Truck-body bonanza
Feb 1, 2008 12:00 PM, BY RICK WEBER
TECHNOLOGY CHANGES APPROACH
Brahm says that because of the technology required in high-end products, there aren't many manufacturers. And, he says, most of them are national markets, whereas the markets for van, dump, flatbed, and utility bodies are more often regional.
“There are still national players in vans, flatbeds, dumps, and utilities, but regional players can survive because they know their local markets better than possibly the big guys,” he said. “The Morgans and Supremes are targeting large fleets.”
He says one of the trends that surprised him is the low number of manufacturers producing multiple body types.
“McNeilus is a great example,” he said. “You only see them in refuse and concrete mixers. You don't see them getting into simple products like van bodies. And likewise for Morgan and Supreme: They're in van bodies and flatbeds. You don't see them going to concrete pumps. They may do a crane body once in awhile, but you don't see somebody who does a standardized product getting into the high high-end customized market.”
He says the geographic location of production facilities is a key aspect of the report because the manufacturers of the products analyzed here are highly local or region-centric. In the majority of the types of bodies analyzed, manufacturers have no more than about a 1,000-mile radius, beyond which the transportation cost factors adversely into the final delivery price to the customer.
The leading region (87,798 units) is the East North Central, home to Supreme, Utilimaster, Knapheide, and Stahl, who are leaders in the van body and service/utility truck categories. The West North Central region, with McNeilus, Crysteel, Iowa Mold Tooling, and Omaha Standard headquarters, is second with 62,404 units.
“Surprisingly no single region produces every single product type,” Brahm says. “The East North Central region is closest to producing all product types, only missing beverage truck bodies. Mexico only produces refuse trucks for a single manufacturer, and the New England region is usually serviced by manufacturers in the Middle Atlantic market, such as Reading and Morgan.”
The leading sales region is the East North Central with $1.62 billion, which he says is due to Supreme, Utilimaster, Knapheide, Hi-Vac, Vactor, Guzzler, and Stahl, who are leaders in the van body, vacuum tank truck, and service/utility truck categories. Then comes the West North Central region ($1.55 billion), home to McNeilus refuse and concrete mixer trucks and Rugby and Crysteel dump trucks.
The East South Central ($621 million) features Heil's refuse trucks and dump trucks (Heil by TBEI) and one of Miller Industries' tow-truck factories. The Middle Atlantic ($614 million) is a home for standardized products in service/utility and van bodies with Morgan and Reading, keeping the region from having higher dollar sales.
“As gas prices are getting higher, companies that don't have multiple manufacturing facilities are going to get creamed when they're trying to ship product from one part of the country to another,” he says. “Reading, for example, does all manufacturing at one facility in Pennsylvania. Right now, say they're trying to get product to the West Coast. It's going to cost them a lot of money, whereas Knapheide, which is a little more central in Illinois, will be able to beat Reading to some degree on distribution costs.
“Somebody who is located on the West Coast can undercut both of them. It just depends on what the person wants. The sad thing is, that's still going to be out there in the future, so businesses will really watch distribution costs. The leading players do have multiple facilities. But you still have regional players who have that one facility in one location and can still be a success, but they know what their limits are for distribution. The big boys, because they're big, can buy raw materials at a cheaper cost than smaller players. It's one of those Catch-22s.”
ACQUISITIONS INCREASING
He says big players in some markets, such as Oshkosh and Morgan, are “dominant and always seeking opportunities to expand.” In the past few years, Oshkosh has acquired Jerr-Dan (tow trucks), Iowa Mold Tooling (utility trucks), London Machinery (concrete mixers), and others.
“For example, Jerr-Dan was one of the dominant players in wreckers/tow trucks,” he says. “On the other hand, London Machinery was acquired because it was the leading Canadian manufacturer of concrete mixer trucks. Morgan, which was already a leader in van bodies, acquired Commercial Babcock in Canada. This purchase gave Morgan a solid foothold into the Canadian market. Other examples include Godwin Group's purchase of smaller dump truck manufacturers, R&S and Galion, to create the second-leading group in the dump truck market.”
He says that not only are existing large manufacturers on the acquisition trail, but so are private equity players with a significant role in the industry. Ox Bodies and Rugby (dump trucks) were purchased by an investment group, Kirtland Capital Partners, in 2005. The new holding company for these two companies was called Truck Bodies & Equipment International Inc (TBEI). TBEI has since acquired the two leading dump truck manufacturers, Crysteel and Heil, in 2006.
“Within a single year, the company has solidified its market share as a group, as well as becoming the leader in dump trucks,” he says. “Another investment group, Insight Equity, has been acquiring specialized manufacturers in the tank truck and trailer industry. It appears that Insight sees this specialization as a way to build a leading company in a hard-to-enter market. Private equity groups will still be the leading method by which family-owned or regional businesses can exit this market.”
In addition, the van body and beverage industry has experienced what he calls an unexpected entry from an overseas buyer within the last two years: Singapore Technologies' Land Systems Division purchased Kidron and Hackney in August 2005. He says Singapore Technologies' primary business is military vehicles, but the company is looking to diversify into the commercial vehicle market in Asia.
He says SVN will not be surprised if other foreign entities attempt to purchase North American companies in the future, for the purpose of owning and transferring technology to faster-growing, emerging markets.
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