Trading places

21 December 2016


Crane owners looking to update their fleets can take advantage of buy-back schemes, trading-in old in part-exchange for new. Sally Spencer reports

Many crane manufacturers offer buy-back schemes, whereby owners can part-exchange their existing machine for a newer model. For some these schemes are built into their business model while others offer them on a case-by- case basis.

As an example of the former, Manitowoc has EnCORE, which is a branded rebuild, repair, re-manufacture and exchange programme. The programme caters for demand for single components or entire cranes and is designed with customers’ productivity and sustainability in mind.

The company says it is committed to helping crane owners maximise their investment.

“The clear benefit to customers is that we can offer a very competitively priced trade-in deal for an ‘old’ crane when we sell a new one,” said Erdogan Arslan, sales director for mobile cranes Central Europe and for used mobile cranes in Europe and Africa at Manitowoc.

He added that most of the cranes traded in are three years old or older and that all terrains make up the majority but that rough terrain and crawler cranes are also part of the mix.

It’s a slightly different situation at Kobelco: Kobelco Cranes Trading in Japan buys back cranes in trade-in deals on both its domestic and the wider south east Asian markets, while Kobelco in the UK sees far fewer of these transactions.

“I haven’t taken a trade-in in four years - not because we won’t but they just haven’t materialised,” said Mark Evans, Europe and Africa sales manager at Kobelco Cranes Europe.

Having said that, Evans is currently considering a deal involving the trade-in of two machines in exchange for two like-for-like models.

He says the market for secondhand Kobelco’s is so strong that if this deal goes ahead, subject to inspection, he anticipates selling on the two used machines without having to refurbish them and possibly without even having to take them into stock.

At Liebherr Nenzing, where crawler cranes up to 300t are manufactured, buy-back and refurbishment deals account for about 5% of the total volume. It’s certainly not the manufacturer’s core business but it is profitable and is a good means of market entry.

“The strategy helps us get a foot into a market,” said Wolfgang Pfister, marketing manager at Liebherr Nenzing. “In Latin America for example there are many businesses that start up with a refurbished machine. It’s in perfect condition but is 30–40% cheaper than a new one so it’s more affordable.”

Liebherr Nenzing manufactures and sells 300–400 new units and buys back and refurbishes 10–20 machines per year. It doesn’t have a standard buy-back scheme so it is always handled case-by-case.

Pfister stressed that there is no definitive ‘book price’ for traded in cranes. “Of course, we have guidelines for residual values based on age and operating hours but we always base our offer for buy-back on an individual evaluation by one of our specialists.”

Meanwhile, at sister company Liebherr Ehingen, where the company’s all terrains and crawlers over 300t are manufactured, 200- 250 used cranes are traded in annually when new machines are bought. As at Liebherr Nenzing, some of the cranes traded in have changed hands more than once since initial purchase and are on their second or third owner.

According to Wolfgang Beringer, marketing manager at Liebherr Ehingen, the company accepts nearly all crane types in trade-in deals and also machines from other manufacturers, from 30-1,200t.

Terex also offers a tradein programme for competitors’ products, along with its own Terex and Demag cranes.

“The trade-in can be part of the payment for the new crane or, if the new crane is fully financed, it is purchased separately,” said Sascha Reischmann, Terex Cranes used cranes manager. “We sell almost the complete range [through buyback/ trade-in programmes], from RT cranes and two-axle AC to big crawler cranes.”

Link-Belt doesn’t operate a direct trade-in, refurbishment and resale programme itself but some of its distributors, of which New England based Woods CRW is one, do.

The distributor covers eight states in the north-east of the US (all of New England, most of New York state and two-thirds of Pennsylvania) and sells both new and used cranes. The majority of its business is with Link-Belt, National Cranes, Shuttlelift Carrydeck cranes, and Maeda mini cranes.

“We sell and rent new machines but a big part of our business is taking in trade-ins, especially when companies may be updating fleets and not growing them,” said Chris Palmer, president.

“The bulk of the machines we have in stock are ones we’ve taken in as trades towards a new machine, or, frequently, another used machine.

“All terrain cranes, hydraulic truck cranes and boom trucks make up the majority but we also see a lot of rough terrain cranes and crawler cranes as well,” said Palmer.

Trade-ins and resales are dealt with on a case-by-case basis and include brands Woods CRW doesn’t represent. Field sales staff carry out an initial evaluation of the crane and a market analysis of comparably priced machines before canvassing the rest of the sales team to get a sense of the current demand for that type of crane, with that level of wear and tear.

