OEMs bullish on construction boom

OEMs bullish on construction boom

OEMs bullish on construction boom

LAS VEGAS. Truck and equipment suppliers believe the strong growth witnessed in the construction market over the past year is going to continue well into 2005 and even into 2006.

“We’re very bullish on construction truck sales for the next two years,” Paul Vikner, president and CEO of Mack Trucks, told Fleet Owner here at the ConExpo-Con/Agg convention. “Whether you’re looking at fleets or the small guys, we’re very optimistic about continued strong truck sales in this market.”

Vikner said there are two reasons for his positive projections. First, the overall U.S. economy remains strong, especially in terms of new home construction and rising public spending on roads and other infrastructure projects. Second, construction fleets that had put off buying new units over the past few years due to the recent recession and the introduction of 2002 low-emission engines, are now starting to buy again.

“So not only is there a lot of replacement activity, strong economic growth is leading them to expand their fleets at the same time,” he explained. “All that is coming together and is superheating the [construction] truck sales market.”

And it’s not just for trucks, either. “Last year was a year of explosive and largely unanticipated growth,” said Jim Owens, Caterpillar’s chairman. “Our sales were up 33%-- an increase of $7 billion to over $30 billion for 2004 and as we look ahead we expect even better in 2005. We believe the economy has legs and that our sales growth is going to come from customers that pave roads, build homes and suburbs, and install underground utilities. They are going to drive economic growth this year.”

Contractors also project a gleaming outlook for the next two years, based on the numbers compiled from the boom year of 2004.

“The value of the construction industry now exceeds $1 trillion – that’s 9% higher than 2003 and represents 8% of the gross domestic product (GDP) of the U.S.,” said Samuel Hunter, president-elect of the Associated General Contractors of America (AGC). “Our industry purchased $471 billion worth of materials and supplies last year, along with $29 billion in construction machinery – 11% of all the machinery sold in the U.S.”

While growing federal government budget deficits are a concern to the construction industry, Hunter contends that deficits shouldn’t impact federal outlays for infrastructure projects in the coming years – especially for roads, bridges, and highways – because of the value that work provides in terms of overall economic growth. “When we build infrastructure, we build a strong economy,” he said.

John Merrifield, senior vp-sales and marketing for Sterling Trucks, believes demand for construction trucks is going to slow down in 2005 from the boom sales in 2004. However, he noted that for the truck manufacturing industry, “that’s a great place to level off.”

Sterling calculates that total construction truck sales increased 6,000 units over the last two years, rising from total market sales of 18,000 units at the end of 2002 to 24,000 units by the end of 2004.

“What’s going to happen in 2005? It’ll still be a great year, as well as 2006,” Merrifield said. “We’ve seen dramatic sales [spikes] in other truck segments, whereas sales to the construction market have been steadier. The only thing that’s going to restrict us in meeting construction demand is shortages of key components, such as axles, tires, etc.”

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