Questions Abound, But Rebound Will Come - From the Chairman
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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SECTION: From the Chairman

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Questions Abound, But Rebound Will Come

By Bennett Closner

Article Date: 08-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.


Who’s to say what this industry will look like even five years from now? Your best defense is AED’s range of business resources.

In an earlier article on AED Government Affairs activities, I had referenced a theory on capitalism by the economist, Joseph Schumpeter; and as the months go by, his words keep ringing in my head:“…[capitalism] incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ...
[The process] must be seen in its role in the perennial gale of creative destruction; it cannot be understood on the hypothesis that there is a perennial lull.” “The Process of Creative Destruction,” 1942I am beginning to grasp his theory – as there is plenty of economic destruction underway. I am confident that economic growth will resume. I am confident the population will continue to grow and that infrastructure, housing, and facilities will be required in large amounts. I am confident the risk aversion in our credit markets will return to normal. I am confident that AED will remain the centerpiece of our collective industry efforts and the place where industry knowledge is shared.But I am not confident in predicting what the equipment distribution model will look like in five years.Private contractors (our customers) are competing against too many bidders for work. The low bidders are taking on construction risk without sufficient margin. Will all our customers survive? How will dealers contribute to their customers’ success?Public entities are also affected. Some are operating with budget deficits, and a few are even issuing IOUs instead of checks.The credit markets are disrupted. In a recent speech, Richard Fisher, president of the Federal Reserve Bank of Dallas stated, “The credit system is clogged with the muck and residue of a prolonged and frenetic period of unrestrained growth and abuse. Until the confusion and debris are cleared away, financial intermediaries will be reluctant to incur additional risks.”He was right. Our industry is seeing higher rates, tougher reporting standards, and lower loan limits, even though the federal funds rate remains very low.Our manufacturers are contracting. The international markets that often ran counter-cyclical to the U.S., are just as weak as our domestic market. How will our manufacturers cope this time around? What will they look like in five years? Will they all survive intact? How many mergers and acquisitions will occur?And finally, what about us? Certainly the business environment for our member dealers is extremely challenging. As this August issue is being produced, AED officers, board members, and staff will be convening for our Summer Board Meeting. This year is shaping up to be anything but normal. Our agenda? The chief focus is on how to help our members adapt to the changing economic climate, maintain their core strength and the ability to reaccelerate once conditions improve.AED offers conventions, seminars, webinars, self-learning tools, weekly newsletters, a monthly magazine, government action teams and networking groups. More programs are being created. I urge you to parti- cipate as often as possible and be part of the creative process.Our next major event, the AED/QUALCOMM Executive Forum, is one of the most important information and networking conferences of the year. Designed for owners and senior management under the direction of four successful distribution owners, this year’s Forum comprises 10 sessions on subjects specifically aimed at helping dealer principals keep their companies going now, and growing when the rebound comes. Relevant business issues and strategic planning, leading subject-matter authorities, and the opportunity to connect with peers and suppliers make this conference one that I would not consider missing – no matter what the state of the economy. Frankly, I can’t think of a reason any executive in this industry would consciously bypass this unique program – I sincerely hope to have the pleasure of greeting you Sept. 10 and 11 when we meet at the Westin O’Hare. (details at www.aednet.org/execforum)Meanwhile, as always, Toby Mack and I welcome your comments and input. Write to us both at: jtm@aednet.org and bennett@closner.com.
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