In a Q&A with the Monitor, Industrial Truck Association’s chairman James Moran notes that the future of the lift truck industry is hopeful thanks to steady growth in the manufacturing sector. However, he cautions that the industry must be flexible, as the growth of e-commerce is demanding a change in the types of lift trucks and materials handling devices needed to accommodate this significant shift in application and process.
JM: It looks like 2013 demand is going to end up around 190,000 units maybe a little better for the U.S. and Canada. That compares to the around 180,000 units last year. Obviously we’re moving in the right direction. However, it is still a little more than 10% below where we were in 2005 and 2006. It is a slow but hopefully sustainable recovery at this point.
Monitor: Our constituents say most post-recession financing has been characterized as re-financing. Can you please comment on how you see this trend playing out over the next year or so?
JM: I think what your readers are telling you is that some fleet users are extending current leases rather than replace their fleets with new equipment. This has been a practical step for some users depending on the application environment and the number of operating hours they are using their lift trucks. As an example, in a retail environment, you could be using your trucks fewer than a thousand hours per year. Extending the term of lease from five-years to a sixth or seventh year can work in these situations. In addition to the application the overall quality of lift trucks has improved noticeably and this improvement helps the user.
Extending leases should be profitable for the leasing company, so in some ways it works for them as well. This trend is going to change — and we’re already seeing that — where users are terminating those leases and replacing the fleet with new products. Users understand the older the fleet, the more it can cost in maintenance dollars. Also using outdated lift trucks in today’s world where users need to be competitive while reducing cost are significant issues.
Monitor: How would you describe the economic scenario that would cause you to believe the outlook is positive enough to encourage new equipment acquisitions? How would you describe the expected lag time between sure signs of sustainable economic growth and the return of robust demand?
JM: Prior to the recent political events that we’ve experienced, I would have said that we were already in a period of positive demand. I think we are all concerned about the future because of the apparent inability of our elected officials to solve problems. Consumer confidence is continuing to move lower at a time when the retail industry is looking towards its busiest part of the year. There are reasons for concern, but there are also reasons for hope in the sense that manufacturing in America has come back somewhat; it’s certainly not pre-recession level, but it is one of the bright spots in our economy. I think this is what could provide us with some positive movement in growth and demand.
Monitor: What’s your take on the remainder of this year and your outlook for the industry over the next three years?
JM: When we began the year, the lift truck manufacturers felt that the growth would probably be around 2%-4% in terms of demand, and I’m using the North American market as the base here. In fact, we’re going to finish somewhere near 6% to 7% so the growth is better than we anticipated. Part of that prediction was dampened by our concerns about where the economy in general was heading and what the government was going to do, but in spite of all that, we’re having a good year. I think if you asked that same group of people today what 2014 and 2015 look like, I think you would hear again somewhere around the 3% to 4% for each of those coming years. I think we’re feeling that we’re in this period of small, not wildly moving growth or decline. So it’s kind of a sustainable curve of growth, but relatively modest.
Monitor: When you look back on your career, what would you say were a few defining moments or events that served to shape the lift truck industry?
JM: One of the defining events has been the consolidation of the industry, which began during the latter part of my career when Toyota purchased the Swedish company BT in Europe, Raymond Corporation here in the United States and most recently Cascade, the lift truck attachment company. In addition we have NACCO now with three brands: Hyster, Yale and UTILEV; the merging of Nissan, Barrett and TCM under the single brand UniCarrier Americas Corporation; and MCFA using the Caterpillar brand, their own Mitsubishi and now a distribution arrangement with the German company Jungheinrich. The last time I counted, we had more than 20 brands as members of the Industrial Truck Association, but there were 12 or 13 financial entities that controlled those brands.
Another development, of course, is the emergence of the Chinese economy and the size of that lift truck market compared to any place else in the world, as well as the economic progress that’s been made in South America, Mexico and Eastern Europe. Those markets have come alive and bring new opportunities for people in our business sitting here in North America.
Another ongoing development is the growth of e-commerce and how could change the type of lift trucks and other materials handling devices that will be needed. When you go from a full pallet load selection to a case pick and now down to an individual piece pick that you’re actually shipping to the customer — that’s a significant shift in the process. As that business grows, we’re going to see a lot of new things come in that are going to be developed to help these companies become more efficient.
Monitor: Do you have any insights into how the industry must adapt to these changes?
JM: We’re going to have to be a flexible industry. When you think about e-commerce and think about the period of time historically where they do the bulk of their business and how the season dramatically impacts their employment levels, the timing of their equipment needs to follow that same kind of pattern, and lift truck providers have to supply the equipment when the customers need it and create programs that allow them to do that economically.
I think flexibility and design creativity today and in the future to the e-commerce world is going to be a requirement. I think it’s going to be up to each manufacturer. It’s what is going to make it fun. Everybody is going to have a different solution and a different view of how important this market is.
Monitor: What’s your take on the importance of having a finance partner that can support your global dealer network?
JM: I think it’s incredibly important. When you think about what it takes to deliver the products and services to the user at the local level, the service and parts, and short and long-term rental fleets your local dealer has to have financing available. Having a close partnership and working relationship with a finance company is an absolute requirement. The name brands in our industry have those relationships.
Monitor: How would you describe the evolution of financing as a sales-aid tool to sell equipment?
JM: In the last couple of years the perfect world for the user is a finance program where they enjoy a long-term rate or payment and the flexibility of a short-term commitment. Because of the uncertainty in the economy, having the ability to flex the size of the fleet in case the business falls off, I can shrink the size of my fleet without a severe financial penalty. On the other hand if business picks up I can get access to more lift trucks and do that without making a long-term commitment because again the user cannot be sure how long this business spike is going to last.
It’s been a challenge for the funding resources to be able to provide that type of flexibility. More and more we’re negotiating a large fleet situation and the buyer or user wants the ability to flex the size of that fleet. Usually it’s negotiated on a percentage basis. For example, if I have 100 trucks, I’d like to be able to return 20% of those without any penalty with a certain period of notice.
Monitor: Can you tell us what your primary equipment finance partner is and why it was selected to support your dealers and retail customers?
JM: We have our own in-house leasing and finance company, Crown Credit Company. One of the reasons we’ve gone in that direction is it simplifies things for the end user by offering a seamless transaction. Also, we should know more about our equipment than any outside financial institution. This knowledge allows us to value the equipment at the end of a lease or set appropriate residual values. It gives us more control over what that end user is going to see in the beginning of our relationship, and allows us to manage the product from sort of a “womb to tomb” perspective.
Jim Moran has had a historic 46-year career in the material handling industry with Crown Equipment. He has held several industry leadership positions, presented at numerous material handling and supply chain conferences and has been quoted throughout trade and national media. He is a 20-year member of the Industrial Truck Association Executive Committee and a three-time president of the association.
Barry Shafran, President and CEO , Chesswood Group Limited
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Patrick Gaskins, Vice President of Financial Services, Corcentric Capital Equipment Solutions
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