Presidents of lift truck associations grilled on trends

During its recent annual meeting held in Palm Beach Gardens, Florida, The Industrial Truck Association (ITA), based in Washington, DC, invited the heads of the Japan Industrial Vehicles Association (JIVA) and its European counterpart, the Industrial Truck Division of FŽdŽration EuropŽenne de la Manutention (FEM), to join in a question and answer session.

The participants were Jim Moran, ITA president and senior vice president of Crown Equipment Corporation, New Bremen, Ohio; Takeo Shibuya, president of the Japan Industrial Vehicle Association (JIVA) and president of Komatsu Forklift Incorporated in Tokyo; and Hans-Peter Schmohl, president of the industrial truck division of the FŽdŽration EuropŽenne de la Manutention (FEM) and president of Linde AG's material handling division. The following are highlights from the Q/A session. -- Tom Andel, chief editor, Material Handling Management

Q: How will fuel cell R&D affect the industrial truck industry?

Jim Moran: One of the big factors in fuel cell development will be the availability of a fuel replenishment infrastructure. How will we get the fuel to where it needs to be? That's a long way from having a big box DC operating strictly on fuel cells. The hydrogen replenishment process must still be figured out.

Takeo Shibuya: Lift truck manufacturers affiliated with automobile manufacturers are a little ahead of the others in terms of their fuel cell research.

Q: How would you characterize the current state of lift truck supply and demand?

Takeo Shibuya: When we had a booming economy, each manufacturer made a major capital investment for factories. At that time we were not producing outside Japan. So we have a lot of capacity for completed vehicles. Japan experienced an economic downturn before anybody else, starting in the 90s, so since then we have tried to improve our production management and industry in general. We are now ready to increase our production any time needed. My company has started producing in China and in the US, so we have added capacity around the world. If we were to experience a sudden demand, we're ready to respond immediately.

Jim Moran

I don't think we'll see 1999 sales levels any time soon. I think we're headed for two or three years of sustained growth and at a faster pace than we're seeing right now, and faster than I think we'll see in 04.

Q: How are customers' requirements changing, and how are you responding?

Takeo Shibuya: In Japan we offer solutions to our customers but they want a guarantee from us. It's not all that simple. After we guarantee, the customer wants their desired price. In Japan price is a major factor. That's why each manufacturer is working very hard on cost reduction. Customers want every function to be guaranteed and on top of all that we have to enter a price war. It's the customer's demand that determines our business.

Hans-Peter Schmohl: There aren't many industries, not even automotive, where manufacturers work together in such a structured way to discuss trends. That's a huge benefit. We can discuss openly our problems and the future of our economic situations. We've created that benefit and we should keep it. These technical issues are not as easy. Worldwide warehouse truck and IC structures are complex. In years past it was not possible to deliver from Germany to Italy or France a truck without adaptation. We overcame these challenges. We're using these forums to overcome our sticking points [to global standards]. Some sticking points will remain, but we should try to overcome them. Our businesses are under high cost pressures. Year by year there's an erosion of net price in new sales. In Europe it's one to two percent, so we have to do a lot of things like cost savings and getting better structures to overcome these problems.

Q: What's the current situation with mergers and acquisitions among lift truck manufacturers?

Takeo Shibuya: Last year there were eight manufacturers in Japan and then the number seven company, Sumitomo/Niko, acquired Shinko, which was number eight, so now there are seven manufacturers. Customers are putting a lot of pressure on us in terms of price. In Japan the trend is toward deregulation and structural change. Whether these remaining manufacturers can survive is being discussed in Japan, and likewise the worldwide market. Changes due to mergers and acquisitions will continue, in my opinion.

Q: How much will the large volume of used equipment in the North American market affect new unit orders and has it already affected the modest increase in your forecast for 2004?

Jim Moran: Some of the growth in the 90s occurred as a result of aggressive leasing practices. These things are now coming home and many of us have some nice five-year old, well maintained lift trucks in stock. This may not affect national accounts as much as the smaller truck users. The equipment is too good and it's priced too right not to make it some sort of alternative for a customer.

Q: What are the two most important industry trends that will change the lift truck industry in the coming years?

Jim Moran: There will be a lot of pressure to increase the service intervals on equipment. We'll follow the automotive industry in that regard. We used to have to get our oil changed every 3,000 miles. That's unheard of in a new automobile. In the lift truck industry the service intervals will be extended because that's one of the elements of cost of ownership. There will also be ongoing work in the area of ergonomics and operator care. That will continue as part of everyone's product development. So will fleet management, where everybody wants to know everything about their fleet and have someone take care of it for them. So much of the growth that occurred in the 90s happened through acquisitions, so a lot of customers don't know how many lift trucks they have today. That will be a major factor as we go forward.

Hans-Peter Schmohl: Our product ranges are changing so they're more productive and cost effective.

Q: How will the technical designs of trucks change as a result of environmental concerns?

Takeo Shibuya: In Japan, July of last year, we introduced new models. One of them had longer tire durability compared to what we had in the past. Counterweights are easier to recycle. We tried to conduct a lot of research so products would not end up as industrial waste. We try not to have wasted parts coming out of our products. In the production process we try not to produce industrial waste. So it's not just the finished product we focus on but we are also looking at the process we use to manufacture them, then we try to meet all the environmental requirements. We're trying to be more mindful of the environment throughout the entire process, and each company is being very creative in doing so.

Q: Will internet or auction selling replace the traditional sales person in the industrial truck industry?

Jim Moran: No, although we'll face it more and more for the next couple years. It's very difficult for people to define value today, particularly in this reverse auction category. I think our business is still non-commodity enough in application and support that reverse auction will continue to be a weapon for pricing. People will eventually get what they're paying for, and that won't work long term. We do have to learn to position ourselves in that world, because this won't stop. However I don't think it will take the place of the distribution channel or a qualified salesperson.

Hans-Peter Schmohl: Our customers are clever enough to look for a real reduction of costs, not having a huge cheap fleet. Internet selling may eventually account for between 5-10% of the total market, but I think the rest will stay as it is.

Takeo Shibuya: In Japan each manufacturer expected this Internet age to arrive, so some investments were made. They expected this new business to grow, however the result is they have not been able to find a sufficient return for the investment. For the time being, it is not that significant. As far as used trucks are concerned, internet auctions are taking place.

Editor's Note: On the final day of the ITA conference, ITA's incoming president, Dirk Von Holt, who is president of Jungheinrich/Multiton Corp of Richmond, Virginia, gave his assessment of the importance of such global industry forums. He also spelled out his priorities for his coming term:

"The ITA board is composed of individuals who listen to one another. They spend time protecting their turf, but they never fail to put their industry hats on when sitting around the meeting table. I've been impressed with the fact that members even seem to support spending resources in support of competitors more than just themselves. They do it because they realize that we have to take a point of view on things to help ourselves. We will continue to be active on air quality issues and statistics issues, both within ITA and with our sister associations abroad. We have to be vigilant on ISO 3691 so that the world understands our needs here and in the North American Market. At the same time we need to drive the global standardization process forward. "Because we are faced with a downward pricing pressure, that can only be stopped and turned around through the application of our knowledge of our market. That's why we need to make sure our statistics program stays the best. I recognize the importance of building alliances not only with our sister associations abroad but also here at home with OSHA."

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