Perfect Fit

March 21, 2007

Credibility, integrity and leadership. All are qualities a strong leader should possess, and as the newly confirmed U.S. secretary of transportation, Mary Peters fits the bill.

Credibility, integrity and leadership. All are qualities a strong leader should possess, and as the newly confirmed U.S. secretary of transportation, Mary Peters fits the bill.

The appointment of Peters to head the nation’s transportation agency received bipartisan praise from Congress and loud applause from the transportation associations. “We think she was an excellent choice,” Matt Jeanneret, senior vice president of communications and marketing for the American Road & Transportation Builders Association, told Roads & Bridges. “We know the nation has some transportation challenges going forward, but we look forward to working with her and we’ll try to address them.”

Taking over for former Secretary of Transportation Norm Mineta, who retired in July, Peters will spend the final two years of the administration’s term dealing with a full plate of issues. Most pressing will be the reauthorization of the nation’s aviation programs and the airport construction law, Vision 100, which expires next fall. Included in the reauthorization is the Airport Improvement Program, which funds airport construction and represents market opportunities for the transportation construction industry at some of the nation’s airports.

In addition to the aviation bill, Peters will be heading the Blue Ribbon Revenue Commission—a creation of SAFETEA-LU to identify the best ways to finance federal transportation improvements post 2009. The commission will work closely with the private and public sectors as well as associations in completing its final report, which is due at the end of 2007. “The recommendations that the commission comes up with will have an important impact on the debate relating to reauthorization,” said Jeanneret.

Although the current administration will be out of office by the time the next highway bill comes along in 2009, work on the reauthorization of SAFETEA-LU will most likely begin in 2008. “I would think they would want to come forward with some policy proposals and legislative recommendations for that bill,” Jeanneret said. “Even though that won’t happen until after they’re gone, I think they will have some stake in that.”

In addition to completing the nation’s aviation bill and planning the reauthorization of SAFETEA-LU in the next two years, Peters also will have to address issues that have been nagging the industry for years, such as the lack of sufficient funding for improving the nation’s infrastructure, as well as alleviating congestion on our roadways.

“Mary is going to be challenged with how the federal government will work with individual states to try to invest in the infrastructure that we need in this country,” Jack Finn, senior vice president of HNTB Corp., told Roads & Bridges. “The federal government has to work with states to come up with additional revenue sources.”

Other sources of revenue that Peters will most likely be looking into, according to Finn, include user fees, or tolls, and privatization. “The federal government sees that they are going to have to tap into other revenue sources, and that may be the private sector,” said Finn. “[Peters] knows it’s not the solution to everything, but it certainly can help leverage and supplement the available state and federal funding that’s out there.”

With Peters heading the transportation department, her creative methods to grab the public’s attention and unanimous support among the industry is a much-welcomed positive in an area of our country that is dealing with many challenges.

Tolls may be the answer out west

Arizonans may have to get used to the idea of paying tolls if they want new and expanded roads, Mary Peters—the nation’s new top transportation official—recently said.

Rapidly growing states such as Arizona will not be able to count on federal money to keep up with highway construction needs, said Peters, who was confirmed in early October as U.S. secretary of transportation. She said states must find other ways to finance new roads and maintain the ones they have, the Arizona Daily Star reported.

Peters, an Arizona resident, said that includes letting private companies build roads and lanes—and allowing them to charge people to use them.

“The truth is, the traditional sources of funding are not going to be adequate in the future,” Peters said in an interview with Capitol Media Services. “So we have to diversify our funding sources.”

Peters acknowledged that Arizona is a donor state when it comes to federal highway aid, sending Washington more in gasoline taxes collected in the state than it receives back in federal highway aid, the Arizona Daily Star reported. But she also said states will have to look at other sources of revenue.

“One good way to do that is to tap into the significant amounts of private-sector money that’s out there today and ready to be invested—if you can find a project that works with it.”

That, she said, means opportunities for the use of toll roads in Arizona.

Peters cited the example of special lanes on the Riverside Freeway in Orange County, Calif., where drivers pay tolls from $1.15 to $8.50—depending on the time of day—to use four special lanes to get around the congestion. Peters said that in Arizona, such funds could be used to add more special car-pool lanes to state highways.

Peters conceded that while people in the East take paying tolls for granted, the concept is relatively alien in the West, according to the newspaper.

Ultimately, Peters said, it comes down to explaining the fiscal reality to motorists. “You can either sit in the congested so-called ‘free’ lanes or you can pay a fee, pay a toll if you will, and use a route that will get you there when you want to get there and when you need to get there,” she said. “It’s about giving the public options.”

