MHM: How has the Raymond Corporation weathered the tough economic times this country's been through recently?
Malvaso:: We made a conscious effort to reinvent the company in the late '80s, early '90s, in particular our manufacturing and distribution. Everyone has come to market with newer, better product features, and they all have different selling propositions. It's hard to buy a bad product these days. Our factories are world-class in almost every aspect. We're probably producing more trucks per person by a factor of two to three. Our dealer network is totally dedicated to Raymond. We haven't lost any dealers throughout the recession. We have different programs to make sure they're financially strong.
MHM: Any trends you're seeing in terms of who you're selling to, how you're selling or why they're buying?
Malvaso:: Grocery has held on strong. Americans continue to eat. Home building and supply did quite well, with low interest rates sustaining new home construction and remodeling. Companies like Home Depot and Lowe's continue to invest and they've built a lot of new stores during the recession. Pharmaceuticals also did well. The biggest downturn was in the retail sector and real discretionary items.
One of the biggest drivers among those who were buying was the need for productivity. This country leads the world in productivity. It's nonsense to think that as the economy comes back all the jobs will be recreated, of course, unless something new comes along. As a country, we're more productive.
MHM: Are you seeing many customers building greenfield sites?
Malvaso:: Not as many. New facilities have been at a premium. In the late 1990s, early 2000s, everyone was ramping up to keep up. Demand was running rampant and we didn't know where it would end. Manufacturers and distributors were building capacity. Then we had this tremendous 30 percent falloff. The economy has to recover 20 percent to 30 percent before you'll see huge investment again. It will be a consumer-driven recovery, not an industry capital investment-driven recovery.
MHM: Are you seeing more special requirements by industry?
Malvaso:: Grocery is one of the biggest drivers of functionality for Raymond. Back in the '70s and '80s we told customers they could save money by going to narrower aisles, and there was a huge conversion, along with a lot of education that went on. Today the masses are pretty well educated. You can't say look what narrow aisle will do for you. They already know. Now they're looking for more capacity at height. Replenishment is moving from ABC stocking to right over the pick slot. You want to be able to put 2,500 pounds up at 400 inches and drop it right down to replenish the pick slot. We're seeing more interest in cost of ownership and operation. That's why there's high interest in AC and energy utilization. We don't downgrade the performance of the truck as the battery discharges. When an operator was getting a 50 percent discharged battery with a DC system, the performance of the truck would start to degrade and they'd change out the battery. Now with AC they're running down to 10 percent to 20 percent before they change the battery. This is because they can run full out without noticing a change in performance. So if they ran through three batteries a shift with DC, with AC they might use two. That's a cost of ownership issue. Operator ergonomics is another industry driver that also impacts safe operation.
MHM: What about the quality of the people using the equipment? Are companies paying more attention to training?
Malvaso:: As you get into the high-velocity industries like retail and grocery, they will spend a lot more time training because they don't have occasional users, but power users. They want operators who are safe, knowledgeable and productive. When you get to the casual user, that's when training might get a little more lax because an operator may be driving the truck in the morning, and tomorrow may not be driving it at all. Does that make it right? Absolutely not, because we can't design out ill-trained operators and you can't label a truck so that the operator is aware of every hazard. Most of the hazards are created by poorly trained operators.
MHM: What's happening with fleet management services?
Malvaso:: We're seeing more clarity in what is meant by fleet management services. When we first started talking about it I asked "What is it?" -- because it might mean something different to me than it does to you. There are three tiers. One is cost of maintenance. The second tier is, "When should I start replacing them?" The third is, "I don't want to be in the material handling business; take care of it for me."
MHM: What do you think of operations that are trying to get rid of lift trucks, say, in favor of AGVs?
Malvaso:: An AGV is a lift truck -- it's a transport mechanism. Is it any safer because there's no operator on it? I'll reserve comment on that, but I think companies desire more flexibility. We have three factories and a distribution center, and when they come to me with a request for capital equipment, one of my first questions is, "Does it limit our flexibility?" Some of the hard wired systems can limit flexibility. If you're going to be straight line, mass production, model changes every five years, you might get by without lift trucks, but if you want a flexible operation, you may need the capability that a lift truck with an operator gives you.
MHM: How are your secondary markets developing?
Malvaso:: Better. Our used truck sales last year were up and the first quarter looks pretty promising. We aren't seeing new equipment replaced by used. There's growth among smaller companies that are just getting into the narrow aisle concept and don't want to invest in a new piece of equipment. In the industry overall, there was a 203,000-unit market in 2000 and maybe as many as 70 percent were leased. Those trucks are coming back.
MHM: What's your take on the sale of gray-market parts vs. OEM-certified components? Is that a concern for you?
Malvaso:: It's a reality. You'll always find replacement parts that aren't as good as the original equipment, and they will affect reliability and the warranty. Most of our trucks go out under some kind of service contract, including comprehensive maintenance. Our dealers tend to service our equipment, and if not our dealers, someone else's. Dealers are more attentive to the types of material that they put in trucks. Our dealers use Raymond parts. The companies that I know well in the industry are members of ITA, and each of them is very attentive to the parts that go into their trucks. I think the customer base understands that high-quality parts are preferred over those from questionable sources. You may find a gypsy here and there who will put anything in your truck, but that won't attract the big users or someone who's really stressing the truck. There is control over bolts, bearings and chain. There aren't many manufacturers of chain, for example, from whom you could purchase substandard material. I tend to believe we have a responsible supply base.
