There may be trouble ahead: the future of the access industry

04 November 2008

Kevin Appletin chief executive, Lavendon Group (UK)

Kevin Appletin chief executive, Lavendon Group (UK)

We are all speculating about what the future holds for the access industry so Access International asked some of the industry's senior figures to share their insights. They tell us what their predictions are for the immediate future and the coming five years.

Kevin Appleton: Group Chief Executive, Lavendon Group (UK)

"Predicting the short-term future for the access industry with any degree of accuracy is fraught with difficulties as, if we're honest about it, next month's utilisation is largely driven by ‘phone calls we haven't even received yet!

Over the medium-to-longer term the future is a bit more certain. Penetration of powered access in Europe when compared to the size of the relevant parts of the economy, still trails the US by ten to twenty percentage points. This implies that there should be a continued growth in demand for access rental - ahead of whatever the general economy is doing.

The big unknown is the rate at which rental companies add fleet (or manufacturers ‘encourage' them to add fleet). Over the last few years many rental companies, us amongst them, have grown the easy way - opening new depots and grabbing local market share from more established competitors, usually at lower rates. The question in the current environment is whether the companies that knew ‘how to grow' can learn ‘how to slow' and are able to work at holding profitability by working at efficiency and pricing, whilst holding or shrinking overall fleet numbers.

One lesson we can take from the last downturn in our industry is that trying to add fleet capacity during a period of softer demand is a sure way of turning a short-term management challenge into a structural economic problem, which is much deeper and more durable. The extent to which manufacturers and rental companies are able to resist the temptation to force additional capacity into a market that doesn't need it will determine how quickly we, together, come out of any current difficulties."

Petter Arvidson: President and CEO, Alimak Hek Group (Sweden)

"There are great challenges in the world's economies with financial turmoil, higher oil and raw material prices. However, I remain confident that this will have less impact on our company today than what would have been the case a few years ago. This is a positive effect of serving many different industries and geographies, plus the result of our strategy to expand our presence and business in geographical growth areas such as China, India and the Middle East. In addition, we continuously work on lowering our cost base.

The market outlook is really mixed;

  • North America and some European markets (e.g. Spain, Italy, UK) show declining activities. We are faced with a wait and see approach by our customers, such as rental companies, in response to the present market challenges. The second half of 2008 and whole of 2009 will show a slow down, and 2010 to 2011 will show moderate growth.
  • In the rest of Europe we see moderate growth from now and up to 2011.
  • For Asia, China, MENA, India, and Eastern Europe we see strong growth up to 2011."

To secure a strong position also in the future, we continue to position Alimak Hek for solid profit growth in 2009 and beyond. Key factors that will contribute include our well developed and global sales and service network, our continued geographical growth, and the continued efforts to reduce costs and increase sourcing from low cost countries. With this in mind, I remain confident that Alimak Hek will achieve its goals!"

John Ball: managing director, Height for Hire Group (Rupublic of Ireland)

"It's going to be tough. How the manufacturers address the situation will be critical. In the past, in crises, in some cases they haven't dealt effectively with troubled companies. That can create bigger problems. Rental companies got into difficulties, and manufacturers continued to support them [which contributed towards] devaluing the access rental market. It's very important that manufacturers address difficulties at the front end, by dealing with it through production levels.

In the last few months we've found the market to be tougher and more competitive. We have seen oversupply in Ireland for the first time in several years. We are addressing that by using a re-deployment policy to the UK or Europe, but that represents a problem for highly leveraged companies that have ramped up in recent years.

The biggest problem is the increased cost of credit and increased cost of fuel. They don't look like they will reduce significantly in the months ahead. These difficulties have presented challenges for some, and give opportunities for others. For more recent entrants to the access rental market, it will be more difficult to be viable and profitable.

We've been through this before, but in slightly different times. There was aggression in rental rates and oversupply, but we didn't have a global credit crisis the last everyone else we are paying more for credit."

A spokesman: Beijing Jingcheng Heavy Industry (China)

"Like a number of international access industry manufacturers, we at Beijing Jingcheng Heavy Industry (JCHI) hold a conservative attitude to the market development of access equipment next year. The worldwide demand will be similar to this year. All manufacturers are faced with the problem of the increasing cost of raw materials and staff. How we deal with the contradiction between increasing costs and competitive pricing, is question in front of every manufacturer.

As infrastructure construction around the world is being accomplished with relatively low profit margins, the future development of the access industry is not optimistic for everyone.

