By all accounts, 2018 was a wacky year. Trade wars between arch rivals and best friends alike. Oil prices stabilizing, though remarkably on the low side. And automotive plant closures, scheduled to take effect later this year, that caught entire communities off-guard.
Yet, in many ways 2018 registered strongly positive for many industry players and analysts, who say they anticipate more of the same in 2019.
“It’s been a strong year for us,” Aaron Rayner, marketing manager with Ramsey Industries, told Service Truck Magazine.
Actual growth experienced
Based in Tulsa, Ramsey maintains several subsidiaries which held their own — Auto Crane, Ramsey Winch, and Eskridge, the latter of which makes helical pile and planetary gear drives in Olathe, Kansas.
“2016 and 2017 were harder for a lot of industrial manufacturers,” Rayner said. “A lot of people
“We continued to gain new business as well as claim more existing market share from competitors.” — Aaron Rayner, marketing manager, Ramsey Industries
were cutting back and downsizing, but Auto Crane and Ramsey Industries didn’t experience any of that. We actually experienced growth.”
Rayner attributes much of this to an aggressive sales team introducing and marketing new product in order to define itself against the competition.
“We continued to gain new business as well as claim more existing market share from competitors,” Rayner said. “Our work-ready truck initiative has really taken off, especially with the inclusion of the Titan Armor option that protects against rust, nicks and damage from the elements.”
Ramsey also worked to push its new NexStar Connect telematics system into the market, so the company’s attitude was clearly forward-looking.
“Our lead times for product go well into the first and early second quarter of 2019,” Rayner said. “I don’t want to use the word backlogged, but it does explain how busy we are.”
Not that Ramsey was unaffected by the year’s many disruptors, including tariffs slapped on steel (25 percent) and aluminum (10 percent). “I don’t think anybody in our industry is unscathed by that and I’m sure they’ll all be happy when there’s a solution for it,” Rayner said.
Sunbelt sales strong
“Sales are strong all over the country but primarily in the Sun Belt — Florida and Texas are some of our strongest states.”— Brett Collins, president, Venco Venturo Industries
Based in Cincinnati, Venco Venturo Industries produces cranes and hoists for work trucks. “Business is outstanding,” president Brett Collins said. “Sales are strong all over the country but primarily in the Sun Belt — Florida and Texas are some of our strongest states.”
Collins names states where he’s placed the most pins in a map on his wall. There’s at least one pin in most states, with some exceptions in the upper midwest.
“There’s a lot of service truck competition centred in that area, especially in Iowa, the Dakotas, Minnesota and the Upper Mississippi River Valley, so I don’t concentrate as hard there because I don’t have as many strong distributor partners like I do down south or in Texas or the East Coast markets,” Collins said. “It’s not as strong as it could be but it’s OK.”
In his best-performing regions, Collins highlighted particularly strong verticals, including oil, gas and propane, and said municipalities also have good budgets.
“I think it’s just general economic conditions. There’s been a lot of consolidation. That’s a definite sign that there’s a lot of successful companies that have a lot of money to spend and invest. This has been the craziest mergers and acquisitions environment I’ve ever seen.”
Collins said recent interest rate hikes are long overdue, but he worries about their overlap with prices increases from the tariffs. Still, he’s optimistic. “Barring any unforeseen political or social event I think we’re going to see similar growth rates through the end of 2019 and into 2020.”
Bakken prospects rising
To the north, prospects for the Bakken oil region may be on the rise. David Flynn, head of the school of business and economics at the University of North Dakota, has watched oil vault into top spot in the state, alongside agriculture, and he forecasts continued moderate expansion in 2019.
“The issue up here is you have a significant amount of extra demands placed on things like wholesale manufacturing and transportation, in particular, as you try to get more goods into oil producing areas and get oil out of oil producing areas,” Flynn said.
Flynn recalls a significant dip in activity around 2014-2015, but says conditions stabilized. The downturn helped producers in the Bakken realize they can manage with oil prices below $50 per barrel because fracking doesn’t have the same cost structure as conventional drilling.
