Beyond BAUMA

The World of Construction Equipment Converges on Germany, Creating the Ulitmate Machine Trade Fair
By Keith Gribbins

For months, the reports kept coming in — machines were taking over Munich. Over the Internet, we would read chatter on the latest compact curiosities arriving in Bavaria, fitted with buckets, forks, augers and every attachment in between. Fuzzy images coming from the German industrial capital showed giant metal excavators like mastodons with long arms and big teeth. We had even heard rumors of robotic systems, with polished steel parts, automating human operations for accuracy.

Every three years this big equipment buzz comes to a crescendo at a place called BAUMA. In Munich for seven days (April 23-29), equipment from all over the world came together to create the largest trade fair on earth. Machine manufacturers from Caterpillar to Komatsu, engine makers from Perkins to John Deere Power Systems and OEMs from Michelin to McLaughlin were all exhibiting their latest construction equipment and technologies at the new Munich Trade Fair Centre.

This year’s iron swarm was the largest on record. BAUMA achieved its largest results ever with approximately 500,000 visitors (an increase of around 20 percent) with 190 countries represented (an increase of more than 11 percent). This sea of humanity (pictured above) crossed mountains and oceans to be a part of the most unique experience in the construction business.

Contractors, engineers, manufacturers, journalists, industry professionals, gear heads and even curious kids and families toured 16 enormous halls and hundreds of acres of outdoor exhibit areas promoting equipment, engines, parts, services, associations and trade commissions.

“We were already delighted with the last BAUMA in 2004. This time, it’s even better,” said Dr. Christof Kemmann, chairman of the exhibitors’ Advisory Board of BAUMA. “The number of contacts, the quality of the talks and the broad international spread among the visitors was just overwhelming.”

Overwhelming is the perfect descriptor for the trade fair. With its pure girth and its chaotic scheduling, you’re lucky to catch half of it in seven days. There are so many people in town, it’s impossible to even find a room (unless you booked two years in advance). Munich Airport registered 120,000 passengers passing through the airport on Thursday, April 26 — an amazing new record (unless you were trying to get a cab that day).

At the show, a spectacle on par with the carnival pageantry of Las Vegas ran from 9:30 a.m. to 6:30 p.m. The next closest construction event in size would be World of Concrete, which simply pales in comparison to BAUMA. Take the Caterpillar booth for example, which nearly took up an entire hall (one of 16 giant halls went specifically to Cat). Surrounded by titanic, yellow mining trucks, a four-story stage was set up in the middle for a jaw-dropping acrobatics show, while hundreds of product managers and professionals mingled and talked machines below.

At the outdoor booths, New Holland had dancers swinging from ropes like howler monkeys, performing elaborate numbers on what seemed like every hour. People rolled into the grandstands (yes, their booth had grandstands) to watch the entertainment. Afterward, they would tour the latest mechanical creations from the CNH brand.

That extravagance was fused with a festive professional atmosphere (European style). Stop by the Falch GMBH booth, a German maker of high-pressure water jet systems, and you could enjoy the company’s unique marketing campaign: “...more fun than sex” with scantily-clad women pressure washing, well, themselves. On top of that, nearly every company had a booth with a bar, so mugs of beer and cocktails began clinking at 10 a.m. every day.

In this giant ocean of kitschy carnival acts, equipment of every sort sat sparkling for attendees to touch, kick and admire. There were no ride and drives at BAUMA, but almost every machine of importance (made around the world) could be found somewhere on the show floor, with a product specialist ready to talk about it. This year’s size, attendance and pomp and circumstance were bigger than ever, probably because the construction industry is still experiencing such strong growth around the world.

“Contributing significantly to the success [of the show] was the global boom in construction — above all in the emerging countries of Asia, Latin America and Africa — and also the pick up in the construction sector in Europe,” said Manfred Wutzlhofer, chairman and CEO of Messe München (the host of the BAUMA show). “Thanks to the joint efforts of the exhibitors, the Exhibitors Advisory Board and the global network of Munich International Trade Fairs, BAUMA was able to further expand its leading position as a worldwide platform.”

