Bob Lemmer (purple shirt) and business partner John Callen, from Global Products, pictured with electric hand pallet truck

By Daphne Haneman and Christine Liew
Sales statistics on the US forklift industry show little change from last year. Industry watchdogs are using words like moderate, subdued and little change to describe the materials handling industry, words that mimic those used to describe the current US economy. But, inside the forklift industry, in terms of business savvy and consumer patterns, there is a shift.

Statistics
The Industrial Truck Association (ITA) has estimated little change in demand from last year in most forklift classes.

Crown Corporation senior vice president and ITA immediate past president James Moran estimated steady end-user orders across all industrial truck classes in 2007 for the US and Canada. The ITA lists seven classes, ranging from counterbalanced, three-wheel electrics (class 1), side loaders, turret trucks and low-lift pallet trucks (class 2) and walkie pallets and high lift straddles (class 3), to variable-reach, rough-terrain forklifts (class 7).

"The 2007 outlook is down 1.7 per cent from 2006, but up 4.2 per cent from the second half of 2006, with orders expected to total 207,000 units," he said.

"There will be no major mix changes between classes."

Moran said orders for classes 1, 3, 4 and 5 would be similar in 2007 to 2006, with a slight decrease for class 2.

According to the National Association for Business Economics, 86 per cent of manufacturers said their "spending plans are little changed" this year. Ten per cent expected to buy more business equipment, while five per cent planned to reduce spending.

The Material Handling Industry of America (MHIA) said the US materials handling business cycle for 2007 would enter "a period of slower growth".

Shifts
The US Institute of Supply Management's gauge of factory activity is forecast to hold at 58.5. Readings above 50 signal expansion and the index has shown growth since May 2003.

A unique MHIA model has predicted patterns of materials handling equipment consumption in 2007. MHIA's geographic consumption analysis shows 70 per cent of materials handling equipment consumption will occur in the US's eastern states (Iowa, Illinois and east to the coast). Fourteen per cent of consumption will occur in the west and 16 per cent in middle America.

According to the ITA, 2006 nearly topped the 2000 record for US factory shipments of internal combustion engines - 85,038 were shipped in 2006 compared with 85,993 in 2000. It was a similar story with electric riders - 53,806 factory shipments in 2006 came close to the 2000 record of 56,090.

However, the ITA said forklift companies expected a shift from IC-powered forklifts towards electric-powered forklifts in the North American market in the next five years.

Global Products president Bob Lemmer said class 3 electric hand pallet trucks were becoming more popular.

"The Occupational Safety & Health Administration has shown a significant increase in US worker injuries related to manually pushing and pulling palletised loads with manual pallet trucks. The corrective action that could reduce these types of injuries is use of class 3" electric hand pallet trucks, he said.

"Since the class 3 is one of the more inexpensive options, this is a cost-effective solution to reduce injuries and increase production at the same time. Depending on capacity, units can sell from USD4,500. The majority of class 3 is now manufactured overseas and fewer US manufacturers are producing this type of unit."

Training technicians a priority
Most industry experts, selling slightly different products and dwelling in different markets, agree that finding skilled technicians is a challenge. And, for some, it is pivotal.

Taylor Machine Works vice president operations Robert Taylor said getting skilled technicians was a significant issue.

"Not only is it difficult to get qualified, experienced technicians, but technicians for the manufacture of the product. I feel this will become a bigger issue in the future," he said.

"The technicians of tomorrow have to be computer savvy and extremely bright individuals and our responsibility is to train them and then give them an opportunity to shine."

Raymond Corp's Bennett said Raymond had a training program for technicians.

"Many years ago the technology was a lot simpler. It used to be about oil and grease. Now we have electronic circuitry. You need people with an aptitude for this. Raymond has a learning centre for dealers and technicians and we do hands-on train-the-trainer programs at dealerships. The average dealer has about 80 hours training."

Lemmer said "technicians were hard to get.

"Getting young people to get dirty while working on forklifts is very difficult. A technician who fixes computers, photocopiers or fax machines walks in with a toolbox as big as a briefcase. Forklift technicians drive a van and carry USD15,000 to USD20,000 of tools. They also have to work outside," he said.

"The shortage of workers has caused wage rates to increase. An average US technician who's well versed with forklifts is paid USD25 to USD30 an hour, then there's benefits. It's a very strenuous job. I don't think it's hard to find sales reps. I've got people calling me wanting to know when we are putting people on."

China an opportunity, not a threat
Three-quarters of respondents to a 2006 ITA business survey said forklift companies currently manufacturing in the US would look to China as a potential manufacturing partner to produce forklifts in China. Respondents also said there was a high likelihood US forklift companies would seek parts suppliers in China. There was a strong belief US forklift companies would build trucks in China for the Chinese market.

US forklift experts said competition from China was not a key issue.

Jungheinrich vice president sales & marketing Chuck Leone said domestic competition was more significant than China.

"We do not face pressure from Chinese manufacturers yet. Our competitors are US manufacturers, like Raymond and Crown. The situation is similar to Europe, where US manufacturers have to compete against strong European manufacturers. It's the reverse here. Raymond and Crown are great competitors," he said.

Raymond's Jim Bennett said Raymond was protected from competition from China.