Cement use rising

Led by an expected 8.5% growth in China, world-wide Portland cement consumption will increase 5.6% this year followed by a rise of 5.5% in 2007—an average of nearly 130 million metric tons annually—according to a new forecast by the Portland Cement Association (PCA).

The report cites growth conditions in the developing world, particularly China, as playing a critical role in consumption trends. Roughly 20% of cement-consumption growth will occur outside of China and the industrialized world, mostly in other Asian countries, the Middle East, Eastern Europe and South America.

“While the major developed economies like the U.S. and Western Europe have generally performed well,” PCA Chief Economist Ed Sullivan said, “world economic growth has been characterized by buoyant growth outside these industrial countries.”

Sullivan predicts the world economy will increase 3.2% in 2006, with a 2.9% increase expected in 2007.

Growth in cement consumption is expected to be in par with estimates for planned capacity expansions and paralleling usage, and most expansions and plant updates will occur in China.

Oshkosh to acquire JLG

Oshkosh Truck Corp. of Oshkosh, Wis., announced in mid-October that it has signed a definitive agreement to acquire JLG Industries Inc., a global leader in aerial work platforms and telehandler vehicles. Oshkosh will acquire all outstanding shares of JLG for $28 per share. Total consideration, including transaction costs and assumed debt, is $3.2 billion in cash on a fully diluted basis. This transaction will create a $6 billion global specialty vehicle manufacturer.

“We have consistently executed strategies to grow this company, creating significant shareholder value during the last decade,” said Robert G. Bohn, Oshkosh’s chairman, president and chief executive officer. “The acquisition of JLG is the latest broad-based initiative in the continuing transformation of Oshkosh Truck Corp.”

JLG had $2.3 billion in revenues during fiscal 2006 and has estimated a 20% to 25% increase in sales in fiscal 2007. It has the top market position in North America and Europe for aerial work platforms and is the top producer of telehandlers in the U.S. JLG placed 22nd on Fortune magazine’s 2006 list of the “100 Fastest-Growing Companies.” The ranking was based on three-year profit and sales growth through the first quarter of 2006 and three-year total return to shareholders.

“This transaction is a good fit for JLG,” stated William M. Lasky, chairman, president and chief executive officer of JLG. “Oshkosh has a similar philosophy of offering premier products, creating strong market positions and delivering after-sales service and support. For the JLG team, this combination offers additional growth opportunities. For our customers, JLG will become an even stronger partner in their future success.”

“We are excited about the addition of this market-leading global company and expect a smooth integration into the Oshkosh family,” said Bohn. “At the same time, we expect to realize substantial purchasing and logistical synergies, while benefiting from JLG’s already outstanding manufacturing operations.”

The transaction is expected to be modestly accretive to Oshkosh’s earnings per share in fiscal 2007 after giving effect to estimated non-cash charges relating to amortization of acquired intangibles and other one-time accounting and transaction-related costs. Oshkosh will finance the transaction with a $3.5 billion senior credit facility provided by Bank of America, N.A., and JPMorgan Chase Bank, N.A., and retire most of JLG’s currently outstanding debt. The acquisition has been approved by the board of directors of each company and is subject to customary closing conditions, including approval under Hart-Scott-Rodino and similar laws outside the U.S. and the approval by the shareholders of JLG.

The transaction is expected to be complete within 90 days. Upon completion of the transaction, JLG will become the largest of four business segments of Oshkosh. It continues the diversification of the company. In fiscal 2008, the first full fiscal year of Oshkosh’s expected ownership of JLG, Oshkosh estimates that JLG will represent approximately 40% of its consolidated sales and operating income.

Bauma gets bigger

Bauma 2007, to be held April 23-29 in Munich, is expecting more international companies for construction, building materials and mining to exhibit their current product innovations as well as the latest trends in technologies and services in the exhibition area than at the 2004 show.

The exhibit halls are already booked and the demand for open-air space is great. Due to so much interest, the bauma exhibition space increased by 30.000 sqm to over 530.000 sqm compared with the 2004 show. It is expected that bauma 2007 will surpass the last bauma by far.

The Chinese exhibitors will be presenting themselves nearly five times as large as at the last edition of bauma. India has asked for more than four times more space and Japan has requested five times the space. Exhibitors from Austria, Luxemburg, Turkey, Korea and Greece have doubled their demand, and companies from countries such as Bulgaria and Singapore want to exhibit at bauma 2007 for the first time.

This demonstrates the importance of bauma as a trade fair for construction machinery and equipment, building materials machinery and mining technology around the world. It underlines its leading position as a meeting place for all key industry players.

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