The impact of the current financial crisis is being felt worldwide with manufacturers increasing prices of their products due to steady increases in raw material costs and businesses facing downturns in sales and orders.

Forkliftaction.com News spoke with materials handling companies and industry sources in Europe, South Africa, the US, Canada and Australia to see how they were fairing in the current economic climate.

According to the Fork Lift Truck Association (FLTA), its members have noticed a decline in orders. David Ellison, chief executive of the UK association, says the decline applies across the board, but particularly to new forklifts. “It is a bit early to start stressing any particular products or markets, other than perhaps the construction industry.”

Dan Pettersson, president of counterbalance products for Kalmar, says his company’s forklift business is being affected by “the current turbulence in worldwide economics”.

“The effects have not impacted our forklift business as much as it has in other related businesses like road trucks or construction equipment,” he says. “Some of our customer segments in the wood, paper and car industries show a clear downturn.”

Jan Coemans, marketing engineer for Hyundai Heavy Industries Europe, comments the company has experienced a general demand decline in the materials handling markets. “This is thanks to a decline in logistics activities in Western Europe.”

Canadian Forklift Distributors Limited is experiencing a 25% reduction in overall sales. Jim Chesla, general manager, says manufacturing industries related to the automotive industry are down, but general negativity in the market has all sectors holding onto their orders until signs of a turnaround.

Rocla reports its market statistics for Europe at the end of August show a decline in demand for warehouse trucks by 2% compared with the same period last year. Tapio Rummukainen, Rocla’s CEO, says sales demand has continued to weaken over the past four months. “The uncertainty related to market developments has reflected on order bookings from Western Europe, with targets falling short in the third quarter of the year.”

Pekka Lundmark, president and CEO of Konecranes, says the company has received some order cancellations and requests for delayed delivery times, but the effect so far on Konecrane’s business outlook is very small.

“However, should the credit market not stabilise in the near future, this situation could change,” he adds. “On the other hand, advance payments received represent approximately one-fourth of our order book. This reduces the financial impact of order cancellations. The fact that we are almost debt-free is another valuable asset right now.”

SA French has not been hit as hard as other economies. Warwick van Breda, operations director, explains this is because of South Africa’s continued exchange control policy and the banking sector being more regulated. “Due to the government targeting headline inflation, our interest rates have as yet not been lowered and the legislature had already (mid-2007) enacted a ‘credit agreements act’ that regulates the provision of finance to all citizens in order to protect the poor or uninitiated from micro-lenders or unscrupulous credit providers.”

However, SA French is finding its clients are hesitant to make capital purchases in anticipation of winning contracts. van Breda says in many cases once the firm won the contract, it would immediately start building. “We have seen a new trend that has negated this behaviour and due to cancellations, the contractors are now waiting for guarantees and planning their jobs in a phased manner.” This, he adds, means a tendency toward rental and not purchase of equipment.

Adrian Burgess, market intelligence analyst for NMHG Europe, says the market for forklifts over recent months has been decreasing steadily, except for Benelux, Germany, and Austria which are showing resilience. “This decrease would be mainly due to the impact of the credit crunch and companies ‘tightening purses’ and holding on to capital equipment like industrial trucks, as they cannot raise capital on credit to replace them.

“Many competitors are competing fiercely on price, firstly because of the heightened price elasticity in the more economically hit markets and industries but also due to price pressure between the larger competitors willing to lose profit on (the) initial sale to try and maintain economies of scale back in their production line.”

Burgess expects the lower-price Chinese and Korean manufacturers to capitalise on this potentially widening market segment.

“With these economic factors in mind, we are not just competing against other forklift providers, but also other goods that businesses require capital and credit to buy as customers prioritise their purchases,” he explains. “This is why we see the growing importance of financial services, and the ability to offer customers greater flexibility and value in the financial service packages being offered.”

In Australia, Todd Brennan, founder of Forkpro Australia, sees the economy as “patchy but not alarming.”

He believes the key to surviving the current economic climate is to maintain high standards. “From our training and licensing perspective, we have diversified to handle other equipment and offer a wider range of courses,” Brennan says. “Nevertheless, we still maintain a keen focus on high-quality forklift operator training and refuse to participate in the low-end discount forklift licence market. To some degree, this policy does harm us (because when) things tighten up, cheaper providers are often sought.”

In order to survive this period of decline and financial instability, many of the companies Forkliftaction.com News spoke to have prepared and implemented plans and strategies.

FLTA’s Ellison says there are certain strategies companies can use to see them through this period “The aim will be to not let income reduction be too significant. Margins on new trucks have been very poor for a number of years now. Dealers would sell trucks with a view to gaining their profit from repairs and maintenance.

“Many lost sales of new trucks will be because companies are deferring the decision to buy (as part of their strategy). This means there will be older trucks around needing more maintenance and more repairs. This will help offset other losses. We are encouraging members to maintain high levels of customer service as dealercustomer relationships will be more important than ever.”

Chesla says Canadian Forklift Distributors Limited will continue to position itself as one of the largest material handling dealer networks in Canada. “Our (wholesale) division continues to develop, grow and prosper and we continue to sign new dealers for all products throughout Canada.

“When things do turn around, we will be well positioned to increase our marketshare throughout Canada. We hope to erase the 25% downturn in 2009 and return to the record sales of 2007.”

Forkpro will continue to maintain good relationships with key clients to carry it through any economic downturn. “Diligent companies maintain their training and safety regime regardless of economic conditions and we try to support them by providing an efficient service 24 hours a day,” Brennan says.

Kalmar’s Pettersson says the company will continue to seek new opportunities despite the economic downturn. “In times of uncertainty, many customers are looking for a strong and stable partner that will be around to support them in the future. We see opportunities to grow our market shares right now.

“As a global company, we are also spreading our risks so we are not over dependent on a few big markets. We are selling our products in 167 countries and this helps to balance downturns in demand. We are constantly working with adjusting to the prevailing market conditions.”

Rocla expects to continue its strong growth, based on recent demand for its products in Finland, Denmark and Russia. Rummukainen comments growth in order bookings and business volume in Russia and Denmark has been significant. “Rocla's automated truck concept has gained the attraction of markets and the bidding volume for automated solutions based on the Rocla business concept is now significant and is expected to grow also in the coming months.”

Konecrane’s Lundmark admits that even though the company is not immune to a general slowdown in the world economy, it has several ways to seek continued growth - even when times get tougher. “Many customers are interested in large-scale maintenance service outsourcing deals when times are bad, simply to improve productivity and reduce costs,” he says. “Several infrastructure-related customer segments such as power generation, transportation and waste handling, are also likely to continue investments in a downturn.

“There are still several geographical markets in the world where we do not have sufficient coverage. We intend to continue to increase our market share organically, but a weak economy typically also opens up attractive opportunities for acquisitions at reasonable prices.”

SA French has increased its rental fleet of rough-terrain forklifts, telescopic handlers and tower cranes to cater for the ongoing uncertainty as more companies choose to rent equipment rather than purchase it. The company has also invested in stock like truck mixers and mobile cranes for the infrastructure market, van Breda says.