Jim
McCullough is president and CEO of Case New Holland Construction Equipment, as
well as being chairman of the Association of Equipment Manufacturers (AEM).
This position gives him a strategic view of the construction sector as a whole
and its importance for both the US and the world economy. He said, “If you look
at the countries that are performing well it’s because they have
infrastructure.”
Investment
in infrastructure is a key priority for the US, according to McCullough. He
said US politicians need to understand the important role that infrastructure
plays in the economy. The risk of deferring infrastructure investments will be
enormous and he added, “North America will lose its competitiveness. There are
a lot of inventive ways to invest in infrastructure, like issuing bonds or
public-private partnerships.”
North
America does not play as important a role in turnover for Case New Holland as
it once did and the balance of sales for the group has changed since the
financial difficulties that impacted on North America and Europe. He said, “About
36-37% of total sales are in North America where once this was around 75% of
the business.” He added that Asia has been another strong market for the group,
long with Latin America. However, he said, “The volumes you get out of Asia and
Latin America are not as high as North America in a good year.”
Despite
the impact of the recession, Case New Holland has continued to invest. He said,
“Probably the most important thing that happened to us is that we didn’t cut spending
on research and development.”
The
raft of emissions legislation has required significant investment, with the
Tier 4 Interim/Stage IIIB requirements now coming into force. He continued, “If
there’s one thing I don’t like about Tier 4 it’s the ramping effect. It’s
harder to manage the phasing in and phasing out of products and you’re
constantly trying to balance the inventory.”
In
terms of manufacturing, building machines to meet different emissions
requirements in different territories does increase the complexity of
production, as a much broader range of components is required. However,
McCullough is sure that market acceptance will be good for Tier 4 machines and
he said, “…once we have the chance to show the customers the advantages of Tier
4. It’s our job to explain to them what’s been done.”
McCullough
continued, “There was concern about the cost of Tier 4 and how much would be
passed on to the customer.” He said that the cost increases vary from around 4-5%, depending on the size of the machine and commented, “My
biggest concern over acceptance is in Europe. Price increases are not well
received there.”
The
increasing cost of fuel, particularly with the recent instability in oil
producing nations in the Middle East and North Africa, should give greater
incentive to the take-up of Tier 4 machines, given that fuel economy is one of
the benefits of this technology. While fuel costs may be lower in the US than
in many other parts of the world, the North American market is still very
conscious of price increases.
Fuel quality is crucial for Tier 4 machines,
which are extremely intolerant of high sulfur levels as this will cause rapid
wear. Some parts of the world may have issues with supplies of the high quality
fuel required for Tier 4 machines. However, McCullough believes that this will
not present an insurmountable problem.
