Will the Equipment Industry Recover from the Recession?
Forty percent report losing more than $1 million in revenues. By an extremely conservative estimate, survey respondents have together lost $75 million in revenues because of customer credit issues.
When the results are projected across AED’s entire U.S. distributor membership, equipment distributors have conservatively lost more than $475 million in revenues over the past year because equipment purchasers could not find financing. By combining the results of this survey and last year’s (which asked the same question), AED estimates that its members have lost more than $1.2 billion during the past two years because of credit issues.
The credit crunch has not just affected equipment markets; it has made it more difficult for distributors to run their companies, AED says. Fifty-nine percent of respondents have seen an increase in credit costs over the past year, and 40 percent have had difficulty securing credit.
Stimulus: What Worked and What Didn’t
The survey asked AED members a number of questions about the impact of the 2009 American Recovery and Reinvestment Act (ARRA), more commonly known the stimulus bill.
The results suggest that the stimulus bill’s infrastructure spending had some impact on equipment sales, as well as on equipment rental and product support business. However, the most benefit came from the capital investment incentives (50-percent depreciation bonus and increased Sec. 179 expensing levels), AED reports. Twice as many members report sales attributable to the capital investment incentives as to ARRA’s infrastructure spending, according to AED.
AED points out these statistics specifically:
- 36 percent of respondents said the ARRA’s 50-percent depreciation bonus and increased Sec. 179 expensing levels motivated equipment purchases at their companies last year;
- 29 percent said the ARRA’s infrastructure spending created product support business at their companies;
- 29 percent said the ARRA’s infrastructure spending resulted in increased equipment rentals at their companies
- 19 percent said that ARRA’s infrastructure spending resulted in used equipment sales at their companies; and
- 18 percent said the ARRA’s infrastructure spending resulted in new equipment sales at their companies.
Infrastructure, credit critical to industry recovery
Members were asked to rate the beneficial impact of the various policy solutions AED is advocating to help distributors recover from the industry depression. Based on average ratings on a five-point scale (1 being no impact and 5 being very beneficial), survey respondents prioritize our public policy objectives as follows:
- Enacting a new, multiyear highway bill that increases investment in roads, bridges, and transit (average score of 4.18);
- Improving access to credit for distributors, contractors, and developers (4);
- Enacting a new multiyear water infrastructure bill that increases investment in sewers and drinking water systems (3.99);
- Reinstating the 50 percent depreciation bonus for new equipment purchases (3.85);
- Resolving the uncertainty surrounding the estate tax (3.81);
- Creating a new tax credit for the purchase of clean diesel equipment. (3.39); and
- Increasing federal investment in broadband infrastructure (3.06).
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