A record-breaking 3,041 exhibitors presented their products and services to the construction populace, which was 7 percent more than at the last event in 2004. Germany, Italy and Great Britain were the three strongest contingents of exhibitors at BAUMA 2007. This was easily the world’s biggest trade fair in terms of exhibition space (540,000 sq meters), which was fully booked. In this ocean of equipment, big things were happening on the compact machine sector.

An Uncertain Future for Bobcat
Ingersoll Rand Considers Big Changes for Its Construction Related Businesses

The BAUMA rumor mill generated a deafening buzz early in the show last April — that Bobcat Co. had been sold. The report wasn’t true, at least not yet. A few weeks later, Ingersoll Rand announced it was exploring “strategic alternatives” for its Bobcat and “construction-related businesses,” including its Utility Equipment and Attachments businesses.

Ingersoll Rand has been an extremely busy company over the last 15 years. Ingersoll Rand purchased Clark Equipment Co, in 1995; Clark Equipment Co. was the holding company for Bobcat as well as Club Car. In 2001, the company expanded into the compact backhoe loader realm, acquiring stock of Superstav, spol. s.r.o., a manufacturer of compact tractor loader backhoes based in Dobríš, Czech Republic. Over the last few years, the company became interested in working with companies that made attachments. Ingersoll Rand announced it had acquired U.S. distribution rights for Tramac branded hydraulic breakers in June 2005. In the fourth quarter of 2006, Ingersoll Rand acquired Geith International, an Irish attachment manufacturer in the construction, excavation, demolition and scrap business.

Ingersoll Rand is a company with a diverse product portfolio, which means its product lines are constantly changing. Just a few months ago, the company announced it was selling its large road machinery business to Volvo for $1.3 billion. That acquisition included 20 U.S. distribution and service facilities. Now, the company is pursuing alternatives that may include an outright sale of Bobcat and other construction-related businesses or a spin-off to shareholders. For full-year 2006, these businesses collectively generated approximately $2.6 billion in revenue. The company expects to conclude the process in the second half of 2007.

“Our Bobcat, Utility Equipment and Attachments businesses represent world-class operations with exceptional people, products and brands; however, these businesses no longer fit Ingersoll Rand’s long-term strategy,” explained Herbert L. Henkel chairman, president and CEO. “The eventual outcome of our process to explore strategic alternatives for these businesses will be the strategic repositioning of Ingersoll Rand away from the capital-intense, heavy-machinery profile of the company’s past and toward a true diversified industrial company with powerful growth platforms consisting of climate control, industrial and security businesses. These businesses are well positioned to deliver consistent growth throughout the business cycle.”

In other BAUMA news, Bobcat Europe, a business unit of the Ingersoll Rand Compact Vehicle Technologies Sector in the European-Served Area (ESA), and Wacker Construction Equipment AG, Germany, announced that their long-standing strategic partnership in Germany, Austria and Switzerland will cease at the end of 2007. Background to this decision is the desire of both partners to focus on their future strategy, which can be best done outside of the current partnership arrangements. In this context, both companies will continue their constructive partnership throughout the remainder of 2007.

Two Compact Equipment Magnates Merge
Wacker Construction Equipment and Neuson Kramer Baumaschinen Announce Union

Two of Europe’s small equipment icons — Wacker Construction Equipment AG, Munich, and Neuson Kramer Baumaschinen AG, Linz, Austria — plan to merge during the course of 2007. The shareholders of both companies and management of Wacker have signed a Memorandum of Understanding to this effect. The new company is to be called Wacker Neuson AG.

“We are convinced that the high-quality portfolios of both companies provide a perfect springboard to capitalize on growth opportunities in the compact equipment segment in the mainstream construction, gardening and landscaping markets in Europe, the United States and Asia,” explained Georg Sick, president and CEO of Wacker.

The planned merger brings together two profitable, family-run quality and technology leaders to create a major global manufacturer of light and compact equipment. The joint venture will hopefully leverage both companies growth opportunities in Europe, Asia and the United States. Both companies are convinced that their product portfolios are mutually complementary. The user base, target markets and sales channels are practically identical.

