Feature story

Canadian forklift industry has positive future

Thursday, 26 March 2009 ( #403 ) - Ontario, Canada
Toronto, Ontario
Toronto, Ontario
The materials handling industry in Canada has been growing steadily over the past decade and is an integral part of the Canadian economy. The industry has grown from revenues of CAD2.3 billion in 1997 to CAD3.2 billion in 2007; an annual increase of 3.0%.

Annette Densham reports that Canadian materials handling manufacturers and dealers anticipate demand for forklifts and other materials handling equipment to drop, resulting in job losses and decreased revenues. However, despite the downturn, manufacturers remain positive about the long term with new factories due to open and new products being launched.

Ontario-based Linamar Corp's Skyjack business has slowed and is now manufacturing only on demand (Forkliftaction.com News #401), after shutting for an unprecedented four weeks over Christmas because of decreased demand (Forkliftaction.com News #388).

Canadian Forklift Distributors Ltd is experiencing a 25% reduction in overall sales. Jim Chesla, general manager, says manufacturing industries related to the automotive industry are down, but general negativity in the market has all sectors holding onto orders until there are signs of a turnaround (Forkliftaction.com News #386).

Heavy equipment manufacturer Komatsu Ltd has announced it will shut its plant in Quebec in September this year. The move will cut 245 jobs. Komatsu temporarily laid off 155 people in January.

The Canadian Press reported in March that employment and trade numbers "paint a picture of an economy, if not literally in free-fall, certainly tumbling at an alarming rate with monthly job losses greater in proportion that those in the United States and as great as any Canada has seen since the Great Depression".

More than129,000 jobs went in January, followed by 82,600 in February and industry commentators expect the economy to 'limp' to recovery in late 2009.

The state of the market

According to the latest figures from Statistic Canada, the materials handling equipment industry in Canada exported more than CAD2.61billion of equipment worldwide in 2008. More than 77% was exported to the US.

However, exports to the US have fallen 10% over the past four years as Canadian exports to other parts of the world have grown. Since 2004, exports to South Korea, the United Kingdom and Australia have increased from 0.32% to 2.4%, 1.77% to 2.4% and 1.42% to 1.51% respectively.

Imports of materials handling equipment come from the US, with 60.93%, Germany 8.65%, China 4.76% and Japan 4.49%.

Most major global manufacturers of materials handling machinery are present in the Canadian market, including Clark Material Handling Company, Toyota Canada Inc Lexus Division, and Komatsu Canada Ltd.

According to the US Department of Commerce's Canada: Materials Handling Machinery - Industry Overview - September 2008, the materials handling market comprises six main segments with forklifts making up 56% of the total market. There are more than 798 active Canadian manufacturers registered federally with Industry Canada. The majority are based in Ontario.

Equipment World has mainteined market share despite slowdown
Equipment World has mainteined market share despite slowdown
Lyle Knudsen, vice-president of Ontario-based Equipment World, says the first part of 2009 has seen huge declines in overall market demand, as reported by ITA. "However, speaking on behalf of Toyota, we have maintained national market share but will see unit numbers decrease in line with the decline."

Greg Pannia, chief operating officer for forklift manufacturer Omega Lift, says the primary concern and challenge in the Canadian market is waiting out the economic slowdown. "Our general business environment, from banking to forklifts, is generally robust in Canada and has been helped by our relatively conservative business approach.

"When the economy rebounds, the companies that emerge will find less competition and great opportunity."

Pannia says, from an economic standpoint, the current economic climate presents challenges to manufacturers because the supply chain of components is contracting. "We've had to fine-tune our 'just in time' manufacturing as suppliers are not carrying the inventory levels they once did and lead times for these components have increased.

"We are adapting to this new reality by carrying additional inventory and having multiple suppliers for any given part."

Omega Lift has been able to maintain production at 100% because of its focus on export. Pannia says Omega's backlog of orders is definitely smaller than it was 12 months ago. "Right now it seems everyone has a 'wait and see' attitude.

"Omega Lift is definitely primed for growth and looking to expand its global presence. Because of our extensive product line, we have the opportunity to see significant growth by penetrating into new geographic markets and gaining market share in new areas. Even if the overall market is shrinking, any penetration into these new markets represents a growth in our overall sales."

Martin Hexspoor, general manager, sales and training, Alberta, for Toyota forklift dealer Western Materials Handling and Equipment Ltd, says as with all economic downturns, sales of new equipment tend to slow. "But it brings opportunities to sell and rent more used equipment.

"The current market has dropped considerably from two years ago but we are very confident it will rebound in two years, probably not to the levels of the past but considerably stronger than today."

Western Materials Handling has been a Toyota forklift dealer for almost 39 years and is based in Calgary. It has branches in Edmonton, Red Deer, Lethbridge, Medicine Hat and Grande Prairie.

Tim Jamal, from the worldwide exclusive distributor of Eagletronic battery chargers, Jamco, says Canada, like the rest of the world, is experiencing tough economic times. "Jamco has taken a more proactive approach to be in touch with our key Canadian customers and partner with them. We have developed a few creative strategies to assist them in increasing gross margins during a period of overall declining sales volumes."

