com | Construction Equipment Distribution | June 2015
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>> SELLING TO THE MILITARY
GOVPLANET HELPS MILITARY GET MORE FROM SURPLUS MACHINES Now open to other government agencies
With military agencies downsizing, Holmes believes a key factor in their Planet returns 75.29 percent of rolling the Department of Defense (DOD) selection was being able to provide the stock gross proceeds back to the DLA, sought new ways to sell their surplus DOD with greater efficiency and faster in addition to paying a percentage of the equipment that would maximize their return on investment. Having a separate original acquisition cost of rolling stock return on investment. In July of 2014, website site enables GovPlanet.com to items upon receipt. IronPlanet was awarded a contract to demonstrate its effectiveness to govern The same IronClad Assurance manage the sale of all of the DOD’s sur- ment agencies, in addition to tracking program offered on IronPlanet.com plus rolling stock property. GovPlanet the site’s unique buyers. extends to buyers who purchase on was launched in November 2014 as a “As we’ve seen with the DOD, by GovPlanet as well. Every item for dedicated online auction site for surplus increasing the buyer base you increase sale is physically inspected before government-owned assets such as trucks the potential for multiple bids, which the sale. The condition of the equip(40%), trailers (30%), Humment outlined in the report is vees (20%) and construcguaranteed to be accurate and tion equipment (10%). includes ratings and com Jeff Holmes, newly apments for key systems and pointed vice president of components, functional test Government Solutions, results and photos. Equipment is leading business deis physically located in more velopment efforts on the than 200 locations in the GovPlanet marketplace. A U.S. and Canada. Next year retired Lieutenant Colonel, a European version of the site Holmes has focused his will launch. corporate career on drivAn estimated 15,000-18,000 ing efficiency and growth pieces of Defense Department through business and rolling stock are expected to be government partnerships. sold annually on the site, but a According to Holmes, new initiative to offer GovPlanthe Defense Reutilization et to other government agenand Marketing Services cies will add to that number. of the Defense Logistics Municipalities, county, state “Today the military is much more focused on cost versus speed of Agency handles all the dis- delivery.” – Diann Benck, vice president, West Side Tractor and federal agencies are all posal of surplus property. potential targets. There is a rigid screening process before increases the price and return on Construction equipment dealers can items are put up for sale. Proceeds cover investment,” said Holmes. use GovPlanet to purchase late model the DLA’s costs and the remaining The results have been impressive. government-owned equipment for funds are given back to the services for According to an article published in resale. The company believes GovPlanet them to use at their discretion. the DLA’s Loglines magazine, the conalso offers an opportunity for govern Moving from the physical auctions tract returned more than $3.2 million ment agencies to sell their equipment process to a robust online model greatly to the agency in the first two months faster and get more for their trade-in expands the number of buyers who are of online public auction – 450 percent equipment. able to view and bid on the equipment. more revenue than it would have re “There are trailers, equipment and Auctions are simulcast on IronPlanet ceived under the previous commercial component parts being sold on the site, and TruckPlanet where they are exventure contract. many of which have gone through a posed to a potential 1.3 million regis “DLA is very pleased,” said Holmes. refurbishment process,” said Holmes. tered buyers. GovPlanet’s direct audi“They are basically doing twice the vol“Dealers should take a good look at ence includes 60,000 registered buyers ume in half the time, with a 300 percent what is out there because it is new, even in construction and forestry as well as increase in revenue.” though it may have been manufactured hobbyists and military enthusiasts. Under the terms of the contract Iron10 years ago.” June 2015 | Construction Equipment Distribution | www.cedmag.com | 35
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DO YOU OR YOUR COMPANY OWN/MANAGE HEAVY EQUIPMENT?
OWNING
TOTAL COST OF OWNERSHIP
Overview: >> COVER STORY vast majority of survey respondents own or manage heavy INDUSTRY RESEARCHThe equipment (86%). Fleet sizes vary significantly by respondent category.
86% YES
Rental companies report owning/managing the largest fleets (with an average of 970 total pieces of equipment) followed by sellers (average
Tier 4 and the True Cost of Ownership 755). Contractors and DOTs report relatively smaller fleets, with an
average 464 and 444 pieces of equipment owned/managed respectively.
HOW MANY TOTAL PIECES OF EQUIPMENT DOES YOUR COMPANY OWN/MANAGE?
14 % NO
Currently, market penetration of Tier 4 equipment is relatively low.
‘The 2015 Tier 4 Benchmark 970 Report’ Uncovers Industry Facts, Moods and755Expectations
In fact, one in four contractors (24%) report
RENTAL
having no Tier 4 equipment at all. Just over a
SELLER
third report Tier 4 equipment comprises less
than 20% of their fleets. For the contractors 464 Management Professionals Equipment Watch and the Association of Equipment (AEMP) who do currently have Tier 4 equipment, 73% 444 present the heavy equipment industry’s mostDOTcomprehensive report – isthe editor Tier 4 I, followedextends by 19% Tier 4 F, and 8% (AVERAGE NUMBER PIECES) Tier 3 flex. in CED. thanks to both organizations for permission to reprint theirOF valuable findings CONTRACTOR
1 in 4
Preface
On May 11, 2004, the Environmental Protection Agency signed the final rule introducing Tier 4 emission standards, to be phased-in over the period of 20082015. While much has been published regarding the required reduction in emissions and improved fuel efficiency, there has been relatively little coverage The heavy equipment industry’s most comprehensive report on the overall adoption, acquisition and managing the largest fleets (with an practical ownership of Tier 4 technology. average of 970 total pieces of equipTo understand the expectations and CONTENTS followed by Protection sellers (average reality regarding the regulation’s impact On May 11, 2004,ment) the Environmental Agency 755). Contractors and DOTs on the industry, EquipmentWatch and signed the final rule introducing Tier 4 emission report ➤ OWNING TIER 4 to survey the heavy relatively smaller fleets, with an averAEMP partnered standards, to be phased-in over the period of 2008-2015. age 464 and 444 pieces of equipment equipment and present the ➤ FINANCINGcommunity TIER 4 While much has been published regarding the required owned/managed respectively. current state of Tier 4. ➤ INSURING TIER 4 reduction in emissions and improved fuel efficiency, there Currently, market penetration of ➤ RENTING TIER 4 has been relatively little coverage on the overall adoption, Owning Tier 4 Tier 4 equipment is relatively low. ➤ OVERALL THOUGHTS acquisition and practical Tier 4 technology. Overview: In fact, ownership one in fourofcontractors (24 AND PERCEPTIONS The vast majority of survey To responpercent) reportand having Tier 4 understand the expectations realityno regarding dents own or manage heavythe equipequipment all. JustEquipmentWatch over a third regulation’s impact on theatindustry, ment (86 percent). Fleet sizes vary report Tier 4 equipment comprises and AEMP partnered to survey the heavy equipment significantly by respondent community category. and present less than 20 percent of their fleets. For the current state of Tier 4. Rental companies report owning/ the contractors who do currently have
2015 TIER 4 BENCHMARK REPORT | 03
CONTRACTORS
THE 2015 TIER4 BENCHMARK REPORT
Not only are the purchase prices of Tier 4 equipment higher, but most owners have experienced higher than expected TCO of their Tier 4 equipment. Incidence of Tier 4 equipment within company fleets remains quite low, and is poised to remain so through mid-2016.
HAVE NO TIER 4 EQUIPMENT While just over a third... 35% report Tier 4 comprises less than 20% of their fleet.
