There is no doubt that the North American crane market is in a horrible state. July 2002 was quite possibly the worst month for crane manufacturers in the USA in the past 35 years. There were just 60 hydraulic mobile cranes sold in North America in that month, perhaps the lowest ever monthly total since sales numbers were collated.
The worst year for mobile crane manufacturers in North America so far was 1983 when fewer than 1,000 mobile cranes were sold on the continent during the year. This compares with a peak of about 5,000 in the mid 1970s and about 3,000 in 1998. Even allowing for the fact that July is normally a slower month, the fact that just 60 units were sold in that month this year is a real indicator of the state of the market.
As we reported in our August issue, industry consultant Chortsey Barr is predicting the North American market for 2002 for hydraulic telescopic boom mobile cranes to be around the 1,200 unit mark, 33% down on 2001, which was itself 33% down on 2000.
Bob Hixon, sales vice president at Grove, agrees with the estimate of 1,200 units being sold in 2002, but says this is a 15% drop on 2001 rather than a 33% drop. Either way, the market is at least as bad as it was in the early 1990s and getting as bad as the early 1980s.
Way to go
Craig Lichty, group senior VP marketing and services at Terex Cranes, believes the North American market still has some distance to fall and that it will not hit the bottom until September 2003. It will be 2004, Lichty believes, before any visible recovery kicks in.
It is in rough terrain sales that the downturn in sales is most visible, with the market less than half the size this year that it was in the peak year of 1998. ‘The big rental companies have learned that they can’t beat each other up on price and they are all looking for niches, Hixon explains. ‘And RTs is not a niche that anyone is choosing.’
Rental companies have also been hit by the devaluation of their fleets, Hixon says. A new crane today costs less than the book value of a two year old machine in the fleet.
What makes the market even worse is that other crane types are now in decline too, after demand for them initially proved more resilient. Lichty says that the boom truck business held firm for a while but is down 15% this year.
The truck crane market is also less than half what it was in 1998, and in 2002 is significantly down on 2001, possibly by as much as 50%. Lichty describes the 40 ton market as ‘soft’, the 60 ton market as ‘okay’, and the 70 ton market as ‘full of Link-Belts’. It is the 90 ton market that is now seen as the only one with potential to exploit. In this class Terex launched its 790 truck crane at ConExpo earlier this year and Grove begins shipments in February of the new TMS 900E. This is a 90 US ton (80t) E series truck crane with a pinned Megaform boom. As previously reported, the crane features the upper of the GMK 4075 and the strong US chassis of the TMS 875. This is not the first time that a German-style Megaform boom has been used on a US product (the TMS 700E is among those that have it), but it is the first time that Grove has gone for a pinned solution rather than a full power boom.
With Terex and Grove bringing out new 90 ton truck cranes, it is highly likely that Link-Belt will also enter this market next year.
The lattice boom crawler crane market was not really down at all in 2001 but this year it is down about 15% to 20%, Lichty says. For Terex’s US crawler crane division, Terex American, the second quarter of 2002 was its ‘best ever quarter’, but this had more to do with Terex’s schedule of delivery to distributors rather than an upswing in market demand. It shipped a lot of the year’s programme of IHI-built cranes ahead of schedule. ‘Then things shut down rather more than usual in July,’ Lichty says.
According to Manitowoc Company Inc CEO and chairman Terry Growcock, the lattice crawler crane market declined 10% in the first six months of 2002, yet Manitowoc’s own revenues were down just 1%. Manitowoc’s sales deteriorated in the third quarter and Growcock warned: ‘We anticipate that slower demand is now likely throughout the fourth quarter and well into 2003.’
The big crawler owners like Essex Crane Rental and All Erection have been hit by the downturn in spending in the energy sector this year in the wake of the collapse of Enron. The energy sector traditionally accounts for about a third of Essex’s revenues.
Manitowoc v Terex
The year’s big acquisitions – Manitowoc buying Grove and Terex buying Demag – has taken no crane manufacturing capacity out of the market but should ultimately reduce costs for buyers. And even though much management time at these companies is being diverted into making the integrations work, and despite the terrible state of the market, there appears to be no reduction in new product development.