Jamal says Canada is evolving into more of a distribution-type market, rather than a manufacturing type. "We have seen several manufacturing companies relocate or close and I see this trend of a distribution-type market continuing going forward two years as well," he says.

Ryder Lift Trucks has a strong product that services the warehouse/distribution industry with the Crown product line
Ryder Lift Trucks has a strong product that services the warehouse/distribution industry with the Crown product line
Ken Eichenberger, customer service manager of JH Ryder Machinery Ltd, says Ryder Lift Trucks is fortunate to have a strong product that services the warehouse/distribution industry with the Crown product line. "Dealers and distributors that are not strongly represented in narrow-aisle applications have been suffering a downturn since early last year as the value of the Canadian dollar versus the US dollar appreciated.

"This caused a lot of local manufacturing to migrate to other economies where there was a dollar advantage," he says. "Add to that the economic downturn in the fourth quarter of 2008 and you have a perfect storm scenario for counterbalanced dealerships.

"Ryder Lift Trucks' plan to sustain growth in the coming year is to capture additional market share in warehouse and distribution applications."

Forklift manufacturers and dealers

Knudsen says most major brands are faring well in Canada. "Equipment World deals with two Canadian forklift manufacturing companies," he says. "Rough terrain forklift manufacturer Loadlifter Manufacturing is in the process of opening a new manufacturing facility in Stouffville, Ontario.

"They plan to open the new facility mid-year. They are also developing new model lines that incorporate ergonomic features beyond the normal design criteria for this class of truck. "

Equipment World also deals with Blue Giant, which manufactures some class 3 products, including walkie stackers and counterbalance forklifts.

Eichenberger says JH Ryder is a 76-year-old independent forklift dealership based in Toronto, primarily serving the Canadian provinces of Ontario and Quebec. "Ryder Machinery started in 1923 as the Clark Machine Tool distributor and eventually went into manufacturing a Burden Carrier truck, which eventually led to the development and manufacturing of forklifts under the Clark brand name."

Chris Glaubitz, president of Provincial Lift Truck Inc, says rough terrain forklift manufacturer Sellick Equipment Ltd is still producing in Canada. "As is Carelift, Loadlifter, LiftKing and a few others," he says. "I think all are down due to the economic downturn."
Loadlifter is a local Canadian forklift manufacturer
Loadlifter is a local Canadian forklift manufacturer

Knudsen says Toyota dealers are the largest dealership body. "They typically command about 30% of the Canadian marketplace in class 1, 4 and 5 trucks," he says. "They have recently started offering class 2 and 3 trucks in their product mix which will make them, by far, the largest Canadian forklift dealer body."

He says an interesting fact about Canadian Toyota dealers is the dealership structure comprises a group of five principal dealers, all privately owned distributorships, with more than 20 years' association with Toyota.

Paling Transporter is a major Canadian forklift manufacturer that makes class 5 pneumatic tyre diesel-powered forklifts in lifting capacities of 25 to 60 tons. Peter Fulcher, director of sales and marketing for Paling Transporter, says other major Canadian forklift manufacturers in class 5 lifts are LiftKing and Omega Lift. "But they mostly make rough terrain units under 25-ton lift capacity."

Paling Transporter last year developed a 60-ton forklift for use at Syncrude mine shops in the Alberta Oil Sands. The forklift can move items 10 feet deep, 15 feet wide and nine feet high.
Paling Transporter's specialling desigend 60-ton forklift for Syncrude mine shops
Paling Transporter's specialling desigend 60-ton forklift for Syncrude mine shops

Wiltzen, from Western Materials Handling, says Canadian manufacturers have to develop unique applications because of the special demands from ore smelting operations, like Aluminium Alcan, Reynolds Aluminium, ABI, Xstrata Copper and Xstrata Zinc. "They have such special demands that very few manufacturers can meet them."

He says Linde has collaborated with Canadian Linde dealers to modify forklifts to handle the ore, vats, and products and by-products moved into and out of ore plants. "The high interior temperatures and the extreme cold winters require special pressurised cabins with full air conditioning and fine powder filtering," he says.

"All forklifts going into one those places have almost 100 modifications either added at the factory or by the dealer before delivery."

Wiltzen says Lift Rite is one of the few manufacturers with a reach beyond Canada. "That is mainly because Linde officially adopted the Lift Rite pallet truck under the Linde name. Many dealers sell Lift Rite but the interest is not as big as Linde's.

"Blue Giant comes in second with some reach outside Canada."

Omega Lift has seen an increase in the need for heavy capacity forklifts with all terrain capabilities. Pannia says the MEGA Series - 8,000lb to 20,000lb capacities - and the HERC Series - 25,000lb to 50,000lb capacities - are all offered in four-wheel drive and certified to rough-terrain standards, which is unique in the industry.

"We have seen more customers requiring heavy lifting capacity but also requesting 4WD traction and the higher stability factors you get with a rough-terrain-certified machine."

Paul Gibson, director of sales at Manitex International Inc, says Canada is almost all 4WD units as rugged terrain and snow is part of the landscape. "We are a resources-rich country so customer bases are heavy into mining/minerals, forestry and general construction, which is all true rough terrain.

