When a manufacturer pulled him aside at ConExpo last year, and asked how they can help rental companies through the economic downturn, Frank Bardonaro said: “Stop making cranes.” The trouble now, he says, is that “the manufacturers all got greedy and made too many cranes too fast. There is now excess supply and utilisation is down and rental rates have plummeted; it’s a double whammy”.
“We won’t buy another tower crane for several years. We will, however, look for some acquisitions of companies who already own tower cranes. We just don’t want to add any more towers into the already saturated US markets. In the last five years 500 tower cranes have been brought into the US and the work has completely dried up. Commercial construction projects and high-rises have simply stopped and the market is down by at least 40%; more in some cases.
“Manufacturers have turned dealers into rental companies because they continued to produce at excessive volumes and dumped them into dealer inventories, and that isn’t good for the market. Manufacturers did this the last time we had a boom as well; they operate at two and three shifts, making as many cranes as possible.”
The consequences are two-pronged, he says. “In the short-term we had problems with imperfections and recalls and when the market dropped there were too many cranes with not enough work.”
You can’t operate like a car dealership and wait for people to start walking back into your yard, he says. With tower crane utilisation down as low as 50% and taxi cranes (say, under 100t) little better at 60%, this isn’t the sort of storm that you can just ride out.
The only hope for towers, says Bardonaro, is improvement in the economy or increased legislation. “We’ve got 100 tower cranes, all of which are electric. Legislation will lead to older and environmentally unfriendly cranes (diesel luffers) being banished and this should free up the marketplace. But that’ll take time.”
Demand for crawlers, all terrains and rough terrains is better. In fact, Bardonaro added a 550USt AT, two 440USt crawlers, a 300USt crawler and a 875USt crawler to the fleet last month (June) and is looking to expand the RT offering in the 90USt plus range, with the fleet currently operating at 93% utilisation.
“There is still a shortage of 200USt and above capacity crawlers; we are now providing crawlers in over 20 states.”
Demand is coming from infrastructure, power and petrochemical industries, “where sometimes 50 cranes can be required on site for up to two years.”
AmQuip’s growth in this sector could be boosted through acquisitions. “The market is perfectly suited to it. We’re typically looking at firms in the USD10-20m revenue range but I have looked at companies with revenue as high as USD70m and above.”
It’s going to be a difficult time for small firms, in particular. “Companies who came into the market and started buying cranes two to three years ago are going to struggle and over the next few years we’re going to see some very distressed businesses.
“We’ve been modifying our fleet in anticipation of this downturn for a couple of years. For example, we’ve replaced 100 small cranes with crawlers and we’ve bought 90USt truck cranes than can do the work of 50USt units. In that sense, we can replace two cranes with one.
“We went through a period of selling cranes at unbelievable prices—probably prices that will never be seen again—and we were able to adapt our fleet in preparation for what was to come.
“You need to be a full crane service and rental company to survive. You have to be a turnkey company providing the transportation, erection, operation, service and support from start to finish.”
AmQuip wasn’t like this 10 years ago, Bardonaro admits. Back then “we were tied to the northeast. But we’ve made successful acquisitions and invested in equipment. We’re not restricted by a 100-mile geographical radius; we’re a nationwide rental and service company.”
Bardonaro accepts that most of his competitors would also claim to be 24-7 companies, passionate about business and safety, and happy to take calls at 3am and arrive on site with a technician an hour later. But in its relationship building with rival rental companies, he reckons AmQuip is unique.
“I don’t think it’s wise to stand alone. Some firms don’t work with rival rental companies at all, others do it less than us, but we extend the olive branch to everyone, and we’re unique in that sense.
“For example, there was a competitor who had four crawler cranes in his yard and we needed some crawler cranes. Instead of buying more stock, I rented his crawlers for a year at a time.
“The same thing applies to tower cranes: If Dennis Bates, our VP of towers, has a yard full of them and another rental company needs towers, we are happy to work with them.”
According to Bardonaro, the US government’s stimulus package will help, but only indirectly. “We’re not forecasting any major positive impact; local contractors will secure most of the work. In fact, some of them have already been out at auctions buying cranes to do the work. But when local contractors become busy it does create opportunities for us.”
Bardonaro has strengthened his sales force over the past six months, most notably with the employment of sales representatives from competitive tower and crawler rental specialists. Other acquisitions bring experience from the government and union sectors. “We know where the work is at,” he concludes, which is just as well considering he’s preparing his business to work in a downcast market for at least another two years.
