New Study Offers Telling Insight on ESA CED Magazine, September 2008
Article Date: 09-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
A new AED-NUCA study shows that the Economic Stimulus Act (ESA) has influenced utility contractors to buy equipment, but more is needed.
On July 30, AED and the National Utility Contractors Association (NUCA) held a press teleconference to release a major economic study the two organizations co-sponsored. The report determined the Economic Stimulus Act (ESA) of 2008 has helped motivate equipment purchasing around the country this year, but the housing downturn and other economic factors are causing many utility contractors to forego buying new machines. The results of the national survey of utility contractors strongly suggest that Congress and the president could give the economy and construction industry an immediate shot in the arm by increasing water infrastructure investment. The study also shows that extending the ESA’s capital investment incentives would have a positive impact on equipment purchasing next year and demonstrates the direct impact that water infrastructure spending has on the equipment industry. “This report underscores the strong connection between water infrastructure investment and equipment purchasing,” AED President Toby Mack said. “We now know that at least 12 cents of every dollar spent on sewer and drinking water projects makes its way into the hands of equipment distributors. If Congress and the president are looking for ways to enhance the ESA’s effectiveness, infrastructure stimulus is the obvious answer.”According to the AED-NUCA report:
In response to the AED-NUCA report, House Transportation & Infrastructure Committee Chairman James Oberstar (D-MN) said, “Investment in our nation’s infrastructure has been one of my top priorities for the 110th Congress. The AED-NUCA study demonstrates why infrastructure investment is so important.
- The ESA’s capital investment incentives have had and will continue to have a positive impact on construction equipment purchasing activity through the end of 2008.
- Extending the depreciation bonus and increased Section 179 expensing levels through the end of 2009 would provide additional economic stimulus next year.
- Utility contractors have been hit hard by the downturn in the housing market.
- Enacting legislation to increase federal investment in water infrastructure would have an immediate and positive impact on the economy and enhance the ESA’s effectiveness.
- Water utility work is equipment-intensive, and at least 12 percent of the average water project bid is attributable to equipment costs.
“I agree with the report’s conclusion that Congress needs to do more to help get the economy back on track, and investment in our nation’s water infrastructure should be high on that list. The Committee on Transportation and Infrastructure will continue to promote improving and upgrading the nation’s water infrastructure.” The report was written by AED Vice President of Government Affairs & Washington Counsel Christian Klein based on an online survey conducted from July 7 to 24, 2008. Seventy-eight utility contractors from all regions of the country participated, resulting in a margin of error is less than 11 percent.
The full report is available at www.aednews.com/aednuca.
John McCain Visits Wagner Equipment On July 30 Republican presidential hopeful Senator John McCain (R-AZ) visited AED member Wagner Equipment, a Caterpillar dealer based near Denver. McCain and his wife Cindy toured the Aurora, Colo., campus with Joe Wagner, Wagner Equipment chairman; Mike Quirk, vice president, earthmoving division; and Scott Wagner, director of Six Sigma. Following the tour, McCain held a town hall meeting with an audience of 300 Wagner employees and a host of special friends of Wagner Equipment. Joe Wagner kicked off the meeting, explaining that he started with the company in 1976 with 300 employees in four locations; today Wagner employs 1,700 people in more than 30 locations and he’s proud they are still family-owned.During his speech, McCain commended Wagner on their apprentice partnership between the dealership and the local community college in both Aurora and Albuquerque.
AED proudly announces two staff promotions. Steve Johnson has been promoted to executive director of The AED Foundation. Also, Mike Fotty has been promoted to vice president of member services.United Rentals has appointed Joseph Dixon vice president of sales. He brings more than 20 years of experience in the equipment rental market to his new position. In his new role, Dixon will lead the company’s strategic sales and business development activities.Terex Aerial Work Platforms (AWP), a business segment of Terex Corp., has announced two new appointments. Siva Balakrishnan has been appointed vice president and general manager of global services. He will be responsible for creating Terex AWP corporate strategy, defining and driving the value proposition and creating the delivery model for services on a global basis. In addition, he will be responsible for leading the Genie Industries parts business, refurbishment and rebuilding businesses including Phoenix Equipment (the recently acquired refurbishment company in Waco, Texas), as well as the Genie used equipment business.In addition, Joe George has been named vice president of global sales and customer service.