"This means units have to be [better] designed with masts, frames and the powertrain to withstand the cold, harsh environment."

Typically, European-designed units, which are more geared towards agricultural use or unimproved yards, do not stand up to the more severe applications found in Canada.

Gibson agrees the Sellick, Omega and Load-Lifter brands are still manufactured in Canada. He says Manitex brands LK and Noble are also made in Canada. "Both models are the toughest in the industry."

Used forklift market

Trade between Canada and the US is vigourous
Trade between Canada and the US is vigourous
Trade between the US and Canada is vibrant and ongoing with more than CAD5.4 billion in exports and imports flowing between the two countries. Both nations are part of world's largest bilateral trade relationship. The US-Canadian relationship revolves around the North American Free Trade Agreement (NAFTA).

Reonac's Berlinguette says Canada gets many used forklifts from the US. "Canadian wholesalers import all makes and models from the US; no particular model more than others," he says. "Even more so these days with so many US companies closing or reducing their fleet size due to the economy. There are more and more used US trucks coming into Canada."

Equipment World's Knudsen says Canada is definitely seeing more equipment wholesalers offering deals in the country. "Many are becoming more aggressive in pricing and freight policies, in some cases, prepaying right to our doorstep.

"We have seen a real shift in availability of all models. Until a year or so ago, we were starving for certain models, such as bread-and-butter pneumatic forklifts.

"Now it has become more of a buyers' market. We do not believe this is due to environmental issues, as Canadian consumers are very much a part of the movement towards more environmentally friendly equipment."

Rob Mackay, president of auctioneer Ritchie Brothers, says Canada is not a dumping ground for US second-hand forklifts because Canada has similar EPA legislation as the US. "Equipment flows back and forth across the border as demand/supply warrants," he says. "Canadian buyers generally seek equipment with specifications to meet our environment, like cabs not canopies.

"Exchange rates have quite an effect on both sides, favouring buyers when one currency is weaker than the other."
Rob Mackay, Ritchie Bros
Rob Mackay, Ritchie Bros

Jamco's Jamal says the safety standards are much higher in Canada and he finds the quality of used forklifts going from Canada into the US much better than that of US forklifts selling into Canada.

Manitex's Gibson believes Canada may be a dumping ground for second-hand units to some extent for US and Canadian equipment, but the evidence is not clear. "Most second-hand units come mainly from North American dealers' rental fleets or national rental fleets," he says. "Most true rough-terrain forklifts are not sold that much in countries outside North America."

Legislation and environmental issues

Knudsen says Ontario has major safety blitzes by the Ministry of Labour, which governs provincial safety rules. "For the first quarter of 2009, the blitz focused on forklifts.

"We have seen an upswing in the sale of compliance parts - seats, beacons, backup alarms, fire extinguishers - and service inspections and a large increase in demand for certified forklift operator training.

"The Ministry of Labour has published information on its website to further drive home the focus on the importance of forklift safety. We are also seeing consumers becoming more demanding of tighter fuel emissions, emission testing and showing an overall awareness/concern for health matters."

Reonac's Berlinguette says Canada is divided into 11 provinces, each of which has its own safety regulations. "Some provinces are stricter than others. The Ontario province leads the way for strict safety, and periodic maintenance and inspections for materials handling trucks.

"For instance, they were the first province to regulate forklift drivers to follow a certified forklift driving program," he says. "They also were the first to regulate and install mandatory annual load testing on all forklifts in Ontario."

Western Materials Handling's Wiltzen says environmental issues are not legislated but Canada tries to stay on par with the US.

"Safety for workers is legislated," he says. "The OHSA (Ontario Health and Safety Association) and the CSST (Quebec equivalent) are now fining companies for not using seat belts, having high noxious emissions and other offences, like signs not being in French.

"Operators are, for the most part, required to pass a safety and operating course and get a driver card approved by the provincial government.

"The result is an increase in safety product sales - alarms, seat belts, flashers and signs."

Asian imports

The impact of Asian imports can affect the bottom line of local manufacturers as customers seek cheaper models, particularly in times of economic downturn. However, according to Canadian manufacturers, the impact of Asian imports has not overly affected that market.

Omega Lift's Pannia says the company has been sheltered from Asian competition because of the specialised, focused nature of its product. "The all-terrain forklift market is very different ball game, compared to the conventional counterbalance forklift market," he says. "We have more than 30 years of industry experience, which helps us avoid the common pitfalls one can run into in this market.

"Also, the size of the all-terrain forklift market is much smaller than the counterbalance market. Asian competitors have chosen to focus on the high-volume counterbalance segment and we don't see that changing any time soon.

"They may decide to offer a small 6,000lb or 8,000lb capacity all-terrain unit, but once you get into higher capacity ranges, the list of competitors gets very small."

Equipment World's Knudsen says the issue of offshore manufacturers "rears its head now and again". However, in most cases, given a fair chance, the company can justify the premium for Toyota forklifts. "Although Chinese imports are becoming more of a factor, they lack cohesive dealer representation as well as parts and service backup in North America."
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