Matthew Flannery: senior vice president - Operations East, United Rentals (USA)

"In North America, the construction environment is expected to be challenging for at least another year. That's obviously a consideration when allocating capital expenditure for lifts and other high investment items. Aerial equipment has an advantage in that it can be refurbished, which extends its earning power and return on investment.

Refurbishment is a responsible approach in a downturn, since the customer has ready access to safe, productive equipment, and there is less flow-through of machines to the used equipment market. At United Rentals, with over 70000 aerial lifts in our fleet, we have had a certified refurbishment program in place for some time now.

Looking at the longer term, I would expect two current trends to continue. The first is demand for boom lifts within the industrial sector, which is still widely under-penetrated from an equipment rental perspective. The second trend relates to the demand for specialty aerial products that enhance labour productivity in construction and industrial applications. Both trends are likely to accelerate as we enter the upturn.

Tim Ford: Terex Aerial Work Platforms (USA)

"In many ways, we have been living in a softer marketplace for the last 12 months already. Since the fourth quarter of 2007, order rates have dropped as many North American and Western European customers pulled back on their spending. It has been emerging markets like Eastern Europe, the Middle East, Brazil, China and Russia that have powered category growth.

I expect the next six to 12 months will bring continued uncertainty to the aerial work platform category. But rental houses should look to manufacturers to behave responsibly in this environment, producing at levels that can be absorbed by the marketplace, which helps keep rental fleet values high. This industry has matured significantly since the last market downturn, and we should get through this without experiencing the kind of pain that was felt earlier in the decade.

Globally, infrastructure growth and the value proposition for aerial work platforms - safety and productivity - continue to gain acceptance in emerging markets. I expect we will also see continued innovation, with new products being developed for new applications. I am bullish for continued growth in this category over the next decade.

Ken McDougall: president, Skyjack (Canada)

"The AWP market has been affected for months by a combination of; continuing fallout from the lending markets, consolidation in the rental industry (mostly in Europe) and a general uncertainty on the economic outlook. Most manufacturers keep a close eye on the market demand and have reduced manufacturing output to more closely match demand. It is also important to note that although manufacturing output has been slowed that most manufacturers had been continually increasing production levels over the last several years so some levelling or even a slight reduction was to be expected at some point. To further exacerbate the current conditions the price of commodities and materials such as steel, rubber, copper etc... have skyrocketed and have forced most OEM's to pass these costs on to the customer base. Skyjack has managed to hold pricing increases off until 2009 and continues to honour our 2008 Price List.

Not all areas of the market have softened in 2008, regionally there continues to be some "hot spots" across North America as well as continued growth in Eastern Europe and the Middle East. We would expect to see a continued cautiousness in the market for the remainder of 2008 and carrying over into 2009. The outlook beyond this time of market uncertainty is good and we predict that beyond 2009 the AWP market will expand on a global basis."

Alexandre Saubot: Haulotte (France)

"In the current environment, it is difficult to predict what will happen and I don't like to comment on things I am not sure about.

The AWP market entered, sooner than anticipated, into a tough environment. I see it continuing certainly for the rest of this year. The length of historical slowdowns is 18 to 24 months. This one began in early 2008, so it could last until early 2009 or into the second quarter of 2010.There is long-term growth in the business.

Haulotte has a flexible manufacturing model; we are going back to Haulotte principles: the model allows us to adjust it to meet demand.

Overall, the forecast for the second half of 2008 is like looking into a crystal ball.

In all emerging countries there is still some growth to come: in China, the Middle East, Latin America, and Eastern Europe. After the recovery there will again be high demand. This is a capital equipment market, with ups and downs. It is likely to be down next year, then we will see a recovery."

Tim Whiteman, managing director, IPAF (International Powered Access Federation)

"There are signs of things not being as frantic or busy as in the boom years. The big problem is that there is very little statistical information that lets people compare facts systematically.

"IPAF is aware of this gap and has three major projects going to address this. We are working with the ERA (European Rental Association) on the first ever survey of the European access rental market.

"The ERA is producing a general study of the European rental market; IPAF is funding separate research on the access industry. We are also cooperating with the ARA (American Rental Association) to do the same in North America. The benchmarking and comparisons between Europe and North America will provide valuable lessons.

"Finally, IPAF is working with the FEM (Fédération Européenne de la Manutention) the US-based AEM (Association of Equipment Manufacturers) to create an international manufacturers' statistical exchange to allow manufacturers to get aggregated total statistics based on delivery data. We hope this will bring more clarity to forecasting in future years."

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