“Even as oil prices went down oil production stayed strong in North Dakota, and in many cases continued to increase because of the cost factors for specific wells,” Flynn said. “If you’re producing in one of these geological sweet spots, your cost was very low for getting oil out of the ground, so with a lower cost structure you didn’t need oil at $90 or $95 a barrel in order to continue production.”
Agriculture has also remained strong despite trade uncertainties and some price levelling, Flynn said, adding that trade within North America and with China account for more than 80 percent of North Dakota exports. “If we could get some of the trade issues resolved, that would improve outlooks.”
Infrastructure tailwinds
At the Association of Equipment Manufacturers, president Dennis Slater said his sector has benefitted from a strong overall economy, with considerable roadbuilding and other infrastructure projects. “That really created a tailwind for 2018 for us,” he explained.
With tariffs, it may become increasingly difficult to avoid passing costs on to customers. “That’s
Photographer:Dan Bishop
“A lot of the fundamentals are there for continued growth. You’ll still have a lot of machines out there that need to be replaced.”— Dennis Slater, president, Association of Equipment Manufacturers
getting to be a bigger issue out there,” Slater said. “We’re starting to hear rumblings of the increasing cost of production becoming their main concern, they’re talking about that more often now.”
Trade issues notwithstanding, Slater anticipates 2019 will remain strong for his sector. “A lot of the fundamentals are there for continued growth. You’ll still have a lot of machines out there that need to be replaced,” he said.
Slater also sees the Democrats gaining control of Congress as a positive because the party tends to support infrastructure renewal and that issue tends to be bipartisan. “They just have to have the resolve,” he said. “It’s just a matter of how are we going to pay for this, how are we going to do this.”
In November, General Motors announced plans to close six plants in late 2019, including four in the U.S. and one in Canada. While entire communities will be affected, Slater said evolving automotive trends are key.
“GM has made some brave decisions on what they need to do to be competitive in the long term,” Slater said. “They’re selling more trucks now than cars and they’re making more bets on electrification and things in that regard.”
Factor in low unemployment levels, with some employers having trouble attracting skilled workers, and Slater said he anticipates a continued need for training programs and public awareness that manufacturing jobs have become information and computer driven and often well-paying.
Trade movement sought
With GM closures including its automotive plant in Oshawa, Ont., near Toronto, Canadian Transportation Equipment Association general manager Suzy Léveillé said the challenges will be significant at the local level and she’s hoping for movement on trade and tariff issues.
“The good thing that comes out of it is that the government is probably going to listen more about
Suzy Léveillé, Canadian Transportation Equipment Association general manager, says the closure of a General Motors plant in Ontario is going to send a message to the Canadian government
the trade and tariff impact that we are living with, with steel and aluminum prices,” Léveillé said, noting that Canada heads into an election year with Prime Minister Justin Trudeau’s Liberal government seeking re-election. “GM closing is going to send a very big signal to the government."
In announcing the closures, GM cited increased demand for electric vehicles and other new markets. Doyle Sumrall, a fellow NTEA managing director, noted that electrification is clearly finding its way into all aspects of trucks and truck equipment and he expects this trend will continue. “Automation is becoming more prevalent in many truck equipment facilities with robotics, automated fabrication equipment, and more. As the skilled labor market continues to be challenging, more automation should be expected.”
Sumrall added that automation and intelligence are also coming to trucks and truck equipment. “Self-braking and lane-keeping stand out as examples. The utilization of smart controls on equipment and intelligent interfaces are accelerating and expected to achieve wide utilization and acceptance in the marketplace. This trend will continue and is moving faster than the government can react, so we also expect regulations will follow.”
Steve Latin-Kasper, NTEA’s director of market data and research, said U.S. economic and commercial truck industry growth expectations are positive for 2019, though the rate of growth is expected to decelerate over the year. “Production capacity is near its limit in many industry segments, and that is likely to be exacerbated by labor constraints and a stretched supply chain. We anticipate a slowing is likely in the next two years but do not see indications of a significant recession at this time.”
Employment prospects are also very good, Latin-Kasper said. “The issue is the shortage of people qualified to fill the open positions. This will likely become an even greater challenge in 2019 as baby boomers continue to leave the labor market.”
— Saul Chernos
Saul Chernos is a freelance writer based in Toronto.