Local News story

Industry cautiously optimistic

Tuesday, 6 October 2009 ( #431 ) - North America
Defaults and consolidation should provide opportunities for those that are fiscally strong.
PHOTO: SHUTTERSTOCK
Defaults and consolidation should provide opportunities for those that are fiscally strong. PHOTO: SHUTTERSTOCK
By Tom Andel, contributing editor Just asking "Are you optimistic or pessimistic about your business in 2010?" is risky. Most smart business people would answer "cautiously optimistic". That way they're covered either way. In fact, most forklift OEMs and dealers did answer that way when Forkliftaction.com News popped the question. However, they didn't stop there. Many of the respondents, being members of the Material Handling Equipment Distributors Association and/or the Industrial Truck Association, are passionate enough about how politics and the economy are affecting business that they want their customers to know they intend to be among the survivors. They're doing what's necessary to help their customers survive too. "Companies are running lean and will need replacement products and outsourced services that allow them to remain lean," says Duncan Murphy, president of Riekes Equipment Company. "There are also great buys on facilities right now and, if monitored, provide opportunities as they are outfitted to meet new uses for them." Tim Hilton, CEO of Carolina Handling, LLC, an authorised Raymond dealer, adds that while there are sure signs of improvement, he doesn't expect equipment orders to increase much-maybe 5-10%. On the plus side of that, equipment in the field will see greater utilisation. "This will result in increased parts and service business," he predicts. "We also expect to see rental activity increase at a greater pace as is always the case in a rebounding market. And I don't think we are much different from others in the industry; we are leaner and should benefit from the rebound as a result if we are staffed properly." Those are examples of strategies within a business's power to execute. However, what happens when forces with even more power have their way? Some of our respondents let their pessimism show when politics entered the discussion. "I think 2010 has a chance to improve over 2009, but it also has a chance to be as bad or even worse," says Mark M. Milovich, president of Lift Atlanta, Inc. "It depends on what Washington does going into next year. The passing of health care reform, if not done the right way, will have devastating effects on the economy and small to mid-size businesses. Full passage of the Cap and Trade legislation would further hamper any economic recovery. Add the fear of inflation and the devaluing of the dollar and the outlook does not bode well for a strong 2010." Milovich adds that companies like his need to see the housing market improve. The building materials supply industry represents a good chunk of business to materials handling dealers. With that business falling off, dealers will be trying to diversify their product lines and service offerings going into 2010. Not all will be successful. "I feel market volumes will remain the same, and that will not allow all to survive," says Kenneth M. MacDonald, president of M&G Materials Handling Co. in East Providence, RI. "Defaults and consolidation should provide opportunities for those that are fiscally strong, and are aligned with premium manufacturers for their products, but I think the distribution channels have many who are underwater. The question is how long can they hold their breath?" John Faulkner, president of FMH Material Handling Solutions, Inc., doesn't think they can do it for very long. Credit issues are too daunting for most. "We have not seen any true rebound in the Rockies or in the LA market," he continues. "I do not think this is over for at least another 14 to 18 months." Jerry Weidmann, president of Wisconsin Lift Truck, thinks it will be more like three to five years before materials handling businesses recover, although he adds the economy will bottom out this quarter. James Malvaso, president and CEO of the Raymond Corporation, adds even a few more years, but puts the whole situation in perspective: "A market that has gone down by more than 50% has to double to get back to even," he says. "That could take seven to 10 years, assuming aggressive growth rates. The big issue is what will the industry do in light of this reduced demand and the current available capacity?"
  • Next week, we'll explore what end-users are doing to survive this economy. Our field of experts will discuss some of the best practices they're seeing customers implement to improve efficiency and productivity.