Web Exclusive: P&Q Roundtable – Part 2

By |  January 7, 2011

Participants

John Bennington, GreyStone

Jim Brown, Breaker Technology Inc.

Darren Constantino, Pit & Quarry

Michael Duffy, Dyno Nobel

Rick Everist, L.G. Everist Inc.

Rob Fuller, Power Transmission Solutions

Jeff Gray, Telsmith

Michael Heenan, Ogletree Deakins

Mike Hinrichsen, Caterpillar

Mark Krause, Lafarge North America

Ron Kuehl, Polydeck Screen Corp.

Bill Malone, Sandvik

Jim Panter, Fenner Dunlop

George Reddin, FMI

Irik Sevin, VantaCore

George Sidney, McLanahan Corp.

Julian Smith Jr., Orica USA

Kent Starwalt, Tennessee Road Builders Assn.

Bill Warr, Thompson Tractor Co.

Mike Wedding, Nugent Sand Co.

 

 

CONSTANTINO: In some parts of the country, producers are finally beginning to recover from the recent recession. Maybe not as much as we’d like to see, and now there’s talk we may be headed for another dip. How are things in your market and for your company?

HINRICHSEN: Where I see the greatest improvement or the continued investment in businesses is in shipping by rail or by water. If you can move your markets a long distance relatively cheap, that seems to be where investment is occurring.

GRAY: [Companies] are manufacturing anything having to do with power generation and natural gas, oil fields. Wind energy is requiring a significant amount of aggregates. We’re seeing high activity in those areas.

KRAUSE: For us it depends on the marketplace. Certain markets are really doing really well right now, but mainly because of government influence – roadwork projects, special projects. It’s not what I call sustainable business right now, but there are some markets that we’re running seven days a week, 24 days a day right now just trying to keep up with demand.

SEVIN: Are they for sale?

KRAUSE: Everything is for sale.

CONSTANTINO: Mark, is that a state-by-state thing? Does it depend on state budgets?

KRAUSE: Yes, state budgets. I live in Iowa and it’s unique in that we have this governor’s race, and the Republican is saying that the highways funds that were spent were spent unwisely because they really didn’t create any jobs and then the Democrat, who’s the guy in power, is saying that’s crazy. It’s a unique stance to say spending money on roads isn’t creating any jobs, and the Republican who’s campaigning on that is up significantly in the polls. It will be interesting to see what happens.

STARWALT: The real question is, “Did they or didn’t they create jobs?” Here in Tennessee it didn’t necessarily create jobs. It sort of retained jobs, but the bigger issue is that until we get a long-term reauthorization program on the transportation side, people aren’t going to invest – companies are not going to invest in people.

They’re not going to invest in equipment because they don’t know what the long-term financial situation is out there. So, until we see something other than six-month, nine-month extensions of the road program and what that money is going to look like, the markets are going to tend to be flat, especially unless the commercial side and the homebuilding side pick up, and I have not seen any indication of that at this point. So, the only thing driving things right now is the highway side so – and that’s the positive. Again, in Tennessee we had a record year last year because of the stimulus.

We had about $1.2 [billion] – we normally have a $650 million program. We were at $1.2 [billion] last year, and this year we’re going to be over a billion again. Primarily we’re going to go over a billion again because it’s the last year of the governor’s term, and he’s going to spend as much money as he can – like all of them do. He’s going to throw everything out the door on the way out the door. That’s what we’re seeing here in Tennessee anyway.

REDDIN: Interest rates are as low as they can get, theoretically. The government spending is arguably pretty high. The residential market’s dead; the commercial market is dying; and the pain is yet to be 100 percent felt. I think we’re very vulnerable because we are more than ever dependent upon public spending, and if that were to change – and we’re in a political campaign right now. If that changes, I think we’re very vulnerable, but there is also a bright side. We could also see opportunity, so I think this is very political right now, the economy, because it’s so dependent upon public spending, and most of the other remedies have already – we’ve already used them, interest rates being a good example.

BENNINGTON: Obviously last year was absolutely miserable. The thing that we saw the most of  – as with every recession that we’ve experienced in the past – was where the sales of new machines would go down and part sales would tend to go up. Customers were keeping older machines running instead of buying the new one.

Last year everything went away. It wasn’t only that they weren’t buying new machines, they weren’t even running the old ones. One of my Georgia dealers was telling me that most plants were running two or three days a week. That was last year. This year we’ve seen a very large uptick in part sales.

New machines are not coming back quite as fast as we like, but they are coming back. I keep filling out these surveys trying to give my idea of what the next year will be. I guess sluggish growth is probably the best way to describe it. I would love it to be better, but that seems to be the reasonable thing.