MHM: What's your feeling about fast charging?
Malvaso:: We're really active in that because a couple of our customers are quite interested. The limitation is understanding what it is. First, somebody has to come up with a battery gauge that does a better job measuring battery state of charge. Today with most gauges on trucks, if you fast charge a battery, the gauge might go to 100 percent and the battery may be only at 40 percent. It's the way the gauges are set up. We need something that measures the true state of charge of the battery. There's also a sequencing issue with some systems. As several operators plug into a fast charge station, generally it will go to the most discharged truck, and it may never get to the last two or three trucks to give them any charge at all. One company I know has gone from 20-minute breaks to 30-minute breaks so they could take advantage of fast charging. I think it will take a change in the way we read battery state of charge and a change in work hours and staggering breaks to allow operators to take advantage of fast charging. It will take a real coming together of what the customer wants and having the lift truck OEMs and the fast charger manufacturers getting their heads together on how to provide a solution.
MHM: What's your feeling on fuel cells?
Malvaso:: We're active in that both at the university level and R&D level. There's a lot to learn. I think it's a little more than a couple years out. We may not see fuel cells in lift trucks right away, until we first see a cost-effective solution that will help to justify replacing lead acid batteries. The issue is, "Can fuel cells be a cost-effective, efficient solution that is as flexible and user friendly as lead acid batteries?" There's still a tremendous amount to learn.
MHM: The EPA clean air standards and their effect on the use of IC trucks in California is still being debated. Your thoughts?
Malvaso:: What's most confusing to me about cushion tire gas trucks is they're typically used indoors. There's a need for gas trucks. Why the cushion tire market hasn't transitioned more to electric confuses me because it flies in the face of the environmental concerns and the clean air concerns in facilities. Part of it may be that the manufacturers of electrics did not design trucks that give the same torque as a gas truck. That won't last long. We've proven you can get decent torque out of electric trucks. If there's any segment of our industry that ought to move to electric it's indoor IC's. But I think gas trucks, based on where they're used, are going to have a good long life.
MHM: Do you think the industrial truck industry in the U.S. will ever surmount the sticking points that exist between ISO and ANSI standards and subscribe to a global truck concept?
Malvaso:: A global standard is fine providing it doesn't compromise the operator-to-truck interface and the truck-to-work interface. The sticking points are focused on those interfaces. Europe has different material handling systems than the U.S. They have different expectations of their operators in Europe. If we let a global standard impact how we do business here, then we aren't providing the best solution to our customer. While I would support a global standard around the general nature of a lift truck, if we start impacting how the operator interfaces with that truck -- operator compartments, barricades on orderpickers that don't allow you to orderpick, taking coast off of pallet trucks, multi-function control handles -- then I think that we would do a disservice to the users.
MHM: Do you see differences between how operators in Europe handle lift trucks vs. U.S. operators?
Malvaso:: We're hard on our equipment. If you compare European productivity to American productivity you'll see a large difference. Case in point, when we started looking at AC; BT makes AC trucks, so we took their system and put it in our truck. We killed it. It burned it up. Working with our suppliers, the power system had to be rebuilt for North American applications because we're a lot harder on our equipment. We use it more rigorously than in Europe. When you talk to operators using our trucks, they'll tell you this is my truck, because this is how I make my money. They don't take the equipment for granted, and tend to push it very hard.
MHM: How is the Raymond/Toyota relationship getting along?
Malvaso:: We will always have two strong brands and two distribution channels. Our factories remain separate. We have different customer sets. If there's a change in the future it will be in looking at how we can leverage leasing infrastructures and how we can leverage a full line offering to customers who want a full line. If they want IC trucks, Raymond doesn't have them, Toyota does, and vice versa. Raymond has all electric trucks.
MHM: Do you think we'll see further consolidations/mergers in the industry?
Malvaso:: I think there are one or two more that can happen. Toyota/BT/Raymond is quite a powerful entity. We managed it right. Nacco is a powerful entity with two brands. Linde, most of the power is in Europe. Jungheinrich's strength is in Europe. Toyota, BT and Raymond has strength in Japan, Europe and North America. It would surprise me if years down the road companies like Linde, Jungheinrich, Crown and Mitsubishi/Cat didn't do something. If there's going to be a mega company to rival the Toyota group and the Nacco group, it's going to come from that kind of relationship. If Toyota and Nacco continue to grow in strength, then the next mega company has to become a mega company through an acquisition. I have no idea what the acquisition will be.
MHM: Will that be good for the industry?
Malvaso:: I have mixed feelings about that. Toyota/Raymond/BT is unique because we've kept ourselves distant from one another. We try to work the synergies as they make sense and I don't think we compromise creativity. But if companies become too big and there's too much efficiency, they compromise creativity. Small companies are more nimble and tend to be more creative. We benefit from the way we're set up.
MHM: With more pressure to speed shipments through the dock area thanks to the new Hours of Service rules, how is that affecting the material handling requirements of your customers?
Malvaso:: As long as consumers have this huge desire for choice and having product on the shelf, full palletloads generally won't be going to the stores. In some cases, product proliferation continues, and that plays into the need for flexibility.
