5 PMV executives on putting their company ahead

PMV speaks to five leaders on the challenges facing the industry

ANALYSIS, PMV

Future minded
Caterpillar is investing heavily in alternate fuels, hybrid technology and electronics says CEO Doug Oberhelman

Caterpillar’s display at Bauma had no fewer than 70 machines, among them 336E H hydraulic excavator. The hybrid excavator uses hydraulic accumulators to store the excavator’s upper structure swing brake energy, which then powers the upper structure, as well as an improved pump and valve systems to conserve fuel. Exactly 315 patents have been filed for the machine.

“The patents represent the state of the art innovation we’ve embedded in this product,” said Caterpillar Chairman and CEO Doug Oberhelman. While hybrid technology can be perceived of as prohibitively expensive, or ‘nice to have’, Oberhelman expects that within three-five years it will be standard on Cat excavators due to the fuel savings (up to 25%), calling it, “The most revolutionary excavator to come to market in decades.”

“This will change the world in our business.”

But this is only one piece of a larger picture for the manufacturer, which in 2012 invested $2.5 billion into R&D in several key areas, revealed by Oberhelman at the show to be natural gas and alternative fuels; advanced hybrid technology; electronics to enable autonomy and remote control; advanced powertrains, and worksite management solutions.

These areas of investment are part of the company’s technology strategy, put forward in the face of challenging economic circumstances in major markets globally.

“At the moment we’ve got a challenging environment around the world for Caterpillar, our dealers, our suppliers, and our customer. The world is changing rapidly,” said Oberhelman.

“The economy is gyrating. Extra regulations around the world, politics around the world, and a whole host of economic factors are impacting on our customers. We look at those challenges as a call to action – and one of the best ways to seize opportunities is to innovate.”

The level of technology on show is a big step forward from the last Bauma three years ago, believes Oberhelman. “It’s very impressive the amount of innovation that’s happening every day right before our eyes.”

On the electonics side, developments from the company include ProductLink and VisionLink, which enable capabilities for remote monitoring, tracking, fleet management, and preventative maintenance.

And beyond telematics there is also technology like AccuGrade, which improves grader and dozer performance, and can boost customer profitability through efficient use of time, safer working conditions, better project cost management, and precise job specifications deliverable, said Oberhelman. Cat dealers are also employing very sophisticated condition monitoring as a part of preventative maintenance programmes.

But at the end of the day, while the company is investing heavily in high-tech improvments for its machines, its core advantage is slightly more old-fashioned, believes Oberhelman.

“We have the best team for delivering world class service, and that’s Caterpillar dealers in every corner of the world. For years Caterpillar has been working hand in hand with our dealer network, to ensure a comprehensive eco-system supports every single customer on the planet.

“And that is our differentiating advantage that sets us apart from all our competitors.”

Market Mover
Doosan’s product offering responds to market demands in the Middle East, says CEO Tony Helsham

Compared with some of the newer entrants in the construction equipment market, the Doosan brand is an old hand, with an established dealer network in the Middle East. But speaking at Bauma, CEO Anthony Helsham was realistic about the brand’s positioning, saying that there is still a long way to go before Doosan is able to play in the same field in terms of residual value and product support as Caterpillar, Komatsu and Volvo CE. “Though we’d like to be there, we’ve got to earn the right to play in that game.”

Consequently the brand’s main value proposition revolve around performance, durability and reliability, as well as a better price, to offset the brand and maybe the residual value. “Price is an important opener for our industry,” said Helsham, “especially in developing markets.”

This includes manufacturing of wheel loaders destined for the Middle East at the Doosan production facility in China.

“The new Korean companies were able to get a foothold outside of Korea in the developing markets, and frankly that’s probably where the Chinese companies will get their first foothold.”

In the Middle East, Doosan has refreshed its range of excavators, drawing on improvements made to the DX range in Europe. And with developing markets growing as a portion of Doosan’s total business, longer term the brand is looking to shift its product development to focus on the emerging market application requirements.

Nevertheless, due to new emission regulations in developed markets, the majority of Doosan’s R&D focus has been on rolling out machines to meet the new standards.

“That has been the principal motivator and focus on R&D,” says Helsham. “But as we develop new products for meeting those emission standards, we are able to upgrade aspects such as the cab, features, quality – but there are no major new product introductions during this period.”

With companies in the industry focused on the new engines, R&D spend across the sector is at historically high levels.