The one thing that always helped the manufacturers is that it takes producers so long to get a permit for your plant, by the time you get the permit, you’re going to put the plant in no matter what. Unless the economy just completely dries up and blows away, you’re going to have to do some sort of work, at least to keep the permits active.

We’ve seen some of that this year – guys who got permits through, and they just put in whatever. Sometimes it’s a smaller plant than what they really wanted.

I had one customer who literally built the plant and designed it so that next year he could put in more equipment. He bought way too big a screen for the material he was producing knowing that next year that he would build a taller structure, put in some more washing equipment and go on from there. At least that’s his hope. I hope he’s right.

SEVIN: I think that a lot in life is compare and contrast. I mean, we’re doing terrible compared to ’07, but to me ’07 and ’06 were a blip up, and to keep comparing ourselves to that can be very depressing – and also somewhat unrealistic. If you think that ’06 and ’07 were normal, well, then we’ll never be normal again.

The world is what it is, and I think that the only good part is everybody’s starting to realize that you can’t embrace ’06 and ’07 as the norm.

Where does it go next – sluggish growth? I don’t think anybody knows. I don’t think we know where the government’s going. We hope residential is coming back. We hope commercial is, too.

We’re in Tennessee. We’re in this micro-market in Clarksville, which is just some oasis in the world, so we can’t really extrapolate from it. We’re lucky. But we’re also in Baton Rouge, and there are no signs that it’s going to get better, so it’s tough for us.

People come to realize that this is the new world and that this is what I’ve got to live with and that’s what I’ve got to deal with, and I just don’t see it coming back. I hope it does. It’s America, but I just don’t see any realistic signs that that’s going to happen.

CONSTANTINO: Not happen soon, you mean?

SEVIN: It’s a great question. We’re going to come back. I bought into the stock market because I think it’s going to come back. When I talk about my own business, I just don’t see when. Now, I believe emotionally that, yes, in three or four years we’re going to be doing great because it’s America, but quantitatively there are no signs other than it just can’t continue.

REDDIN: The Portland Cement Association announced statistics analyzing this from peak to trough specific with this recession and identified that this is the second worst drop ever other than the Great Depression. In ’09 it was down about 33 percent from peak to trough. To put it in perspective, the ’73 to ’75 drop was 22 percent; the ’80 to ’81 drop was 24 percent; the ’90 to ’91 drop was 14 percent, so it’s been a tough time.

That’s the bad news. I think long term the good news is that many people are forecasting that between ’06 and 2050 the United States will grow 100 million people faster than any country in the world other than Pakistan and India. Faster than China. And we know that our industry is off and there are per capita metrics associated with that, so I do think that long term the forecasts are decent. It’s just getting out of this bottom and figuring out what the new normal is.

KUEHL: We’ve recently seen that everybody has depleted their inventories and have started buying again, so our sales are back a little bit to normal on the parts side of business, which is primarily our business. So we feel like it’s going to be slow, steady growth from this point forward. We’re not looking for another dip.

MALONE: Looking at it from an equipment manufacturer’s point of view – from the West Coast to the East Coast – we could sum it up by saying a famine to a feast; The West Coast is picking up reasonably nicely, the East Coast is picking up a little bit more. When we look at the government incentives, how they’ve actually affected us as a manufacturer of equipment, they haven’t made any impression.

It’s getting better. In 2008-2009 or 2009-2010, we were basically living hand-to-mouth. This year we have one of those magical, mystical things that has come back into play called the backlog. So, we’re tentatively and cautiously predicting that 2011 is going to be a lot better than ’09 and ’10, and that’s how we see the market just now.

HINRICHSEN: Developing countries are powering the economies, and from our standpoint at Caterpillar, we see Latin America and Asia and Australia with tremendous growth. I was in a meeting last week with the Latin Americans. They’re talking the same conversation we had three years ago, and they don’t see it falling off.

SEVIN: I’m in Baton Rouge. Baton Rouge is not growing like Caracas. I like Baton Rouge and I like our country but you’re absolutely right. The developing countries are not like they were in the ’50s. They’re not backwaters. Mexico City and Caracas, they’re real places, and so for companies such as yours, that’s where the growth is going to be. Baton Rouge and those worlds are going to be slow. They are slow.

SMITH: It seems that producers who are holding their own are the ones that have the ability to ship by barge or by rail, or companies in specialty stone markets.

We’re an explosives company, and we’ve been flat or less than flat from a growth standpoint. We do have some unique markets that have experienced an upswing, depending on the product they’re mining, such as gold. They can’t get gold out of the ground fast enough with the dollar weakening like it is, but that’s a very small part of what we do from a nationwide perspective, so we’re definitely seeing a downside.