These two big mergers put Manitowoc Crane Group and Terex Cranes very clearly at the forefront of the North American mobile crane manufacturing industry. There are other important players too, of course. Link-Belt, backed by Sumitomo, remains a powerful competitor, and imports from Liebherr in particular, but also Kobelco, Tadano and others, are a significant challenge. But it is the Manitowoc-Terex battle that is most acute across the full range of crawlers, ATs, RTs, truck cranes, tower cranes and boom trucks.
At Manitowoc there is enormous confidence that Terex poses no great threat. ‘We differentiate ourselves from Terex by quality and product support,’ says Manitowoc Crane Group president and general manager Glen Tellock. He recognises that Demag, along with Liebherr, offers strong competition in the large sized crawlers but says that Manitowoc’s new 600t model 18000 ‘will hit them right in the face’. It is just about the only product segment for which Manitowoc admits to having any need to respond to the competition. On the mobile crane side, when asked to suggest any product areas in which Grove is losing out to Terex/Demag, Grove marketing director John Bittner says: ‘Nothing comes to mind.’ He acknowledges that Grove does not have the very largest all terrains of 500t and above, but the market is so small – with only about a dozen of them across the entire USA – that this is not a major consideration.
Manitowoc and Grove are still continually improving their product offerings, however. This year sees new model 1015 and 18000 crawler cranes from Manitowoc. Grove is continuing the cross-fertilisation of its German-built GMK all terrain family with its US truck and rough terrain cranes. The previously mentioned TMS 900E is an example of this.
There remain weak spots in the Manitowoc/Grove line up, which are likely to be acted upon. Grove’s three-axle all terrains do not do as well as its four-, five- and six-axle ATs; and despite the best efforts of the West-Manitowoc adventure, Manitowoc’s presence at the smaller end of the crawler crane market presents no global challenge.
Of the battle between Terex/Demag and Manitowoc/Grove, Terex Cranes CEO Fil Filipov suggests that the product lines are comparable. ‘In North America it’s clearly a wild guess as to who has the best product and which is going to work.’
Filipov does not accept that the Manitowoc/Grove combination has any advantages over Terex/Demag in distribution. Terex American and Demag have both sold crawlers cranes direct rather than through a distribution network. This will continue. According to Filipov, fewer than 10% of Manitowoc’s crawler crane sales go through distributors. The crawler crane business is all direct sales now anyway, Filipov says, so established distributors are not that much of an advantage. And increasingly the mobile crane business is also moving away from distribution to direct sales, he argues. Terex sells direct what Filipov describes as its ‘bare rental pickers, our simple, available, cost effective machines’. This is because about a dozen rental company customers account for two thirds of the market. Filipov’s attitude is: What does it matter if Manitowoc has a great distribution network? Direct sales, he firmly believes, is ‘where it’s at’.
Filipov is also adamant that Terex has got its act together on product support, an area that has brought criticism in the past. ‘We have more than 30 people working in crane support in North America. That’s more than the competition.’ This figure includes direct employees of the Waverley, American Crane, RO and Demag operations. It will be up to customers to decide how this coverage compares with the responsiveness of Manitowoc/Grove’s support network, in which distributors are closer to the bosom of the manufacturer than is the case at Terex, or, for example, with the 25 field service engineers that Schiller, the exclusive Liebherr distributor, promises to have by June.
While Filipov has no inferiority complex about the market reach of Terex, he does appear to have a much greater sense of purpose about ‘beating up the competition’, which means primarily Manitowoc/Grove in North America and Liebherr in Europe.
Terex is not just looking to be more aggressive but also more flexible in the deals that it offers. It now takes trade ins, where it did not used to, and has set up a rental operation as a separate cost centre.
Filipov identifies city class mobile cranes as one of his advantages. ‘We have great 30t, 40t and 60t city cranes. We have already made more than 500 of them. We are going to try to promote these in the US against the trucks.’ He concedes that ‘there are roadability issues in certain states but these can be taken care of more easily in some states than in others.’
But the future of Terex does not depend on US end-users falling in love with city cranes. Such a strategy would be high risk indeed. There is a wide scope of new models, as reported on pp 14/15 this issue. Of these, the one being aimed directly at North America is the 300t Demag CC 1500 lattice boom crawler.
