Usually when Americans travel to Japan, whether as tourists or as business people, they come back with stories of what they learned. Brett Wood is no different. But when he travels to Japan he must also impart knowledge. As president of Toyota Material Handling USA, part of his job is to keep his counterparts in Japan updated on what’s happening in the U.S. lift truck market. With all the angst the global economy has caused among lift truck buyers and sellers, MHM thought this would be a perfect time to ask Wood what he told the parent company on his most recent trip a few weeks ago.—Tom Andel, editor-in-chief
MHM: So what did you tell Mr. Toyoda, and his executive team, about the status of North American markets and about our lift truck industry?
Wood: That the lift truck market is showing signs of recovery. We won’t reach the peak levels of 2006 quite yet, but the recovery will be more like a Nike “Swoosh” than a V. We see incremental growth over the next three years. But more immediately the 2010 first quarter results, based on statistics from the Industrial Truck Association [ITA], are very encouraging. Last year the industry was down 38% compared to the prior year. At the beginning of this year we were seeing 5-10% growth for 2010 over 2009. But because the first quarter was strong now we’re seeing a 15-20% difference. There’s cautious optimism. We had a strong March and April. There were some competitive actions in the industry during that time. The summer months will be a telling time for what 2010 will bring.
MHM: Is there a flood of equipment coming off leases and entering the market right now, and if so, what effect could that have on the market?
Wood: There is a market for used trucks due to bankruptcies and people turning in trucks early, so used trucks are competitively priced. But the ITA numbers for new truck sales tell me that smart customers see value in buying that new truck. And even though you may get good quality used trucks, they’re still used. Lift truck purchasers should compare what it takes to maintain a used fleet vs a new fleet.
MHM: But don’t most leased and rented trucks come with maintenance agreements?
Wood: Leased doesn’t always mean that it comes with maintenance. The larger fleets might do their own maintenance and if they do, the lease vs purchase proposition is just a financial decision. But if they do their own maintenance they also realize the value of a new product. Some customers are realizing they should have bought last year. They extended their leases, they parked trucks and cut corners wherever they could. You get to the point where you can’t do that every year. The ones who are buying now have really stretched their dollars. Now as their business is coming back they need lift trucks.
MHM: So you’re seeing business come back?
Wood: Our quote activity is up, but the time it takes customers to place a purchase order is longer than ever. That’s because of the scrutiny and extra signatures that last year’s economic downturn imparted on these companies. One of our national account managers said it used to take two signatures to buy a forklift and now it’s taking four or five.
MHM: Is that good news or bad news?
Wood: I wouldn’t call it a negative. It’s a longer cycle but at least customers are doing more due diligence and a more thorough analysis of what they’re investing in. When they finally get that capital approved, maybe more so than in the past, they’re under pressure to make a more informed decision than ever.
MHM: What’s happening with leasing vs purchasing vs rental?
Wood: To me these are indicators. The rental market is starting to pick up. That’s the first indicator that customers need more trucks and are willing to invest. By monitoring that carefully with dealers it helps us forecast our parts sales. It means trucks are being used more. That’s another indicator. Then that leads to used truck sales through our dealers. Now we’re getting close to new trucks. What we’ve seen in lease vs buy, the ratio is similar to prior years. Leasing may even be picking up. With that long purchase cycle and the team of people involved, the signoff for a $400 a month forklift lease vs a $20,000 forklift purchase is sometimes easier.
MHM: Any lessons learned from this economic downturn?
Wood: I’m starting to get tired of the phrase “the new normal,” but even as we start to see some positive signs you won’t see people hiring wildly. It will be smart and well thought out. We haven’t seen this kind of industry downturn since 1981. 2009 results highlighted the strength of the electric lift truck market vs IC. This was propelled by food and beverage, products moved primarily by electric lift trucks, remaining strong during an economic downturn. Factors like no emissions and fewer moving parts on electric lift trucks also help.
MHM: How is the new Toyota Material Handling North America going with Raymond?
Wood: It’s going very well and is still in the early stages. April 1st was the formation. We’ve already identified some synergies in our companies that will make the whole enterprise even stronger than in the past. There’s a trend toward more consolidation and partnerships, not just at the OEM level but even at the dealer level.
