AEDNews - Construction Equipment Industry News
Less Backlog, Prolonged Uncertainty Will Cause More Layoffs, Less Purchasing
While the $27 billion dedicated to highway construction in the $775 billion stimulus package likely saved thousands of construction-related jobs, it was not enough to prevent widespread lay-offs among road and transit construction businesses, according to the 527 responses of a transportation construction contractor survey released Friday, Nov. 13 by the Washington, D.C.-based Transportation Construction Coalition (TCC). And while stimulus funds will continue supporting transportation projects next year, 44 percent of contractors anticipate having to lay off additional permanent employees in 2010 due to overall economic conditions.
“We were promised stimulus and I think we’ve received a bit of a tickle,” said Terex Chairman Ron DeFeo, who was among the equipment industry spokespeople who delivered prepared remarks and answered reporters’ questions on Friday morning’s media conference call. “From my point of view, a lot of the money spent has replaced spending that would have taken place at the state level; the state of our infrastructure in this country has gotten very poor grades. It puts people in harms way...it’s time for serious action. Infrastructure investment has historically equaled economic prosperity; that’s an equation that has worked in this country for many, many years.
“We’ really would like to see [congressional] leadership reauthorize the highway bill at the levels that Chairman Oberstar is promoting,” DeFeo continued. “It won’t fix all our problems, but it will create some certainty as we go forward.
According to the survey results, less than 20 percent of the contractor respondents say they plan to purchase new construction equipment (19 percent) or trucks (18 percent) next year. And just five percent anticipate bringing on new, non-seasonal personnel. DeFeo pointed out that manufacturing has been deeply affected by the equipment demand plummet, his own company’s U.S. workforce having shrunk from 9,000 to 5,000 over about 15 months. Terex 2008 revenues of $10 billion are expected to drop to just above $5 billion for 2009.
AGC Chief Economist Ken Simonson, said Friday, “It is impossible to overstate just how difficult current conditions are or how dire the outlook for next year is,” said Simonson. “One-time investments in transportation infrastructure like the stimulus help, but they’re simply no substitute for having a long-term investment strategy in our roads, bridges and transit systems.”
“Contractors know there’s nothing after the stimulus except depleted state and local coffers and continued uncertainty about a highway bill, Simonson added. “In other words, the lack of a completed transportation bill is threatening to undermine the short term benefits of the stimulus. Worse, the market uncertainty in the transportation construction sector will continue to drag on broader economic growth. With construction unemployment already at 18.7 percent, by far the highest of any industry, and with Washington increasingly worried about the jobs situation, these figures show the real economic risks posed by continued inaction on surface transportation legislation. While [stimulus] may make for good headlines, if Washington wants to deliver new jobs and economic growth, it must act to quickly pass a six-year surface transportation bill that includes significant increases in funding for the nation’s highway and transit systems.”
Other key findings of the survey included:
- Almost 80 percent of road and transit builders expect construction market decline next year despite federal stimulus as multi-year transportation bill remains stalled.
- Nearly 70 percent of transportation contractors reported receiving stimulus-funded contracts work so far this year. But 63 percent also reported they had to lay off permanent employees during 2009 due to adverse business conditions. Almost two out of every three transportation construction firms have had to lay off people this year.
- Less than 20 percent of the contractor respondents say they plan to purchase new construction equipment (19 percent) or trucks (18 percent) next year. And just five percent anticipate bringing on new, non-seasonal personnel.
- Despite the federal stimulus funding, more than three-quarters of the firms responding to the TCC survey anticipate either a “slight” (46 percent) or “severe” (32 percent) decline next year in the state markets in which they work. More than 76 percent expect state transportation departments to put out less work to bid on in 2010 than they will this year.
- Only 17 percent of transportation contractors will enter 2010 with a work volume backlog at least as large, by value, as they had entering 2009. Almost one in five report they will enter 2010 with at least 50 percent less backlog than last year. An additional 33 percent report the value of their work backlog will be 25 to 50 percent less going into 2010. (Contractors, of course, depend on maintaining a healthy backlog of future work contracts to ensure the cash flow necessary to maintain or add to their permanent work force.)
Article Date: 11-16-2009
Source: Associated Equipment Distributors
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