According to Filipov, Demag has 45% of the worldwide market for lattice boom crawler cranes of 300t capacity and above. But it is a market of only about 90 or 95 units. In North America Terex American has 35% of the market up to 200t, but that also is a small market. The real action takes place in the 200t to 300t range where there is a market of about 200 units, dominated by Manitowoc’s 999 and 2250 models. Terex is targeting this market, and not just with the CC 1500. This month a luffing jib attachment becomes available for the HC 275 (275 US ton). This machine has also been tweaked to take on the Manitowoc 999. Some 23t (51,000 lb) of counterweight has been added to improve its chart to outperform the 999, Terex says. Upper counterweights have been redesigned to make it easier to transport, reducing by three the number of trucks needed to transport the full machine. Improvements have been made to the counterweight handling hydraulics to improve control and make installation and removal of counterweight smoother. The next step for this crane is a heavylift attachment, for the which the famous Skyhorse brand name might well be revived.
The only crawler cranes that Terex American builds today are the HC 150 (150 US ton) and the HC 210 (210 US ton). Both models have the same carrier. Terex American will build about 10 of these cranes this year in total. But even these are on their way out. Next year Terex plans to replace the HC 150 and the HC 210 with Japanese IHI machines, and then bring in luffers for them. This will standardise the range below 300t to all IHI models.
Terex American’s facility at Wilmington is today mostly an assembly plant for lattice booms and tower crane masts, welding together the chords and sections that come in ready cut and shot from a supplier in the Midwest. Next year it won’t make any cranes at all in Wilmington.
The one market segment where Terex-Demag might really expect growth in North America is in all terrains. Traditionally Demag has lagged behind Grove and Liebherr. Grove is the market leader in ATs in North America, selling well over 100 in 2001 out of a total of nearly 290. Schiller sold a little over 100 Liebherrs, and Demag about 35. This year the AT market is looking like being in the region of 230 units, with Grove again selling nearly half of these and Schiller/Liebherr at about 80 to 85 units.
Deliveries by Grove this year include the first GMK 7550 to Armstrong Crane & Rigging of Minneapolis. A second unit is scheduled to ship to All Erection this month. The GMK 7550, called 7450 in Europe, is a seven-axle AT rated at 450t (550 US ton) and was launched at ConExpo this year.
Schiller reports that ConExpo generated ‘quite a bit of business’ for both ATs and crawler cranes. Deliveries include two 400t LR 1400 crawlers to WO Grubb, a 350t LR 1350 to Cranes Inc, and a 500t LTM 1500 to Bay Crane.
Schiller vice president Ingo Schiller adds: ‘We have had great success with the LTM 1250 in the New York City area with small companies. The long boom [72m] opens up new possibilities for them. It’s not always about lifting capacity.’
Ingo and his father Heinz Schiller, founder and president of the company, are both ‘absolutely thrilled’ about the industry consolidation. ‘The more successful they are, the better it will be,’ says Ingo Schiller. ‘This industry really needs competition to keep the development of new products going.’
Looking to the year ahead, Schiller has pre-ordered 84 new cranes from Liebherr Ehingen for 2003 (its has not sold a factory reconditioned crane in North America for four years) and believes it will sell more than that, which shows a high degree of confidence in the resilience of the market.
Link-Belt is also now in the all terrain market, offering Link-Belt badged ATs built by Tadano Faun in Germany under a deal announced last February as part of the worldwide alliance between Tadano, Hitachi and Link-Belt’s parent Sumitomo. To date, only a single Link-Belt AT has been shipped – a 130 US ton rated ATC-3130 (Faun’s ATF 100-5) to Lomma Crane & Rigging. While it has been Manitowoc, Grove, Terex and Demag that have been making all the headlines in the second half of the year, Link-Belt can claim to have been the star of ConExpo back in March, with new products including the three-axle RTC-80100 rough terrain and LS-308H II duty cycle crawler, as well as the ATC-3130.
The market for new industrial and carrydeck cranes, informed industry sources confirm, is also down to about half the size it was four years ago. Industrial cranes are at the lower end of the cost spectrum and it is the kind of market that gets hit quicker by an economic downturn than, say, the market for heavylift crawlers. There is no reporting of numbers by manufacturers in this segment but somewhere between 250 and 300 units are likely to be bought this year. The market continues to be led by Broderson and Shuttlelift. Grove’s presence in this segment, with its YardBoss range, is said to be less strong than it has been.
Across the whole spectrum of mobile cranes, all that the manufacturers need now is for the market to start its upturn. It will come, but just not yet.