When it comes to the crunch
December 1st 2007

Launching new warehouse and IC products to dealers in Rome last Month, Yale Europe Materials Handling managing director, Bill Pfleger, says the credit crunch may deflate the buoyant lift truck market next year, but the opportunity remains for profitable growth. Brendan Coyne reports

It's been a good year for lift truck sales.

According to latest World Industrial Truck Statistics (WITS), the period from January to September saw a global rise of 10 per cent to 696,000 trucks, with Europe – up 18 per cent on last year – performing strongly.

The current credit crunch means next year could be tougher. But Yale Europe Materials Handling managing director, Bill Pfleger, believes the opportunity remains for profitable growth: "You just have to be smarter and more focussed today. And tomorrow you have to be even smarter." Speaking to Handling & Storage solutions at a dealer conference in Rome, Pfleger (who joined the company following eight years at an independent Yale dealership in Michigan) says the conference served not only to introduce dealers to the new products (a high level order picker, pedestrian controlled stacker truck, pedestrian/rider pallet truck, heavy duty reach truck mast and new 6- 7tonne VX Series counterbalance truck) but to understand how better to work with them. "The competition is going to keep coming, so you have to figure out how to compete and work with distribution more effectively. Because, ultimately there's still an opportunity to improve customers' materials handling," says Pfleger. "As we bring out more products, it's an opportunity for customers to realise either more savings or more efficiency. So there is still room to make a profit. But you have to work for it." Warehouse, combustion or both? Precisely which areas will grow are less certain. But Pfleger says manufacturing a full product line is Yale's strength: "Everyone said IC trucks would be in decline this year, with warehouse and electric trucks the growth drivers. But IC grew dramatically in very mature markets. Going forward I think there will be a balanced impact in both sides of the market, which presents a lot of opportunities as we continue to hone those products. There is no question that warehouse is a growing segment – anyone who says otherwise is probably misguided.

But can it continue forever? I don't know. At some point we will need not more warehouses but more efficiency and productivity. If the economy starts to slow it affects all segments of the industry as happened in the US. But warehouse development slowed [more] quickly." However, he says Europe's lease cycle affords some protection.

Raw materials handling Raw materials remain pressured, particularly lead and steel, affecting prices and lead times. Despite the Yale purchasing group's "great job offsetting inflation with better purchasing decisions and outsourcing", the company announced a three per cent price increase in November. "Some of our competitors increased their prices in June or July," says Pfleger. "It's rolling through the industry." Steel seemed to stabilise mid-year, but the pressure has returned. Lead, up anything up to 25 per cent this year, looks likely to jump again soon, according to Pfleger.

As rapidly developing economies and countries consume more raw materials, their products also advance. Dismayed at the amount of investment needed to bring new products to market, "and how fast some others can copy it", Pfleger expects the competition to keep coming. "Which is why we have to work hard in our development cycle to understand not only the customer's wants today but what they think they will want tomorrow – and build appropriate elements into our trucks." He says a consultative approach with dealers and customers is key.

"That's where the salesman adds value, which customers are willing to pay for. They are not willing to be stupid. The limiter is whether the salesman can communicate to the customer the value they are getting," says Pfleger. "It's a mature market in a lot of senses." He says there is no substitute for a strong physical presence – enabling prospects to "touch the iron" and see it in action at existing customer sites.

Green the new black? While customers are willing to pay for value, Pfleger questions whether they will pay for green. He says there's a lot of window dressing. "I think some companies have adopted very corporate, environmentallyfocussed processes and said 'yes we're willing to pay slightly more for something [greener]'. The question is, how much is slightly? Because it's all still business. They still have the same economic pressures to compete. From Yale's manufacturing point of view, we have absolute focus on being a good corporate citizen relative to the environment. From a product perspective, we're always looking to make products more efficient, use less energy, less servicing. Any aspect can be trickled back to either less carbon or more favourable use of natural resources. But we have not jumped on the bandwagon to shout about how environmentally friendly we are. I am not interested in being trendy." Change good for the rest? With consolidation a continuing trend , Pfleger says change provides opportunity.

"Whether it will come to pass or not depends on whether those situations are handled effectively by those manufacturers. But there is no question that change causes people to be uncertain, and when people are uncertain it provides an opportunity for everybody in the marketplace. We'll be looking wherever there might be opportunity." It will be interesting to see how the new products help turn opportunity into sales. Or whether the market, after a bullish year so far, feels the sub-prime effect. Pfleger says the company is prepared for either outcome.

Bill Pfleger is now NMHG managing director for Asia Pacific. Ralf Mock is now managing director for the EMEA region.

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