OPE Industry Forecasts: Leading minds delve into 2012 (Part I)

The following is the first of a two-part series:


Outdoor Power Equipment recently took the pulse of the OPE industry by asking several of its leaders to share their thoughts.


Specifically, we asked the following thought-provoking questions:


1. What is exciting or new about your company or organization for 2012?


2. What will be the OPE industry’s top trends in 2012?


3. What will be the OPE industry’s biggest story in 2012?


4. Who will emerge as the Republican Party representative for the 2012 U.S. presidential election? Who will be elected president? How will the outcome of the presidential election impact the OPE industry?


5. What is your overall outlook for the OPE industry in 2012?


OPE received the following written responses, in order, Dec. 13-22, 2011:



BOB WALKER
PRESIDENT
WALKER MFG. CO.
(FORT COLLINS, COLO.)


1. What is exciting or new about your company or organization for 2012?


BW: Ryan Walker, Dean Walker’s second oldest son (my nephew), has started to work in the company as a third-generation Walker family member, and his brother, Ted Walker, Dean’s firstborn, is planning to join early in 2012; we are excited because our planning and dreaming for the company are to continue to be a independent, family-owned and family-operated business. Also, we are making capital investments for our operations to be more productive and efficient — a new ERP (Enterprise Resource Planning) manufacturing software operating system will be installed in 2012 and several new metal-working machines have been purchased for the factory.


2. What will be the OPE industry’s top trends in 2012?


BW: We think EFI engines will become the dominant power for commercial mowing equipment in the next couple of years. We began putting Kohler EFI engines in our machines 13 years ago, and now for the first time, in 2011, we sold more machines equipped with EFI engines than carburetor engines in our most popular model. With the major producers such as Exmark and John Deere beginning to use EFI engines in their machines, the industry should begin to shift and the momentum build for the EFI technology.


3. What will be the OPE industry’s biggest story in 2012?


BW: I don’t have any insight on the “big” story, but would suggest that industry consolidation and the impact of environmental and technical compliance issues on equipment design have the potential to be big stories in 2012.


4. Who will emerge as the Republican Party representative for the 2012 U.S. presidential election? Who will be elected president? How will the outcome of the presidential election impact the OPE industry?


BW: Mitt Romney will be nominated and elected as president. He will have a positive influence on the OPE industry and the economic engine of this country. Just shifting away from leadership that denigrates wealth creators and job creators “not paying their fair share” to leadership that understands how the economy works will be a huge boost to business and to the attitude of folks throughout the country. The common sense possessed by the majority of our citizens understands that the high standard of living we enjoy in the country comes from wealth generated by private enterprise and not from tax revenues and government spending.


5. What is your overall outlook for the OPE industry in 2012?


BW: The industry will be on a plateau in 2012, holding at about the same level as 2011. Modest expansion could begin in the last quarter of 2012.



JOHN D. HEDGES
DIRECTOR OF
SALES & MARKETING
CENTRAL POWER
DISTRIBUTORS, INC. (CPD)
(ANOKA, MINN.)


1. What is exciting or new about your company or organization for 2012?


JDH: Central Power Distributors, Inc. (CPD) has again had a banner year. There are always those obvious reasons like rain when we need it, cool temperatures instead of burning hot, and record snowfall in much of our territory. But when we take the weather out of the equation, customers need to like doing business with their suppliers, there must be inventory on hand, and the orders must be shipped every day. CPD is blessed with outstanding employees that make sure our customers are treated with respect, they are helped without controversy, and then the product(s) are shipped that day. That is exciting to me.


Our online customer ordering system, E-Zone, continues to add value to the user. We have been able to customize an E-Zone account for every one of our customers. This allows us to put programs and pricing that pertain to that customer on their E-Zone page, while hiding programs and pricing of lines they don’t carry. E-Zone is like having your own customer service agent 24/7 all year long.


We will continue to be more efficient in our warehouses. In 2012, we will add more customization to the picking process, making the flow from the first part picked to the last very efficient.


2. What will be the OPE industry’s top trends in 2012?


JDH: I have been in this industry since 1985 and continue to be amazed at the changes taking place. 2012 will continue to see the smaller dealers go out of business and the larger ones becoming larger. However, more so in 2012 than in past years, small, more regional distributors will be challenged by their customers (and distributors) to have parts now. If they take the stance of the dealer and utilize their distributor’s inventory, they could be gone in 2012. More than ever, we will be asked to provide value to our vendors and customers but prove why this industry is better with, rather than without, quality distribution.


