South American markets are the future for US firms

As companies reveal their second quarter figures, it has become more apparent than ever that South America and its markets have been a huge part of the rising numbers. The economies of the US and Europe have begun to recover, but are doing so slowly, in minute increments. However, many European and US companies have been saved by large demand from South America, particularly Argentina and Brazil.

There are two saline treasons behind this: firstly, exports, particularly of agricultural and mineral products, have precipitated a growth in gross domestic product, and secondly, the factors which used to be prohibitive for American companies, such as hyperinflation and political volatility, are noticeably less pronounced.

Nicholas Heymann, an analyst for Sterne Agee and Leach, a brokerage firm, said, There's nowhere else in the world that's had the dramatic change in the middle class like Brazil, not even China. You've got an unfathomable amount of money there.

A variety of companies are either indebted to the Brazilian market, or are scrambling to become a part of it. PACCAR, makers of DAF trucks, has announced that it plans to construct an assembly facility in Brazil, in order to launch new and used DAF trucks across the continent of South America. They have decided that South America is actually a sounder investment than the vast emerging market of China, as the Chinese government often demands that Western companies enter into joint ventures with indigenous firms. Chairman and chief executive officer of PACCAR, Mark Pigott, said:

There's still been no Western truck manufacturer that's ever made any money in China in a partnership. Any of our competitors that are in South America seem to gain an inordinate amount of their net income from those markets. We're looking forward to growing in South America.

One company which demonstrates the potential of the Brazilian market is Whirlpool Corp., which manufactures appliances under the Brastemp and Consul brands, and have a huge market share in Brazil, with half of all Brazilian households, according to Whirlpool, owning a Consul appliance. Their rate of profit increase in South America was four times that of North America. Whirlpool chairman and chief executive officer Jeff Fettig said, In Latin America, the underlying economic fundamentals remain strong and we continue to see full-year growth [in appliance shipments] in the range of 10%.

Depreciation of dollar can be good for tractor makers

The chairman and chief executive of Titan International, the tyre manufacturing firm, has observed that the depreciation of the US dollar, in relation to other farming countries, is actually proving beneficial for the America's market for farm machinery.

Maurice Taylor said that although Brazil had become a major competitor to America, when concerning output of cotton, soybeans and corn, the farmers in Brazil are 'fighting' a currency that is appreciating. Mr Taylor said, Remember, a few years ago the Brazilian real conversion rate to US dollars was 4:1. Today it is 1.8:1. Therefore, it's a great time for the American farmer. Therefore, the fact that American farmers are in a very profitable state, will 'support farm equipment purchases'. He says that John Deere and Fendt tractors could become the 'big' winners. Large farm is running good and we believe it will go on for a few more years because corn, soybeans, cotton and wheat all use big equipment, said Taylor.

Titan International itself, which provides tyres for John Deere and Fendt, revealed a rise of 11 percent between April and June. The operating profits rose by 35 percent, although this was helped by cuts to the research and development department. The total earnings came in at $0.12 per share, which was fractionally ahead of the projections, which was $0.11.

Mr Taylor also said that the Titan International was set to stay on track to meet its financial targets for the year, on the mid-to-high side if business keeps going as it is today.

Construction underway on world's largest semiconductor plant

Saratoga County, New York has become the site of the largest computer chip production facility in the world. The construction of Module 1, the first of three semiconductor production plants to be built on the site, is under construction presently at the Luther Forest Technology campus.
The 1st module is to comprise four structures, which will span over 1.45 million square feet. The structures will include a support building, an administrative building, and a central utility building.

The construction is under the auspices of M and W US, which was awarded design and build contract worth $650 million, and is a three year project, having begun in 2009, with production of the semiconductors set to begin in 2012. A variety of Liebherr cranes are being utilised, and they have been supplied by Bay Crane. Bay Crane is the largest supplier of mobile cranes in New York City, and has been expanding its reach across the Northeastern regions of the country; the cranes for module 1 were supplied form their new Connecticut facility.

