I'm often asked, “What’s your take on the market? What do you see happening over the next few years?” My responses have been couched with one rather large caveat in the current market.
From a national perspective, construction is driven by public spending. A federal transportation bill, for example, would affect the construction market like a Red Bull prepares a high schooler for finals.
Without it, construction continues to flounder: unemployment levels stay high and new equipment doesn’t move. According to Associated Equipment Distributors (AED), whose members run the country’s constuction equipment distributorships, a failure to maintain highway funding will cost the equipment industry $900 million in “lost market opportunity” next year.
If federal funding is the Red Bull, state and local implementation represents a passing grade on the final. The financial challenges our state, county and local governments are facing threaten to squelch the eventual upturn.
For asset managers, the issue becomes less about buying new equipment and more about how to continue caring for current fleets. Financial management has never been more keenly needed from a construction equipment fleet’s management team. Lifecycle management and maintenance management are critical.
This year, equipment professionals should consider two key decisions: Upgraded emissions and telematics.
New machines in the 175-to-750-horsepower range are rolling off assembly lines with Tier 4-Interim engines, powerplants that promise fuel efficiency as well as emissions compliance. If an asset manager has effectively managed fleet average age and has been fortunate enough to maintain a properly budgeted fleet-replacement strategy, now is the time to implement it.
Once the economy picks up, the demand for those machines will follow. Plus, uncertaintly over Tier 4-I performance and maintenance will dissapate as machines enter the market, further adding to the demand.
Second, jump on machine technology. Telematics offers fleets a management tool that streamlines data management and, hence, decision-making. These technologies, although proven, have not been fully implemented. Take advantage of some of the down time to investigate, do some peer review, and implement a strategy.
I can’t see too far into the future, put I am certain that at some point demand for new machines is going to ramp up. The smart asset manager will make the right choices with these two critical decisions now, and be ahead of the curve then.