For several years, the focus has been on the dealer, and we have paid attention to how they will manage their businesses moving forward. I believe that same attention will now be focused on the smaller distributors. And just like the pattern of the smaller dealer vs. the larger one, you will see fewer distributors by the end of 2012. Someone reading this may see this as a bold prediction, but it is already starting, One major lawn and garden manufacturer will introduce a new, scaled-down version of distributors at the start of 2012. I will be anxiously watching to see if they have the correct amount of quality distributors, or have forgotten a specific segment in the U.S.


I can see more consolidation continuing throughout the industry. There are aging owners of manufacturers that will want to modify their succession plans, and some of the modification will be selling off the company.


3. What will be the OPE industry’s biggest story in 2012?


JDH: I think there are several big stories that will emerge during 2012. One I alluded to in question 2: The cancellation of certain distributors for a major lawn and garden line will be big news but forgotten.


The fuel discussions on E85, E15 and/or E10 will cause more warranty-related problems that won’t be covered. Dealers will need to help manufacturers educate the general public. Lobbyists will continue to battle against the use of high ethanol but will lose in the long run. Therefore, associations like OPEAA, OPEI or OPEESA will start to lead the charge in consumer education.


Events leading us to the Presidential election will keep the industry from growing the way it deserves to grow. More and more Chinese engines will appear, and dealers will “be used to it” at the end of the year. Chinese engine companies will have a difficult time emerging on their own. They will need a major player to help them get a start. The hype of China will begin to fade in 2012, and we will seriously ask ourselves, “Where is the next China?”


4. Who will emerge as the Republican Party representative for the 2012 U.S. presidential election? Who will be elected president? How will the outcome of the presidential election impact the OPE industry?


JDH: For 2004, OPE asked the industry leaders this same question regarding the Democratic Party. I said Howard Dean, and a month later, he had a meltdown in Iowa and quickly went away. So I will stick my reputation out there again for the world to see and say Newt Gingrich will be the nominee and eventually President of the United States. (In eight years, I’ll look back and shake my head one way or another.) However, I think Newt would be industry friendly. His immediate actions would create jobs, and with his election to the Presidential office, would make Christmas 2012 the holiday that America got back to spending without fear. His love for the Constitution, the United States and its small government, and putting people back to work, will send massive cuts to czars, EPA and other departmental money suckers. With all that said, any Republican running for office will be a step in the right direction for our industry, our families and our country.


5. What is your overall outlook for the OPE industry in 2012?


JDH: The industry might remain flat, as I mentioned earlier. But, I do believe (hope) help is on the way in 2013. In 2012, companies should watch their spending, cut where they can cut, hire when they can hire, and offer specials to keep afloat. Manufacturers that are selling directly should evaluate having distributors. A real evaluation of how you are going to market needs to happen during 2012. If it is true that help is on the way in 2013, you will want to be ahead of the competition when that time comes. Preparation for 2013 during 2012 will prove to be a great use of employee strategizing.


Dealers that continue to embrace the mass merchant as partners rather than enemies will prevail. If you haven’t met your mass-merchant neighbors, make a point to get known. Every time a customer visits their store, they are one problem away from coming to see you. Be ready, be known.



MICHAEL JONES
PRESIDENT OF
THE AMERICAS
HUSQVARNA PROFESSIONAL
PRODUCTS, INC.
(CHARLOTTE, N.C.) &
BOARD MEMBER, OPEI


1. What is exciting or new about your company or organization for 2012?


MJ: We are excited about 2012. We have invested heavily in our North American production and manufacturing transitions in order to drive excellent supply performance in 2012. We have an excellent inventory position going into the season. And we are excited about our new CEO, Hans Linnarson, who has a very strong sales and operational background.


2. What will be the OPE industry’s top trends in 2012?


MJ: It will be interesting to see how the tough economy and upcoming election shape the consumer buying habits in general, in the short term. I would expect a continued return to lawn care professionals to maintain residential lawn service as the economy continues to return, and lawn care professionals to continue to invest in new equipment to maintain their fleet. I would also expect the consumer business to remain somewhat sluggish until at least after the election and improvement in unemployment rates.


3. What will be the OPE industry’s biggest story in 2012?


MJ: It will probably be the impact of regulation on our industry, which could be in the form of ethanol use in outdoor power equipment or some other legislation impacting product design, engineering and cost on future products.


4. Who will emerge as the Republican Party representative for the 2012 U.S. presidential election? Who will be elected president? How will the outcome of the presidential election impact the OPE industry?


MJ: The Husqvarna Group observes strict neutrality with regard to political parties and candidates.


