Bobcat: A firm with bite?

Doosan sets ambitious targets for compact construction vehicle maker

ANALYSIS, Projects

Scott Park argues that the Bobcat brand of compact construction vehicles will prove to be crucial to parent firm Doosan’s plans to grow its construction equipment arm over the next five years.

Doosan, which is Korea’s oldest conglomerate with overall revenues of around $24.5bn a year, shelled out $4.9bn for the iconic Bobcat brand seven years ago in what was the biggest ever purchase of an overseas business by a Korean firm.

The move, Park explained, was part of an ongoing strategy being implemented by Doosan to move “from a consumer-orientated type of business into the infrastructure support businesses”, and targeting infrastructure projects in emerging economies.

Doosan looks to achieve this partly through business units that are involved in civil construction, as well as EPC work for power, water and offshore plants. It also has a huge construction equipment arm containing both the Bobcat and Doosan Heavy Equipment range.

Park, who joined the firm in November 2013 to head the Doosan Infracore Construction Equipment (DICE) business in the Middle East, Africa, Europe, North America and Oceania, says that the infracore division earns around $8.2bn of revenues – 75%-80% of this through the construction equipment.

Within the territories overseen by Park, the firm earns revenues of approximately $3.4-$4bn a year, but in a message to dealers and journalists at Bobcat’s worldwide dealer convention in Prague, he said that he aims for this to grow significantly.

“What am I looking at? If you look at our growth plans for the next five years, I’m looking to double my revenues in that period. So, pretty aggressive growth, but I think we’ve got some very good strategies and some underlying infrastructure to be able to develop that result,” he said.

Park, who had previously been chief information officer at Volvo Construction Equipment, said: “I think there is huge growth potential for the Bobcat product. If you look at the marketplace where we’re playing today, CTLs (compact track loaders), SSLs (skid-steer loaders), MEXs (mini-excavators), telehandlers – there’s a lot of opportunities in each sector.

“CTL is a concept that really was dominated or created by Bobcat,” said Park. “And this product is so good that once the customers know that they need it, they come looking for it.”

Therefore, he argues that much of its growth plan is based on creating new business by demonstrating the capability of products as opposed to purely taking market share from competitors.

“I’m talking about growing revenues through selling a concept and being able to be a market-maker.”

Park is looking to do this in a number of ways. Part of this involves product development, with a growing number of Bobcat’s new ranges being produced at a facility in Dobríš in the Czech Republic, which opened in 2001.

The company is currently investing $19mn in a new research and development centre at Dobríš that will include high-tech facilities such as wind tunnels to test stability and aerodynamics.

Martin Knoetgen, Bobcat’s EMEA president, told the convention: “When I look at the 16 factories Doosan has globally, this is definitely in the top rank of those. However, we are never satisfied and we are always striving to increase our safety, quality and cost performance.”

Alongside the campus at Dobríš the firm has four other factories in Europe – two in France, one in Ireland and one in Belgium, which is also the site of its European headquarters.

It employs around 2,000 people in the region. Bobcat contributes approximately half of Doosan Infracore’s EMEA revenues, he argues, and an even higher portion of its margins.

“But I think what is also important is that we do significant investment into new products, equipment and infrastructure for our business. Having adjusted after the crisis and restructured, we are now starting to employ new people, especially in our sales organisation.”

Moreover, Knoetgen said that there had been a “transformation” in terms of its supply chain over the past 10 years, with more of its own manufacturing and parts originating from the region.

“It was purely an importer both on the Bobcat and the Doosan side of the business but we are now producing 75% of the products we sell in the region in Europe and we are even exporting 30% of what we produce to the rest of the world.”

Around 7,000 machines – loaders and mini-excavators – are manufacturered every year in Dobríš, while most of its telehanders are produced at a factory in Pontchâteau in France.

“The market dynamics are very different depending on region, country, segment and application,” Knoetgen added. “Skids are strong in MEA [Middle East and Africa], MEX in Europe, and telehandlers are shared equally between construction and agricultural applications. We are well-balanced concerning the regional mix.”

Park said the Bobcat brand is “is something that is going to carry us over for the next 100 years. So, what do we have to do to this business to ensure we have the proper set up and structure to achieve our growth targets? For me, that starts with technology.”

For instance, he argues that Bobcat, which has traditionally relied on third-party providers for its engines, is now set to benefit from a new range of engines to meet US Tier 4 regulations (which cover diesel emissions) designed specifically for its machines by Doosan – an investment of around $250mn-$300mn.

And although these engines won’t feature in Middle East models (Gulf regulations are not as stringent), the company has been investing in the Middle East.

“I guess about 50% of loaders (produced in Europe) go into that market and of course we take the specific requirements of those markets seriously when we develop new products,” said Knoetgen.

Giuliano Parodi, EMEA vice-president of sales & marketing for DICE, argued that resources placed into the region had also grown substantially. Until it opened a dedicated Dubai office around six years ago, the market was served by a London-based representative. Now, regional director Gaby Rhayem heads a team of 13 staff based in Dubai, where the firm is also planning further investment.

“By the end of this year, we will open a parts and depot centre in Dubai to better serve our dealers and customers in the Middle East and Africa,” said Parodi.

He added that the training facility on the Dobríš campus now receives more than 2,000 visitors a year, “with a very high participation from dealers and customers in the Middle East”.

With the pipeline of projects across the region building, the firm expects a clamour for both heavy and compact equipment. On the Heavy Equipment side of the business, Doosan is already market leader in the Middle East, with a share of around 20%.

In compact equipment, too, Bobcat enjoys healthy market share, and around 85%-90% of its orders from the Middle East are for its skid steer loaders.

Bobcat recently replaced the most popular model used in the region, the S130, with a new S450 product in April.

It has a number of advantages over its predecessor, including a 30% increase in visibility, a choice of 48 different attachments and a slightly bigger cab, with internal space increasing by 10%.

Perhaps the most important change, though, and one which is pertinent to the region, is that the S450 offers an option for a pressurised, air-conditioned cab – the first time such a feature has been offered on a loader that is so compact.

Jose Cuadrado, EMEA vice-president of Doosan’s Compact Equipment division, said: “When we decided to set up our manufacturing centre here (Dobríš) we wanted to be closer to the EMEA market and that means making a product that the customer segment in our region needs. And those needs may be slightly different than somewhere else.

“The Middle East is a big portion of our industry. When we think about developing products, especially loaders, we think about the needs of the Middle East from the customer value, comfort and requirement point of view.”

During the convention, Bobcat also gave a sneak preview of its new 1-2-tonne mini-excavators – the E17, E19 and E20, which will hit the market at the end of this year.

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