1999-00 ROADS & BRIDGES equipment and truck ownership trends survey

Article December 28, 2000
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Buoyed by the passage of a new federal transportation act and a strong economy, the outlook for truck and equipment purchases for ’99 remains optimistic, according to responses to the annual ROADS & BRIDGES equipment ownership survey.

Four thousand surveys representative of the magazine’s circulation list were mailed to contractors, municipalities, county agencies and state DOTs to gauge the level of equipment purchasing for the next two years. Recipients of the survey were selected on an “Nth name” basis, all of whom indicated they are responsible for buying or specifying trucks, trailers and mobile equipment. The response rate was 19%, with a total of 747 responses. All percentages and numbers listed in the survey are based on these 747 responses.

The classification of the 747 respondents are: contractors, 35%; municipalities/townships, 29%; state DOTs, 19%; and county agencies, 17%.

State DOT outlook bright

State DOTs indicated that the conditions are favorable for an increase in ’99 for truck and equipment purchases and even more promising for 2000. The majority of DOTs plan on spending between $1 to $100,000 on trucks in ’99 and 48% forsee an increase in that amount in 2000. Overall, the state DOTs estimated buying 1,057 Class I, 622 Class II, 395 Class III, 254 Class IV, 151 Class V, 220 Class VI, 792 Class VII and 1,607 Class VIII trucks.

According to Ford, the classes are defined as: Class I (less than 6,001 lb GWV); Class II (6,001 to 10M GWV); Class III (10,001 to 14M GWV); Class IV (14,001 to 16M GWV); Class V (16,001 to 19.5M GWV); Class VI (19,501 to 26M GWV); Class VII (26,001 to 33M GWV); and class VIII (greater than 33,000 lb GWV).

When making equipment and truck purchases, state DOTs and contractors concede that price and meeting their specifications are the two most important factors that they consider. Manufacturer support and dealer service also ranked high on the list for contractors.

“We take a variety of things into consideration for a variety of reasons,” John Avery, highway managment administrator for the Ohio DOT told ROADS & BRIDGES. “Price usually is one of the first things we look at, since we’re a state agency, but we do have multi-award contracts so we can purchase the various types of equipment that we need, so it’s not necessarily price all of the time. We want to be sure that we have all of the options we need. That’s the most important thing: to have what we need to do our job. Particularly in snow and ice equipment, there’s a lot of specialized equipment.”

Contractors plan for purchases

Contractors are looking at purchasing more concrete and asphalt pavers, graders and wheel loaders, which can be attributed to new construction. The amount of new construction for 2000 is expected to increase even more, due to the Transportation Equity Act for the 21st Century (TEA-21), according to the respondents.

“In 2000 we will see an increase,” said Jon Rose, office manager at Inland Crane Inc. in Boise, Idaho. “I’ve seen the preliminary drawings for some of the projects and there are some pretty substantial projects that are coming up. So if those come to pass, I think that our end of work will definitely increase.”

“I would anticipate in the year 2000 that our equipment purchasing may go up,” said Jim Ovard, president of Ovard Construction Inc., Idaho Falls, Idaho. “I see some opportunities on the horizon that would require expanding our fleets.”

Reconstruction also is on the rise, as indicated by the number of milling machines and curb and barrier formers being purchased.

TEA-21 to increase demand

According to equipment manufacturers and highway contractors, the impact of the new federal transportation funding legislation passed last summer, TEA-21, will result in increased sales trucks and heavy construction equipment.

John H. Marrifield, senior vice president of sales and marketing for Sterling Truck was optimistic about TEA-21’s impact on the nation’s infrastructure and the effect it would have on truck sales. “The sheer volume of road projects to be funded virtually guarantees increased demand for these vehicles,” he said.

Helping agencies improve highways and bridges is another benefit truck manufacturers will derive from improved funding, according to Marrifield. “Anything that enhances highway transportation enhances the attraction of trucking as the pre-eminent mode of freight transportation, which again should lead to an increased demand for heavy trucks.”

“The next two years should see a significant increase in the highway and bridge construction market,” said Pete Wert, chairman of highway contractor Haskell Lemon Construction, Oklahoma City, Okla., and AGC president. “With confidence that a growing construction market is assured, contractors will be making needed investments in new trucks and equipment to keep up with the demand and to replace aging vehicles.”