5. What is your overall outlook for the OPE industry in 2012?


MJ: Our expectations for the USA industry are largely shaped by the information we receive from OPEI, which is a fairly flat year compared to 2011.



BRAD MURPHY
EXECUTIVE VICE-PRESIDENT
AND COO
SUBARU INDUSTRIAL
POWER PRODUCTS
(LAKE ZURICH, ILL.)


1. What is exciting or new about your company or organization for 2012?


BM: 2011 was one of our best years, and we are looking forward to continuing and building on the momentum. We are anticipating a great year in 2012, and have a lot to be excited about in the new year. One of the biggest pieces of exciting news is our official partnership with Toro. Subaru is providing the engine for Toro’s Greens Mower, the GreenMaster Flex. Anyone in the OPE industry is likely familiar with Toro, and this product line in particular. The Greens Mower is the hallmark of Toro’s line; it’s the foundation on which Toro’s reputation in the industry was built. For us to provide the engine on such a prestigious product is a great honor. We’re really excited to be working with a company as well-known and well-respected as Toro. Although it’s a newer announcement in the industry, this partnership has been in the works for quite some time. Our engine went through extensive testing, thousands of hours and in multiple countries, before Toro approved.


We’ve also seen great success with our vertical-shaft OHC EA engine line, and expect that to continue as well. It’s a newer arena for us; in the past and even more recently, we’ve always produced horizontal-shaft engines. But we were able to take OHC technology and utilize it in a vertical application, thus getting all the benefits that come with OHC design. Our EA engines feature a completely original design too, so we’ve been pleased to see it work out so well.


The growth in chore products is another exciting area — equipment like walk-behind blowers, log splitters, chippers and shredders. The equipment category itself is growing and becoming stronger. But for us, we’ve seen our engines grow in popularity with these manufacturers; Subaru has essentially become the preferred engine in this equipment category, and that’s very exciting for us.


Finally, Tier 3 requirements (effective Jan. 1, 2012) are top of mind of many in the industry. As an engine company, this is huge for us. But what’s great for us this time around is we didn’t have to do anything to our EX engines to meet the new exhaust standards. The engines’ modern OHC design and technology just lends itself to compliance. As for the evaporative stipulation, we include a copper-type gas cap.


2. What will be the OPE industry’s top trends in 2012?


BM: A trend we’re seeing is one that’s not necessarily new, but it’s still very strong and will continue to be in 2012. People are still of the mentality of do-it-yourself. The growth in chore products I mentioned previously is going hand-in-hand with this trend. Traditionally, professionals have always bought this equipment, but the use is now spreading down to consumers. Whether professional or homeowner, it’s still a winning scenario for dealers because this has created a whole new audience for the product. Many manufacturers are recognizing this trend and responding by producing slightly smaller versions of their machines — more of a “consumer grade” yet still built for professional use.


3. What will be the OPE industry’s biggest story in 2012?


BM: The OPE industry is a major market for Subaru, one of our biggest. However, we also deal with quite a few other industries. I could make my predictions as to what the biggest story will be next year, but I think most dealers would like to hear it from the professionals that are 100-percent focused on the industry, so I’ll defer to them on this one. I know I’m interested to find out what these industry experts are anticipating as big in 2012!


4. Who will emerge as the Republican Party representative for the 2012 U.S. presidential election? Who will be elected president? How will the outcome of the presidential election impact the OPE industry?


BM: I think there’s a bit of a struggle right now as to who should emerge as the candidate on the Republican Party’s ticket, but my personal prediction is Mitt Romney will get the nomination.


Now, the big question comes in: Who will be elected? Traditionally, it has always been tougher for a candidate to win over an incumbent. But I really feel any of the potential Republican candidates could win.


For the health of the OPE industry and the country, I think we need to see a Republican take over office; we need that fiscally conservative leadership. This will put us on the right track for a strong economy and recovery. The budget will be balanced, spending will decrease, and employment will increase, I have no doubt. I don’t think you’ll find anyone in the industry that feels the past four years has resulted in anything resembling even mild success. If the Republican Party wants to increase its chances of winning, the campaign strategy has to focus on the results of these past four years.


5. What is your overall outlook for the OPE industry in 2012?


BM: Our outlook is very positive, for the industry and for our company. It feels really great to say that after the past few years and the feelings of uncertainty and even at best, cautious optimism.


For Subaru, we’re coming off a great year, and we expect next year to be better. And I don’t even just mean on the engine side with our OEM customers, but our generators and pumps as well. Our business is up significantly, and we want to continue to build on that growth in 2012.

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