MHM: Are small businesses in trouble?
Wood: I’m not sure how a small lift truck company can compete against some of the more well established lift truck suppliers when the market gets reduced by approximately 40%. It goes back to doing more with less—making smarter business decisions and leveraging the maximum you can get out of your own company.
MHM: What are you hearing from the dealers?
Wood: When the downturn started happening we thought there might be a lot of dealer bankruptcies throughout the industry, but looking back there weren’t as many as I thought. All dealers did a tremendous job weathering this storm and making difficult decisions within their dealerships that probably impacted their own families. Now that they’ve survived they’re sustaining business and next they’ll be thinking about growth. The dealers in this industry deserve a tremendous amount of credit for making tough decisions and doing the right things in difficult times. They’re stronger because of it.
MHM: What should OEMs and their dealers be excited about going forward?
Wood: I’m proud that R&D at Toyota was not cut during the recession. We have long term plans and vision. We just launched a new 4-wheel electric lift truck last month. It didn’t happen overnight, we’ve been working on it during these troubling times when it would have been tempting to cut engineers. We didn’t. Because of these challenges we’ve faced, customers are starting to look at automation more than they did before. Automatic Guided Vehicles [AGVs] are an example. You can repurpose people very economically with efficient, low cost AGVs, especially at manufacturing facilities and even some warehouses.
MHM: What about alternative power sources?
Wood: Fast charging technology isn’t new, and it’s not suitable for all users, but for multi-shift, larger fleets it’s a very efficient way to make good use of your batteries and lift trucks. With that, people are looking a lot more for value than they have before—the value proposition of the lift truck, the battery, maintenance, and fuel sources. If I can run 30 minutes longer in one lift truck than another, that’s part of the value proposition that might not have sounded so important five years ago. Now it’s getting attention.
MHM: Is 80 volt technology gaining any ground in the US?
Wood: We thought this technology would make it over here from Europe, but it hasn’t taken off. There are a few applications but there are hurdles if you have more than ten trucks. You already have more than one battery per truck if you’re running a couple shifts. To go to an 80 volt lift truck as opposed to just switching out your 36 volt lift truck, now you’re talking about disposing of those batteries and getting new ones. Before, you could always use those older batteries in the newer lift trucks. 80 volt has value for new applications where they don’t already have batteries or they need higher performance. There is a niche for it.
MHM: What’s happening with alternative power sources like fuel cells and hybrids?
Wood: A lot still depends on government support. The infrastructure is still expensive so fuel cell operations aren’t for everyone, and without that government support I don’t know if it will be as strong as everyone thought. With hybrids if it’s like a Prius, you have an engine and a battery source. There’s no infrastructure required that’s any different from what you already have. Now that the Tesla car is making news everyone is asking me about electric cars. The Volt, the Leaf and Toyota iQ EV are also coming to the automotive industry and raising awareness for electric vehicles.
MHM: So what’s the lesson for the lift truck industry?
Wood: Lift trucks have been utilizing electric technology for more than 50 years. We didn’t need that hybrid stopgap. Hybrids sound sexy and exciting and everyone can relate to it now. But in the lift truck world if you want to be green and efficient you can go electric as easy as anything.
MHM: Is there still life in propane?
Wood: 33% of the industry is IC. When housing and manufacturing come back, there will still be a strong need for ICs to climb ramps and handle heavy loads.
MHM: Let’s conclude with predictions for next year and beyond.
Wood: If we use 2008 as a benchmark year for investment in industrial equipment, using data from Global Insight, 2009 investment was down over 20%. For 2010 the forecast is 3-5% growth over last year and 2011 we may get back to 2008 levels. There are some risks however. What will be the impact of the European economy on the U.S. recovery? The other risk is home sales. Weaker home sales will have a direct impact on the lift truck market. And then there’s credit access. Whether you’re a consumer buying a house or a car or a lift truck user wanting to lease a fleet, the credit market could be more challenging this year than ever. In summary, like this year, we are cautiously optimistic about next year.