“Typically in our industry before this emission requirement R&D as a percentage of sales was somewhere in the vicinity of 2.5 to 3%. Because of Tier 3, Tier 4i, Tier 4 final, that’s gone up to as high as 5%, which is unsustainable in our industry, but that’s what we’ve all had to spend to meet these regulations.

“On the back of introducing new products for Tier 4i and Tier 4 final, we will go back, and take some of the same concepts for Tier 2, and introduce them into the countries that don’t need the regulated engines,” says Helsham.

Doosan is currently working towards opening its new factory in Brazil, and balancing its global production output will be one of the challenges for the next few years, says Helsham, who believes markets globally are starting to recover.

“Our industry never remains flat – it’s either up or down. It only remains flat at the peak of the cycle, and at the bottom of the cycle. We now believe that China has bottomed out and is on its recovery, albeit very slow. We are becoming a little bit more optimistic that Europe is also starting to recover, albeit slowly.”

Usefully Small
Bobcat has seen significant growth in the Middle East over five years, says EMEA president Martin Knoetgen

There can be no doubting the ubiquity of Bobcat’s skid steer loaders, found on site at mega-projects and in the fleets of small contractors alike. It’s a perception backed up by solid sales figures.

And the importance of the Middle East and Africa for Bobcat is growing as Europe’s construction market stagnates, with MEA now making up 30% of the total business volume for the EMEA region, Martin Knoetgen, president of Europe, Middle East, and Africa, Doosan Infracore, told PMV. “EMEA results here are going faster, and Bobcat is growing its market share,” said Knoetgen.

“The growth rate of the industry is significantly higher than in Europe. At a certain day it may be 50/50. That is why we are here, so the dealers realise that the dynamics in the industry are shifting, and other regions becoming more important. Growth regions like MEA have more and more focus, and we need to reallocate our internal resources to support our growth here.”

While Bobcat’s strongest product offering is obviously its range of skid steer and tracked loaders, since it already dominates this segment of the market its strongest growth has been in other segments, such as telescopic handlers and mini-excavators.

“When you are on the high end of a market share, increasing market share further is difficult. In other areas we are able to, and we need to leverage from the brand recognition of the Bobcat,” explains Knoetgen.

Last year it saw 22% growth in skid steers, 26% in telescopic handlers, and nearly 100% growth mini-excavators – the smallest of its segments, and where it seeing the highest growth, a sign that the smaller machines are needed for jobs such as finishing work on completed projects.

One of the big differentiators for Bobcat is the number of attachments for its loaders, with 40 families and more than 800 different attachments in the range.

“This is one of our strengths, and one of the reasons why our market share of machines is so high,” says Knoetgen.

In Europe, use of attachments is more varied than in MEA, in part because there is greater variation in the ground conditions, as well as more uses for the machines across the agricultural sectors.

Here, rates of attachment utilisation are growing, but continue to lag behind developed markets. One application that has proven popular however has been the use of wheel saws for projects such as fibre optical cable installations.

This comes on the back of a series of product demonstrations across the Middle East, including Oman, Saudi Arabia, UAE and Egypt. It is a tool that needs high horse power and high hydraulic flow to power the wheel saw, and is a good fit for the Bobcat loader range.

Recently Bobcat launched its new 500 series platform, part of an overhaul of its loader line. Knoetgen says that the new machines, as well as the larger 600, 700 and 800 series loaders, provide significant benefits to customers.

“It is evident to anyone the improvements we have been able to make, and when you compare these with the competition, the gap has never been as large as it is today. With the new generation we are two steps ahead of the competition.”

And as sales in the Middle East continue to grow, there is increasingly more focus from the factories on developing machines for the markets. “We are developing the machines in EMEA for EMEA, so the focus on MEA is pretty big in terms of new product development,” says Knoetgen.

“We have dedicated machines with specifications for the needs of the Middle East and Africa. We do not yet have dedicated machines for the market, but it’s what we’re looking at”.

Prime Power
Atlas Copco is making headway with its expanded portable power unit, says VP of marketing Ben Van Hove

Over the past years Atlas Copco has steadily acquired a number of new companies, signalling new product lines, as well as expanding its current portfolio of offerings. And industry major, in 2012 the company had revenue of $13.9 billion, with 39,800 employees worldwide.

On the power generation side, the company is looking to expand in the prime power sector, and has seen rapid growth in many markets including the Middle East, said Ben Van Hove, vice president marketing, portable power.

“We are seeing rapid growth in Africa and the Middle East, very rapid growth in South America, but even North America is still developing very strongly,” says Van Hove. Here, the main users are in construction and oil and gas.