OWNING
Half of all contractors surveyed plan to invest in Tier 4 compliant equipment w
Those planning to do so are most likely to invest in Tier 4 Interim (61%) and/or T
Tier 4 equipment, 73 percent is Tier 4 I, followed by 19INVESTMENTS percent Tier 4 F, and CURRENT What percentage 8 percent Tier 3 flex. of your total equipment is Tier 4? Half of all 24 contractors surveyed NONE plan to9 invest in Tier1%4– 19% compliant 10 equipment within the 20%next – 39% 18 months. 35 What are your Tier 4 Those22planning to do40%so– 59% are most 60% OR MORE likely to invest in Tier 4 Interim (61 percent) and/or Tier 4 Flex equipment PLAN (55 percent). If so, wh %
INVES ASSES
%
%
%
%
equipme
PLANNED INVESTMENTS Do you plan to invest in any Tier 4 equipment in the next 18 months?
Life Expectancy: Respondents expect their Tier 4 equipment to yield 23 percent more % hours on average50 than YES their Tier 3 % NO 50 equipment.
61
TIER INTER
AT A GLANCE
•
The finance world is seeing very little Tier 4 equipment, but has seen an increase in finance or leasing costs.
•
ON AVERAGE, HOW LONG DO YOU EXPECT YOUR EQUIPMENT TO LAST IN TOTAL?
Life Expectancy:
The insurance world is also seeing very little Tier 4 equipment, but
Respondents expe
an increased insurance cost.
yield 23% more ho
•
The majority of rental companies are renting Tier 4, but it will
•
Equipment owners/managers can expect to see increases in
TIER4
11,513 HR
Tier 3 equipment.
TIER3
9,333
However, whether
come at an increased cost for customers. purchase prices, maintenance costs, and training costs, but can
(IN HOURS)
relatively new equ remains to be see
expect fuel cost savings.
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2015 TIER 4 BENCHMARK REPORT | 04
➤ OWNI
OWNING
WHAT DOES YOUR COMPANY USE TO TRACK EQUIPMENTRELATED OWNERSHIP COSTS?
Tracking Total Cost of Ownership: The majority of respondent companies currently track their equipment-related
ACCOUNTING SOFTWARE
70%
SPREADSHEET
23%
ownership costs (79%). Those tracking such costs are by far most likely to do so with accounting software (70%), followed at a distance by the use of spreadsheets (23%).
However, whether or not the expectations of this relatively new equipment offering are realistic remains to be seen. 2015 TIER 4 BENCHMARK REPORT | 03
Tracking Total Cost of Ownership: The majority of respondent companies currently track their equipment-related ownership costs (79 percent). Those tracking such costs are by far most likely to do so with accounting software (70 percent), followed at a distance by the use of spreadsheets (23 percent).
79% YES
21 % NO
OWNING
➤ OWNING TIER 4
DOES YOUR COMPANY CURRENTLY TRACK EQUIPMENT-RELATED OWNERSHIP COSTS?
Annual Maintenance Costs: Half of all contractors surveyed plan to invest in Tier 4 compliant equipment within the next 18 months. Most respondents (82 percent) expect maintenance costs Those planning to do so are most likely to invest in Tier 4 Interim (61%) and/or Tier 4 Flex equipment (55%). of Tier 4 equipment to either increase or remain on part with annual mainMost respondents (82%) expect maintenance costs of Tier 4 equipment to either increase or remain CURRENT INVESTMENTS tenance costs of Tier 3 equipment. What percentagepart of your withtotal annual maintenance costs of Tier 3 equipment. Relatively few expect costs to decrease (18 Relatively few expect costs to decrease equipment is Tier 4? (18 percent). 24% Respondents report spending an average $4,885 on annual maintenance costs for the typical piece NONE 9% Respondents report spending an of Tier 3 equipment, and an average $6,683 to maintain the typical piece of Tier 4 equipment. This 1% – 19% 10% average $4,885 on annual maintenance 20% – 39% to a 37% increase in annual maintenance costs. 35% translates costs for the typical piece of Tier 3 40% – 59% What are your Tier 4 investment plans? 22%
INVESTMENT ASSESSMENT
(continued on next page)
Not only are the purchase prices of Tier 4 equipment higher, but most owners have experienced higher than expected total cost of ownership (TCO) of their Tier 4 equipment. Incidence of Tier 4 equipment within company fleets remains quite low, and is poised to remain so through mid-2016.
60% OR MORE
PLANNED INVESTMENTS If so, what type(s) of Tier 4 compliant equipment do you plan to purchase?
PLANNED INVESTMENTS Do you plan to invest in any Tier 4 equipment in the next 18 months?
50%YES 50%NO
61% 55% 17% TIER 4 INTERIM
TIER 4 FLEX
TIER 3 FLEX
June 2015 | Construction Equipment Distribution | www.cedmag.com | 37
ON AVERAGE, HOW LONG DO YOU EXPECT YOUR EQUIPMENT TO LAST IN TOTAL?
Life Expectancy: Respondents expect their Tier 4 equipment to
36_Cover_Story_Tier4_Report_Feature.indd 37
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2015 TIER 4 BENCHMARK REPORT | 05
>> COVER STORY INDUSTRY RESEARCH OWNING (“Tier 4 and the True Cost of Ownership” continued from page 37)
equipment, and an average $6,683 to maintain the typical piece of Tier 4 equipment. This translates to a 37 percent increase in annual maintenance costs.
4%
EXAMINING EXPENDITURES
Equipment Overhaul: Given its recent entry into the market place, Tier 4 equipment has not yet had the chance to age to a point requiring overhaul. However, most respondents expect Tier 4 equipment overhaul to be more expensive than that of Tier 3 equipment. The typical respondent expects to spend an average 12 percent more to overhaul a piece of Tier 4 equipment. Given the TIER current average ofREPORT $10,233| to 2015 4 BENCHMARK 06overhaul a piece of Tier 3 equipment, respondents can expect to pay approximately $11,461 to overhaul a piece of Tier 4 equipment.
OVERHAUL COSTS >
more efficient, how do you expect hourly fuel costs to compare with those of Tier 3 equipment?
Given its re
market pla 30% MORE+
has not yet
age to a po
However, m 10-19% 20-29% MORE MORE
Tier 4 equi more expe
EXPECT COSTS WILL REMAIN THE SAME
equipment expects to
more to ov COSTS WILL INCREASE COSTS WILL STAY THE SAME
Mechanic Wages: The introduction of Tier 4 equipment also has the potential to impact mechanic wages, especially as Tier 4 market penetration increases. Most respondents
GAUGING EXPECTATIONS Tier 4 machines are said to be
Equipmen
1-9% MORE
43%
On average, how much more do you expect to pay for Tier 4 relative to Tier 3 equipment?...
21% 21% 11%
COSTS WILL DECREASE
equipment
MAINTENANCE < COSTS
41% 41% 18%
average of
How do you expect costs of Tier 4 equipment to compare to that of Tier 3 ➤ OWNING TIER 4 equipment?
piece of Tie
responden
approxima
a piece of T
HOW DO YOU EXPECT TO CHANGE FOR MECH The introduction of Tier 4 equipment Despite also hasthe the fact that Tier 4 ON TIER 4 EQU Fuel:
Mechanic Wages:
machines are designed to be potential to impact mechanic wages, especially more efficient, the majority of as Tier 4 market penetration increases. Most
61 22 17
73
%(73%) do % not expect % thisrespondents respondents to be the case expect hourly fuel % EXPECT EXPECT EXPECT and stated would beFUEL no change costs in the to wages remain the same as STAY THE FUELthereFUEL COSTS COSTSworking COSTS of those mechanics on Tier 4those equipment, of Tier 3. Only 22% expect SAME TO STAY TO BE TO BE THE SAME LOWER$48/hour. HIGHER The 27% who currently an average hourly fuel costs to decrease. expect wage increases believe mechanics working $ on Tier 4 equipment will earn an extra 15%, for an 30 $
$55/hour. In reality, those responding expectations of average lower costs were correct.
compared to just $27/HOUR FOR TIER 4 EQUIPMENT.