"We are somewhat insulated from Chinese competition. We specialise in narrow aisle forklifts whereas the Chinese look enviously at internal combustion units. It is their primary focus. Maybe down the track we'll have some problems," he said.

Atlas International Lift Trucks chairman and CEO and veteran industry expert Howard Bernstein said overseas competition would come from several countries.

"Offshore producers will continue to challenge the US markets and accomplish this in less time than it took Japanese and Korean manufacturers, as customers today recognise the capabilities of foreign suppliers," he said.

"Competition from China will increase as they improve quality and product acceptance. We will see additional competition from other countries with lower labour costs."

An ITA report said 2006 US growth rates in the industrial truck market were about 12 per cent. In China for the same period, it was about 34 per cent.

A Chinese Construction Machinery Association (CCMA) presentation to the ITA in 2005 said the Chinese forklift market was improving in terms of market share, parts, R&D and product quality. However, there were still challenges.

"Not all suppliers have CAD software, some suppliers have limited knowledge of foreign standards and technical requirements, dealers are often more interested in big orders and small orders are often ignored. Not all raw materials are available in China, and there are travel time considerations."

The CCMA said the positives were "low labour costs and transport and warehouse costs were low in China.

"It is expected the industrial truck market [in China] will benefit from growth in the Chinese economy and clear double digit increases for 2007."

Last week the People's Bank of China said China wanted to stop a record USD177.5 billion trade surplus from fuelling inflation, bad loans and investment in idle factories. The bank said the country was finding it harder to boost imports because it was producing more of its own products and replacing goods from abroad. It said the economy expanded at the fastest pace in 11 years in 2006.

China is the world's biggest energy user after the US. The People's Bank of China report said it would restrict bank lending to industries that wasted fuels and were polluting and extend credit support to some industries, including agricultural groups and environmentally friendly and energy-saving companies.

Technology
An ITA survey of four forklift companies found respondents saw fuel cells becoming a significant share of the forklift market in two to five years.

Raymond is currently researching fuel cell technology and RFID-enabled forklifts. Jim Bennett said "fuel cell technology is actually several years away from us. Getting it commercialised is a big step. You have to incorporate design. It's really a replacement battery. You have to consider whether it can be integrated. It changes the dynamics".

Material Handling Equipment magazine said forklifts and other materials handling vehicles were good test cases for fuel cells.

"First, there's the closed-loop nature of the work environment, which easily accommodates a central fuelling station. The need for counterbalance eliminates any concern about weight.

"It's also easy to measure productivity gains from not having to recharge or switch batteries at facilities that run 24 hours a day, seven days a week. The challenge at the moment is the high price of the fuel cell stack materials - we're talking about expensive stuff like platinum-a relatively short operating life, and limited functionality in cold-storage environments.

"Those familiar with the technical details expect these challenges will be solved sooner, within a few years, rather than later. After that, some monumental cultural, economic and government hurdles will have to be overcome before hybrid technology can move into more mainstream vehicles. Hydrogen isn't really a fuel source. It's a way of storing and transporting energy. It must be extracted from fossil fuels, releasing carbon dioxide in the process, or from water by using electricity," the magazine said.

Robert Taylor said technological innovation was secondary to quality.

"Technology continually makes our product better. I always say Taylor is committed to being on the leading edge but not the bleeding edge of technology. We may not be there first, but we will be the best when we get there in terms of durability and serviceability of our products," he said.

Cautious optimism
US economists said consumer spending was helping the nation overcome a housing slump and "keeping the economy expanding at a pace the government predicts will be moderate".

According to a Bloomberg News survey, the US jobless rate has held at 4.5 per cent but is at a five-year low and subdued job growth is predicted for 2007.

"So far, increases in payrolls and incomes have been enough to hold the unemployment rate stable and encourage Americans to keep shopping," it said.

US forklift industry leaders are cautiously optimistic. The number of dealerships is planned to increase, and some experts talk about diversification and globalisation.

In 2005, Jungheinrich introduced order pickers and rider pallet trucks designed for the North American market. In 2006, a pantograph-style reach truck was introduced. Differences in pallet sizes and chassis between European and US forklifts meant Jungheinrich's product line was restricted. Nevertheless, Jungheinrich's Chuck Leone was optimistic.

"Our goal is to build a strong distribution. Our distribution network has grown from 11 dealers. Now there are about 65 Jungheinrich dealers in North America (60 in the US) and we aim to increase that to 80. In 2006 we experienced strong growth," he said.

Atlas's Bernstein said it was a "wonderful period of time with so many creative technical advances".


The future
Raymond's Jim Bennett said the main game for major forklift players was "not to be repairing and maintaining forklifts" but "to step up to fleet management programs and review, audit, and deliver a single bill".

Bernstein said diversification could be on the cards.

"We predict forklift dealers will diversify into more companion products so they can serve their customers as a complete materials handling equipment source rather than just a forklift dealer," he said.

The MHIA said there were "many forces at work to keep materials handling and logistics on a healthy economic path", including "continued shift towards applying equipment versus new plant capital spending, globalisation and consolidation of companies, shifts to outsourcing and continued pressure to reduce inventories".

It expected "exceptional opportunities through the remainder of the decade for the industry, both domestically and internationally".