Rental: What are your general predictions for the aerial market in 2017?
Frank Nerenhausen, president of JLG Industries: [Oshkosh Corp.’s] public statement said JLG would be down 7 to 8 percent year over year and at the end of our first quarter in December, we came in somewhere around that, but income was up over 20 percent from 2016. So we’re very happy with that start. We haven’t changed our guidance for the year - that we’ll be down 7 percent - but what I can tell you is that I feel a much more positive sentiment in the industry than I did prior to when we were establishing our forecast for the full year. There’s definitely a good, positive sentiment.
Rental: What factors are contributing to this?
Nerenhausen: General market conditions are good. I think it’s going to be a good year for rental. Just drive around… the amount of construction activity you see is amazing. While at The Rental Show in Florida, I saw so many concrete mixer trucks while driving from the airport. When the economy was down, you could drive for 50 miles and not see a redi-mix truck anywhere. It’s a fundamental part of construction - when you start selling concrete you know folks are ramping up. It’s just a grassroots pulse but I feel it.
Rental: Last year, our discussion centered on the replacement cycle. How much of a factor is that this year?
Nerenhausen: We’re still feeling the effect of the replacement cycle. We didn’t see a lot of sales in ‘09 and ‘10 and we’re seeing the impact now. But that headwind will soon switch gears and become a tailwind. If we get a combination of the replacement cycle returning and a continued positive construction outlook, then we’ll have some pretty interesting dynamics to deal with. We think that will happen in the 2018-19 time frame; maybe closer to 2018.
Are we going to see an infrastructure spending bill? If so, how big, how long and how soon? I can’t be precise but I feel pretty good for the next two to three years.
Rental: Where do things stand with the oil and gas market?
Nerenhausen: I don’t think that’s a headwind anymore. I think oil and gas have hit bottom. Things are starting to become a little more active and we’re starting to see gear getting redeployed back into those markets a little bit. I think people will be cautious, but with oil at $55 a barrel, they’ll start putting holes in the ground again. I feel good about that aspect too. We’re seeing a little sign of life in Canada, which is good.
Rental: What market segments are on the upswing for aerials?
Nerenhausen: The industrial and commercial sectors are improving, and housing is good, at 1.2 million housing starts. I think 1.5 to 1.6 million is healthy, and we’ll hit that in the not too distant future, maybe even be back at 2 million. There’s a real need for housing. The US and India have the capacity to add 100 million to the world population in the next few years and that will require housing, but 1.2 million starts is not enough to support that.
Rental: Earlier this year, JLG reported its strategy to simplify its manufacturing footprint. What was the impetus behind that decision?
Nerenhausen: We looked at our business with a different lens and saw areas requiring high effort for a low return. We could either change that business model or divest those areas. As we looked at our foot print, we realized there was some streamlining required for our telehandler lineup in Europe. It’s a highly complex lineup; we had certain models making very small contributions yet requiring a lot of effort to keep up. With the regulations coming into Europe in 2019 with Tier 5, we need to really look closely at what we’re doing. We asked ourselves, do we have the opportunity to grow this business? If not, then let’s streamline and focus on where we can do some good.
Basically, we scoped down the number of telehandlers we’re going to make and that allowed us to propose a consolidated footprint in Europe. That doesn’t mean we’re abandoning Europe. We’re not. We are the global leader in telehandlers and they’re very important to us - we even introduced new models at CONEXPO. So we’re in it to stay, but we’re taking a very calculated approach that allows us to put resources where they can do the most good for our customers and for the company.
Rental: What are the major trends in product development?
Nerenhausen: Low-level access is something that’s interesting to us. It might not be big to JLG at this point, but it’s our job to put people safely to work at height. There’s always a lot of focus on height over that 6-meter mark, yet we’ve got people falling off ladders every day. Here’s a simple, cheap product with no hydraulics or electronics that can eliminate ladders. It’s probably not a consumer-level product but more for the industrial and commercial space, these smaller aerials are wonderful. We just launched the EcoLift in North America last year and we sold out inventory. This year we expect the product to grow multi-fold.
Productivity and safety sell our products, so we’re definitely looking at those as our main thrusts, but environmentally friendly products are now more interesting to some of our customers as well. If we can show them how those models can help their bottom line, then it’s an easy sell.