4 ER
10
$
TIER 3
$
40 50
$
TI
The average hourly fuel cost for TIER 3 EQUIPMENT IS $39/HOUR,
20
INC
E
F
ACTUAL AVERAGE HOURLY FUEL COSTS 38 | www.cedmag.com | Construction Equipment Distribution | June 2015
While Tier 4 equipment has the ability to heavily impact the finance world, it currently accounts for a relatively small portion of heavy equipment inventory; just 35% of the heavy equipment financed or leased6/10/15
36_Cover_Story_Tier4_Report_Feature.indd 38
12:02 PM
>> COVER STORY INDUSTRY RESEARCH (73 TIER percent) do not expect 2015 4 BENCHMARK REPORTthis | 08to
be Insuring Tier 4 WHAT THE RENTERS SAY: Increased acquisition of Tier 4 equipthe case and stated there would be no ment has impacted the insurance world change in the wages of those mechanThe majority of contractor responas well. On average, approximately 17 ics working on Tier 4 equipment, dents reported their companies percent of the policies written in the currently an average $48/hour. The rent Tier 4 equipment (58 percent). past 12 months have been for Tier 4 27 percent who expect wage increases ➤ ACQUIRING TIER 4 Contractors can expect Tier 4 equipment. Predictably, the higher costs believe mechanics working on Tier equipment rental costs to be either of Tier 4 equipment are associated with 4 equipment will earn an extra 15 on par or slightly more expensive increased insurance rates. Businesses percent, for anTHOUGHTS average $55/hour. OVERALL + PERCEPTIONS than Tier 3 equipment rental. Concan expect to pay an average 9 percent tractor respondents experiencing more to insure their Tier 4 equipment Fuel: Summary: increased TierOF 4 rental costs reportHOW HAS THE TOTAL COST relative to Tier 3 equipment. Despite the fact that Tier 4 machines ed an average 11 percent increase are designed to be more efficient, the OWNERSHIP FOR TIER 4 EQUIPMENT Results indicate an initial disappointment in over Tier 3 equipment, very similar Renting Tier COMPARED 4 majority of respondents expect hourly TO YOUR EXPECTATIONS? to the 13 percent increase reported What Rental Companies Say: fuelthe costs to remain the same as those with performance of Tier 4 equipment, by rental company respondents. The rental market is poised to benefit of Tier 3. Only 22 percent expect morefuel than halfto(52%) reporting TCO is more from the higher costs associated with hourly costs decrease. MUCH LESS EXPENSIVE % Those Overall Thoughts & Perceptions Tier 4 equipment purchases. expensive than they had expected. Several Financing Tier 4 Summary: either reluctant or unable to purchase factors are likely contributing to higher While Tier 4 equipment has the ability Results an initial disapmay turn to rental companies for their SOMEWHAT LESSindicate EXPENSIVE % to heavily impact the finance purchase world, it price,Tier 4 equipment needs. Our recent pointment in the performance of Tier TCO, including increased currently accounts for a relatively small 4 equipment, with more than half survey revealed the vast majority of ON PAR WITH increased maintenance costs and additional portion of heavy equipment inventory; (52 percent) reporting TCO is more rental companies (92 percent) currently % EXPECTATIONS for of employees mechanics. Some justtraining 35 percent the heavyand equipment expensive than they had expected. rent out Tier 4 equipment. financed or leased in the past 12 months Several factors are likely contributing However, only half of those renting SOMEWHAT businesses have experienced increased %their clients MORE EXPENSIVE is Tier 4. This lower incidence of Tier to higher TCO, including increased Tier 4 equipment charge downtimeisassociated with Tier 4 more than they do for Tier 3 equipment 4 equipment likely driven at their least in purchase price, increased mainteMUCH MORE partequipment, by its higher price tag. On average, nance costs and additional training (54 percent). Those charging more which obviously negatively % EXPENSIVE businesses can expect to pay 17 percent for employees and mechanics. Some report an average 13 percent increase in impacts their bottom more when financing Tierlines. 4 equipment businesses have experienced increased rental costs for Tier 4 equipment. compared to Tier 3. downtime associated with their Tier 4 equipment, which obviously negatively impacts their bottom lines. % The impact of the Tier 4 equipment’s increased original costs on RENT MORE The impact of the equipment Tier 4 2015 TIER 4 BENCHMARK REPORT | 08 EQUIPMENT 2015 buying decisions varied among equipment’s increased respondents. Half report it has no How will the increased original effect on equipment 2015 buying decisions. One in original ➤ ACQUIRING TIER 4 equipment cost of Tier 4 equipment four (23 percent) will be renting more costs on 2015 buying affect your decisions in 2015? equipment in 2015. n OVERALL THOUGHTS + PERCEPTIONS decisions varied among
4 4 40 33 19
IMPLICATIONS OF IMPLEMENTATION 6%
BUY MORE EQUIPMENT
23
Summary:
HOW HAS Half THE TOTAL respondents. reportCOST OF
Results indicate an initial disappointment in
itCOMPARED has no effect on 2015 TO YOUR EXPECTATIONS?
the performance of Tier 4 equipment, with
BUYING
50% NO EFFECT
more than half (52%) reporting TCO is more
RENTING
expensive than they had expected. Several factors are likely contributing to higher TCO, including increased purchase price, increased maintenance costs and additional RENT LESS EQUIPMENT training for employees and mechanics. Some
BUY LESS EQUIPMENT
9%
3%
businesses have experienced increased downtime associated with their Tier 4 equipment, which obviously negatively
OWNERSHIP FOR TIER 4 EQUIPMENT
buying decisions. One in
4% MUCH LESS EXPENSIVE SOMEWHAT LESS EXPENSIVE % more4equipment in 2015. ON PAR WITH 40% EXPECTATIONS 33% SOMEWHAT MORE EXPENSIVE four (23%) will be renting
19%
MUCH MORE EXPENSIVE
impacts their bottom (9%lines. OF RESPONDENTS SELECTED “OTHER”)
23%
June 2015 | Construction Equipment Distribution | www.cedmag.com | 39
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How will the increased original equipment cost of Tier 4 equipment
RENT MORE EQUIPMENT
The impact of the Tier 4 equipment’s increased original equipment 6/10/15 12:02 PM costs on 2015 buying
>> PERSPECTIVE
LORI TOBIAS
Reflections on Rental and the Tier 4 Revolution Joe Mastunduno at John Deere, industry consultant and analyst Frank Manfredi, and Southeastern Equipment Regional Manager Heath Watton discuss the ups, the downs, and the question marks that today’s emissions technology has placed upon the industry.
T
he topic of Tier 4 regulations tends to inspire a fair amount of criticism: equipment acquisition and maintenance costs are higher, but rental rates aren’t keeping up the increases – and, to add insult to perceived injury, some believe the environmental benefits are minimal. But when three industry leaders took part in a recent webinar hosted by Rental Equipment Register to talk about
the implementation of Tier 4 regulations, the news was not only not all bad, but in fact much of it is pretty good. The key to succeeding under the Tier 4 regulations is understanding the technology that comes with it, says Joe Mastanduno, account manager in rental marketing with the John Deere Construction and Forestry Division. “Don’t be afraid of the technology, learn about it,” he said.
The Growth of the Rental of Construction Equipment
Year
Estimate Number Locations
Estimated Rent Revenue per location
Estimated CE Rentals Industry Rent Revenue
% Change From Previous
2015
14,000
$2,900
$40,600
11%
2014
14,640
$2,500
$36,600
12%
2013
14,100
$2,313
$32,615
16%
2012
13,975
$2,019
$28,224
12%
2011
13,830
$1,822
$25,200
17%
2010
14,208
$1,518
$21,571
-15%
2009
14,648
$1,733
$25,377
-30%
2008
15,750
$2,302
$36,253
-4%
2007
15,865
$2,372
$37,636
8%
2006
15,708
$2,218
$34,848
20%
2005
15,400
$1,886
$29,040
9%
2004
14,000
$1,895
$26,530
11%
2003
14,005
$1,723
$23,927
1%
2002
13,250
$1,790
$23,717
-4%
2001
13,500
$1,837
$24,800
0%
2000
13,932
$1,780
$24,784
3%
Source: Manfredi & Associates, Inc.
