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Recovery position

Last month Las Vegas was host to the year’s largest construction equipment show, and NCE was there. Margo Cole reports on the latest products on display at the show and the view of the market from the world’s leading manufacturers.

The mood was cautiously optimistic among the leading players in the US construction equipment market as they convened in Las Vegas for last month’s Conexpo exhibition. The CEOs of all the major manufacturers were there, celebrating improved figures for the past year, and looking forward to even better sales in 2011.

Volvo Construction Equipment CEO Olof Persson kicked things off by highlighting improving trading conditions, in the North American market and globally, mirrored by a sales increase of 51% over the past year.

JCB reports increase

JCB reported a similar increase, with 2010 revenue up 49% at £2bn. But the firm is still only achieving two thirds of 2007’s level of sales, and deputy chairman John Patterson cautioned that, while the industry is now in “recovery mode”, it is a two-speed recovery, with the BRIC countries (Brazil, India, Russia and China) taking the lead.
Terex CEO Ron DeFeo agreed: “I expect the developing markets to outstrip the developed, but for them all to grow, with recovery in the US and slightly later in Europe.”

All the major players are poised to take advantage of growth in the BRIC countries, having established manufacturing bases to supply the local markets. JCB, for example, has built a new factory in India with the capacity to produce up to 5,000 machines a year and has committed £61M to build a new plant in Brazil with the capacity to manufacture 5,000 backhoes and 2,500 excavators a year.

At the moment US firm CNH, which owns the Case and New Holland brands, is the market leader in Brazil, selling one third of its machines there.

While there are hints of a US construction recovery, this follows a massive drop in plant revenues for construction equipment firms in the US. “We took a divot in 2008/9 and the first part of 2010, but I have high expectations,” said Caterpillar group president Stuart Levenick. “We’ve come through every type of abnormality for many years and I think we’ll get through this one.”

However, he added: “I think there’s much more the government could do in terms of stimuli to create jobs in the construction industry.”

Non-stimulative stimulus

His comments refer to the £548bn stimulus package announced by the Obama administration in February 2009, which was, in part, supposed to provide additional spending for infrastructure. Describing the measure as the “non-stimulative stimulus package”, Terex

CEO Ron DeFeo said: “It was well intentioned, but only £29bn came into industry as direct investment. If we could’ve spent more it would’ve helped this industry. One in eight jobs lost in this country were in construction.”

CNH president Jim McCulloch added: “The truth is, in certain places the stimulus money was employed effectively, and in certain places it wasn’t. But the bottom line is that nobody went out and bought new equipment, and nobody went out and hired more labour, because levels were already high enough.

What was clear at Conexpo is that the manufacturers are still producing for the US market, even if growth is slow.

This is most evident in the crowded skid steer market, which accounts for over 40% of equipment sales in North America, with new ranges on display on every stand.

Recovery strategies differ among the leading players. So, while Caterpillar CEO Doug Oberhelman said his company is “on a roll and we’re in a hurry - we can’t go fast enough for what we want to get done”, CNH is more cautious. “It might be good if the industry travels on a modest basis for a while,” said McCulloch.

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