HEENAN: I keep thinking about the housing market. We had a super-heated economy because people believed that buying a house was a good investment, and people who couldn’t afford to buy these good investments were getting the money to buy them. Now we fixed all that.

We took away that money. You can’t buy the house. And we convinced everybody else it was a very bad idea to buy a house because they’re going to lose money. And, of course, there’s a lot of infrastructure that goes with all that good housing.

BENNINGTON: There are about four or five states right around us that that are not feeling the pain in terms of unemployment. Nebraska, South Dakota, Minnesota – at least western Minnesota and North Dakota – are running 4 percent unemployment, and that’s basically full employment. Everybody who wants a job is getting one, at least in those areas, and then you look at the rest of the U.S. – Southern California and Michigan and places like that where there aren’t jobs.

They’re going to open a bottling plant in Columbus, Neb. That’s not going to affect the national economy. We’re talking about micro-economies. Columbus is already at full employment, and we’re going to add another 200 jobs in town. Platt County in Nebraska has about 25,000 people, and 22,000 of them live in Columbus, so there’s not going to be anybody in the county left to come in. They’re going to have to draw from other places.

Eventually the guys in Michigan or Southern California are going to have to be coming to these states to live because the jobs are there. And we don’t have enough houses now.

They’ve brought two extended-stay hotels to Columbus a year and a half ago because of a major expansion to a corn syrup plant in town, and now we’re adding this, and there just aren’t the houses. We’re going to end up with parts of the country that still have way too many houses, and we’re going to end up with parts of the country that don’t have enough now and won’t have enough.

EVERIST: It’s that giant sucking sound from Columbus, Neb. It’s going to draw everybody to Columbus. I’ve been listening with great interest here. I’ve got just one or two comments quickly. I drove 1,000 miles from Western Montana to Sioux Falls, S.D., and you know what struck me is that all the billboards were empty. All the outside advertising billboards were empty because apparently their lease ran out and no one wanted to renew them.

That tells you something. Nobody wants to advertise outside anymore. That’s one part of the economy that is going to take a while to come back.

Secondly, I noticed there are 600 large commercial properties that are going to auction in the next 30 days, and banks are saying, “I’ve got a hotel properties, commercial office structures, strip malls, all of them with prices of $6 million to $30 million,” and they essentially say, “Make an offer.”

And they’re willing to write these things for a dime to 20 cents on the dollar. I think there’s a tremendous amount of that. If that’s what we see in the Wall Street Journal, how much more is there? So I think in order for any economy to have any predicative curve, banks are going to have to start making money. I believe they are making money.

I believe the banks are starting to make money, but I think it’s going to be another 18 months, 24 months, 30 months before you see any kind of movement because they’ve got to shed a tremendous amount of property, or what amounts to assets now that don’t have the same value that they had on their books a couple of years ago, and I think that’s really what’s going to drive this economy.

KRAUSE: In the news this morning, they said that 25 percent of second quarter home sales were foreclosures. That’s a scary number.

EVERIST: So the good news is that it’s actually starting to work, but the bad news is it’s going to take a long time.

REDDIN: I agree with all those comments. I think in the short-term the biggest impactor is going to be transportation funding and transportation funding at all levels. Jay Hansen at the National Asphalt Paving Association indicated that for every billion dollars spent on transportation, it creates four to five million tons of asphalt.

And, of course, one key ingredient to the hot mix asphalt is construction aggregate, so I think the short-term is we’re going to depend on public spending at the state and federal level, and so I think what happens with the reauthorization of the transportation bill will be one of the most important things for the short-term.

WARR: I work for a Caterpillar dealer in Alabama. From our perspective, it’s pretty interesting because in a lot of the industries we serve – house building, commercial forestry – we’re seeing a lot of repossessions of machines. But in this market, you don’t have any repossession of machines.

What you have is the ability to go to the customer and rebuild the machines when they’re not buying, so it’s helped our business from a parts-and-service standpoint. We don’t see these customers going out of business. They’re just doing half business. They’re down 50 percent from what they normally were doing.

As a Caterpillar dealer, we have a lot of programs in place to support rebuilds and that type of thing, so it’s not hurt us that bad really. New machine sales are definitely down. We’re doing more leases than we are straight-out cash purchases, but other than that, it’s still a good business for us.

WEDDING: Regarding transportation, we do some by rail and by barge in addition to trucking. With the cost of fuel going up, we can’t extend some of the truck markets as far as we normally could. A lot of times, the cost of transportation outweighs the cost of the actual product you’re selling.

Safety and environmental regulations are going to have an impact, too. Air regulations are getting tighter; water, permitting, everything. It’s driving some of the costs up. We’re not an energy company, so we just can’t pass these costs to the customer like everyone else.