It appears to me it is a really good time to be in the equipment rental business. “When I joined John Deere in 2007 and we started talking about Tier 4 four to five years ahead of time, the key thing was to keep repeating the message often and very early so that when the machines did hit the market both our customers and dealers were ready for the technology. The Tier 4 people have been talking about it. It hasn’t been tough. It’s just like learning another piece of technology. We’ve done a lot of education. That would be the key message today.” These days, when he asks customers how Tier 4 is working for them, Mastanduno said the subject often changes to a different topic. “It’s really proven technology,” he said. “When you look at the value of Tier 4 it has affected a lot of product updates. The customers are seeing a lot of benefits. That’s part of the reason they call me the vice-president of the optimist club of Tier 4.” Some of those benefits include an increase in the volume of equipment being rented, said Frank Manfredi, president of Manfredi & Associates Inc., a consultant to the heavy equipment industry for more than 35 years. “It appears as if the amount that is rented versus sold is increasing,” he said. For example, 85 percent of aerial work platforms are going into rental
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fleets, he said. However, the numbers for equipment such as dozers and loaders are lower. “It varies quite a bit by type of product,” Manfredi said. “Generally speaking, it looks like it is increasing. Over the years, I have estimated the amount of rental construction equipment that is occurring in the marketplace. I’ve done that by estimating the number of rental locations in U.S. “This year, I am looking at probably 14,000 locations where somebody can walk in and rent a machine,” he continued. “If you analyze by location … consider the authorized dealers who also have rental fleets, and estimate their rentals per location might be, you come up with almost $3 million per location. If you mix all those locations together, this year will approach rentals of $40 billion dollars – which is a huge increase compared to where this industry started. If you take that total dollar and divide that by the number of employees employed in the construction trades, you can see that over a long period of time, the rentals per employee has increased tremendously. The amount of equipment rentals per employee will continue climbing as we go off into the future. It appears to me it is a really good time to
be in the equipment rental business.” Another benefit is the advanced technology. Updated equipment generally means more electronic features inside, including telematics, Mastanduno said. The data from the telematics can show managers how the machine is performing, which in turn can help lower operating costs. “All of these features are made with a lot better technology that came with Tier 4,” he said. In the old days before telematics, we had to run machines and do side-by-side comparisons and take fuel consumption and divide it out. It took a long time to do that. With telematics you can see that very easily. We have payload weighing – what was low workload, high workload. That was always a broad generalization of what fuel consumption was. With new telematics you can go in and get that data. It’s a very good indication how our machines are performing. You have to figure out how to use [the data].” The new Tier 4 machines also perform better, said Heath Watton, southeast Ohio regional manager for Southeastern Equipment Company. His firm deals with selective catalytic reduction system (SCR) and cooled exhaust gas recirculation (CEGR).
“We’ve seen actually nice fuel economy,” Watton said. “Nice torque curve. Horsepower is very good. The machines are performing very well. Everything gets bigger and stronger and faster. That’s just the name of the game. As far as engine and the performance, we’ve really had no complaints. We’ve actually had a lot of customers who, once you get past the worrisome part of Tier 4, really, really liked how smooth the machines worked itself through the horsepower range and torque range. It’s been extremely good for us.” But there are still challenges ahead, and largely those revolve around cost. Rental companies are struggling to increase rates to keep up with the increased costs of equipment, both acquisition costs as well as operational costs, Manfredi said. That is, however, offset somewhat by the increase in rental volume and efficiency. There are also additional costs associated with training and education. “When we first had the Tier 4 product hit, we were going above and beyond,” Watton said. “No matter what the product was, we would try to be there first thing in the morning with our salesman or manager, trying to set up times for (continued on next page)
June 2015 | Construction Equipment Distribution | www.cedmag.com | 41
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>> PROFIT IMPROVEMENT REPORT DR. ALBERT D. BATES
Joining the 40/40 Club
Gross margin and expenses are the name of the game in improving profitability.
T
This report will examine the linkage between gross margin and expenses from two perspectives:
he statement “gross margin minus expenses equals profit” is an accounting tautology. It is also probably the single most important concept in improving profitability. That is because gross margin and expenses are highly correlated. Firms with high margins tend to have high expenses, while low margin firms have low expenses. The reality is that at all points along the spectrum, from low margin/low expenses to high margin/high expenses, profits are inadequate. The key to profit improvement is to break the linkage and either produce an enhanced margin without increasing expenses or lower expenses without sacrificing gross margin. This is incredibly easy to talk about, but frustratingly difficult to actually accomplish.
n The Nature of the Margin/Expense
Linkage – An empirical examination of the precise link between gross margin and expenses in distribution. n Breaking the Link – A discussion of the specific margin and expense improvement levels that are required to break the linkage.
The Nature of the Margin/ Expense Linkage
Within every line of trade in distribution, including AED, there are wide variations in the gross margin percentage. The reasons are myriad, including different product assortments, variations in the firm’s service profile and
Exhibit 1 The Relationship Between Gross Margin and Expense Percentages
Expenses: % Deviation from the Industry Norm
50 40 30 20 10 0 -50
-40
-30
-20
-10
0
10
20
-10 -20 -30 -40 -50 Gross Margin: % Deviation from the Industry Norm
30
40
50
strategic decisions about the role of price in the firm. At the same time, there are equally wide variations in expense percentages. These arise because of differing levels of technology usage, the complexity of operations and, as with margin, the firm’s service profile.
Dramatically better is not required; slightly better is good enough. The critical issue in profitability improvement is that the gross margin percentage and the expense percentage are essentially joined at the hip in distribution. This relationship is presented graphically in Exhibit 1. The exhibit highlights results from a recently published analysis of distributor profitability by the Profit Planning Group. It is the largest such study ever conducted, encompassing 885 firms from 17 different lines of trade. The size of the study ensures that the results are applicable to distributors in any segment, including AED members. Across the horizontal axis the graph reflects the gross margin percentage for firms relative to other firms in the same line of trade. For example, at the 20 percent point on the axis the firm would have a gross margin percentage that is 20 percent higher than the typical firm. For AED members this would mean a gross margin of 25.2 percent of sales versus the industry norm of 21.0 percent (21.0% x 1.2 = 25.2%). At first blush, such large variations may not seem realistic. However, they appear in every sector of distribution.
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AED is no exception as such variations are reflected in the industry’s Cost of Doing Business (CODB) report. There is always an industry norm, but there is also always a wide range of variation around that norm. The vertical axis presents information for expense percentages. Again, the variations are from the norm in the industry. Also, once again because of strategic, operating and product mix differences, the range is large. There are two main points to be gleaned from the exhibit. The first point is that gross margin and expense percentages are inexorably tied together. The trend line from lower left to upper left clearly reflects that. The second point is that the key to profitability is to either lower expense percentages while maintaining margin or raise margin percentages without impacting expenses. Ideally, firms should do both. The open issue is how much of an improvement is possible.
