January 2015

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Page 47 of 83

seen is the upside. At some point we will probably see the downside." As of the time of this writing on Dec. 15, crude oil prices dropped 42 percent since the beginning of 2013 to less than $60 per barrel, based on weakening global demand. Dealers impacted by the downturn in the coal industry have a considerably less positive outlook for 2015. "e federal government's assault on our coal industry has destroyed 25 percent of our market opportunity," said Wes Stowers, president and CEO of Stow- ers Machinery, the Caterpillar dealer for Eastern Tennessee. It's a similar story for West Virginia Tractor Company, where declining coal markets have negatively impacted business. Challenges in 2015 Just over half of AED dealers surveyed identified the uncertainty of the federal highway program as a "very important" challenge. Stowers believes the lack of a long-term federal highway bill has the potential to eliminate all highway projects in Tennessee. "I don't think there is any way we will be able to maintain our state program, much less match federal dollars," he added. Economists agree that in the short term a lack of public funding will continue to hold back construction of schools as well as infrastructure. To what degree private enterprise will be able to help address public construc- tion needs remains to be seen. According to Humphries, the Savannah Hilton Head International Airport and Gulfstream Aviation recently worked together to fund an additional turn lane to help employees and customers access their business. "What we are seeing is that businesses are picking up the slack," she said. Availability continued to be a chal- lenge for some dealers in 2014, as manufacturers shied production to Tier-4 final machines. JCB of Georgia is one of those firms, as is Leppo Rents. About 40 percent of respondents said availability was either somewhat or much better in 2014, while 20 percent said it was somewhat worse or much worse (6 percent). Just over 54 percent of dealers surveyed identified Tier 4 Final issues as a "very important" challenge. More Rent-to-Rent in 2015 Rental strategies appear to be making a shi with 41 percent of dealers saying they will do more rent-to-rent in 2015. Stowers says their rental program is designed to be flexible to meet customer demand. "We are trying to do what our customers want to do," he said. Leppo sees no advantage to rental- purchase options. "You take all the risk. ey can send the equipment back. You are stuck." Humphries says financing can be a challenge for customers who have been out of business three or four years. A rental-purchase option can help contrac- tors build equity. While acknowledging an increase in rent-to-rent activities for 2015, Doug Hansen, president of Connecticut John Deere dealer W.I. Clark Company, differentiates its business from pure rental companies. "We do rent-to-rent-to-sell. Our goal is to fully participate in the rent-to-rent market, but sell it to the first person who is willing to pay the money for it as the price is reduced by rental income." Employment Challenges Finding skilled labor was an important challenge for 65 percent of AED deal- ers surveyed. More than 69 percent of dealers plan to add 1-5 percent more employees in 2015. Nearly 88 percent of dealers surveyed were trying to find addi- tional mechanics. e most widely used approaches to recruitment includes local advertising and attracting from competi- tors (73%) and support and recruit from technical colleges (71%). Regional advertising is employed by nearly 47 percent of dealers surveyed. Four in 10 dealers recruit from the military. Labor is also an issue for contractors. e industry lost more than 300,000 employees since the recession to other industries. In an Associated General Contractor Survey conducted earlier this year, 80 percent of respondents reported shortages of cra workers, while 60 percent reported a shortage of profes- sional positions. "For some niches where you have specialized or complex projects, there is an absolute shortage of skilled labor," said Simonson. "However, we will see workers come back to the industry if wages increase enough." Telematics Taking Hold About 29 percent of dealers reported that they offer products equipped with telematics and data management reporting services with a dedicated staff. Another 31 percent are just getting their feet wet and beginning to offer telematics services. Although JCB of Georgia is just starting in this area, Humphries already can see how it boosts service revenue. "We get an e-mail alert when services are due and it helps the service sales tremendously," she said. Collecting on rentals is another plus, because customers can no longer falsely claim a rental machine wasn't working. "You can check the hours of the machine ("Construction Recovery May Finally Gain Steam in 2015" continued from page 45) >> COVER STORY U.S. BUSINESS OUTLOOK REPORT 46 | www.cedmag.com | Construction Equipment Distribution | January 2015 Annual Percent Change Commercial Construction Upturn Paces Broader Nonresidential Building Recovery $299 $102 $49 $147 4.4% 9.9% 7.6% -0.1% 8.1% 11.2% 9.2% 5.8% -5% 0% 5% 10% 15% -$100 $0 $100 $200 $300 Total Nonres. Commercial Industrial Institutional 2013 Spending level 2014 % change 2015 % change Billions of $ of Construction Spending Source: AIA Consensus Construction Forecast Panel, July, 2014 82 #CMDInfo

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