Survey: Dealers Aim for Skinnier Inventories - Industry
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Survey: Dealers Aim for Skinnier Inventories

CED Magazine, Oct. 2007

Article Date: 10-01-2007
Copyright (C) 2007 Associated Equipment Distributors. All Rights Reserved.

North American dealers are starting New Year's diets early - for their equipment inventories, that is, making deliberate trims toward a leaner start in 2008. Research published midsummer by Citigroup Global Markets, titled "Global Construction Dealer Survey," indicates that dealers are already paring down their six-month purchasing outlooks even though their same-period sales outlooks aren't slipping. The summary reports on second quarter survey results.
Research author and Citigroup chief economist David Raso says respondents expressed more angst about 2008 prospects, and have taken educated "guesstimates" so as to be prepared for some modest weakening.
The survey, reflecting perspectives from just a sliver of the total distributor universe - 159 dealers globally - did provide Raso with data to make an industry observation about a current "ripple effect" coming out of Volvo's acquisition of Ingersoll Rand's road machinery business last spring. He notes that many Komatsu dealers who carried Ingersoll road equipment are seeking a new road equipment supplier as Volvo looks to give its road equipment license to its stronger Volvo dealers.

"We believe Komatsu management is not too fond of a competitor, Volvo, having significant access to Komatsu dealers given the new road machinery relationship," Raso writes, "thus we believe Komatsu is likely to be pleased to see its dealers changes their road machinery supplier. Numerous industry contacts indicate Komatsu dealers that shift suppliers will go with Wirtgen road equipment. We are likely to see many more distribution and supply ripple effects with the market still ripe for mergers and acquisitions, with the next to come being the coming change in ownership of Ingersoll Rand Bobcat and United Rentals."

Raso notes in his report summary that Volvo received the strongest overall survey results, particularly in the area of dealer six-month outlook and inventory. Cat dealers in North America are reducing inventories, with declines from 6.5 from Citgroup's last survey down to 5.9 on a scale in which 1 is too little and 10 is too much. Raso says pricing gains below the industry average for two consecutive surveys may be indicative that some Cat dealers are struggling.

Ingersoll Rand dealers did not report strong sales outlooks; however their new and used inventories were among the lowest in the industry, according to the survey. Along with IR dealers, Volvo and Komatsu dealers posted the lowest new equipment inventories. Among publicly owned manufacturers, Terex posted the strongest price increases, and Raso says that Deere dealers had increased their six-month sales outlook slightly.

Manufacturer construction equipment market shares in North America- a $27 billion pie in the U.S. alone - was divided up as: Caterpillar: 29.9 percent; Deere: 15 percent; Terex: 8.5 percent; CNH: 6.7 percent; Volvo: 6.4 percent; Komatsu: 5.6 percent; OSK/JLG: 5.4 percent; IR Bobcat: 4.1 percent; Hitachi: 2.9 percent; Manitowoc: 2.3 percent; Kobelco: 1.6 percent; Astec: 1.3 percent; Liebherr: 1.3 percent; JCB 1.3 percent; Gehl 1.2 percent and Other: 6.6 percent.

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