The Trillion Dollar Stimulus
North America is an important region for PALFINGER. In 2022 it proved to be the strongest growing market. And there is more to come. Leandro Lecheta, CNH Head of Construction Equipment for North America, talks about the effects of the US government’s stimuli programs and how European companies can become part of the American project.
Q: The Biden administration is launching a billion-dollar funding scheme to rebuild the US economy. What will be the effects?
Lecheta: We have some really big things moving. Yet it will take some time to see results. Just as an example, residential is about half of the US construction business. Due to the current high interest rates and high inflation, people are reluctant to buy new houses. Given these circumstances we expect growth in the construction business to be around two to maximum five percent – which is considerably lower than the 8.5 percent in 2021. Also, office buildings are not an exciting market in the US right now. Due to the pandemic companies have switched to offer working-at-home to their employees. Looking at Dallas, which used to be the number one growth region in the States, customers are renegotiating their leases on office space right now because you don't need big spaces anymore. But we believe that the infrastructure stimulus will offset these negative effects.
Q: One positive effect generates another?
Lecheta: Exactly. Just look at the scale of the infrastructure stimulus, we are talking about a 550-billion-dollar program. The government announced it to be a five-year project. We believe it is going to last eight to ten years. The reason is the infrastructure in the US needs to be renewed. The last major investments were back in the 80’s. US infrastructure is getting older and older. We expect this stimulus to gain track in about two years’ time. By 2025, 2026, we are also positive that residential construction will recover and that we are going to see substantial growth.
Q: The US administration focuses on strengthening the American economy, American companies, American technology. How can a European company fit into this whole concept?
Lecheta: It is pretty easy to enter the North America market. But it is really difficult to perform successfully because of the specifics of the US market. The construction business is quite conservative, and people expect products made in the USA to be used in construction projects. So, first of all it is important to clarify that the company is here to stay, to understand the customer’s needs, to bring solutions to solve these specific needs. And never ever try to force your European model onto the American market, because you will most likely fail. You need a clear message, and you must be ready to invest in the US. Make sure that your engineers and product development people understand the market. Establish a headquarter, maybe a parts depot or even some final assembly, local operations like these, where you can really say, hey, maybe it's not an American product, but it is developed specifically for the North American segment.
Q: Could you give an example for a specific need in the US?
Lecheta: In the US we are currently experiencing a labor shortage. This is one of the reasons we see the industry moving towards digital in terms of connecting machinery and making use of the information coming from the machines to enhance their efficiency. If you can develop partnerships with truck companies where you provide the technology to make your forklift communicate with the truck; and if you are able to decrease the workload of the driver and operator while maximizing efficiency; and if you can make sure the headquarters receive information from the truck and from the forklift – this could offer a major advantage in the US. This is where you can really shake up the market and bring new technologies and efficiency, especially in this kind of industry. And one last thought on this: It is important that your customers see you are coming for the long term, to be part of the great American project.
Q: The American project...
Lecheta: It is about bringing jobs and industry back to the USA. It combines the Infrastructure Investment Jobs Act, the Chips Act, and the Inflation Reduction Act. Together we are talking about more than 1.2 trillion dollars to stimulate and rebuild the American economy. The effects will last for at least 15 to 20 years. And it will be a major boost and improvement for the whole North American market.
Q: Thank you very much.
