Since coming on board JLG Industries in 1999, Bill Lasky has seen both the highs and lows of the construction machinery business. In 2001 through 2003 those lows got low indeed. “The U.S. recession became a depression in the access industry,” the chairman of the board, president and CEO of JLG says. “Our industry experienced staggering declines in market demand, resulting in many manufacturers exiting the market.”
But not JLG. The company focused on managing through the tough times. It continued to invest in what it calls its lifeblood – new product offerings – introducing its successful Workstation in the Sky concept in 2001.
In 2003, JLG bought OmniQuip, and with it the Lull, SkyTrak and military-design telehandler lines, complementing earlier acquisitions of two European-style telehandler lines. In early 2004 it acquired long-time rival Manlift, including the France-based Delta Manlift.
Although JLG took its punches – delaying some initiatives and watching its major rental customers constrict their buying – it has emerged holding the No. 1 position in telehandlers in North America and the No. 1 position in aerial lifts worldwide.
So what’s next for JLG? Read on.
Q: The construction equipment industry – and the aerial lift industry in particular – is coming out of some tough years. How do you view the next 12 months and why?
A: We think the next two years will be excellent in North America for two reasons. One, we’ve had a long stretch of limited infrastructure development in this country. Second, our rental company customers really held back their purchases and aged their rental fleets over the past three years and now they are experiencing the reality that an average fleet age of 48 months is too old.
This extended aging also goes against the rental companies’ foundation of value to their customers, where they offer new or newer reliable rental machines. Newer equipment also means a lower cost of ownership with less maintenance costs for rental companies and more dependable machines for the end-users. Rental companies have tested pushing their machine ages into the fifth year and they’ve found out it’s too much.
So it gives us a good opportunity when you look at what the rental companies need to do to refresh their fleets and bring the age of their fleets down. We have the stars lined up for our products – meaning the economy is in recovery, the used equipment market is strengthening and rental customers are having an easier time raising capital. We don’t think, however, this is another eight-year boom period. We should be in good shape for at least the next two to three years.
You do have to color those comments, however, with the fact we’re in an election year, we’re in the middle of a war, we have rising costs of raw materials and energy and we have interest rates going up. And so there’s the chemistry there to put a little doubt on how robust the economy will be.
Q. You now have four different telehandler brands – Lull, SkyTrak, JLG and Gradall. Some companies claim multi-branding is the kiss of death, others say it’s smart marketing. Could you go into how you are positioning each brand in the marketplace?
A. Multiple brands can be the kiss of death or they can be the reason for your success. You have to focus on really understanding who your customer is. The customer for our products is the boss, the reason we exist, and I’m talking particularly about the end-users as well as the rental companies.
There are important distinctions in our telehandler lines, including the way they function. The Gradall telehandler’s unique rear-pivot steer allows tight turning radiuses. The Lull telehandler – with its traversing boom – is revered by masons. They feel comfortable the machine has stopped and the operator can move in slowly when delivering brick to scaffolding.
Then there’s the popular all-wheel crab steer featured on our JLG and SkyTrak models.
These three different designs really do support the four separate brands. When people refer to a traversing boom, they call it a Lull. When they think of the pivot steer, it’s Big Blue, or Gradall. Looking at all-wheel crab steer machines, the JLG telehandler is a more fully featured product, with high capacities and high horsepower engines. And, as our current campaign for SkyTrak says, “SkyTrak has everything you need, nothing you don’t.”
The Sky Trak machine has been a successful rental unit, although we sell all of our telehandlers to rental companies, particularly in light of local preferences. In California, for instance, the Gradall machine is highly popular. In the east, Lull is more popular.
In addition, we feel there are brands and price points that are more appropriate for the rental channels than products that go through dealers. Thirty-five to 40 percent of our telehandlers are sold through retail, so dealers play a huge role. We have well over 100 telehandler dealers now and if you have good quality dealers, you can support more than one brand.
I will say we examined the four brands in great detail and actually brought in an outside consultant to study this before we closed on the OmniQuip acquisition.
