T
he results of this year’s Yellow Table survey (see p. 13) confirm
what anecdotal evidence and firmer facts like financial results
already indicated – 2013 was not a happy year for the global
construction equipment industry, with revenues for the 50 largest
manufacturers falling -10% toUS$ 163 billion.
It was an abysmal year for the global mining industry last year, and
this had an impact on long-line manufacturers in the construction
equipment sector. Add to this the on-going slowdown inChina and the
mixed (but on the whole negative) impact of a depreciating Japanese
Yen on the top 50’s revenues, and a -10% decline for the industry is
probably better thanmight have been expected.
But awider question forme iswhether the industry is going tohave to
get used to a changed andmore challenging global economic cycle.The
historical perspective is that cycles in this industry used to be as long
as nine years, with as many as seven years of growth followed by two
years or so of falling revenues. Not every company survived this cycle,
but from today’s perspective an era when an equipment manufacturer
could expect double-digit revenue growth for about 75% of the time
sounds like paradise!
Life since the Lehman Bros. collapse in 2008 has of course been
much tougher, and the revenues for the Top 50, as illustrated in this
month’s News Report, point to a much shorter cycle, with the periods
of growth and decline more evenly balanced. In fact this was a point
Doug Oberhelman, the chairman of Caterpillar, highlighted in the
company’s press conference at the ConExpo-Con/Agg exhibition last
month, voicing concern that the industry is facing shorter and more
vicious cycles than before.
I agree that has been the case since the crisis, but Iwouldn’t necessarily
say that this is the ‘newnormal’ that wewill all have to get used to from
nowon.This is becausewe are not back tonormal economic conditions
or policies..
Lehman’s collapse may be 5 ½ years ago, but the global economy
is still in an unusual place – interest rates remain historically low in
many countries of the world, many central banks are still keeping
the flow of money up with the unconventional policy of quantitative
easing – printingmoney – and numerous economies around the world
are having shaky moments, be they peripheral countries in Europe
struggling out of recession, or slowing emerging markets feeling the
come-down from all the stimulus of the last few years.
Clearly the global economy is not in a ‘normal’ phase, so I don’t think
it is possible to say this is the situationwe will be stuckwith forever. At
the same time, it will take time for a more robust and reliable cycle to
reassert itself and there may be more bumps in the road ahead. So for
equipmentmanufacturers, the keywill be to stay flexible, and findways
to stay profitable in these uncertain times.
Chris Sleight
Editor
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COMMENT
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april 2014
international
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