“Both companies were on the path to success and would have continued to thrive irrespective of the merger. However, the merger does open up a new dimension, paving the way for a strong position in the global compact and light equipment market,” explained Dr. Ulrich Wacker, president of the Supervisory Board of Wacker.

Both companies say they are united in their commitment to continue serving their existing customer bases and building a successful future through a long-term strategy focused on local market requirements. Wacker’s global sales and service network, coupled with its rental business, offer significant synergy potential and the state that Neuson Kramer’s high-quality compact equipment such as excavators and wheel loaders is the ideal complement for Wacker’s rental pool. Wacker’s distribution partnership for Bobcat products in Germany, Austria, and Switzerland was terminated at the end of 2006. It was due to expire in 2007.

Compact Equipment Q&A with Wolfgang Immel
Komatsu Deutschland Sales and Product Marketing Utility

CE: Are skid steers and compact track loaders big in the European market?

Wolfgang: Bobcat started it and since then, everybody started to bring them into the market. In Germany, skid steers and track loaders are very much in decline. Bobcat, Gehl, everyone in the market is seeing a decline — only 300 or 350 units are sold a year. Germans still use them for demolition — inside buildings because they are small, low and narrow. But to use them as load and carry machines, no. I did a demonstration with such a machine and the driver came out of the machine and said, “I hate these jerky skid steers.” He hated the shaking all the time. In Germany, we have a lot of small articulated shovels, and even though the performance is lower than these [skid steers], they are far more comfortable to drive. The operator is not shaking all the time. That’s one reason this market is on a decline and is getting smaller.

CE: Will the skid steer and track loader markets ever develop in Europe?

Wolfgang: No. I don’t think it will develop in a positive sense. Of course, these products here [the skid steers and track loaders] are made in Italy, and Italy, for instance, still has a massive skid steer market.

CE: Which of your compact machines are big in Europe?

Wolfgang: It’s extremely different. You have a lot of different markets. Germany has a big mini excavator market. Italy has a big skid steer market. All of Europe, except for the German market, is really good for backhoe loaders. But in Germany there’s only 80 units sold into that market.

CE: Who are the biggest players in the backhoe market in Europe?

Wolfgang: JCB in Europe is 40 to 50 percent of the backhoe market. Komatsu has about 15 percent. We came to the market late. What we have now is great, but there were lots of details about reliability that we had to work out.

Flexing Machine Muscle
Volvo Says It's Stealing the World’s Top Position in Wheel Loader Sales

Growing its world market presence further while flexing a little Swedish muscle, Volvo claimed the world number one spot in wheel loader sales at a BAUMA press conference.

“With the addition of Lingong, we will be selling around 25,000 wheel loaders a year – which makes us number one in wheel loaders globally,” Volvo CE chief Tony Helsham told a Bauma press corps.

With the 70 percent purchase of Chinese wheel loader and excavator manufacturer Lingong, at the end of last year, Volvo says its now the world’s largest supplier of wheel loaders. Adding that achievement to its world number one position in articulated dump trucks, and number four position in excavators, puts Volvo on track to be a “clear number three” in the global construction equipment market by 2009, he said.

“By adding Lingong and Ingersoll Rand, we will see this grow further during 2007, 2008 and 2009,” Helsham announced. “We are forecasting during 2007 to shift 42,000 to 44,000 Volvo machines. When combined with more than 16,000 Lingong machines sold in China and 15,000 to 16,000 IR machines that gives us a total annual sales figure of around 75,000 machines. In addition, that’s a very nice engine demand. We are looking at strong growth in developing markets such as China, India and Russia, with growth rates of between 5 and 15 percent and see the market continuing to kick along at a very healthy rate. We are having a tough time sourcing components and raw materials to allow us to meet the demand.” Helsham added that the company will not change its production systems for Volvo wheel loaders. “Our manufacturing facilities will continue to operate in Sweden, the United States and Brazil,” he assured.

He also said Volvo would be integrating the Ingersoll Rand products into Volvo’s Road Machinery division. Volvo sees clear opportunities to leverage IR’s distribution network in conjunction with its own network.

“We are very interested in IR’s distribution network, especially in North America, but we also see opportunities in the rest of the world,” he said.