Breaking the Link
Despite the linkage between gross margin and expenses, some firms are able to break out of the margin/expense straight jacket. Three different improvement scenarios are evaluated here. They all involve producing just slightly better results than other firms in the industry, either on margin, expenses or both. Dramatically better is not required; slightly better is good enough. n Good Gross Margin/Adequate
Operating Expenses—This combination includes those in the top 40 percent of the firms in the industry with regard to gross margin and whose operating expenses are at least slightly better than the typical firm. That is, they are in the upper 50 percent on expense control. It can be thought of as a 40 percent/50 percent model.
n Adequate Gross Margin/Good
Operating Expenses—This is simply the mirror image of the previous scenario. It includes firms whose gross margin is at least slightly better than the typical firm and is in the top 40 percent in controlling operating expenses. This is a 50 percent/40 percent model. n Good Gross Margin and Operating Expenses—This raises the performance bar significantly by requiring results in the top 40 percent on both factors. This can be characterized as the 40 percent/40 percent model or the 40/40 Club. It is important to note the percentages used in the three bullet points. Firms in the top 40 percent on gross margin do not have a gross margin that is 40 percent higher than the industry norm. They simply outperform 60 percent of their peers with regard to the gross margin percentage. The payoff for being somewhat better than the industry norm is substantial, regardless of which of the three combinations a firm produces. The impact is reflected in both profit before taxes (PBT) and return on assets (ROA): According to the CODB report the Gross Margin
Oper. Exp.
typical AED member has a PBT of 3.0 percent of sales and an ROA of 4.0 percent. Firms in the 40/40 Club would have a PBT of 9.8 percent and an ROA of 11.6 percent. It is a striking improvement in performance. As stated before, being in the top 40 percent with regard to either gross margin or expenses does not represent dramatically superior performance. It simply reflects being a little bit better than the norm. The challenge is being better on both factors at the same time. Management needs to develop plans to produce somewhat better than typical performance. To start the process the firm must first know where it stands in the industry. This necessitates a close review of the CODB report on an annual basis. That report provides percentile rankings for both margin and expenses for each participating firm.
Moving Forward
Simply put, gross margin and expenses are the name of the game in improving profitability. However, margin and expenses cannot be viewed as an either/ or proposition. They must be managed simultaneously. n Improvement In PBT(%) ROA(%) 163.5
128.6
Top 40%
Top 50%
Top 50%
Top 40%
154.7
151.5
Top 40%
Top 40%
226.3
189.7
DR. ALBERT D. BATES is founder and president of Profit Planning Group. His recent book, The Real Profit Drivers is the basis for this report. It is a book every C-Level manager should read. It is available in trade-paper format from Amazon. ©2015 Profit Planning Group. AED has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited. June 2015 | Construction Equipment Distribution | www.cedmag.com | 43
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>> GOOD COMPANY
JOANNE COSTIN
Blow Away Snow Plow Problems A contractor’s desire to find a better way to plow snow becomes the foundation of a manufacturing business.
W
hen Randy Strait first developed his snow-pusher plow, he was only trying to find a way to save time, reduce expenses and make more money as a snow-plowing contractor. “I designed and built the snow-pusher for my own use,” said the CEO of Arctic Snow and Ice Control, a commercial snowplowing company serving the Chicagoland area. Strait started in the commercial snowplowing business in 1978 and over the years grew the business from a one-man operation to one with more than 300 employees and 400 snowpushers. In 2006, he was so tired of all the problems he experienced traditional rubber-edged snow-pushers he decided to design something that would work far better. A unique design solves traditional box plow problems
The traditional one piece box plow designs that were the industry standard in 2006 had blades made of rubber. That way if the blade hit a manhole cover, it would give. The problem with a rubber edge is that it also had a tendency to tear. And the
one-piece design was not effective in reaching the low sections of a parking lot. The straight edge would skim over the top of low spots leaving inches of snow unplowed. A smaller snow plow would have to finish off the snow clearing work or a heavy application of road salt would be required to melt the snow. Neither method was cost efficient or productive. Strait solved the problem with a patented sectional snow-pusher made out of 32-inch moldboard sections. If the pusher hits a manhole cover or other unseen obstacle, one moldboard section trips over the obstacle, while the other sections remain contoured to the surface. A patented slip hitch ensures full traction while the moldboard continually adjusts to the pavement. Steel cutting edges scrape compacted snow and ice down to the pavement, eliminating the need for follow-up plowing and repairs of torn rubber. With each section working with the effectiveness of a smaller plow, parking lots are cleared faster and less salt is needed to melt remaining snow. Maintenance costs are reduced because repairs are confined
The Arctic Sectional Snow-Pusher Line
CD Series Pushers
Compatible with small skid-steers, compact tractors and small wheel loaders
Up to 5,000 pounds
LD Series Pushers
Compatible with several types of lighterduty equipment including backhoes, skid steers, compact loaders, and tractors
Less than 15,000 pounds
HD Series Pushers
Compatible with wheel loaders, backhoes, skid-steers, tractors and telehandlers.
More than 18,000 pounds
Randy Strait President & CEO Arctice Snow and Ice Control
to one section of the plow, not the entire unit. Fuel and labor costs are also reduced.
“People buy my plow because there is cost justification. It will reduce your salt usage 50 percent.” Strait didn’t stop there. The rigid side panels of the conventional snowpusher were also replaced with panels that move up and down over parking lot curbs and islands. This solved the problems of excessive wear on the shoe near the side panel, bent snow plows and damaged concrete. From contractor to manufacturer
After seeing how productive Arctic was with its new snow-pusher, competitors started asking Strait to build snow-pushers for them. “My snow plowing business couldn’t grow because I couldn’t build the snow-pushers fast enough,” added Strait. In 2008, the manufacturing arm of the business, Arctic Snow and Ice Products, opened a 144,000-square-foot manufacturing facility in Bradley, Ill. Today, the plant is running two shifts to meet demand for 12 models of snow-pushers in various sizes built for compact equipment, lightduty equipment and heavy-duty equipment. The snow-pushers can be mounted on skid-steer loaders,
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backhoes, wheel loaders, and tractors. Strait believes Arctic is the fastestgrowing snow-pusher manufacturer on the market. “People buy my plow because there is cost justification,” said Strait. “It will reduce your salt usage 50 percent. That alone will pay for your snow-pusher in the first year.” With the price of road salt going from $19 to $125 per ton, Strait says contractors have an incentive to reduce their salt usage. Titan Machinery, Fargo, N.D., has represented the sectional snow-pusher for the past six years with great success. They were first attracted to the plow because of its unique design, and quickly realized that customers could see its value. Al Weigel, in field marketing for Titan’s construction division, says customers typically take a step back when you give them a price, compared to a straight-edge plow. “But once you show them the video and the benefits of it, and demonstrate that maintenance costs are lower than with a straightedge plow, they realize that dollar-fordollar it’s a better plow,” said Weigel. Since Patten CAT started representing Arctic Snow and Ice Products in the Chicago area six years ago, their
sectional snow plow business has increased from about 10 units to 150 units annually. The high cost of salt has been a sales driver. “As the price of salt increases these plows have more value,” said Mike Jaworski, divisional sales manager, Patten CAT. In addition to reducing costs, less salt usage also carries with it additional environmental benefits because salt is damaging to grass, bushes and landscaping. Less salt in the parking lot also means less salt can be carried indoors to damage store floors. Strait says the market for sectional snow-pushers is solid because dealing with snow is a necessary evil for building owners. Jaworski concurs that the market shows no sign of slowing down. “The day of the truck and angle plow has been diminished,” added Jaworski. “Construction machinery and box plows offer efficiency and time-savings.” While competitive manufacturers have tried to replicate the snow-pusher, Strait says they aren’t able to succeed due to the patented design. As a result, dealers are able to command a premium price for the Arctic sectional snow-pusher. “They’re a very good company, and
they make a very good product,” added Jaworski. “The owner will sacrifice some of his own inventory to make sure customers are up and running.” Look for Arctic to add new products in the near future. An Arctic Snow and Ice Power Angle Sectional Snow Plow will be introduced later this year. “We want to be known as a solutions company,” explained Strait. “The sectional snow-pusher is just the beginning.” Looking for distributors
Arctic Snow and Ice Control Products is represented by dealers throughout the U.S. and Canada. They hope to add 20 more dealers this year. According to Strait, the ideal dealer should have a full-service facility from which to service customers, as well as a parts inventory. “If someone needs parts during a snowstorm, they need to be available,” he added. Dealers who sell heavy equipment and other snow and ice control equipment make a good fit for selling the sectional snow plow. For more information on becoming a dealer for Arctic Snow and Ice Control Products, contact Steve Sepaniak, director of Sales and Marketing, at 585-690-8811 or email ssepaniak@ arcticsnowandice.com.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. June 2015 | Construction Equipment Distribution | www.cedmag.com | 45
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Raising the Mark
Japan
USA
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
-Ad_template.indd 2
3/27/2015 2:49:40 PM
>> CFO 411
RON HODGEMAN
No More Surprises at Tax Time Bonus Depreciation loses its potency after a few years; time to give LKE another look.