It’s going to be a long way to get back, and I don’t think we’ll ever go back to where we were before ’06 and some of the boom years. We will get back, but it’s going to be a long haul to get there.

SIDNEY: Mike hit it on the head, in my opinion. We have some interesting dynamics at work in this country right now, and it will be interesting to see how they play out in the next 10 years. Roads and bridges still need built and repaired and airports need upgraded. That’s not going to go way; however, the need for that may diminish. First of all, we have a socialistic mentality in our nation’s capital that is driving this attitude.

It’s not that I’m against saving the whales, but there needs to be a balance of reality brought to this picture so that we do things smart. One could make a case that if we just upped the federal gas tax, we could have some more money for road repair and construction and all that sort of thing. Well, that’s a beautiful thing if you pretend that actually happens. But there are fewer miles being driven than in recent history. The road usage isn’t what it has been in the past, so road repair isn’t going to be done as much. That’s a real possibility.

When you look at what the government’s doing to us from a regulations standpoint – I was just in Washington last week attending a National Mining Association board meeting, and I had the absolute displeasure of listening to our government officials talk about the economy and specifically where they are in terms of their attitude toward the mining industry.

It’s scary. There was not one member of that board of directors that left Washington feeling optimistic. When you have the Secretary of Labor stand before you and tell you that she has seen to it that MSHA comes after the mining industry with a vengeance, that’s not a good signal, because what that means is producers are going to have to raise there costs of doing business  – because it’s going to cost them more.

There is not an American power plant builder that can meet the emissions standards for a coal-fired power plant. You have to go offshore to get that technology, so what does that say for our government being here to help us? They’re not helping us. They’re trying to drive us out of business.

I don’t mean this to sound like a political advertisement, but we’re in dire times, my friends. This is not a good time for America when you see the type of politics that are attempting to run this country, and until we get hold of that, I think a lot of these problems aren’t going to be solved.

BROWN: As we’re talking here, I get the sense that we’re all experiencing discomfort, and it’s really not going to go away anytime soon. I’m thinking about a number of things from a government perspective. What you have taught in most business schools today is that when the economy starts to dip you have to have government spending. That’s a basic macroeconomic model.

Something I’ve heard of late that hits all of us personally is this talk about a 1 percent premium or penalty that banks are looking at. Anytime you would move your money from a checking account, savings account, any single transaction would be 1 percent. The government is looking at it as a way to help pay down this deficit.

We have all of this money that’s out there, but how is that going to level itself out? It’s going to take a little time. It’s going to be a long haul, but you have to focus on today. We have to help our customers, end users, whoever it might be and get through it with the least amount of pain possible. We have to share in all of that.

 

CONSTANTINO: The next question is two parts: Do you expect a near half-trillion-dollar, multi-year highway funding bill to be passed by the end of 2012 or is it time to pursue alternative options? Is a multi-year highway bill as important to your company as everyone is saying or are there other concerns having more of an effect on your bottom line?

SIDNEY: We should all be shocked if it happens in 2012, and it all comes back to focusing around the budget issue that this country has, and that’s going to be the tail that wags the dog. So, personally, no, I don’t think it’s going to happen in 2011. I don’t think it’s going to happen in 2012. I don’t think it’s going to happen in 2013. I think they’re going to just give token amounts here and there to do things.

There was a comment made earlier about funding – the stimulus funding that really helped this nation. I listened to Secretary Solis last week make the claim that our big government really saved the sand and gravel business in America this year by providing the stimulus money. Now, I was in a room full of miners and most of them are coal miners.

They didn’t have a lot to say about that, but I almost jumped to my feet and said, are you kidding me? Because what that stimulus money did was it funded projects that had already been approved, but there just weren’t funds available to pay for them. So it didn’t create new work. It funded work that was already on the books.

We’ve had to reconstruct our business plan based on an international base as opposed to a domestic base because we don’t see it occurring – not just in the construction/aggregate business, but in the coal business, as well.

We’re dealing with a government here that we haven’t seen in this country for a long, long time, if ever, because they’re going about things in non-legislative ways. They’re using the executive power, if you will, to take mining properties off the table. They’re turning them into national parks, and you do not build a mining business with a lack of reserves. You just don’t.

Our company is devoting its attention internationally because that’s where it’s happening. These other countries are not afraid to strike a balance between the environment and doing business. In this country, we have this idea that it’s just strictly environmental-based.

DUFFY: Obviously I would love to see a highway bill get passed. I don’t have the confidence that it’s going to happen anytime soon because of the political environment that we have in Washington. Regardless of whether Democrat or Republican, I have absolutely no faith in the people that are running this country now.

