Times may get tougher for heavy equipment manufacturers

Mar 25, 2013 | 07:00 PM | Myra Pinkham

Tags  heavy equipment manufacturers, O’Neal Industries Inc., Jeff Simons, Deere & Co., Caterpillar Inc., Douglas R. Oberhelman, Mike DeWalt, Terex Corp. Dean Barley

A combination of declining export opportunities and excessive inventories could result in somewhat lower growth in 2013 than in the past few years for U.S. heavy equipment manufacturers. Just how much lower, however, depends on the type of equipment, with agricultural holding up well despite last year’s drought but construction and mining experiencing difficulty.

Such an outlook follows a somewhat schizophrenic 2012--one that Jeff Simons, vice president of marketing and business development at Birmingham, Ala.-based O’Neal Industries Inc., called “a tale of two halves,” with manufacturers of all types of yellow goods “hitting it out of the park” early in the year. While shipment levels didn’t quite match those prior to the recession, they were quite strong.

“After a great first half, the economies around the world began to slow around mid-year, and as a result dealer sales to end-users began to flatten out,” Mike DeWalt, corporate controller and director of investor relations at Peoria, Ill.-based Caterpillar Inc., recently told investors. “We found ourselves with inventory that was too high, and our dealers also found themselves with too much inventory. As a result, dealers slowed orders, and in the third quarter we began the process of scaling back production.”

Caterpillar was not alone in seeing a buildup in heavy equipment inventory. Marie Ziegler, deputy financial officer at Deere & Co., Moline, Ill., told investors that Deere also has been “really tweaking” its inventories, especially on the construction side. ....

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