Joe Zils, Bay Crane's regional manager, said:

On such a high profile and fast tracked project, it was important for us to use the best machinery on the market. We operate one of the largest fleet of Liebherr crawler cranes in the Northeast, and they never let us down. The lifting capacity, maneuverability and reliability of the LR 1100 and LR 1300 made them the perfect cranes for this job.

Confidence beginning to grow in travel sectors

Travel, transportation and haulage firms, such as an airline or a truck trader, are a good indicator of the state of the economy as a whole. Air travel is rapidly affected by economic declines, and this was the case in the recession of the last two years, as airlines lost billions of Euros, as both individuals and businesses tightened their belts and refrained from flying. Likewise, when the numbers of these transportation industries begin to pick up, it tends to indicate that the economic climate is improving. The airlines have reported that it has almost returned to the pre-recession numbers, with Asia in particular driving the growth. China, the primary growth economy of Asia, and indeed the world, is vitally important, and although the government has begun to shrink some of the incentives and stimulus offers that were introduced in the face of the global recession, it still continues to grow in terms of its demand for equipment and products. Europe presents a less rosy picture, where the levels of growth are sluggish, and many governments have introduced so called 'austerity' policies in order to cut public deficits.

The industry continues to recover faster-than-expected but with sharp regional differences, said Giovanni Bisignani, Director General of IATA, Business confidence remains high and there is no indication that the recovery will stall any time soon. But, with government stimulus packages tailing off and restocking largely completed, we do expect some slowing over the months ahead.

The IATA said that air freight had grown by 26.5 percent, which points to a general increase in business. The world's largest steel-maker, ArcelorMittal, posted quarterly profits of €1.31 billion, which was a surprising level of growth, considering the figures for the commensurate period last year recorded a loss of more than €600 million. The reason for their 43 percent increase this quarter from the first can be accounted for by the return to profit of automobile groups. PSA Peugeot Citroen reported earnings of €680 million in the first half of the year, compared to a loss of €962 million in the first half of last year. Truck manufacturers are also superb indicators of the economic state of nearly every sector, and both Scania trucks for sale and Volvo trucks have been reported as being surprisingly robust. In Germany, the largest market in the EU, confidence in business rose remarkably, with the IFO Institute, a Munich based organisation, said, Firms are reporting significantly more favourable business conditions. The German economy is in party mood again.

Komatsu invest in Chinese market

The surge in demand for construction equipment in Indonesia and China has led Komatsu, one of the giants of the industry, to announce plans to double their production.

Despite projections being released in April, Executive Officer Masahiro Uegaki said in a Tokyo interview that the actual figures will exceed those projections by 60 percent. Last year saw 44,000 machines for the construction and mining industries produced by Komatsu; the end of this year will see approximately 85,000.

Komatsu's rivalry with Caterpillar means that they are counting on the US and Asian markets to grow this year. Despite China's demand for equipment, it saw a rapid decline in growth in 2008, and Yasuhiro Matsumoto, an analyst at Shinsei Securities Co. in Tokyo warns that, Komatsu faces the risk of a further slowdown in the Chinese economy, which would lead to a drop in its stock price. However, long term growth in the Chinese market, which is expected, will benefit Komatsu.

Both Komatsu and Caterpillar, great rivals and manufacturers of excavators, saw their share prices dip this, with Komatsu's falling 2 percent, and Caterpillar's falling by 0.3 percent. Komatsu have clearly targeted China as the market with the most potential, setting up a specific buying department for China, and sending a more than 20-strong delegation of executives to the country, as they vied with Hitachi, the Japanese construction equipment firm, and Sany Heavy Industry, an indigenous company, for business. At present, Komatsu is the leading supplier of excavators and other construction equipment to China, and it means to retain that share.

China is the world's most rapidly expanding economy, and also one of the largest, with Uegaki saying, China’s strength is outstanding. Indonesia is also strong, the markets for the country’s mining, agriculture, forestry and construction sectors are all good.