There are a lot of people that have been up there for a long time that need to go, and hopefully the American people will speak this time and make it happen instead of talking about it. Until some changes are made in Washington, we’re going to be faced with a lot of challenges in our industry. I look at my business, and I see it being very flat for the next several years. I don’t see any growth.

Globally, our company has opportunities in Asia, Australia, China. That’s where our growth is going to be. I want our growth to be in the United States because that’s how it affects my livelihood, and a highway bill would be huge to our business – bringing back some revenues and profitability. But the biggest hurdle that we’ve got right now is that our government has to learn to live like we do.

We all run our own personal households, and we have to balance our budgets, and these people seem to think they can spend money like there’s no end to the pot, and that concerns me. And they put so much pressure on us as far as regulations. Our government is a worse polluter than we, by far the biggest polluter in this country.

BENNINGTON: I think there’s a possibility that [a highway bill] will happen in 2011.

The big thing that concerns me about not having a road bill is then we’re leaving it to all to the individual states to muddle through on these things. Replacing a bridge might take six or eight months, but putting 15 miles of highway is not something that’s not going to get done in six months, so we’re finding state DOTs are just not doing those big projects.

Nebraska is not doing any road building next year. All Nebraska is doing next year is maintenance, which is just not a sustainable way to run your society. At this point, I don’t honestly see a different mechanism for funding an interstate transportation system other than the federal government.

In regards to the funding issue, there has to be a different method, whether it’s miles driven or whether it’s the fuel economy of the cars we’re driving. I read recently in an article that this is the first time since it was introduced that the road fund had to have money come into it from the general fund, because there wasn’t enough revenue coming from fuel taxes. So long term there has to be a different funding mechanism.

There have been three or four different pilot ideas of how to do it. I’m not up to date as to how well they work, but we need to have some other system for funding the highway fund.

SEVIN: The second part of your question is about how important the highway bill is to us. I see it as supplemental, marginal, the icing on the cake or the Band-Aid if we’re having a problem. We can’t continue to hope for the government to provide the fundamental demand for our product that’s going to keep us viable.

We can’t continue to spend even if the stimulus package worked or even if a large highway bill gets pass. This is not what’s going to either save or condemn the industry. The fundamental thing is that business has got to get better and the economy has got to get better, and there has to be a demand from the residential and commercial side.

KUEHL: I’d like to add to Irik’s comments. The recovery is based on jobs, and the interesting statistic for me lately is underemployment, which is the people that have jobs but they’re not working at the level they were working at three years ago. With underemployment, you have more foreclosures, so it’s kind of a snowball effect where the people can’t afford to get back to where they were because they don’t have the jobs that they used to have.

KRAUSE: I don’t hear anybody who thinks we’re going to have a highway bill. Who is in Washington that’s actually going to carry that forward? Nobody is going to want to vote for tax increases of any kind.

Next year will be an abysmal year in Washington, D.C., because we’re going to be driven by both polar extremes, and so nothing will happen. My challenge to all of us is that we have to make it happen. If we’re going to wait for Washington to make it happen, we’re sunk already.

HINRICHSEN: As the old saying goes, learning has occurred here, but I came with a different perspective. It was my belief that next year there would be a highway bill in some form that would be passed. I’m doubting that now, based on what I’m hearing. And if it does pass, what does it look like? How is it funded? What are the strings tied to it? What kind of emissions regulations are they going to put into it? Maybe they’ll require you to have union jobs? Right? So I feel better about where we’re at than where we could go.

REDDIN: I think Mark’s point is a great one about who’s going to carry the water. I’ve only been watching these bills for the last 20 years or so, but it seems to me that the campaign has to change to get something done. Every time one of these bills comes up, the discussion is about how our roads are in disrepair, how our bridges are in disrepair, and how the bill will create jobs.

It’s the same story over and over, and my sense is that people are getting more apathetic.

HINRICHSEN: Does it take a few more bridge collapses like the Minneapolis bridge for us to wake up?

BROWN: I read an interesting statistic just the other day about interstate bridges. The average age now is 51 years. There’s not a lot of useful life beyond that. There is road building going on, but, again, it’s minimalistic at best. That’s a concern.

STARWALT: I guess to answer your specific question: A half-trillion dollar bill,? I don’t think that’s going to happen, We might have a bill, but I think it will be a rather short-term bill: a two-year bill or a three-year bill.

People talk about vehicle miles driven. That’s what we’re going to have to go to instead of a fuel tax. But that has to happen at a national level. We can’t do it here in Tennessee or any other states. I think we might get a bill. It will be short-term, but the Republicans aren’t going to be quick to do it, and the closer we get into 2012, then I think we may just start living on six-, nine-, 12-month extensions.