R
ecently I met with the principal of an benefit in the first couple years. Let’s take a equipment dealer to discuss our Like look at an example: n Dealer ABC acquires $10 million of rental Kind Exchange (LKE) solution. He equipment each year asked me, “Do you know why you’re here?” I have never had to n Dealer rents the equipment for 3 years, and Before I could get a word out, he continued, then sells the equipment for 75 percent of “You are here because last month I walked write such a large its original cost into a dead-silent conference room with eight check to the IRS n Dealer took advantage of bonus depreciasets of eyes watching me as I sat down and tion from 2008 through 2014 opened up the folder placed in front of me. n Assume that bonus depreciation is not After quickly skimming the first page of the extended in 2015 report, I immediately slammed it down and walked back out of the room. I have never had The following table illustrates how the benefitoof such a tlarge check the IRS –for that ! Dealer rents the equipment to for write 3 years, and hen sells the to equipment 75 pisercent f bonus depreciation reverses. When bonus depreciation was enacted in 2008, Dealer ABC why you are here.” its original cost claimed an additional $4 million of deprecia After years of paying little to no tax, ! Dealer took advantage of bonus depreciation from through 014 tion expense on its tax return. As a result, its equipment dealers are2008 once again 2worrying ! Assume that bonus depreciation is taxes. not extended in 2015 taxable income in 2008 was $4 million less about Increasing sales and profits have than it was a year earlier in 2007. In 2014, the resulted in many dealers burning through The following table illustrates how the benefit of bonus depreciation reverses, and explains why amount of depreciation expense reported is their tax loss carry-forwards. a dealer might have been surprised when filing its 2his 014 dealership tax return. W onus depreciation only slightly more than claimed in 2007, a year How could behen on bthe hook was enacted in 2008, Dealer ABC claimed an aadditional million of bonus depreciation expense in on which there was no bonus depreciation. for such large tax$4 bill when depreciaits tax return. As a result, its taxable tion income in 2008 as $end 4 million less than it was a year Additionally, Dealer ABC recognized approxireturned atwthe of 2014? peopleedo not realize bonus earlier in 2007. In 2014, the amount of Many depreciation xpense reported is only depreslightly more mately than $2.3 million more tax gain in 2014 on the sale of its rental equipment. The higher tax ciation lose its effectiveness as Dealer ABC claimed in 2007, a year in which there was nbegins o bonus todepreciation. Additionally, gain is attributed to the rental assets having an m economic stimulus the first recognized approximately $2.3 million ore tax gain in 2014 after on the sale of icouple ts rental significantly lower tax basis at the time of sale years. Equipment dealers have enjoyed seven equipment. The higher tax gain is attributed to the rental assets having significantly lower tax due to bonus depreciation. straight years of either 50 or 100 percent basis at the time of sale due to bonus depreciation. If things weren’t bad enough in 2014, bonus depreciation. However, the benefit to Dealer ABC is in for an even bigger surprise a dealer this past year is not the same as the in 2015 if bonus depreciation is not reinstated. By implementing an LKE 2007 2008 2014 2015 program in 2015, though, Dealer Bonus ABC can potentially reduce the No 50% Bonus 50% Bonus No Depreciation amount of tax gain recognized on the sale of its rental equipment to Tax Depreciation ($7,696,000) ($11,696,000) ($8,560,000) ($4,848,000) $0. Without an LKE program, this Tax Gain – Sales of dealer is faced with approximately $5,196,000 $5,196,000 $7,500,000 $6,348,000 Rental Equipment $4 million more of taxable income Combined Impact as compared to 2007! Now is the on Taxable ($2,500,000) ($6,500,000) ($1,060,000) $1,500,000 time to review tax projections and Income determine what needs to be done to Taxable Income as -‐ avoid any surprises. n $4m less ≈ $1.5m more $4m more Compared to 2007
RON HODGEMAN is aan tax attorney the leader ofif the Like-Kind Exchange (LKE) practice at WTP If things weren’t bad enough in 2014, Dealer ABC is in for even bigger and surprise in 2015 Exchange, AED’s Preferred Provider of LKE services. Ron has dedicated his entire career to helping bonus depreciation is not brought back again. By implementing an LKE program in 2015, companies minimize their tax liability by taking advantage of the LKE tax solution. He can be reached at though, Dealer ABC can potentially reduce the amount of tax gain recognized on the sale of its ron.hodgeman@wtpexchange.com. rental equipment to $0. Without an LKE program, this dealer is faced with approximately $4 June 2015 | Construction Equipment Distribution | www.cedmag.com | 47 million more of taxable income as compared to 2007! The bottom line is that now is the time to review tax projections and determine what needs to be done to avoid any surprises at tax time.
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An American Manufacturer of Portable Crushing & Screening Plants, Trommels and Stacking Conveyors
www.screenmachine.com
5256T Impact Crusher Spyder 622TH Triple Deck Screen
60 Foot (18.3m) Radial Stacking Conveyor
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5/18/2015 10:27:54 AM
>> IN THE MARKET
ELI S. LUSTGARTEN
Can Construction Drive the U.S. Economic Machine? Despite recent setbacks and disappointments, outlook is positive.
T The acceleration of wages and decline in the pool of experienced jobseekers suggests developing problems for contractors
his was supposed to be a much better year for the U.S. economy, but 2015 conditions arenâ&#x20AC;&#x2122;t getting better very quickly. U.S. GDP reportedly inched up 0.2 percent (seasonally adjusted) in 1Q2015, a sharp slowdown from the revised 2.2 percent growth reported for 4Q2014. However, the trade deficit reported after the preliminary GDP data widened significantly to $51.5B from an artificially low $35.9B in February, in part due to the resumption of work at West Coast ports after their recent work stoppage. The wider than expected trade deficit relative to Bureau of Economic Analysis estimates means a downward revision to 1Q15 GDP growth; the U.S. economy likely contracted about -0.5 percent. A weak first quarter for the U.S. economy has become the norm, but forecasters remain optimistic for a snap back beginning in the second quarter. Reassuring economists was the bounce back of nonfarm payrolls in April to 223,000 after a disappointing revised 85,000 jobs in March. This leaves the 12-month rolling average around 200,000 (three-month average about 191,000), numbers aligned with an underlying economic growth rate of around 2.5 percent. The underlying payroll data running ahead of economic growth also helps explain the weak productivity data. Mining suffered another sharp loss with a monthly jobs decline of 15,000, while manufacturing employment moved sideways for the third consecutive month of slowing momentum, reflecting the stronger dollar and sluggish global growth. However, construction employment posted its strongest monthly increase in 16 months, rising 45,000 following a 9,000 drop in March. Average hourly wages rose 2.7 percent in construction over the past year and the number of unemployed workers who last worked in construction fell to 652,000 in April 2015, the lowest April total since 2001 according to the Associated General Contractors (AGC). The acceleration of wages and decline in the pool of experienced jobseekers suggests developing problems for contractors
in finding qualified new hires. Recent construction spending data remains somewhat disappointing, falling 0.6 percent in March as both residential and non-residential spending declined. However, 1Q15 spending (which mitigates weather effects) rose 3.2 percent over the same months in 2014 with private residential spending up 0.8 percent, private non-residential spending was up 6.4 percent and public construction spending rose 1.7 percent. American Institute of Architectsâ&#x20AC;&#x2122; Architecture Billing Index (ABI) rose to 51.7 in March from 50.4 in February with the new project inquiry index a more robust 58.2 in March (vs. 56.6 in February). In sum, construction in the U.S. is getting healthy despite all the headwinds. Virtually all commodity markets continue to be quite weak. The sharp 50 percent-plus declines over the past three years in coal and metal mining activity has now been joined by dramatic 35 percent plus declines in both farm equipment demand due to the greater than 50 percent drop in ag commodity prices and upstream oil spending reflecting $50 to $60 oil, with more declines of 20 percent or more coming in oil and gas related spending as the cutbacks spread to mid stream and downstream sectors. The outlook for housing and most other segments of nonresidential construction excluding commodities seems to be improving at moderate mid to high single digit rates. This translates into low to mid-single digit gains in construction equipment demand, a level of activity that should continue through the remainder of 2015. The housing outlook is still moderately positive even though the NAHB has further reduced its projection for housing starts to 1.054 million, up 5.2 percent from the 1.001million in 2014 and well below their most recent forecast of 1.169M. We are also assuming some compromise in highway funding. This segment obviously represents significant upside potential for construction equipment manufacturers in the future. n
ELI LUSTGARTEN (elustgarten@aol.com) is president of ESL Consultants, an industrial consulting firm. June 2015 | Construction Equipment Distribution | www.cedmag.com | 49
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>> PROBLEM SOLVED
TROY OTTMER
How to Partner with Customers and Vendors to Grow Your Business Focus on five principles to make it profitable for all parties.
