Johann Sailer (right) remains optimistic
CMME meets with the head of the European construction equipment association to find out how the industry is coping with the continuing downturn.
In May last year, the Commitee for European Construction Equipment produced its predictions for the year ahead. Despite the collapse of the Greek economy and the subsequent burden that placed on the powerhouses of Germany and France, the CECE was predicting a 5% rise in the market to $20 billion and a 6% rise in production. Fast forward to the end of 2012 and a lot of that optimism was threatening to evapourate faster than you could say triple dip recession. CMME wanted to find out if it all really is doom and gloom in Europe so it recently met up with Johann Sailer of German hoist manufacturer GEDA-Dechentreiter.
Sailer is a man of many faces and many job titles. Including his day job as general managing partner at GEDA, he is also the chairman of the VDMA Construction Equipment and Building Material Machinery Association and president of the CECE.
Asked whether he has good news, Sailer lets out a long sigh. Trouble in Europe is being exasperated by a collapse in sales in the Chinese market which had up until the past 18 months provided relief for the continent’s global players.
“It depends on what side you’re on (when we talk about the China market),” he says. “In the first half year we saw a fall of 40% in the sector.”
The 2012 results aren’t fully compiled when we meet.
“And they expect more of the same from the last half of the year.”
Tellingly he points to those countries that have been hit hardest by the global financial economic downturn as those most likely to continue to struggle.
“I think with Spain and Italy, we’ve not seen them bottom out yet,” he says. “Everybody thought we had found the bottom of the belly but it is decreasing again. Look at young unemployment in Spain, it is at 50%. This is going to be headache for the whole of Europe.”
While the downshift in the industry, he describes, would appear to show that Europe is heading into an abyss, it doesn’t really portray the whole picture. A split is clearly emerging on the continent between the north and south. Construction machinery manufacturers and construction in general is in a much healthier condition the further north and east you head.
“The Scandinavian and Turkish markets are both growing,” he explains. “Sweden especially is looking really good. If you look at Germany, France and the UK, there is stagnation. It may even be going down a little bit.”
He says the UK benefited from the Olympic Games it hosted in 2012 but that spike in construction is now over. “It is done now,” he says bluntly.
The CECE comprises 1,200 manufacturers who between them employ 130,000 people and generate a turnover of $31 billion. Most of them are small and medium-sized companies, but it also represents big European and multinational companies with production sites in Europe. In total 20% of all global production is produced by its members. It therefore has a sizeable thumb place on a major artery of the industry. At its last check up, Sailer, says the pulse felt rather weak.
“The CECE barometer from the last four months (up to November 2012), has fallen four months in a row,” he says. “When I looked at it, I found it worrying.”
We may not feel as at keenly as other markets, but European manufacturing has found the going tough against the Chinese manufacturers that have risen to prominence in the past decade.
Now that market has slowed dramatically, some industry experts are predicting that 2013 could be vicious on western and Chinese companies that are manufacturing there.
The Middle East is already seeing excess machines being delivered. Sailer suggests that Europe could be flooded with cheao Chinese equipment. He hints that now is the time for European manufacturers to seek protection.
“That market could influence us in different ways. If Chinese manufacturers have a 40% decrease and are looking for exports; then we should take care in Europe that we are all playing with the same rules. It will become a competitive market, and we should look at how fast they can enter.”
If they don’t export they could always buy a company to gain access? Such as XCMG and Schwing or Sany and Putzmeister: “Yes that’s happened, but there’s more to it than just buying a company.”
Germany is fiercely proud of its manufacturers and it seems inconceivable to an outsider that they would buy anything else. Sailer says that may not always be the case.
“Usually they would buy German products but yes it may happen,” he says. “However a lot of construction equipment is now going to the European rental companies. They have a different view. They look to the long term side of things such as maintenance. You would think they would buy German equipment.”
When Europe was set up as a common market, it was supposed to be able to allow for not only the free trade of goods (many manufacturers still see other European countries as their main export destinations) but also the free movement of labour.
Theoretically a multilingual operator or machinest should be able to ply their trade in either Munich or Madrid. So why aren’t more skilled Spanish workers leaving to work for manufacturers in other countries that are doing better, such as Sailer’s own Germany?
“Partly it is social. They want to still want to have their friends and families around,” he explains. “The language skills of the English and Spanish is often not high enough for them to move out.
“Also, what happens when they move back from Germany to Spain? What about things like state pensions? We don’t have the same level of regulation between countries and this is something that handicaps people moving from Spain to Germany. Maybe the European government will look into it and get involved.”
Despite Europe being in the duldrums, German manufacturers have proven to be resilient (the XCMG-acquired Scwing-Stetter perhaps one of the exceptions). Perhaps part of their secret is a culture of maintaining close links to local communities and recruiting (and retaining) local talent in their ranks? He describes Geda as a middle sized company that works with the community.
“In Germany it starts in the kindergarten. We’ve tried to make young people more technically orientated,” he explains.
While he is pessimistic about 2013 he sees some reasons to be cheerful.
“From 2008 we went down, then we went up, then we went down, now we have found a level. Speaking as someone from a small company but with a big view of things, I can see companies that are hugely diverse and we have (in Germany particular) kept hold of our knowledge. And this is helping.”