SMITH: When you look at the last highway bill, there was a lot of money that wasn’t spent because a lot of the states didn’t have the financial backing for the matching funds. It did help some, I guess, for the states that really took advantage of it – the states that were in a financial position where they could.

It created work, but did it create profitable work? Those states are really the ones that came out as a winner because the bids were coming out 20 percent less than normal, and the contractors were doing the work basically at cost.

GRAY: President Obama proposed $50 billion in infrastructure spending, and he did it in a city in Wisconsin that has suffered one of the highest unemployment rates due to the automotive industry moving out. I think the general voter sees 50 billion as less threatening [than a half-trillion-dollar bill] to the future of our country, so I guess my opinion would be that, going forward, a higher frequency of bills and spending measures is going to be the norm.

STARWALT: It ultimately gets back to how do you pay for it and where do you go from there? We’re going to have to have a fuel tax increase. That’s the only way you’re going to pay for this program right now. It is the only way it’s going to happen. To say a fuel-tax increase is going to cost the Republicans their majority, whether it’s in Washington or a state house, I think is crazy, but they’re not going to do it. That’s the problem.

By the way, the $500 billion Oberstar bill is horrible for the DOTs. If you do a lot of DOT work, you don’t want that bill. Now, if you live in a city, if you live in a very large urban area, you might like the bill, but if you come from a rural state, it’s horrible. Most of the spending goes to the urban areas, to the large urban states and then even those states that may be considered rural, the spending still goes to the cities.

 

CONSTANTINO: Mike Heenan helped us formulate this next question: MSHA may ask a producer to modify a piece of equipment to make it safer; however, suppliers are often hesitant to recommend modifications and may even void a warranty. So, suppliers, is there an opportunity here for you to work with MSHA to help producers? Producers, has this happened to you and how have you handled the situation?

HEENAN: MSHA wants handrails on mobile equipment. Mechanics have to work underneath the trucks, and there’s an issue about the fan: that it needs to be guarded in case the trucks were to start or something. There are issues today about scales. For all these years scales have had nothing more than rub rails and now they have to have guardrails if they’re elevated virtually at all, more than 16 in. according to MSHA’s most recent guidelines, and there are other examples.

Those are just some of the ones that come quickly to mind, but operators have resisted lots of times saying, “This is the way the equipment comes. This is the way the manufacturer built it. They built it for more people than just the mining industry. This is the way they think it’s appropriate.” MSHA says, “Well, too bad about that.”

EVERIST: The top of a backhoe is a primary location for someone to crawl out and check the oil like they’re supposed to and check other fluid levels. It’s considered hazardous and unguarded, and so you have to have a lanyard on it. There’s no place to hook the lanyard. So let’s just say you put in eyebolt on the top. Does that really help? It’s a serious question, and I’d like the manufacturers to give us some guidance on that, because we need it.

BENNINGTON: I think I speak for most manufacturers: We’d like some guidance from MSHA. MSHA writes the rules so vague. We make screw washers that have belts on them. The rule is that they’re supposed to not be accessible to someone’s fingers even though they’re already 8, 10, 15 ft. in the air. Nobody can get there anyway.

There are at least four or five manufacturers of that particular kind of machine. There are at least four or five different versions of that guard. Some of them may be better than others, but the problem is that the rules that we’re dealing with are so vague.

I get a call from a customer in Texas who got a citation because we have a loader hopper that didn’t have enough guarding on the return idlers. If I satisfy his inspector’s concerns, then the next guy in California who has the same machine won’t satisfy that inspector’s concerns, so what do I do?

I don’t see the government changing the way they’re doing it because they don’t want to get into the business of mandating this particular thing. And we don’t necessarily want them to mandate it, but we all kind of want somebody else to tell us what to do.

Producers want the manufacturers to tell them what to do, and the manufacturers want the government to tell us what to do. We just all kind of chase each other.

HEENAN: You put your finger right on it. And, actually, I can help you with a couple of those things. One, there were a lot problems in California regarding return idlers, which have now died down.

The law allows conveyors to be unguarded. It doesn’t specify troughing rollers or return rollers, but MSHA went off in California saying that all return rollers have to be guarded. So you have huge overland conveyors with hundreds of rollers, and they wanted them all guarded.

They’ve backed off of that. I don’t see the solution as one you get in court. You’ve got to get the agency to change. You’ve got to make them see reason, and there can only be one rule for the whole country. So, if you see one thing one place and it’s different in another, that can’t be.