We debated about the JLG brand telehandler, but then we looked at our brand equity and customer preference and concluded that it’s a well engineered, robust machine and fits well within our telehandler portfolio.
Interestingly, SkyTrak, Lull, Gradall and JLG are the top four brands. Any one of these brands is greater than the fifth-selling brand – and in a North American market that currently supports nearly 20 brands. That also speaks to the reason why you would keep the brands alive. We think it would have been a mistake to go down the path of one brand.
Q. With acquisitions always comes the joy of dealer rationalization. What went into your decisions about what dealers to keep? Do you want one dealer to represent all your products in a particular market?
A. Rationalization is not as traumatic as one may think. Even though OmniQuip had poor parenting for about four years, they had a strong customer base. That’s a testament to the fact they had good dealers.
The key thing is we’re not doing away with dealers. Back in 1997 this company recognized we had to sell our aerial work platforms direct to the national rental companies as well as to our dealers. When we did it, we explained the situation to the dealers and they eventually came to accept it.
We don’t see the same pattern with telehandlers, where a strong 40 percent of our sales go through our dealers. We think it’s an excellent dealer product and we have no intention of doing away with dealers.
And our dealers appreciate we’re focused on access-related products. They look at us as being committed to what’s important to them. They know we have a strong belief in introducing new products. For example, with history as our guide, over the next 24 months approximately one-third of our sales will come from our new products. That gives our dealer networks a good strong lifeline, and innovation is the lifeblood of JLG.
One of the things we identified when we acquired OmniQuip was its competency in military spec’d telehandlers. We’ve kept that talent in tact. We received permission from the U.S. Army to move the manufacturing of the ATLAS telehandler from Port Washington to McConnellsburg, where the team has done a phenomenal job of incorporating manufacturing of all the telehandler products under one roof in only four assembly lines. We’re also entering into new relationships with the U. S. Army and the U.S. Marines to rebuild their equipment. We already have machines coming back from Iraq for reconditioning. The Army has about 4,000 of our units in their fleet.
Q. I understand you’ve started some service and support facilities in Texas and elsewhere. Could you go into what you’re trying to accomplish with these facilities?
A. The majority of rental companies will tell you their strength lies in renting equipment, not in repairing it. And so we’ve been asked by these rental companies to support their service needs. To do this, we’ve just started a servicing initiative we call ServicePLUS.
To start, we’ve opened a facility in Houston with 35 service bays. This will give us an opportunity to extend the practical working life of our product so it’s more compatible with the depreciation model most rental companies use. Sometimes it’s just not practical to get rid of a 30-month-old machine.
We really don’t have dealers on the aerial work platform side so this service initiative will be a big opportunity to support our customers. ServicePLUS gives us lots of opportunities, such as servicing rental warranty claims. We will also be able to sell extended service contracts. This will help our rental customers retain the value of their equipment through their entire depreciation period.
Q. Where does the Gradall excavator fit in your product mix?
A. Obviously when we bought Gradall we bought it for the telescopic handlers, which share many similarities with aerial work platforms, including a customer base and manufacturing processes.
Machines used to dig dirt are not our future however, although the Gradall excavator does offset our customer base a little, which is good. It’s not a rental company product, but rather a governmental product. It’s a solid contributor to the company; we like the product, but it’s not a core product.
The Gradall product and plant in New Philadelphia is not for sale but if we found a better home for it and a company that could give the people there greater security, we would consider that.
In addition, we make our Triple L trailers in California, a product prompted by the fact we’re in the safety business. Taking a slab scissor up a trailer ramp can be done safely, but it’s not the best way to do it. And aerial lifts are constantly being picked up and delivered. Our Triple L trailers can load an aerial lift on the ground and then safely lift it. We looked at the trailer as a way to safely move our smaller aerial lifts, plus other equipment.
Q. Most of your products have high rental use. What is your outlook for the rental market for the next 12 months? What will happen to rental rates?
A. On the aerial work platform side, around 90 percent of the product is going to rental companies. We’re working on expanding other channels of distribution, such as big retail store chains for our vertical mast lifts, scissor lifts and trailers. We also have a lot of retail chains and industrial clients who buy our lifts for internal use.