The next step is a thorough technical evaluation enabling the company to estimate what it will take financially to bring the machine up to a safe, reliable condition.

There are occasions with older cranes or those for which there is very low demand when the figures don’t stack up and Woods CRW doesn’t take them in trade but recommends the owner tries to sell it outright on his own.

“Another option is to put used machines into an auction. We have relationships with auctioneers that we can refer customers to and perhaps give them some suggestions how to prepare that machine for sale,” said Palmer.

Liebherr Nenzing also reported instances where the company doesn’t buy back a machine, even though it could.

“If we know of other customers who are in need of such a machine we can bring them together,” said Pfister. “We don’t make any money on that but helping both parties build long-term partnerships can benefit us in the future.”

There is no really typical age for a used crane to be traded in, with manufacturers citing anything from three-years-old to more than 20.

“The two machines I am looking at are 12 and 13 years-old but I’ve got customers looking to trade in 25-year-old cranes,” said Kobelco’s Mark Evans. “The age profile for crawler cranes is far greater than it is for all terrain mobile cranes.

“Mobile cranes are using their running gear constantly up and down the motorway and they run heavy, with axle loads of 15–16t in the UK.

A crawler may be doing the same level of site work but it’s usually transported on a low loader or broken down and moved by truck.

“Most all terrain rental companies are looking to move those machines on at five-to-seven or seven-to-ten years, depending on what their cycle is,” said Evans.

“But crawler cranes retain a higher residual value than all terrains and in the UK (and indeed most of mainland Europe), people wouldn’t look to trade-in a crawler crane until it was at least ten years old and probably nearer 15.”

Market conditions, geography and regulations also have a bearing on the number of cranes being sold back to manufacturers.

“Current conditions are such that we are probably taking in more trade-ins than we were pre-2008,” said Palmer at Woods CRW. “That’s because many had the ability to sell their machines directly to end users.

There was a time when the US dollar was weak and a lot of emerging economies, particularly in the oil and gas sector, were hungry for used cranes. All someone had to do was put a machine up on a website and if it was reasonably priced it would go: regardless of condition, to be perfectly honest.

“In the current global economic environment it is work to sell used machines and people are looking for quality and safety. In the past we have done a fair amount of export but that has diminished significantly with the strength of the dollar and challenges in some of the developing markets. As a result, the majority of our used equipment sales currently are within the US and Canada.”

In a slower market crane owners are likely to experience more problems selling a used machine themselves rather than via a manufacturer with a global network, says Beringer at Liebherr Ehingen.

“A weaker second-hand market leads to more trade-in deals,” agrees Reischmann at Terex. “In these market conditions owners trust we will be able to sell their crane quickly through our network.”

At Liebherr Nenzing, Pfister shares the view that an economic slowdown provides opportunities “to strategically support markets that are not willing to invest in a new machine but are interested in a refurbished second-hand one”. That, he says, creates an incentive for the company to buy back used machines ready to sell on.

However, he adds that the flip side of the coin is that a booming economy sees reinvestment in new cranes and a corresponding increase in trade-ins. And, of course, it’s easier to find a customer for that machine when times are good.

“Booming or slowing markets both have an impact,” said Pfister. And Arslan at Manitowoc made the point that with the increasing “transparency” brought by the internet, many crane owners try to sell a used crane themselves.

“It’s also a regional issue,” he added. “For example, the market for buy-backs in Spain is very receptive. Spain’s economy has recovered but not to its mid-2000s level when it was booming and customers are very willing to buy refurbished machines.

“For this reason we are being proactive, buying back machines and refurbishing them. That way we have some sales in the Spanish market despite the fact that the economy is not strong.”

Pfister said that another significant area for its refurbished cranes at the moment is Hong Kong and other South-east Asian markets.

An area where there is currently less appetite for refurbished machines is Africa, where a dip in commodity markets and a hold on infrastructure projects are having a knock-on effect on demand.

“The economies of countries like Angola are very oil-based and dependent on the oil price,” said Kobelco’s Evans. “They will wait for the oil price to come back up and then the work will resume. There are also a huge number of infrastructure projects that are awaiting financing.

Contractors won’t commit to replacement equipment until these projects get the go-ahead.” Currency exchange rates also play their part, of course, as do regulations.

