Up on a boom

25 April 2008

At the time of writing in early May, Hans-Georg Frey had just returned from Intermat, the biggest crane industry exhibition of 2006. This Paris show marked three years since Frey's first big crane industry event - Intermat 2003.

“It was the first big show shortly after I took over from Freddy Bär and we have had some interesting times since then. In 2002 there was a tremendous down turn, in the range of 20%, and I started in the industry when it was at this low level. The market moved sideways in the following year and only really started to look up later in 2004 and then, in 2005, there was strong market growth. Now all markets are very active worldwide. There are no slow markets, which is quite unusual.”

A primary development affecting the industry in Frey's time has been the shortage of components. “We were seeing tremendous increases in prices for components and steel. We were seeing and still are seeing shortages in components, especially tyres. In fact tyres are the limiting factor for increasing production today.”

Consolidation among manufacturers has been another influential change. “Other very dramatic developments we have seen in these recent years are a concentration of our industry - Terex taking over Demag and Manitowoc taking over Grove - which are very significant changes in our industry. And these are challenges for us.”

On developments at Liebherr in his time, Frey says, “I think most important has been to really prove continuity, to really show that Liebherr is a solid and stable force in the market. It is certainly something that helped us increase our market share in all terrain cranes in 2004 to 44%. This was the highest [world] market share we had ever had in all terrain cranes and this was at a time when the market was going sideways.”

Product development is a primary contributor to Liebherr's success. Frey continues, “It is very important to keep our leadership in innovation. We are not just doing longer booms and higher capacity. Our research and development department has done an excellent job bringing out new innovative machines and components, for example, our active rear axle steering system that saves money on tyres.”

Disc brakes, shown at Intermat, are another innovation on all terrains.

“This highlights that we make new and good cranes that are interesting machines. Disc brakes might be a small thing but they are quite an improvement - less maintenance, lower cost and greater durability.” Liebherr is the only manufacturer using disc brakes on its all terrains. “So far it is only us, we are at the forefront. It is one example of our innovative approach that is one of the reasons why we have been able to build the business since that time.”

Getting results

That growth is shown in the 2005 financial results for Liebherr-Werk Ehingen, which “had a turnover of more than €936 million, a record year for us.” Official figures will be published later in the year and the Liebherr Group as a whole last year had more than €5 billion turnover.

Frey continues, “In my first year [2003] turnover was €784 million, in 2004 it was €852 million and last year it was €936 million. Now this year there is a good chance that we will go beyond one billion. We expect another good year.”

The number of cranes manufactured has also risen, “Last year [2005] we made and delivered very close to 1,200 machines.” This includes the full Ehingen product line of all terrains, large crawlers and the niche machines, for example, the LTF truck mounts, LTR telescopic crawler, MK mobile tower cranes and LTC compact mobile. “The year before [2004] we built 1,049, so the increase in 2005 was almost 150 machines.

“We expect this year to go higher again - to slightly below 1,400 machines. This is almost maximum capacity but we still have some reserves.

To sum up, “Looking at turnover we are experiencing a strong market growth and we also have a strong increase this year.”

Markets and the share

Commenting on world markets, “It is wonderful to say that all markets are very active. The US has come back strongly, the Middle East is very strong -Qatar, Saudi Arabia and Dubai are still going strong. India is coming up. Improvements in the overall infrastructure will create demand for, in particular, large equipment, in addition to small machines.

“Japan has also recovered nicely from the depression, and Latin America is coming in a big way. It looks like everywhere where you have a lot of oil industry, or where a lot of oil money accumulates, you find investment in infrastructure. All this naturally creates demand for our equipment. With all the regions going so strongly there is really no area where I could say we want to focus or where we want to push because we are active in all markets.

Liebherr is in a strong market share position, “Looking at market share, in 2004 we had a record,>while in 2005 it was marginally lower, but the first three months of this year already show again that we have a good chance to achieve the level of 2004 and maybe even exceed it. Looking at the manufacturers based in Germany, which make 90 to 95% of the world's all terrains, we have almost 4% more market share in the first quarter this year than we did for the same period last year.

“It looks good so far this year. Obviously you have the situation that you gain in one market and lose in another but overall we look at the world market share. We had a very good market gain in the UK and Ireland where we have more than 40% market share on sales of new all terrains in 2005 whereas we were around 30% before.”

On the overall world market share for this year, “I think what is important is if we had more than 40%, this would be quite an achievement with such strong competition.

“It is a very good situation to be in. We do not know how long it will last. We know this year will be a good year and we expect that 2007 should be a good year but to look beyond 2007 it is not possible to say.”

On delivery

Lengthy delivery times are a hot topic. “Delivery times can be as short as the end of this year or the beginning of next but also as long as the end of next year, depending on the type of machine. And you find anything in between but the minimum is the end of this year.”

Frey is reluctant to give exact figures but puts the size of Liebherr's order backlog somewhere between $700 million and $900 million. “People are still ordering. They have realised that they need to order now to get a crane even in a year or so. People are aware of this situation and they are adjusting to it. When the world is booming like it is today everybody wants cranes and then, of course, your order book becomes larger and larger and we are limited in increasing our production because we don't have enough tyres.”

Another hot topic is manufacturing in China. “We have no plans to go to China and manufacture there. I don't think the all terrain crane would be the right machine to be built in China. For us it would be again a question of quality and, no matter where we manufacture, it would reduce the number of units manufactured here [at Ehingen] and that would reduce the economies of scale.”

On rental

Changes are afoot in the rental sector, Frey explains, “The majority of our customers are and will remain smaller local companies but some will continue to grow by acquisition. Some are expanding into certain areas, in particular because, for example, the east of Europe is opening up. There you find companies who have gone to Poland. With the enlargement of the European Union some players have moved into the new markets before the local players could really develop themselves.

“To a certain extent you find pan-European rental players but very few. Often they are companies that also have a big transport business. Felbermayr [in Austria] is a good example. Felbermayr has moved into Romania, Slovakia and Poland. Then we have some Germans who have moved into Poland and some Finns who have moved into Lithuania.

“Then you have international companies. Still for me the big international companies are Mammoet and Sarens. I don't think we will find many more companies like that.”

Frey is clear on the question of whether Liebherr will be moving into crane rental, “We will not, because the majority of our clients are rental companies so that if we entered the rental business it would be in direct competition with our clients and this we do not do.”

Moving on to products, at the top of Liebherr's crane line is the new 1,350 tonne (initially projected as a 1,250 tonne) capacity LR 11350 crawler crane. Are there plans for an even larger model? “We are now pushing this machine into the market and will take it from here. We see what the competition has done. It is natural to increase capacity.

Look at the [750 tonne capacity] LR 1750; a few years ago nobody would have thought about such machines but now this is the norm so we will also go into the higher field. It is too early to be concrete but we are looking at the higher class to see if it makes sense. I want to look first to see if it takes off so much. These are big beasts and only a certain number of these machines are needed in the world.”

It is all down to the customer. Frey concludes, “I have the feeling that we are enjoying a little bit better situation than our competitors and this is thanks to the efforts of our team. We have to get up early every morning, do our homework, not become arrogant and every day work hard for future orders. Every day we have to work hard to satisfy the needs of our customers and help them wherever we can. We must always try very hard and never forget that times will change. •

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