More highway and bridge projects also means more materials will have to be transported. For instance, increased federal spending for highways and mass transit in TEA-21 should result in an increase in shipments of asphalt products of almost $700 million by 2003 and an increase in shipments of concrete products of over $800 million, according to a report by Bill Buecher, an economist for the American Road & Transportation Builders Association (ARTBA) in Washington, D.C.

The figures include both direct and indirect sales, which are sales generated by the initial spending on highways and mass transit plus the indirect sales generated by the increased output of other industries.

According to the report, the increases would represent a 7% increase in shipments of asphalt products over the 1997 level of about $10 billion and a 3% increase in shipments of concrete products over the 1997 level of about $26 billion.

Sales boom

“The passage of TEA-21 will be a tremendous benefit to the equipment sales of our members who make most of the equipment for highway and bridge construction,” said John Smiley, vice president for Equipment Manufacturers Institute (EMI), Chicago. “EMI was very supportive of the bill and encouraged President Clinton to sign the authorization.”

Al Cervero, vice president of the Milwaukee-based Construction Industry Manufacturers Association (CIMA), told ROADS & BRIDGES, “The impact of the recently passed highway bill, TEA-21, will certainly be a significant boost for the manufacturers of road-building equipment and related equipment and products.”

According to ARTBA, between FY 1997 and FY 2003, federal highway spending is scheduled to increase by about $8 billion to $8.5 billion. This means that sales of construction machinery in 2003 could be as much as $2.5 billion higher than in 1997, if past relationships hold.

Jack Lease, vice president and sales manager for Bid-Well, a manufacturer of concrete paving equipment, added, “TEA-21 will provide money for equipment. Overall, it will improve the infrastructure in the country. TEA-21 will be good for everyone, the general public, contractors and manufacturers, because it will generate jobs with the money spent.”

Joel Borgardt, marketing manager for heavy equipment maker Case Corp., said, “TEA-21 will give the broad construction industry and equipment manufacturers continued growth opportunities. It is estimated that for every billion dollars spent, $300 million worth of equipment will be purchased and 42,000 jobs will be supported.”

“It’s a definite positive for construction equipment in new and old highway construction and bridge building,” said Pat Reilly, marketing manager for Hitachi Construction Equipment.

CMI’s Swisher told ROADS & BRIDGES, “As far as a sales standpoint, I expect an increase in activity between 40 and 50%. Greater volumes of equipment may be manufactured as a result of the bill. TEA-21 is very positive from an equipment manufacturer’s standpoint.”

“At Caterpillar, we can expect to see increased sales of motor graders, tractor scrapers, paving products and articulated tracks,” said Rita L. Castle, issues analyses manager, corporate government affairs for Caterpillar. “And our newly announced compact construction equipment will certainly benefit from the program funding.”

Additionally, there also is a state matching requirement for most highway programs. The state match is generally 25% of the federal contribution—for an additional $2 billion of highway spending—or a total increase of $10 billion to $10.5 billion by FY 2003. The net impact of TEA-21 on sales of construction equipment could be as much as $3 billion by 2003, according to ARTBA.

“We project the largest TEA-21 equipment purchasing impact to hit manufacturers in the second half of 1999 and in 2000,” said Case’s Borgardt. “As such, Case plans to capitalize on the opportunity. Customers will see us launch several new products that are especially well-suited for road and bridge work, during the first half of 1999.”

Equipment sales expected to remain healthy in ’99

The construction equipment manufacturing industry is anticipated to remain healthy through 1999, with domestic markets leading the way, according to an annual forecast of machinery makers conducted by the Construction Industry Manufacturers Association (CIMA).

Construction machinery manufacturers participating in CIMA’s annual “outlook” survey expect construction equipment business in the U.S. to close on a strong note for 1998, with increases of 12.3%, followed by a 1999 growth of 9.3%.

“CIMA’s survey revealed optimism across all product lines,” stated Ronald DeFeo, chairman of Terex Corp. in Westport, Conn., and chairman of the CIMA international trade group. “Certainly the passage of the six-year highway bill is a significant boost to our industry and the strength of our domestic growth will help offset the impact of falling export sales. Of course, recent economic and political uncertainties can affect consumer and investor confidence, so our optimism is tempered with caution.”

The state of the overall U.S. economy tops the concerns of machinery manufacturers across all product lines as they look to 1999, as well as the impact to their businesses of falling Asian markets and other international downturns, according to the CIMA forecast survey.

Machinery makers also cite distribution trends, especially growth and consolidation in the rental industry, as another key factor which will have a major impact on their business in the coming year.

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