Crane users in Africa may have an incentive to hold onto their old machines rather than trade-in and trade-up because they don’t have the fuel for Tier 4 engines.

“The sulphur content in the fuels they have is far higher so they can’t run a Tier 4 engine,” said Evans. “99% of Africa still runs a Tier 3 machine and there is a need for these older engines until the refineries come up to speed.

“We sell a number of Tier 3A machines and they are perfect for places such as South America, the Middle East or Africa, but I can’t sell them into the US or Europe.”

This, of course, has a profound impact on the attractiveness of a crane presented for trade-in.

“A crane rental company operating predominantly in London isn’t going to buy a year 2000 or even 2008 machine from you because he can’t send it to work on job sites that specify a Tier 4 engine. And people aren’t trading in Tier 4 engined cranes yet because they are too new and demand is too high.”

Pfister adds that one trend that has emerged is that more machines are now exchanged before they reach the end of their life cycle.

“Emissions standards have an impact on trade-ins because some countries have very strict regulations. For example, Hong Kong is well known for having job sites that will only allow machines under a certain age to operate and this forces crane owners to renew them earlier than they otherwise would.” Another trigger for a crane owner trading-in and buying new is a financial incentive.

“The customer may want something newer and with more capacity or it may be a situation where there are accelerated tax advantages,” said Chris Palmer at Woods CRW. “Here in the US there are tax advantages to buying new equipment in so far as what you can write off in the first year. That tax saving can then be reinvested in a new machine to update a fleet.”

Having the option to sell a crane back to a manufacturer has many benefits for the owner but chief among them are convenience and “security”, particularly where the machine is something other than a standard lift crane.

“There isn’t a mass market for a duty cycle crawler crane, for example, so the knowledge the owner can give it back [in part exchange] gives them security,” said Pfister. “If the manufacturer buys the machine back, the customer usually gets a better price than from a dealer. And, even more important, the customer benefits with regards to the time factor. With specialized equipment such as duty cycle crawler cranes there might be a long lead time for a new purchase. This is where the customer benefits from buy-backs.”

As mentioned, the price paid for a traded-in crane depends on its marketability and on condition – the economics of paying for a secondhand machine and refurbishing it have to stack up for the manufacturer as well as the owner.

“The condition of the crane, its maintenance and performance define the value,” said Reischmann at Terex. “If a crane has been in an accident or been damaged we offer professional repair or trade-in. And even if a crane has worked hard over many hours and travelled many kilometres in challenging locations, we offer fair values.”

Selling cranes without repair or refurbishment is the exception and only happens with older units that are sold on an “as seen” basis.

Terex carries out 90% of refurbishments in its own workshops in Bierbach in Germany, Long Crendon in the UK, Helsingborg in Sweden and Crespallano in Italy and only uses original spare parts.

“If we rely on third parties to refurbish we specify that only original spare parts are used,” said Reischmann. “The refurbishment process and content is standardized and we verify the condition of the crane by a final inspection by our team.”

Liebherr Ehingen examines the condition of the traded in crane, rates its value and then when negotiating its onward sale, discusses the level of refurbishment with the new buyer. And new buyers are often lined up before the machine comes in.

“When customers want to buy a very special model we contact them as soon as one comes in,” said Beringer.

“We discuss what condition the customer wants the crane in: its actual [existing] condition, repaired, newly painted, a new inscription or even with warranty. We carry out the refurbishments in our own repair shops in Germany, Spain, Italy, the UK, France, the US and more.” Liebherr Nenzing also carries out any necessary refurbishments in the company’s own “strategically located” repair workshops, including, for example, Hamburg and Hong Kong.

“Liebherr is a premium brand and we want to ensure standards and quality levels are met,” said Pfister. “If a third party were to have responsibility [for repairs and refurbishments] we wouldn’t have the control we want.”

All Manitowoc’s used cranes go through the EnCORE programme before resale “to make sure we can offer the best quality even on used machines”, said Arslan.

“We either do the refurbishment at our Manitowoc EnCORE workshops around the globe or we use our dealers, who are qualified to operate our EnCORE programme,” he added.

Most of the trade-ins at Woods CRW require “basic refurbishment” rather than complete rebuilds. Mechanical repairs are completed in house at the company’s full service workshops in New York State, Pennsylvania, central Massachusetts and Vermont.

“Our newest built facility is in central Massachusetts and has a extra wide doors for bringing in large crawler cranes,” said Palmer. “We also have extra high shop ceilings and twin overhead cranes that allow us to tear hydraulic booms apart very efficiently.”

