Roger Brown was one of the original founders of Genie and has been a senior management executive with the company for 30 years. RER last week spoke with Brown about Genie’s planned price increases and why he is bullish on the future of the aerial market.
RER: I understand Genie will be announcing a price increase. Can you explain the details and the reasons.
Brown: Like other manufacturers, Genie is feeling the effects of rising material costs. These increases are very real. I have been at Genie for 30 years and these are the most extreme cost increases I have ever seen.
Our customers know the impact is real as well. Customers are seeing rising prices in their areas of business such as transportation, logistics and fuel.
Genie was forced to raise prices effective Sept. 1st given current market conditions. All orders placed prior to Sept. 1st for shipment in 2008 will not receive the price increase. However, all current and new orders placed before Sept. 1st, and scheduled to ship after Dec. 31st, 2008, will reflect these new prices. The model-specific pricing varies, but the global weighted average increase is 7.7 percent.
Our customers depend on healthy and stable suppliers to ensure the long-term viability of their business. While no one likes a price increase, raising equipment prices to the rental and dealer network may actually help our customers prevent rental rates from deteriorating. This gives them a vehicle to revisit pricing with their customers. Savvy rental operators know that there is money to be made in a volatile and changing marketplace.
Many rental companies will understand the cost pressures you are going through, but are facing cost increases themselves and are going through a time of decreased demand for equipment. Won’t price increases make it even more difficult for your customers in the rental business to buy your equipment?
Our customers are basing their purchasing decisions on the overall market conditions generally reflected in their utilization rates and rental rates. Rising costs, and the resulting increase in prices, is a normal business activity and is generally not the major determinant of demand.
What are your expectations for the economy over the foreseeable future, in North America and worldwide?
In the next six to 12 months, I expect to see continued uncertainty in the aerial work platform category. But rental houses should look to manufacturers to behave responsibly in this environment, producing at levels that can be absorbed by the marketplace, which helps keep rental fleet values high. This industry has matured significantly since the last market downturn, and we should get through this without experiencing the kind of pain that was felt earlier in the decade.
Globally, infrastructure growth and the value proposition for aerial work platforms — safety and productivity — continue to gain acceptance in emerging markets. I expect we will also see continued innovation, with new products being developed for new applications. I am bullish for continued growth in this category over the next decade.
Some in the manufacturing business are saying that because of increasing transport costs, it might make more sense for manufacturers to de-centralize manufacturing globally and attempt to produce machines closer to the customer base. Does Genie go along with this idea?
Our overall vision is to become the most global aerial work platform manufacturer, with local production to meet local needs. This is because we believe in providing local support and products to local markets for a better overall customer experience.
We plan to announce the groundbreaking of our China facility very soon. China, in particular, is a big potential market for us, and we feel that it will become one of the largest aerial work platform markets in the world.
What are some of the ways Genie has worked to cut costs from the manufacturing process and supply chain relationships?
We are working diligently to mitigate the rising costs through various initiatives including cost reductions, supplier negotiations, labor reductions and productivity improvements. However, the recent cost increases have had a significant impact on the costs of our products.
Might rental companies expect more support and services from manufacturers to help compensate for higher prices?
Our customers expect a lot more these days. Our primary focus is to help customers make more money by partnering with Genie. If we understand each customer's unique challenges and can develop solutions uniquely tailored to their needs - new products, availability, financing, aftermarket support or something else, then we can make a real difference by delivering on that promise. In my experience, price becomes the issue when you aren't delivering this kind of value.