Komatsu combines Japanese and local produce in their excavators, with Japanese steel used to make the high-pressure tubes, and local steel for the booms and exterior shells. They have exceeded their projections, with an net income of 52 billion yen in the last two quarters, after a prediction 37 billion yen. The huge infrastructural projects in China, such as railways, roads and mining, mean that it now accounts for 19 percent of Komatsu' sales.

Recovery begins in the truck industry

The gradual worldwide recovery of the trucking sector is finally beginning to be felt further down the line, with automotive parts dealers in London seeing a small upsurge in business.

London, Ontario based wheel manufacturers Accuride have been forced into staff cuts in recent years, but recently was able to recall 40 workers who had been let go, making the staff numbers up to 130. Four years ago, the Accuride facility had 500 employees, and so the levels are still much lower than the pre-recession years. However, the beginnings of a recovery are an encouraging sign, with Tim Carrie, president of Canadian Auto Workers Local 27, saying, It is a good sign. It is good news when a company that supplies the trucking industry recalls workers — that is positive.

The fortunes of a company which is a truck trader is generally a good arbiter of wider economic situation, as a successful trucking industry indicates that goods are being purchased which require transportation. Someone buying used DAF trucks represents a pyramid of spending. The recovery is slow; as Carrie puts it, It is coming back in dribs and drabs.

Ceva logistics, which transports items for General Dynamics Land Systems Canada, is another firm which has recently been able to resume hiring new staff. They are recruiting 30 new employees, in various capacities; warehouse, shipping, forklift drivers and administration. To this end they are hosting a job fair on the 5th of August.

The Cami car facility, located in Ingersoll, is working to keep up with a large demand for two utility vehicles, the Terrain and the Equinox.
As a result it is looking employ a further 200 staff by the end of the year. As the recovery trickles down, Cami' supplier Rieter Automotive is also able to add staff, with 40 more jobs created. Carrie is cautiously optimistic, saying, I don’t think we will ever rebound to the level we were at, but this is a good sign. I measure a rebound in workers getting their jobs back, and that is happening now.

Manitowoc release second quarter figures

Manitowoc Co. Inc., manufacturers of tower cranes and mobile cranes, have announced their most recent sales figures, which are an increase on the last quarter, but still below last year's levels.

Manitowoc is based in Wisconsin, and is a major employer in Franklin County, where its plant is located in Shady Grove.

The sales figures that Manitowoc released are a 23 percent increase on the previous quarter, which is still 31 percent less than the second quarter of last year. During 2008, in the second quarter, Manitowoc sold cranes worth $1.1 billion; this second quarter saw sales of $425 million. Glen E.Tellock, Chairman and CEO of Manitowoc, said, The second-quarter crane segment results illustrate the continuing challenges of the current economic environment in which we operate.

The first part of 2009 saw Manitowoc cut the workforce at Shady Grove by 750 members of staff, whilst the share prices fell to a low of less than $5 per share, compared with the $40 per share which was quoted in 2008; at present, the shares are on the rise, with the current price being $10 per share. Like many other construction equipment manufacturers, Manitowoc is focusing on the developing markets, where the economic recovery has been much swifter than the US or Europe, with Trellock commenting, Similar to prior quarters, emerging markets such as Asia, Latin America, and the Middle East demonstrated positive signs of improvement, while demand in the developed economies of North America and Europe continues to be weak.

Eric Etchart, president of the Manitowoc Crane Group, says that the emrging and developing markets account for 40 percent of the crane orders that they are receiving currently, with the demand for tower cranes even on the rise in Europe. We're seeing better and better times, Etchart says, whilst still remaining cautious.

One problem is that companies and individuals wishing to order cranes are struggling to obtain the necessary credit. A sizeable order had to be removed recently because of what Tellock describes as, persistent financing challenges in the current credit markets.

The firms which supply equipment are also now likely to hold less stock, and are declining to purchase small cranes. While some recent positive indicators suggest a stabilization in certain mature markets, said Trellock, we remain guarded as we move into the second half of 2010. At the same time, we continue to drive the operational efficiencies, process improvements and cost reduction initiatives we implemented last year, which should provide enhanced profitability as demand strengthens across our business.