“In power generation our main target market is the prime power market, we are a partner in construction, and mining, power generation in remote locations, oil and gas and off-shore – all the places where there is no grid available.”

While historically the company mainly operated in the 20-200-500 kVA segments, in the past two-three years it has extended its portfolio from 14-kVA up to 1 megawatt, 1250kVA.In the second half of this year there will be a number of major product releases, both in the large and small size power generation units.

“Now with the bigger, containerised products we really go into this power generation market. That’s the next big thing for us, and there important markets are the Middle East, Africa, and the mining in South America,” Van Hove explained.

The 1MW QAC 1250, built into a standard 20-foot container, is a good example of Atlas Copco’s new product profile.

Released in 2011, the generator was originally developed for the European rental segment. However as the rental businesses stagnated due to the construction crisis in Europe, subsequently the unit has seen success in the Middle East and in the mining sector globally, quickly becoming a sought after product. Built with a Cummins KTA50 engine, it has been well received by the mining sector in part because of their familiarity with the engine manufacturer.

Atlas Copco’s generator sales channel is split between distributors and direct sales, with distributors selling mainly smaller units used in construction, while the larger units sold to oil and gas and industry are sold direct. 80-85% of its sales are direct, says Van Hove.

Supplying direct differs from some of their competitors who work 100% through distribution. “That’s a very big difference. We want to be there for our customers. We have very large service support, and in Saudi Arabia we have a very strong service organisation.”

Of Atlas Copco’s many acquisitions, Van Hove says these are either to expand the product offering, or to expand its sales territories. When it is a product-related acquisition the engineering and R&D resources will stay onboard.

“Typically when a company has been for sale, what has happened is the last two-three years before they were sold they have not invested a lot, so then we would invest in R&D again, and keep the culture and the product as good as possible.”

Being part of a larger company has its advantages for the power business unit, including in the supply chain, in terms of sourcing componentry and larger manufacturing facilities.

“There is of course a big synergy in the upstream, in the supply chain,” says Van Hove.

“But I think what is most important for customers is that they know the brand that we stand for, being reliable, and with service and spare parts being provided on time. The most important part is that the customer really knows what they get – a brand they can trust.”

On the rise
Wolffkran Arabia is experiencing rising demand for tower cranes in the Emirates, says MD Martin Kirby

Wolffkran AG is unique as a major crane manufacturer in that it produces tower cranes, as well as operating a large rental fleet of its own products.

This is replicated in a sense by Wolffkran Arabia, a joint venture between Wolffkran and Kanoo Group, based in Dubai and operating across the UAE and Qatar, which sells new cranes as well as offering a tower crane rental option.

Martin Kirby, managing director, says that they’ve seen some recovery in Dubai in the past 12 months, and have cranes working on a handful of larger sites, as well as a number of smaller projects. Kirby says that the real asset for the company is the quality of the Wolffkran product, something which is as important to them as their customers.

“We’re probably the biggest customers for Wolffkran in the region, and at the end of the day we’re not just customers, we’re users of what we sell. The beauty of the Wolffkran product is that it does last, it lasts 25-30 years, but during that lifetime it uses a lot less spares. That’s something that you try to get across to customers.

“It’s to the detriment to Wolffkran, because typically manufacturers make a lot of money off spare parts.”

With a premium product, potential buyers need to be convinced that in the long run they will save money. Kirby says that with their business experience, they’re able to demonstrate the advantages of the cranes. “It’s not just a matter of showing someone a glossy leaflet.”

On the business confidence front, Kirby’s sentiment is echoed by Bob Curtis, CEO of Kanoo Group, UAE and Oman.

“I think there is understated optimism in the UAE market. There is some confidence coming back into Dubai, which hasn’t been there. Abu Dhabi never really took on the shortfall when Dubai basically collapsed four years ago, as some expected. Abu Dhabi were quite conservative in how they released the projects, but now there are a few starting to filter through.”

“Obviously if Dubai is successful in Expo Dubai 2020, it will be a very big boost for the economy.”

Speaking from the perspective of Kanoo Group’s wider activities in the construction market, Curtis says that they’ve had a very good start to 2013.

“We’re very diversified. Construction equipment started well, we’re doing very well in Grove, we delivered a 300t mobile crane to Dubai Drydocks, their largest mobile crane. Abu Dhabi and the oil sector is doing quite well for mobile cranes. Kanoo also have a rebar business, BRC Arabia, and that’s starting to bounce back after a reasonably difficult period.”

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