The year's outlook for construction machinery is essentially flat: Equipment sales in the U.S. are expected to fall slightly in the first half of the year, followed by a modest uptick in the second half.
The market may be off to a lukewarm start, but global manufacturers are adding local capacity to widen coverage in key markets while meeting what they believe is a slowly recovering demand for big iron.
"North America is the world's second-largest market, so even if it is flat, it is still a good market," says Pat Olney, president of Volvo Construction Equipment, which on March 21 opened a $100-million expansion of its American headquarters in Shippensburg, Pa. The market's "sideways" outlook this year will be enough to sustain Volvo's business here, with residential construction and shale-gas work driving most of the demand, Olney adds.
Future infrastructure work, another driver of heavy equipment, remains less certain. A deeply divided Congress last year managed to enact a $105-billion, two-year transportation bill, but more long-term funding is needed, say government officials.
There needs to be "a heart-to-heart discussion with Congress, the administration and the American people to see how can we invest in our future," says federal highway administrator Victor Mendez, who spoke to Volvo's 1,000 Shippensburg employees at the March event. "We spent a lot of time, effort and resources rebuilding other countries. It's time to rebuild our own country."
Volvo, which now builds wheel loaders at the Shippensburg plant to reduce delivery times, has spent more than $1 billion in five years expanding there. Most recently, Volvo invested more than $100 million on the Shippensburg campus, which now covers 650,000 sq ft.
The firm is also expanding in Russia, India and Brazil. Later this year, Volvo's China-based discount brand, SDLG, will start producing excavators near São Paulo.