Terex - A Specialized Construction Equipment Company

Terex - A Specialized Construction Equipment Company
"Terex is a specialized construction equipment company. We are in niche businesses, and have invested resources to ensure that we are the leaders in these businesses. In Aerial Work Platforms, our brand Genie is Number One globally; in cranes, we are in the top three, globally. In Materials Processing, we are the market leader not only in India but also globally. With the acquisition of Demag, which is amongst the top three in overhead cranes and ship-to-shore harbour crane products, and coupled with our port equipment, we will be a strong player in the port equipment business," says Mr. Jehangir Ardeshir, President & Managing Director, Terex India, in an interview with S.K.Khanna.

What is the current status of Terex's grandplan to invest over $30 million in Indiato increase its presence? Apart from strengthening its presence in India; what else has promptedTerex to make this significant move?
Terex has made significant investments in India where we have enhanced our stake in our Greater Noida facility which was a 50:50 JV to start with and has now become 99% Terex owned; our manufacturing facility at Hosur established in 2008/2009 was our next big investment with over USD 25m invested for manufacturing crushers and screens and tower sections for the Indian market. In Bangalore, we have developed a team of nearly 180 engineers and our Terex India Research and Development Center now serves not only our global businesses for which it was initially set up, but increasingly the Indian market also. We have recently inaugurated our Bangalore Corporate Office and have satellite offices in major cities across India. And the global acquisition of Demag AG by Terex brings two new brands and 16 new manufacturing facilities into the Terex fold globally, including one in India, which is a very well run business.

Terex - A Specialized Construction Equipment Company

The next set of investments will be made to focus more on extracting synergies across businesses, bringing in new productlines through ground up design or localization of existing products, and on adding facilities for customer service, employee learning and operator training. Capability building is going to be a key focus, so you will see investments in human resources and supporting facilities, though obviously, these are not so capital intensive. We see huge growth potential in our cranes, port equipment, construction and materials processing segments and the potential to develop a market in our aerial work platforms and others, and thus will be increasing our capabilities (and team strength) as we grow. World class engineering and "Best Cost Country" sourcing will further support these initiatives. Our new product lines will include wheel-mounted crushing and screening equipment, site dumpers, wheel loaders and light towers, and we are still exploring options in other product lines. Where we are already present, we will focus also on improving our market reach and our dealer network and their capabilities in addition to our engineering and manufacturing.

About 35% of Terex Corporation's revenues come from the developing markets and the largest growth in the last couple of years has been from the BRIC countries. India will increasingly become a manufacturing base for Terex, initially for Indian markets, and once we proved our capabilities here, for global markets also. Indeed, we have already started exporting material processing equipment, tower crane sections and construction equipment not only to neighbouring countries but also to South East Asia and Africa. Russia is also awaiting some products from Terex's India manufacturing base, and even our competitors are looking at our manufacturing capabilities in non compete areas!

How do you look at the emerging stiff market competition and what would be Terex marketfocus to meet the competition?
Terex has the widest products range of any equipment company on the planet in this broad space, though it is not easy to compare companies like for like. Our products range from the general category to highly specialized purpose built machines. Along with our engineering capabilities in India which gives us the ability to choose appropriate lines and tailor make them to meet the needs of markets we choose to serve. Being in niche businesses, many of our lines are leaders. For example, in Aerial Work Platforms, our brand Genie is either the leader or a close second depending on the market you look at; in Cranes, we are amongst the top three as well. In Materials Processing, we are the market leader in track mounted crushers and screens globally (and also in India), and we have just entered into the wheel plant market where we are confident of gaining share. With Demag becoming part of the Terex group, the group is now a leader in a brand new segment (EOT cranes and related equipment). Terex has also become a force to reckon with in Port equipment: you will be happy to hear that we have successfully re-entered the Port equipment market globally as well as in India post the Terex acquisition of Fantuzzi, and now that Gottwald port equipment (a part of Demag) has also joined the Terex fold, we have a full range port equipment capability which is a force to reckon with.

Terex - A Specialized Construction Equipment Company

Terex started operations in India as a construction equipment manufacturer, and has since progressively expanded such that now all Terex segments are represented in India with an increasing number of product lines from each segment meeting Indian market needs.

Critical success factors for us going forward will be customer service and solutioning (including timely support with parts and spares), distribution and reach, financing support for customers and suppliers, and engineering & sourcing activity to get us the best cost structures for competitive pricing in what is arguably the most price conscious and yet demanding market. The Terex Financial Services program in India has recently signed up Tata Capital in addition to our existing relationship with HDFC and there are others in the pipeline. We will achieve this without sacrificing Terex's premium quality, and the customer will certainly see value in this combination. Choosing which battles to fight will therefore be the key, as we cannot spread ourselves too thin, and yet we must avail all our available opportunities.

In the beginning of 2011, there was a clear indication of good demand for CE and the CE sector was very optimistic to clock over 20% growth, but now concerns are there about the second spell of recession emerging in. In the light of above; how do you see CE growth / market in the next two years as the first spell of recessionhas not hit the country as bad?
Terex - A Specialized Construction Equipment Company
Your concerns are uppermost in our minds too; India is such a country that realize the fantastic growth story if its projected outlays are executed, even if they do not take place as aggressively as initially envisioned (which, frankly, is the likely scenario). A "slowdown" story for India would be 9% growth now reducing to 7% or 6%. As reflected in infrastructure and CE, this would be a great concern for companies that have over-invested in capacity. We are reasonably confident that Terex has planned capacities well in India and will grow into the market and win share over time. With over 50% growth in 2011, and over 100% growth last year, we have every reason to feel secure for the present, considering that our businesses are looking increasingly profitable. We can also foresee our ability to take share increase with time, as we bring more of our products and capabilities to bear in India and related markets. India's proposed project outlay for 2008 – 2018 is close to USD 1.3 bn with major focus on urban and rural infrastructure and roads and highways. Though not all these projects have taken off as planned, we would continue to grow, albeit slower than before. The concerned areas we will have to focus on are related to land acquisition issues, as these will slowdown the market for new infrastructure; at the same time, we should remember that India now has a sizeable redevelopment market also. The larger equipment industry has seen fluctuating growth in the last few quarters and we foresee that this will continue for the next few months; so we will keep watching the market.

Do you think that the entry of reputed CE auctioning companies making inroads is a threat or an opportunity to the CE manufacturers?
Rental and Remarketing are the new routes that are making inroads into our industry. Most of the manufacturers have their own rental/reman business models via which they support their customers or dealers. Terex has similar ongoing initiatives in North America but we have not yet explored those opportunities in India. We have started looking at them more seriously now. CE auctioning companies have opened doors across continents for import and export of used equipment. India is a price conscious nation but buyers are increasing unwilling to take on machines which have already been excessively used and have delivered most of their lives, so the market dynamic is evolving. The CE manufacturers along with the government will have to ensure that the machines allowed for import into the country are screened for good condition (i.e. they should be relatively new!), so that they will help build infrastructure cost-effectively and productively. The rental/reman model actually helps companies with buy back mechanisms for certain customers who can then move on to buy new equipment, thereby stimulating two different categories of buyers and growing the market. However, the business models used by the CE auctioning companies need to be well-scrutinized to ensure that the right quality of equipment comes into India. As manufacturers and importers in different product lines, we see value in both approaches.

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