D
A strategic partnership is about give and take…it’s about meeting in the middle
eveloping strategic partnerships with customers and vendors makes sense. But have needs of both your customer and vendor been met? And have the goals of your organization been satisfied through these partnerships, too? Are these formal agreements or verbal commitments? The synonyms for partnership I want to focus on are “connection”, “association,” “cooperation,” “relationship” and “alliance.” Our goal is to position our company with our customers or vendors in a manner that reinforces the five principles below. Connection – Get connected to your customer or vendor Association – Get associated with who the customer or vendor is Cooperation – Build mutual cooperation with you customer or vendor Relationship – Nurture and grow the relationship Alliance – Build a long-lasting alliance with the customer or vendor These principles could be put into any orders – the point is to use them to build your strategic partnerships. Is our business going the direction we want it to go? While some of you would say yes it is, others would say no. However you answer we all must be on the lookout for ways to sustain and grow our market presence. Getting connected with a customer or vendor is as simple as taking a look at your business needs. If your customer sales are down, then you will need to review which customers have fallen off as compared to the previous period. Once these customers are identified, then you need to work with your sales team to determine how best to reconnect with them, or connect with new customers.
Likewise, making a connection to a vendor may open doors, which lead to improved profitability. Now that you have made a connection with your customer or vendor, how do you get better associated with the customer or vendor’s business? Identify the common ground that you share with them. Build on a mutual cooperation between your unique or common interests. From these common interests or unique business challenges, you and your strategic partners can lay the foundation for future business endeavors. This foundation is where your relationship begins to grow and prosper. This is the critical part of the process of building a strategic partnership. This doesn’t mean that the previously listed principles are insignificant or unimportant. This simply means that once you’ve laid the groundwork, you must remember that a strategic partnership is about give and take. It’s about meeting in the middle and growing your collective businesses. This is not where you sacrifice your company’s best interest. This is where you and your strategic partners pay careful attention to the relationship you’ve built and make mutually respectful decisions that are good for all parties. If you can do all this, then you will have created a business alliance. This alliance is where all the previous principles are put together to form a cohesive and long-lasting business relationship, which can be very lucrative to all parties in good times, and can also be very sustaining in the hard times of a recession or downturn. I’ve used these principles and processes with success during the recession of 2007-2011, and we came out stronger and better than when we entered the recession. n
TROY OTTMER is vice presidentof 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 surrounding market. He can be reached at troy.ottmer@doggettmachinery.com. Mitchell Ivey, Fixed Operations coordinator at Doggett, contributed to this article.
June 2015 | Construction Equipment Distribution | www.cedmag.com | 51
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6/2/2015 11:07:45 AM
>> WASHINGTON INSIDER
CHRISTIAN A. KLEIN
America’s Crude Oil Export Ban: An Ancient Artifact That Should Be Buried Given our industry’s more active role in the energy supply chain, what’s bad for producers is also bad for us.
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The good news is that legislation to lift the ban is gaining traction on the Hill.
ollecting ancient antiquities is one of my hobbies. Holding an object someone created centuries or millennia ago gives you a sense of connectedness with the past. Of course, I’m not an archaeologist, I’m a lobbyist. But that doesn’t mean I don’t sometimes encounter artifacts of a different kind in the course of my job. The crude oil export ban is a case in point. Most Americans don’t even know our country has an export ban. To understand why we do, you have to step into a time machine and travel back to the Middle East; not to ancient times, but to 1973. That’s when, in retaliation for U.S. support for Israel during the Yom Kippur War, Arab countries imposed an oil embargo against the United States and its allies. The resulting shortages and oil price spikes (from $3 per barrel to $12) led to steep inflation that caused widespread misery. In an effort to mitigate the impact of possible future embargoes and lessen the power of hostile oil exporting countries, Congress created the strategic petroleum reserve, mandated energy efficiency standards, increased reliance on coal for power generation, and imposed the crude oil export ban. In 2015, things are very different than they were four decades ago. The political situation in the Middle East may be as bad (or worse) than it was, but our domestic energy situation is much more secure. The U.S. is now the world’s third-largest crude oil producer after Saudi Arabia and Russia, and we’re the largest producer of oil and natural gas liquids combined. Yet, completely contrary to our position as an international energy leader, the crude oil export ban persists, legally restricting U.S. producers to the over-supplied domestic market. According to a recent IHS report, this causes U.S. crude prices to be discounted versus international prices, which in turn reduces U.S. production, supply chain activity, and job growth but actually raises U.S. gasoline
prices (based on international oil prices, which are higher without U.S. exports in the marketplace). In recent years, the equipment industry has become a significant part of the energy supply chain. With the boom in America’s shale oil and gas sector, distributors have seen a surge in demand for equipment to build drilling sites and energy-related infrastructure, including roads, pipelines, storage facilities, processing plants, export terminals, and worker housing. The economic effects have been felt in states where manufacturers are producing more equipment and parts to supply the energy sector. Shale energy development has also meant additional activity in other industries supported by AED members like frack sand mining. That means if the export ban is bad for oil producers, it’s bad for us too. New data from IHS shows maintaining the ban will cost America 1.5 million jobs and $220 billion in lost annual economic output through 2018. The benefits of lifting the ban are equally significant. Domestic oil production could increase by as much as three million barrels per day by 2018 and by five million barrels per day by 2025. Over the next five years, that would create between $34 billion and $53 billion in additional GDP in the supply chain and 224,000 to 345,000 new supply chain jobs. The good news is that legislation to lift the ban is gaining traction on the Hill. AED is participating in this debate through its leadership in the Energy Equipment & Infrastructure Alliance, an organization AED founded in 2012. A bill introduced by Rep. Joe Barton (R-Texas) – H.R. 702 – has 26 co-sponsors (including four Democrats) and is picking up additional support as more lawmakers are made aware of the ban and its pernicious economic effects. If you think the export ban should be buried once and for all, now is the time to weigh in with Congress to help move the process forward. n
CHRISTIAN KLEIN (caklein@aednet.org) AED’s vice president of Government Affairs. He can be reached at 703-739-9513. June 2015 | Construction Equipment Distribution | www.cedmag.com | 53
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>> SELLING TO THE MILITARY
Global Reach Caterpillar D8K crawler tractor located in Washington Auction viewers from 112 countries Bidders from U.S., Canada, Pakistan, Saudi Arabia, and U.A.E. Sold to highest bidder in Oregon
(“Built for a Fight” continued from page 35)
surfaces. It can even be used inside malls or schools. “You can put virtually any attachment on it,” said Mitchell. While most units have been sold to SWAT teams, Mitchell believes there is a good opportunity to sell to the U.S. military. The challenge has been finding the right contacts. Ring Power expects to sell approximately 20 units per year in the U.S. They have ramped up marketing efforts through demonstrations and exhibits at specialized trade shows domestically and internationally. Eventually they believe they can also sell 40-50 units annually overseas. In addition to saving lives by protecting officers in situations where they might otherwise be exposed to threats, Mitchell believes law enforcement agencies using the Rook reduce their costs as well. “It really pays for itself,” said Mitchell. “When suspects are barricaded in a house and they see this pull up, they normally give up, so it saves departments on overtime. The ram with a camera can be poked into a house to intimidate suspects.
