There is a conflicting picture coming out of the USA in regards to the current state of the materials handling industry. Most of those Forkliftaction.com News
spoke with are approaching the upcoming year with cautious optimism, but others are wary of being too optimistic in an unpredictable economic and political environment, both domestically and globally. Melissa Barnett
Manufacturing has a decisive influence on the materials handling sector. Manufacturing and production indices such as the US Industrial Production Index are forecasting continued modest growth in manufacturing of up to 6.1% over the next three years. However, the Manufacturing Alliance for Productivity and Innovation's council director and senior economist, Cliff Waldren, recently reported that the Production Index, which fell by 6.9 percentage points in January, fell another 6.6 percentage points in February to 48.2%, indicating a contraction in production activity. This drop, he believes, can't be attributed solely to the recent severe weather conditions in the USA, but to an over-exuberance of inventories which had got ahead of demand in the latter months of 2013.
As a result, manufacturing growth will be slower in the first half of 2014 than at the end of 2013. He believes the global recovery remains fragile and US economic growth continues to disappoint. While there was an encouraging lift in equipment investment during the fourth quarter of 2013, capital spending remains volatile and uncertain which, Waldren believes, reflects uncertainty in the global economy and in US policy.
George Prest, CEO of MHI
The Materials Handling Institute's (MHI) CEO, George W Prest, told Forkliftaction.com News
in December that based on MHI's Materials Handling Equipment Manufacturing (MHEM) data, equipment orders were forecast to grow 11% or more in 2014. MHEM's most recent forecast, released in January, shows a downgrading of that estimate to 8.5% in 2014 and up to 12% in 2015. Prest said in December that "risks certainly remain, but these risks are not new. We expect these fundamentals to favourably support MHEM through 2014." After the latest forecast, MHI executives remain optimistic for expansion.
David C Mirsky, CEO of equipment leasing and asset management company Pacific Rim Capital (PRC), believes that in his line of business, he gets a picture of the economy months before the economists have numbers to work with and talk about. He explains: "The first half of 2013 saw an increase of 28% in business, the third quarter was down a little but the fourth quarter, which is traditionally the busiest for us, became very quiet. After analysis, PRC concluded that many companies were simply deferring decisions. There was an unmistakable trend, demonstrating a lack of confidence in the economy."
Mirsky believes there are a number of reasons why companies would defer their equipment leasing decisions at this time, including political uncertainty in Washington, the impact of the recent government shutdown and companies reviewing their Q4 trading results. Mirsky suggests that when most of PRC originations are for replacement and not for new installations, it reflects a slowing economy.
Despite the slowdown in late 2013, Mirsky reports a stronger start in 2014, with deferred decisions now coming to fruition. "I would say that we can expect a slow-growing and competitive market for the foreseeable future, with limited domestic expansion - but at least it's not contracting," he predicts.
MHI conducts a quarterly survey of members to ascertain economic sentiment. The most recent survey, conducted in the first quarter of 2014, found that 60% of members were concerned about the economy and 50% concerned about uncertainty in Washington. However, a sizable number - 74% - predicted growth for new orders for 2014, with 33% predicting double-digit growth.
The good news is there are areas of growth predicted for the US economy in 2014. MHEM data forecasts that factory utilisation will grow by 0.5% this year to 78.2%, rising to 80% by 2015, and the rate of capital spending will exceed 7%. The US Industrial Production Index predicts growth in mining, manufacturing and utility generation.
Nacco Materials Handling Group (NMHG), manufacturer of Hyster and Yale forklifts, in its end-of-year report, anticipates an overall increase in unit shipments and parts volume in 2014 with the majority of this increase to come from the Americas. Backlog orders for new forklifts as of December 2013 was 28,200 units, compared to 27,300 the previous year - all of which, the company says, it expects to sell during fiscal 2014. Furthermore, NMHG will be instituting a new model year update program for each of its existing forklift model platforms. The first model updates are expected in April on the 1-9 T ICE counterbalance forklifts.
Bill Heston - Vice President, First Financial Corporate Services.
Bill Heston, vice-president of equipment leasing company First Financial Corporate Services, believes that re-shoring of US manufacturing has positively affected the North American market. "As US companies gear their production back up, more forklifts are needed to ship products to the domestic market," he says. "With production on the rise, we are experiencing a flood of requests from existing customers looking to lease two or three additional forklifts to add to their current fleet and to extend the hours on existing leases." He adds that his business has also seen steady growth in the automotive sector and distribution centres.
Tom Carbott, senior vice-president of exhibitions with MHI, believes one sector that will likely outperform most is the e-commerce sector and the quest for Omni distribution by retailers. Carbott believes that materials handling technology through automation is contributing to overall productivity in this sector. Nielsen's January consumer confidence report showed a decline in overall US consumer confidence to 95 points, but also reported an upsurge in US online spending on Cyber Monday (the Monday after Thanksgiving) by 30% on the previous year. Historical data on online spending strongly indicates that the trend will continue.
George Sefer, vice-president of new sales at Atlas International Lift Truck, sees the growth in distribution centres reflected in increased sales of electric forklifts in classes I, II and III as well as narrow-aisle forklifts. "We fully expect growth in these markets to continue," he says.
Mirsky agrees and says that new activity in fuel cell batteries and the government tax credits available for this equipment and infrastructure are creating business.
Bo Maslanyk, vice-president of sales and marketing for Clark Materials Handling Company, says Clark expects to exceed expected industry growth in 2014. Anticipating growth in the goods distribution industry, Clark plans to expand production capabilities at its factories in Kentucky and Mexico and to introduce new products this year for the class II and III markets - electric narrow-aisle forklifts and electric hand/ride forklifts, says Maslanyk.