There is also good news regarding the height of guards. If the hazard is more than 7 ft. up, it’s considered guarded by location – unless there’s a catwalk or something that goes up to it. MSHA came out with a comprehensive guarding guide, which is on their website. I printed it out and got it spiral bound because it tells you what’s okay and what’s not.

HINRICHSEN: We have been very active, particularly in the last 12 months, working with MSHA and our safety people. We’re as committed to safety as anybody is, and we’re not doing this by ourselves. We’ve been working with MSHA, with Volvo, with Komatsu, with Deere, and with the others because we’re all being hit by the same thing.

And in the past, there was an agreement that if we met the ISO and other regulatory regulations in our designs, that was sufficient and those machines weren’t challenged. MSHA recognizes that it now has a lot of new inspectors who don’t understand how to read these rules. They understand now that they need to do a better job of training their people.

We’re not going to solve it overnight. They don’t give you a lot of clarity, but we have a legal firm in Washington that is very good at reminding MSHA of how they need to interpret these regulations.

HEENAN: There was an inspector in the southeast region who told a company that the manuals Caterpillar and other manufacturers put out for their equipment are treated by inspectors now as the standard.

For example, one manual recommends that seat belts be replaced every three years, but they don’t always need to be replaced every three years. He had an inspector issuing citations for perfectly good seat belts.

I’ve got a couple in my office right now – perfectly good seat belts. Beautiful. I wish my car had such good ones. MSHA did back off on that, and I’m still working on getting these kind of citations undone.

WEDDING: We all want to be safe, but one reason that companies are so reluctant to make changes is that someone is going to have to sign off on it. Even if it’s better, even if it’s safer, if some accident happens, then somebody is going to be liable.

GRAY: Our position at Telsmith on new equipment, whether it’s portable or stationary, is to provide the equipment and guard it in accordance with MSHA. We will make changes after the courtesy inspection one time. From that point forward, it becomes the owner’s cost to keep up with it. That seems to be received fairly well by our customers.

HEENAN: That’s a good policy. That’s a very nice policy and also the producers ought to document that event, because that would be a pretty strong defense to a citation.

WEDDING: Not only in writing. We go in now and videotape everything and take pictures with date stamps on them.

MALONE: Safety comes first whatever the cost. I think that kind of goes without saying. Any process that can boost the safety factors and send somebody home at night safe has got to be adhered to. The trouble is that the interpretation of MSHA regulations –state-by-state, inspector-by-inspector – are so varied, we all have this big hangup. Did they do a modification? Did they not do a mod? Does the mod help us? Does it hinder us? In our case, as a manufacturer of equipment, modifications will be done back at the factory. Once they’re done, they’re signed off on, and they’re globally issued out.

EVERIST: We have two rules in our company. One is, you’re the superintendent of the plant. You know your plant better than anybody, so it’s your plant. You know every nut and bolt in it, right? And you made sure that every inspection is not only signed done but you’ve looked at it, right? So anything that’s ever discussed with an inspector, the superintendent is right there to counter, because 100 percent of the time, there’s a disagreement between what the inspector thinks and what our superintendent has designed.

Secondly, we always have someone go with them with a camera and a notebook, and we write everything down that they say, and we tell them that we’re going to write everything that they say and we watch them, and they watch us write it down, and we take pictures of every single thing we look at. It really helps.

SIDNEY: You’re holding them accountable.

EVERIST: Absolutely. And they know they’re being held accountable because we’ve got a walking secretary there writing everything down by hand.

HEENAN: That is great. Everybody should be doing that, and maybe the trend is that way, but more people are probably not doing it.

 

CONSTANTINO: Will ConExpo-Con/Agg 2011 help jump-start the aggregates industry for both producers and suppliers? Is your company treating this ConExpo any differently owing to the economic conditions? For example, are you reducing the number of employees or the amount of equipment you’re sending to the show?

KRAUSE: Prior to the last ConExpo, we started to see things slow down, so we actually treated the last ConExpo differently than we had previously, We’re treating it the same way this time – fewer people, fewer days. It will be in and out. You’ve got to have a method to your madness. You’re going to go see exactly who you want to go see, and you’re in and you’re out, because Vegas isn’t the cheapest place anymore.

DUFFY: Our plans for the Con/Agg will be similar to the last one. We’ll have the necessary people there, but our numbers will probably be similar to where they were in the last show. Not everyone gets to go anymore. It’s the right people that are going to do the right job and to take advantage of the time that they’re there.

FULLER: I wasn’t involved with the last show, but I do know that our company, and our division specifically, ramped up just a little more than they had in the past. This year we’ll have fewer people, but I think overall the booth will be slightly more than what it was last time.