IR’s market share in pavers is 37 percent in North America (IR brand) and 30 percent in Europe (ABG); in compaction it is 25 percent in North America and 3 percent in Europe. Despite the low compaction market share, Helsham said Volvo was “very excited about the opportunities in Europe, through our strong Volvo CE dealer network. We think we will be able to drive this business in a much more competitive way, giving us significant opportunities to grow the business.”

Discussing Compact Wheel Loaders with Christopher Lee
Caterpillar Marketing Communications Manager

CE: In Europe, the compact wheel loader is a huge market, but in America, it’s very small because of the skid steer.

Lee: For the compact wheel loader market, we find that 50 to 60 percent is in Germany. The volume in the States is becoming more significant. What I think will happen is that that growth will steadily grow over the years. I think some of that will be a substitution for the skid steer in particular applications. How much it will grow in the states, I don’t know, but it’s steadily creeping up. But the main market is still Germany.

CE: What types of applications are popular?

Lee: Light industrial applications and recycling materials are big. In applications where a skid steer loader is too low to the ground, you can gain additional clearance and height with a compact wheel loader. The reach is higher and of course access in and out of the cab is much better.

CE: What are the biggest markets for compact wheel loaders in Europe?

Lee: The German market is small construction sites. In the U.K., we have a backhoe loader that goes onto the site first. In Germany, it’s almost always a wheeled excavator and a compact wheel loader. You go around Germany and there’s a compact wheel loader on almost every site. We sell most here with just forks and buckets, but in the States, it’s marketed much more as a skid steer loader. You’ve got a standard skid steer coupler on it in the States with a lot more hydro-mechanical tools. What we’ve done with these new compact wheel loaders is that we’re offering a high-flow option, so can run attachments like a cold planer and landscape rakes.

CE: What do compact wheel loaders offer that’s missing from American machines?

Lee: Visibility and operator comfort. You’ve got a full cab, space around you and you’re much, much higher. If you put a cold planer on the front of a skid steer, you really can’t see a great deal of what you’re doing. On this unit, you’re looking down when working. And there’s just better all around visibility — especially to the rear and to the fork tips.

The Trail of Tiers
John Deere Power Systems Offers Tier 3, Interim Tier 4 and Stage III A Ready Engines

At BAUMA, John Deere Power Systems (JDPS) announced that many of its engines under 75 kW (100 hp) are now U.S. Environmental Protection Agency (EPA) Tier 3, Interim Tier 4 and European Union (EU) Stage III A ready.

“With some of our PowerTech M and PowerTech E engines below 56 kW [75 hp], we chose to go straight from Tier 2 to Interim Tier 4. Because our 2.4 l engines have demonstrated Interim Tier 4 and Stage III A capabilities, we’ve met our 2008 deadline. This demonstrates that the technology we have developed is a great foundation for our Tier 4 solution,” said Gita Rao, product manager of strategy and long-term planning for JDPS.

Four ratings of the PowerTech M 2.4 l engine are planned for EPA Interim Tier 4. These engines will also meet current EU Stage III A standards, which took effect January 2007. The PowerTech M 2.4 l engines are either naturally aspirated or turbocharged.

Four new ratings of the PowerTech E 2.4 l engine and one new rating of the PowerTech E 3.0 l are Interim Tier 4 and Stage III A ready. The 2.4 l engines are turbocharged and air-to-air aspirated and the 3.0 l engine is turbocharged.

JDPS will leverage the technology developed to meet Tier 3/Stage III A emissions as the basis for meeting future emissions regulations. John Deere is exploring various technology options, including advanced in-cylinder and after-treatment solutions.

“We have narrowed down the technologies we are exploring for Tier 4, but have not yet settled on the solution that will be right for our customers and us,” said Rao. “For Tier 4, we are planning to continue with the multiple-platform option. We’re trying to include many potential solutions for Tier 4. The goal is to determine which concepts work best together in order to provide a solution that meets the needs of each given application.”