An H&K Equipment dealer
Richard Rich, wholesale equipment manager at Pittsburgh-based dealer H&K Equipment, identifies heavy-capacity pneumatic-tyred forklifts and telehandlers as growth sectors. "Heavy manufacturing and drilling are growing; the energy industry in particular has been growing at a rapid pace, especially natural gas drilling, and that trend is expected to continue well beyond the next three years," he explains.
The cautious optimism that many companies are feeling is being reflected in an upswing in employment within the materials handling sector. During the Global Financial Crisis (GFC), many in the industry reduced staff and Carbott says that MHI members are re-employing again, confident that business will be sustained through to 2017.
Even those who are cautiously optimistic admit that there are challenges ahead. Environmental compliance legislation has affected many. Rich explains that the tier IV-compliant forklifts require very low sulphur fuel in the diesel configurations. This and other compliance issues, he believes, add significant costs to each truck, while the overall maintenance required is also increasing. "None of this has been well received by buyers," he says. "Educating buyers and working within the new regulatory environment continues to be a challenge for many dealers."
A more worrying challenge for the materials handling sector is finding appropriately skilled technicians. This is a worldwide phenomenon and the US is not immune. Rich believes that the recent expansion of the gas and oil drilling industry has had a significant impact on the availability of skilled technicians. "The drilling companies can offer high wages and substantial incentives which the dealers have difficulty matching. This is depleting the pool of technicians normally available to dealerships," he explains.
Carbott says MHI members are very aware of the problem, with 37% of them concerned with the availability of a skilled workforce. He says some manufacturers like Toyota are working hand-in-hand with their dealer base to address this issue. Toyota Material Handling, USA, Inc (TMHU) recently announced an extension of its successful Giving Veterans a Lift program through to December 2014. The program is a Toyota dealership-based initiative which sees returned US veterans provided with forklift technician and operator safety training, subsidised by TMHU. "Veterans have great work attributes that apply to the materials handling industry team - leadership, a strong work ethic, adaptability and the ability to problem solve," says Jeff Rufener, president of TMHU.
Used forklifts from Atlas International Lift Truck
Kevin Sweet, vice-president of operations at Atlas International Lift Truck, agrees that there are challenges finding suitably qualified service technicians, but says that in-house referrals work well for his company. Atlas has also accessed technicians through military veteran placement organisations.
The US has always been an attractive market and Ireland's Combilift and China's Zhejiang Maximal are among those companies which have looked to America to expand their businesses. Combilift entered the North American market in 1999 and CEO Martin McVicar says that the US is Combilift's single largest market. He expects his business to grow in North America by 20% during 2014. His advice to newcomers is to have a physical local presence, have readily available services and a network of dealerships.
Maximal products on show
Maximal entered the North American market in 2008 but admits sales and marketshare have been slow. Barry Su, deputy general manager for Zhejiang Maximal Forklift, says that Maximal now has an appropriate forklift for the US market: the new dual-fuel engine A series will be launched in 2014. Su says that Maximal has several products specifically designed for the US market and will continue to invest in and expand the product range for the market. He also advises that spare parts and technical support are imperative for business success in the US.
2014 and beyond
James Russo, senior vice-president, global consumer insights at Nielsen, says in the latest Nielsen report: "As we enter 2014, the US consumer remains cautious and pragmatic." Alan Beaulieu of ITR Economics in his report for MHI in January, says "uncertainty is the enemy of decision-making, and there is plenty of uncertainty in Washington and in various projections for the future. 2014 is a good time to get aggressive in preparation for better times ahead."
Maslanyk believes that US manufacturing is highly sustainable with the availability of a skilled workforce, with emphasis on quality and availability of components and safety. He advises suppliers to "stay lean and efficient and have available, educated and skilled employees".
Rich suggests that for forklift manufacturing to remain sustainable in the US, there will ultimately need to be more consolidation:"I think we are going to see more of the smaller manufacturers being absorbed into larger companies." For dealers Rich suggests, " to survive, dealers will need to specialise more. Smaller dealers need to concentrate on a very narrow focus or niche market. If the political climate shifts at the end of this year then I will be a lot more optimistic about the future of the market."
Dave Mirsky (CEO) of Pacific Rim Capital
Heston believes that improved market conditions and replacement of ageing forklifts fleets will continue to feed growth over the next few years. "I see the materials handling market continuing to expand over the next three to five years," he says. Sefer is cautiously optimistic about economic recovery: "We are hoping that the national and state governments will help promote business and manufacturing growth which will be a great benefit to all."
Mirsky notes that respected economists are predicting slow and steady growth for the next few years in a low-inflation but rising interest rate environment. "Certain indicators are implying that there will be a sharp business cycle recession in about four years. We are acting like that slow steady growth followed by recession is going to happen," he adds.
Additional information by our contributors:
FIRST FINANCIAL EXPANDS INTO CANADA TO MEET INCREASING DEMAND
First Financial Corporate Services, Inc.
COMBI-WR4 WINS FLTA ERGONOMICS AWARD
Combilift Ltd., Co.
PRC'S NEW STREAM CUSTOMER ADVANTAGE PORTAL™ GOES LIVE!
Pacific Rim Capital, Inc.
H&K EQUIPMENT RE-LAUNCHES ELWELLPARKER.COM AFTER YEARS OFFLINE
H&K Equipment, Inc.
Zhejiang Maximal Forklift Co., Ltd.
Clark Material Handling Company
Material Handling Institute (MHI)
NACCO Materials Handling Group (NMHG)
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