A Caterpillar D8K recently sold on GovPlanet was viewed by potential buyers in 112 countries before being sold to the highest bidder located in Washington state.
Fabrication and painting of the Rook takes place at an offsite location and units are completed at the dealership in St. Augustine, Fla. in about 12 to 16 weeks. The sales process typically takes four to six months. “You need a background on law enforcement and military to sell them,” said Mitchell. “We would love to have all the Caterpillar dealers sell them but it is a very specialized piece of equipment.” For more information on selling the Rook contact Shaun Mitchell at 904-669-4336. 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.
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54 | www.cedmag.com | Construction Equipment Distribution | June 2015
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>> PERSPECTIVE
(“Reflections on Rental and the Tier 4 Revolution” continued from page 41)
these owners and operators… We went so far as to laminate extra signage to hang in the cabs. We’ve really tried to go over the top. The reality is where do you recover that cost?” There is also concern about the resale value of equipment and the availability of ultra low emission fuel. In the U.S., when the new emission standards were set, the Environmental Protection Agency worked with engine manufacturers and the fuel industry to ensure the necessary fuel was available, Manfredi said. But looking at where the fuel is available elsewhere in the world, he observes it can mainly be found in North America, Australia, Europe and Japan. “You have most of the world, which is also most of the market for used equipment, coming out of North America, and they do not have access to this fuel – so that is a big dilemma,” Manfredi said. “Where are the used machines going to go that are coming out as the Tier
4 fleets start to age?” he asks. “Who is going to buy? How is that going affect the residual value? What does that do to the cost of financing machines? Who is going to take that risk?” For example, Manfredi took a hypothetical Tier 1 machine that cost $100,000 new and determined that it would have an end-residual value of about $25,000. With a Tier 4 interim and Tier 4 final machine, you’ve added about 25 percent to the cost, he said. “So now instead of $100,000 machine you have $125,000 machine,” he said. The dilemma for people who are trying to roll those out of their fleet, and the dilemma for finance companies is that machine is still only worth $25,000 seven years down the road. If buyers in South America want the machines they will pay a higher price. But it’s not likely. It’s putting a tremendous amount of pressure on that end value. Rental companies have to address finances going forward. And finance companies have to decide what they are going to
do about that end value. Someone has to absorb the difference in those values. That is what I see as the major issue in this whole event as all these emission regulated products roll into the marketplace.” But despite the challenges and concerns, the industry has progressed and overcome many issues already, Watton said. “We had issues,” he said. “The biggest problem for us is that we’ve struggled with operator issues. “So we try to do due diligence in operator training, and hope when the guy gets on and you tell him how it’s going to work, it does. “Right now, we’re two seasons into having Tier 4 up and going. I seldom have a true Tier 4 related issue. We’ve done a good job here explaining what the product is. We’ve really embraced it. We’ve gotten our customers to embrace it. Salesmen have to be proactive. Managers have to be proactive. Anyone who can share the story has to share the story.” n
LORI TOBIAS is a journalist of more than 20 years, including time at the Rocky Mountain News as a columnist and feature writer and 10 years at The Oregonian. She currently freelances for numerous publications from her home on the Oregon Coast. She can be reached at ltwriter0815@gmail.com.
advertisers’ index BAIR Products, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Ritchie Bros. Auctioneers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
BidSpotter.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Sakai America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Construction Equipment Guide . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Screen Machine Industries, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 48
EPG Insurance, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Sentry Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC
GE Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Solesbee’s Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ICUEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Sumitomo Finance and Leasing Co.. . . . . . . . . . . . . . . . . . . . . . 46
Infor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unified Purchasing Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC
LayMor Sweepers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
WTP Advisors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Okada America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
XAPT Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OBC
As the official magazine of Associated Equipment Distributors, this publication carries authoritative notices and articles in regard to the activities of the association. In all other respects, the association cannot be responsible for the contents thereof or the opinions of contributors. Copyright © 2013 by Associated Equipment Distributors. Construction Equipment Distribution (ISSN0010-6755) is published monthly as the official journal of Associated Equipment Distributors. Subscription rate — $39 per year for members; $79 per year for nonmembers. Office of publication: 600 W. 22nd St., Suite 220, Oak Brook, Ill. Phone: 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
June 2015 | Construction Equipment Distribution | www.cedmag.com | 55
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>> EASY WINS
STEVE CALECHMAN
Throwing the Only Customer Event that Matters Pay attention to these seven details for a memorable event that builds loyalty to the dealership.
Y
Customer events are for retaining and re-engaging existing clients through training and education.
ou have the essentials for your customer event and you have people coming. But more than just attending, you want them to leave more committed to your company. Some useful training and a good plate of food never hurts, but success also lies in the planning details. Take care of those and clients will see your business as thoughtful and meticulous. Allie Keller, marketing manager for MacQueen Equipment Group, offers tips on what to keep in mind: Focus on the old. Trade shows are good for attracting new business. Customer events are for retaining and re-engaging existing clients through training and education. Salespeople have already established individual relationships, but, by bringing everyone together, people get a sense of the bigger entity and you can build loyalty to your brand rather than an individual. Know your place. If your facility isn’t sufficient, make sure the offsite location offers the following: It’s centrally located. It has ample room for equipment demonstrations. It has an inside congregating area, so people don’t file in and out of workshops without meeting anyone else. It provides indoor/outdoor flexibility, particularly when the weather is warm. As for schedule, think about who will most likely be coming. If it’s people who start their day early and end by 3 p.m., mimic that rhythm. Showing off. Popular equipment doesn’t need attention. Have salespeople demonstrate new or lesser-known items. It gives needed
exposure to the pieces and reminds people of your capabilities. The sales force can also answer questions directly, which lead to bigger discussions among the attendees. Use signs and balloons. While the industry moves toward mobile technology more each year, not everyone is online, so signs are effective for taglines and information. One with photos of service employees and the total years of experience can quickly promote the message that your company is not a small operation. Balloons add atmosphere, can be taken home to kids, and by having them in the company’s colors, offer an easy branding opportunity. Streamline registration. Invest in an electronic sign-in process that scans tickets. No one is excessively standing in line and you don’t have to waste time manually, and sometimes incorrectly, entering in information. Along with that, have support staff at the event to help with the registration, directing people and picking up trash since salespeople will be busy with demonstrations and training sessions. Invite manufacturer representatives. For what your staff doesn’t know, they can directly answer product questions. People can also give immediate feedback about equipment and feel more connected to a certain line, and, with that, your company. And the food. You don’t want to, not to mention can’t, capture anyone’s attention when they’re hungry. Don’t skimp on the order – you can’t have too much – and make it warm, comforting and hearty. It works for the higher-level managers and executives, but most especially to the frontline employees who often have to attend and who appreciate the full-on attention. 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. 56 | www.cedmag.com | Construction Equipment Distribution | June 2015
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