The rental side is in great shape. The analysts now know a lot more about how rental companies work – they’re highly leveraged, but they’re big cash generators when business is solid.
These companies will be able to significantly improve their balance sheets. During consolidation everyone was buying companies and it was a lot of fun. But it’s a lot harder to make those companies work as a team than it is to buy them. During the recent tough times rental companies moved from buying companies to making their past acquisitions run more efficiently. They’re getting the cost out. Going forward most are well positioned to capitalize on the opportunity of a stronger economy.
Q. Your “JLG Workstation in the Sky” aerial lift approach has been successful. Are there any more of these packages on the horizon? Will you expand this approach to other products?
A. The aerial work platform used to be thought of as just a piece of equipment to put the worker in the air to do a job. Whatever they were doing once they got to height had nothing to do with the platform. Workers just brought everything up there with them they needed to do the job.
On a customer call when I first came to the company the guy asked me why I thought our 40-foot aerial work platform was more valuable than other manufacturers’ 40-foot aerial work platforms. As a result, I figured we hadn’t done a sufficient enough job to differentiate our product. We couldn’t just rely on the rental company to determine our value, we had to also appeal to the operator. If we could embrace the true boss – the operator or end-user – the value would be better understood.
The Workstation in the Sky concept has been successful because it does differentiate us. Although the worker still may want to get up to 100 feet, having a platform already plumbed with a welder, or with water, air or hydraulic lines, makes it so much more productive and safer to use.
The Workstation in the Sky was not the first approach. We had a sky welder, sky generator, sky saw and so on. Then we realized if we had a Workstation in the Sky, we could accommodate the majority of these accessories, all of which make things more productive for the contractor. And if it’s more productive for the contractor it’s easier for our rental company customers to rent the equipment and to realize higher rental rates. Our job when it comes to aerial work platforms is very simple: we’re in the safety business that’s driven by productivity.
Q. You were one of the first manufacturers to announce a steel-related surcharge. What was the reaction of your dealers and rental customers?
A. We are the leaders in the access industry and if you want to be a leader, you have to act like a leader. Rising steel prices are not a fabrication, they are a challenge across many industry sectors. Steel has gone up more than 100 percent over a short time period. It’s a real issue.
I think it was the right thing to do. Of course, no one was excited about it, but at the same time they were anticipating it. We would be very happy to see the need for the surcharge disappear.
Q. JLG has a stated goal to become a $2 billion company by 2007. Are you on track?
A. It’s attainable, but with the recession it’s probably been pushed out to 2009. The key thing is we can get to $2 billion with our two core products, aerial work platforms and telescopic handlers, plus our financial services.
We believe, with a few bolt-on additions such as what we’ve been doing in Europe and our service initiatives, we can attain this goal. We’re bullish about it. I’m more focused, however, with the bottom line profit than the top line revenues.
A chunk of it may be through some acquisitions, such as our recent purchase of Delta Manlift in Tonneins, France. Within three to four years we may see some bigger acquisitions. We’re comfortable with the fact we don’t need to go outside of our focus of aerial work platforms and telescopic handlers. These products offer us great success. We’re No. 1 in North America and No. 3 in the world in telescopic handlers; and we’re No. 1 in North America and No. 1 in the world in aerial work platforms. In 1999, we weren’t even in telescopic handlers and now we’re No. 3 globally – that’s success.
Any acquisitions, or anything we develop, will be geared toward those two products.
Q. What are your goals and plans for the worldwide market?
A. Obviously, we’d always like to reduce any cyclicality, and different parts of the world have their seasons totally reversed from ours. So more business outside of North America would give us some protection.
Our products go where safety and productivity are valued. In some areas of the world, however, these two items do not appear to be the top priorities they are in Western Europe and North America.
The aerial work platform market in Europe now is about a third of the usage rate per construction dollar as in North America, which would suggest Europe could grow significantly in this product in five to 10 years. Additionally, with our entrée into the European telehandler market we see some good growth opportunities.