ConExpo After Thoughts
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| Guy Ramsey |
March 23, 2005 • At last, things are looking up for construction equipment manufacturers. My eyes were opened to just how hot the market is at last week's ConExpo. Over and over, I heard, “Order now, or it could be next year.” By the end of the show many aerial, telehandler, and crane manufacturers were talking about nine-month lead times for many sizes and models.
I couldn't help but be giddy after talking with the presidents of several lifting equipment producers. Bill Lasky, JLG's chairman, president, and CEO, believes many factors have aligned to produce today's positive trend. Low cost of capital and invigorated economies in virtually every corner of the globe set the stage, but the fact that many of the largest rental fleets are overdue for renewal is central to the turn-around.
Market conditions following 9/11 delayed many fleet renewal programs; equipment aged longer than expected. Now buyers are both replacing and expanding their fleets. In light of these conditions, one has to ask if things aren't getting a little too hot. Could this be a situation of pent-up demand crossing paths with a rush to take advantage of cheap capital? Terex's Roger Brown, vice president of sales, didn't seem to think so. He believes that while there might be a small rising bubble from pent up demand the underlying market was as solid as it could be.
I'm not convinced, however, that we're not headed for a burst bubble. A recent survey conducted by a leading Wall Street analyst of United Rentals branch managers revealed some interesting observations relative to the market. A top concern of these branch managers from around the country is the rapid expansion of rental fleets. As leading manufacturers ramp up production to meet demand coupled with the resurrection of several other suppliers, we could be headed for an “over fleeting” condition. This is of particular concern when it comes to aerial work platforms and telehandlers. The fear, of course, is that flooding the market with equipment will slow or reverse the dramatically improved market conditions.
However, confusing the issue is that this same survey listed long lead times for receipt of this equipment as an even bigger concern among branch managers.
So if everyone wants more machines than they can get and OEMs are scrambling to build them, what will govern this ramp-up in demand? I think it will be the component suppliers, which are struggling to feed the demand. Hopefully, once the component suppliers actually do catch up, everyone else will have had time to cool their heels. If not, I predict that with fleet renewal behind us, the organic growth of the market will find it hard to keep up with the capacity being generated.