The next buyer of a traded in and refurbished crane often – though not always – benefits from a manufacturer’s warranty.

“The customer can inspect the crane unhurriedly and we deliver tested quality with a warranty,” said Beringer at Liebherr Ehingen.

Terex Cranes offers a warranty programme for “young to midage” Terex/Demag products which comprises full warranties (as for a new crane) or major component warranties (for parts).

“The purchaser gets full and new documentation along with every Terex and Demag crane,” said Reischmann. “Refurbishment certifications can be issued as well as country-specific confirmations.” Liebherr Nenzing’s warranty cover depends on the level of refurbishment and while it’s not the same as that offered on a new crane, it is usual to give a six-month or 1,000 operating hours warranty following a complete overhaul.

“There is also negotiation with the customer – some want an additional warranty on the engine, for example,” said Pfister.

At Manitowoc the guarantees are dependent on the customers’ needs. “We offer up to a 12 month warranty and all inspection reports are delivered with the crane,” said Arslan.

Distributor Woods CRW has a different policy, however.“There is so much variability it makes it very difficult to offer written warranties and it would make us less price competitive,” said Palmer. “However, we do have a policy whereby if anything major were to happen within a short period of time after purchasing one of our used machines we would work with that customer and ensure they felt they were treated fairly on the repair.”

For Woods CRW it’s all about building trust. “As an example, a few years ago a customer bought a used 65t hydraulic truck crane from us and the engine blew on the way back to their facility,” said Palmer.

“We brought it back, did the repairs here and worked with the customer, contributing to the repair cost. The customer ended up with a used machine with a rebuilt engine, as opposed to something that was a bit more of a question mark and he’s been loyal to us ever since.

“Our business model is to create long-term mutually beneficial partnerships with our customers. I’ve known machines that we’ve taken in as trade-ins as many as four times over the years as customers’ needs have changed.”

An EnCORE for tower cranes

Buyback and refurbishment isn’t unique to mobile cranes. Manitowoc’s EnCORE programme also covers Potain tower cranes, extending their lifetime and helping customers maximise their investment.

“We are trying to minimize so called ‘forced trade-in’ purchases and are reinforcing proactive purchasing, looking specifically for models that will serve our used crane strategic market developments,” said Bruno Durand, used cranes director at Potain.

“This will certainly impact the way crane owners interact with us.” This proactive process takes into consideration the model, year of manufacture, crane options, market demands and the condition of the unit. The programme isn’t specifically tailored for damaged or very hard worked cranes and well maintained units attract a premium.

“Mostly based on the year of manufacture and the condition we are able to assess what is the most suitable EnCORE refurbishment level,” said Durand.

“These are Working Condition – which is the absolute minimum condition in which the crane will be sold to our partners, dealers and key accounts – EnCORE Standard or EnCORE Premium.”

All used cranes are inspected on arrival. “Most cranes require some level of repair in order to reach the minimum requirement that we call ‘working condition’,” he added. “And we intend to increase the number of used units undergoing our EnCORE refurbishment programme as this adds value for our customers.”

Refurbishments take place in selected Manitowoc manufacturing plants and by employees trained and equipped to carry out the structured EnCORE methodology. All parts used are OEM.

“We are also developing EnCORE certified partners that are selected Manitowoc dealers best capable of executing our ‘OEM certified’ refurbishment programmes,” said Durand. “Guaranteeing our used cranes gives us strategic differentiation and our EnCORE refurbished used cranes come with guarantees ranging from 6-12 months, depending on the level of refurbishment chosen by our customers.”

As well as the warranty, other advantages provide by the EnCORE programme are that the company is structured to meet specific regulations in the countries where the used crane will be used. And in addition, said Durand “all our inspections are documented, service is directly provided by our distribution network and we provide technical support.”

Liebherr’s repair shop at Ehingen
This 21-year-old Potain Potain HD 32 A self erecting tower crane was refurbished at the Manitowoc EnCORE facility in Baltar, Portugal and sold to long-standing customer Talib & Shamsi Constructions in India
A Manitowoc GMK 5220 before, during, and after repair
A Terex AC 40 City, before and after repairs.
Woods CRW refurbished this 15-year-old Link-Belt HTC8670, shown before (left) and after (here).
An RTC 8090 at Woods’ North Oxford, Massachusetts, workshop.