Craig Paylor warns of challenges ahead for rental
By Murray Pollok17 September 2010
Former JLG president Craig Paylor used his keynote address at the Europlatform conference to urge rental companies to exploit the full economic life of their machines, and warned the industry that it had to be ready for some major challenges, including increased competition from Asia and rising price pressures on machines.
He argued that rental companies should resist underselling their machines; "Why are new 45 ft booms rented at the same price as 8 year old machines?...Rental companies tell me that their customers like to have new machines, but they won't pay extra for them...We let that happen."
In a well-received speech, Mr Paylor acknowledged that manufacturers had contributed to the problem by overproducing machines during the years preceding the recession; "We've got to get over the greed...manufacturers made too much and distribution bought too much."
He said rental companies should consider returning to a rental model where machines are kept for longer periods. "If you go to an auction today it is out of your control. If it sells for less than the book value then you are devaluing the rest of your fleet...Five year old scissors are selling for US$1000: I guarantee that you will double your return if you keep it for parts and use it for your fleet. Don't be in a hurry to run out and sell it."
He challenged his OEM competitors to find ways of producing lower cost products; "To my brother OEMs, we're going to have to lower the cost of our products...we're so used to putting bells and whistles on them and calling them standard machines. We have to take some of the cost out of the machines - you don't need a machine to go places where it's dangerous to be."
At the same time he warned that there were upward pressures on machine prices caused by raw material cost increases as well regulations such as engine emission limits.
"Does everybody understand that most OEMs are spending up to 30-40% of their design time to accommodate the new Tier III and Tier IV engines?" These engines could add as much as $7000 to the cost of machines, said Mr Paylor; "Distribution doesn't have [the extra money], I don't know any rental companies who have it. It's just another squeeze on margins."
Mr Paylor said western manufacturers and rental companies should prepare for major changes in the competitive landscape with the potential for major Asian companies - primarily Chinese - investing in North America or Europe.
"You are likely to see distribution coming from other parts of the world. People are getting into the business and are looking for other opportunities...[they] don't want to wait five or 10 years for their home markets to grow.
"If a big international manufacturer of aerial work platforms decides to go to the US and buy the two biggest rental consolidators, then that's a new ball game. You have to have a game plan."
Mr Paylor, who was accompanied at Europlatform by JLG's new president, Wilson Jones, said he remained optimistic about the global opportunities in the aerial platform market and when asked during the panel discussion about his future plans, said "I see an awful lot of opportunities. There are a lot of things our industry hasn't done that other industries have done."
It seems very likely that Mr Paylor will remain in the industry in some capacity. As he said at the start of his speech; "I just love aerials."