Think about the days before large bulldozer and the giant excavator, construction was a much more dangerous and time wasting affair.In many ways heavy equipment is the backbone of American industry. The invention of heavy equipment made it possible to more efficiently create buildings and structures. But apparently the heavy equipment industry are experiencing a financial downturn. Market researchers are speculating that the bubble may be on the verge of bursting for the bigger heavy equipment companies such as John Deere, Caterpillar, and Agco.
The development for much of the heavy equipment and heavy equipment servicing industry mostly arose out of the need for new construction technology. For example during the 1960?s there was a large explosion in the heavy equipment parts. This was costly due to the need produced from large scale governmental projects such as the construction of the new Interstate roadways.
The demanding work of building the highways precipitated the need for powerful earth moving vehicles to move the massive amounts of dirt as well as machines with cutting edges to address the rocks. There were hundreds of these heavy duty vehicles that were used on this highway project.
During the 1960?s the size of the machines began to get larger and larger. Much of this growth was based off the need for more efficient mining. The heavy equipment used for surface mining is some of the biggest in the world. Mining involves excavating and also moving huge amounts of earth, therefore some of the largest shoveling and earth moving vehicles ever were created for this purpose, thus making mining more efficient and safer. One would think that with the massive growth of heavy equipment in the 60?s we could expect to see mammoth machines regularly rolling through the streets, but the size of machinery hit a cap in the 60?s. Improvements in technology such as commercial engine cylinders have made it so that bigger is not always better these days. Modern fuel injection technology has made so it that today?s heavy machinery is able to be more efficient without having to be overwhelming large to get the job done. Smaller machines means less moving parts to fail and subsequently less time wasted on heavy equipment servicing.
At the outset of the 1980s there was a great deal of change in the heavy equipment industry. The field of heavy equipment manufactures saw drastic reduction. Many companies were hit hard by the recession and had to close their doors. Other companies we being bought by larger companies. By the start of the 1990s the landscape of the heavy equipment industry had changed drastically. The most prominent heavy machinery companies of the 60s were Harvester, Caterpillar and Euclid. By the end of the 80s the only one of those companies still standing was Caterpillar.
During the 1990s new changes in laws having to deal with the environment changed the allowable amount of carbon emissions from diesel engines. This affected the in-factory heavy equipment servicing by manufactures, forcing them to make cleaner engines, which in effect affected the cost of production.
In recent times the market has changed drastically for the heavy equipment industry. There appears to be less of a market for long term heavy equipment ownership for construction companies. Rather than spending the money on buying and housing heavy equipment companies are finding it to be more cost effective to rent rather than buy. Financially this saves them the cost of heavy equipment servicing costs as well as the cost of storage.
This is in stark contrast to the market years ago. In the late 80?s and early 90?s the amount of heavy machine rental accounted for about 20% of the heavy equipment industry. Today the market share of heavy equipment rentals has grown to about 40% and rising. This may speak to a sea change in how contractors and construction companies view heavy equipment. Rather than paying for features, they are finding it more cost effective to have standard fleet models that can perform a job as quickly as possible, minimizing overhead.
This change in the climate has put pressure on manufactures to find more efficient designs that provide adequate power, but require less heavy equipment servicing. Maybe these pressures are affecting stock prices.