JDPS is also optimizing the combustion system for reduced emissions. This includes the use of multiple injections, increased fuel injection pressure, modified combustion bowl and fuel injector geometry. JDPS is reviewing a number of after-treatment technologies, including diesel oxidation catalyst (DOC) and diesel particulate filter (DPF) systems. John Deere is also working on NOx absorbers, lean NOx catalysts and selective catalytic reduction (SCR) solutions. Homogeneous charge compression ignition (HCCI) continues to be explored as an alternative solution.

Top Brass Talk
Caterpillar CEO Jim Owens Discusses the Future of Machinery at BAUMA

Caterpillar chairman and CEO Jim Owens expressed confidence in reaching the company’s 2010 corporate strategic goalsat BAUMA. Owens outlined the product, geographic and end-market diversity of Caterpillar’s businesses. He also covered Cat’s track record of financial performance, including first quarter results and the outlook for 2007.

“Despite slowing economic growth in the U.S., the rest of the world is doing quite well,” said Owens. “Many of the industries we serve, like mining, global oil and gas and infrastructure development are strong and continue to grow. The first quarter was a great demonstration of Caterpillar’s broad global and industry reach. Our sales and revenues and profit per share continued to increase despite significant weakness in two important U.S. industries — housing and on-highway truck engines. As we look ahead to 2010, we are well-positioned to deliver on our strategic goals of improved safety, quality and velocity, top line sales of more than $50 billion and profit growth in the top half of the S&P 500.”

Owens highlighted key factors involved in executing Cat’s 2010 strategy, including deployment of the Caterpillar production system to drive breakthroughs in safety, quality and velocity, a comprehensive implementation of Caterpillar’s business model in China and continuined growth in less cyclical service-related businesses.

“We are on track to deliver the future as we’ve outlined it,” Owens said. “We have a great product line, a growing range of diversified service businesses, a well-defined strategy that we are focused on executing and the broadest global reach of any company in our industry.”

Compact Utility Loaders with Brent Bolay
Ditch Witch Senior Product Manager

CE: Are compact utility loaders or mini skid steers being sold in Europe today?

Bolay: The mini skid steers have started to become popular really worldwide. I think the Australians feel they invented it and then it lingered into the U.S. market and now it’s becoming more popular over here. The main thing driving it is the versatility of putting all these different attachments on it. We’ve had a lot of success with these units in niche markets like forestry, trail building, parks and recreational departments. Users want to get into areas as narrow as they can. They also have terrain issues, so the tracks and the low center of gravity work out very well for that.

CE: Is there any difference between the machines sold in Europe and in the United States?

Bolay: On this particular mini skid steer, no. They’re exactly the same. On some machines we’ll do something different, depending on the market, but this one stays the same.

CE: What are some interesting trends in these foreign markets.

Bolay: Toro is probably still leading this market, but we feel like we’ve made some big in roads in the last few years – especially in the international markets. The key markets would be landscape, utility construction and there is some activity in the rental market – more in the U.S., but there is some here as well. But we feel these machines can provide a lot of opportunities for the markets were in. There is a strong favor for the diesel units in the European market too. I’d say that continues to be a big trend in Europe.

Directional Drills with Tony Briggs
Vermeer Marketing and Communications Manager

CE: How does the trenchless directional drilling market in Europe compare to its North America counterpart?

Briggs: Looking at numbers of units, it’s smaller, but it’s still widely accepted here. The trenchless market is accepted here and we do really well in market share.

CE: Is there a certain European market that really embraces HDD technologies?

Briggs: They’re accepted all over. Obviously, the amount of work, like in the States, is spread around. Some states are doing more fiber projects. Some states are doing more oil and gas projects. It’s the same over here.

CE: Is the fiber market coming back for directional drilling?

Briggs: You do here spots of it. You here some of it going in various places – in South Africa and in Germany. Different fiber projects going that cause an increase in the sales of our smaller directional drills. Over here you get varying ground conditions just like you do in the States. You get into the rock areas in Sweden, so the small drills aren’t used as much in those situations.

CE: How big is directional drilling for Vermeer? How do sales of HDD units compare to the rest of the company’s profit centers?

Briggs: In regards to dollar wise, it’s a big part of underground division – more so than our trencher division for sure. Your most expensive trencher models are $150,000, where you get into a mid-sized drill and you can double that. So the ratio falls more to the trenchless side.