In his new role, George will be responsible for developing global sales and customer service strategies, leading the professional development of global sales leaders and focusing on continuous improvement of the Terex AWP account management and sales administration systems. In addition, George will partner with the marketing organization to further develop the business unit’s global channels of distribution.Terex is a diversified global manufacturer with five business segments: Terex Aerial Work Platforms, Terex Construction, Terex Cranes, Terex Materials Processing & Mining, and Terex Roadbuilding, Utility Products and Other.Honnen Equipment Co., with six locations throughout Colorado and Wyoming, announces several new appointments. Rusty L. Anderson has been promoted to vice president. Anderson, who has served at Honnen for six years, will continue as the Wyoming regional sales manager as well as the general manager for Wyoming. Matt Murphy has been appointed as the company’s Colorado Front Range regional sales manager. He will oversee John Deere construction and forestry sales operations for the Denver metro and Front Range areas. Also, Steve Malloy has been appointed as the Colorado west slope regional sales manager. He will oversee options for the Western slope of Colorado, as well as take on branch manager responsibilities in Grand Junction, Colo. Honnen has also appointed Steve Bruskivage as the company’s new used equipment and allied product division sales manager. He will oversee sales operations for all the used equipment and allied product lines Honnen carries.Basic Software Systems, a provider of business management systems, has announced its affiliation with Strategic Feedback. Users of Basic Software Systems’ products will obtain customer feedback on sales, service and parts transactions through Strategic Feedback’s “SatisfYd” survey process. The product will allow dealers to strengthen any weakness within their dealerships.Hyundai has appointed Grove River a full-line dealership in Savannah, Ga. Hyundai manufactures construction equipment, including crawler excavators, wheeled excavators, mini excavators, wheel loaders and skid-steers.Shawn R. Sweet has been appointed president of Doosan Infracore Portable Power. Sweet joined the company in January 2008, when he was appointed vice president of global marketing. In related news, Doosan Infracore America has appointed Bobcat of Boston its newest addition to the company’s dealer network. Bobcat of Boston serves the eastern Massachusetts area. Doosan Infracore manufacturers construction and utility equipment and related attachments.
Housing Stimulus Bill a Big Win for Construction IndustryPresident Bush signed the American Housing Rescue and Foreclosure Prevention Act (H.R. 3221) into law July 30. AED was an instrumental force in bringing the home purchase tax credit provision in the bill to fruition.AED first proposed the tax credit in January, arguing that it would stimulate demand in the housing market, help eliminate excess inventory, reverse declining home prices, and restore consumer confidence. Other organizations quickly saw the merits of the proposal and ultimately, AED helped build a broad-based coalition to support enactment of the legislation.“The home purchase tax credit isn’t a panacea for every woe plaguing the economy, but it should help nudge buyers off the fence, eliminate excess inventory, and ultimately get companies involved in home construction back on firmer financial footing,” said AED President Toby Mack.Ninety-three percent of distributors who responded to AED’s 2008 Government Affairs Survey said the housing downturn had an impact on their companies; close to half said the impact was “major.”
In June, AED Government Affairs Committee Chairman Dale Leppo, Leppo Rents/Bobcat of Akron, testified at a House Small Business Committee hearing along with representatives from other major trade associations involved in the campaign.Under the new law, first-time homebuyers who buy a home in the next year will receive a tax credit of 10 percent of the cost the home (up to $7,500). Taxpayers who take advantage of the credit will have to pay it back to the government in 15 annual installments. The credit begins to phase out for a taxpayer with an adjusted gross income in excess of $75,000 ($150,000 in the case of joint returns).
New Study Finds Direct Link Between Economy and New Equipment Purchases On average, 6.4 cents of every dollar spent on highway construction is used toward the purchase or lease of new equipment or on major repair and maintnenance costs.In other words, highway contractors attribute an average of 6.4 percent of their annual budgets to purchase or lease equipment, or for major repairs and maintenance costs.This finding is part of an economic impact study released by AED. Authored by Stephen S. Fuller, Ph.D., professor at George Mason University, the study was undertaken to determine the market impact of highway infrastructure investment on the construction equipment industry, and to also determine the impact of spending on construction equipment on the overall U.S. economy.While the impact of the highway program on equipment distributors is expected to continue to be significant, the consensus of contractors surveyed for the study was that with rapidly rising nonequipment costs, the percentage of a construction budget attributable to the purchase and leasing of heavy construction equipment will be declining in the future.The study also found that for every dollar in direct spending for the purchase of heavy construction equipment, a total of $3.19 of economic impact is generated: $1 in direct spending, and $2.19 in indirect and induced economic activity from the re-spending of the direct payment affecting all sectors of the national economy. With total estimated direct spending for the purchase of heavy construction equipment at $10.2 billion, the total impact of this spending on the national economy totaled an estimated $32.5 billion.Key study findings:
A national survey of construction contracting companies was completed during the months of April and May. Nineteen construction companies located in nine states participated in the survey.To determine the approximate economic impact of this spending for heavy equipment, the average percentage developed from the construction company survey was applied to the total value of all nonbuilding construction in 2007. The total value of outlays for heavy construction equipment (purchase or leasing) was multiplied by the appropriate national Gross Domestic Product (GDP) multiplier to calculate the resultant impact on the U.S. economy.The study was paid for by AED’s Highway Infrastructure Taskforce (HIT). For more information, visit www.aednet.org.
- On average, 6.4 percent of the annual budget of the highway contractors surveyed is attributable to equipment costs.
- In 2007, an estimated $10.2 billion was spent to purchase equipment for power, highways and streets, sewage and waste disposal, water supply, conservation and development projects.
- Every dollar of direct spending for the purchase of heavy construction equipment generates a total of $3.19 in economic impact – one dollar of direct spending and $2.19 in indirect and induced economic activity from the re-spending in other sectors of the national economy of monies paid to equipment distributors.
- The total economic impact of nonbuilding construction-related equipment spending in the U.S. in 2007 was approximately $32.5 billion.
- In 2007, the $10.2 billion in direct spending for the purchase and lease of heavy construction equipment generated an estimated $9.2 billion in personal earnings ($903,200 per $1 million in direct equipment outlays) and supported more than 265,000 jobs (26 jobs per $1 million in direct equipment outlays).
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