BROWN: I probably couldn’t say it any better than Mark [Krause] did. We try to be innovative, so we’re optimistic in regards to the product display and showcasing. But the manpower is going to be short and sweet, get in there and get out and see the people you have to see and get the product in front of the customer. It’s not going to shake the world – we’ll treat it more traditionally as we did in 2002 and 2005 as compared to 2008.

KUEHL: We’ve been fortunate because of our diversification, so actually we’re going to increase the size of our booth this time. We’re going to try to present some new products and take advantage of the show.

WARR: We will be there, and we will host the customers that plan to go. If less customers go, then we will take a smaller group, but I don’t think that will be the case. I expect us to go out there and do what we did last time, which is host about 20 people with three or four different salespeople and managers.

SMITH: We feel it’s a place to show off new products and interact with the industry, but as much as we’re doing with our everyday travel and expenses during these economic times, I’m sure it will be more limited than it has in the past.

SIDNEY: We’re doing about the same this show as we did the last one, and, quite frankly, we look at it a little differently. We fought long and hard to get this show from an every two years to every three or four years. We do it to support the industries that are meaningful to us, and that’s why we’ll be there. And we’ll be there in probably about the same force as we were for the last one.

PANTER: We will be there probably with less people, but we’ll have the same booth size as the last one. Right now we’re setting up meetings away from the show – little sessions where we’re going to be talking with some customers on some new programs and products.

MALONE: Sandvik is going to be there. I think the last time we were there we had a pretty big floor space. We were just going through the acquisition of Fintec and Extec, and they had a separate stand, separate colors. So we’re going to be there en force, all the same color, maybe a slightly smaller stand inside, but we’ve also got a stand outside. We will be very much more customer-focused this time on some of our largest users.

HINRICHSEN: Our booth size generally is going to be about the same as what we’ve done in the past. I think in terms of our participation, we’d agree with you, Mark [Krause]. The last ConExpo we tried to trim back and make the right choices on people. I would say this year there’s more focus on having more of the right people and less of the wrong people. There’s nobody there to hang out. You’ve got a specific job. When you’re done, you go home.

GRAY: The one trend we saw over the last two shows was more South American visitors to ConExpo. So, if we add people, it will be to deal with international customers as opposed to domestic U.S. customers. That’s probably our big change.

We think the attitude of the people attending the show will be a little more upbeat and probably a little more in-depth in looking at equipment. In 2008, we already were seeing the trend start to fall down a little bit on aggregate production, so there was a little uneasiness at the show. Now we’re probably in the inverse position, even though I think in ’08 we were thinking of a slow downturn, and now we’re looking at a slow uptick. So I think there will be a little more in-depth conversation.

WEDDING: We will be there, but pared back. We’ll definitely have a couple people going out, but nothing like in the past.

BENNINGTON: We’ve got the same sized booth, same number of people. You can’t have a smaller booth than the size of your equipment. We’re depending a lot on our dealers to funnel customers to us. The nice thing about the three-year time span is it allows us a little more time. It’s the major show, so we’ve got a couple of innovations coming out. We put our efforts into it because it is the best bang for the buck as far as letting the whole world know what we do. It’s one thing to see it on a website and see it in print media, but it’s another thing to walk up and kick the tires.

 

CONSTANTINO: How has the cost for manufacturers changed compared to the last show?

GRAY: Freight should be down a little bit as far as getting equipment there.

SIDNEY: We think maybe hotel space may be more available, and, therefore, a little more cost-effective. It used to be the cheapest city in America to visit from an accommodations standpoint, from an eating standpoint. Anymore, it’s probably one of the most expensive places to go.

 

CONSTANTINO: Equipment and technology supplier, what innovations do you see coming in the near future that will help producers with cost savings, production efficiencies and safety? Producers, what technologies would you like to see introduced?

JOHN BENNINGTON: From an energy standpoint, the conversations come up every time we talk to customers – maybe not the first conversation but certainly the second or third – as to energy requirements for the equipment and then how can that be reduced.

BROWN: There is a focus on energy-efficient electric motors. I see that sort of thing being more of a craze. I see GPS becoming a little bit more mainstream with companies being able to keep tabs on equipment, so I think some of those things will continue to grow.

HINRICHSEN: One of the areas of innovation is going to be electronics and how the machine communicates to you. We can give you lots of data. We can maybe boil down the information, but actionable knowledge is going to take discipline from the producers. There is a tremendous amount of information coming off these machines, but nobody is using it. There are an awful lot of dollars in this industry that are lost because we don’t collectively execute on equipment management. People get excited about fuel costs. But, if you can move your component life from 12,000 to 18,000 hours and see what that does to your owning and operating costs, there are a lot of dollars there, and there is a lot of reduction in your cost per ton.

 

Comments are closed