The Big Interview: Manitowoc Crane's Eric Etchart
Manitowoc's Eric Etchart talks to PMV about its Middle East presence
Manitowoc Cranes president Eric Etchart explains to PMV Middle East editor Stian Overdahl how the Middle East fits into Manitowoc’s global emerging markets strategy, and why the emerging markets are critical to the Manitowoc’s long term success.
Manitowoc Cranes has a clear strategy when it comes to emerging markets, including the Middle East: to be number one, two, or three in any given market.
Devised by former-president, now CEO, Glen Tellock, it’s a strategy that makes sense given the needs of a large manufacturer of a capitally intensive product, since significant sales volumes are required to keep the factories running and achieve an effective economy of scale.
Speaking at a press conference at bauma China in November last year, Etchart explained the importance for a major crane manufacturer of gaining footholds in the emerging markets.
“Glen Tellock had the vision that if we wanted to be successful long term in the crane business, we had to really focus –first of all, on China of course – but also other emerging markets, like the Middle East, like Africa, like India, Latin America, and more specifically Brazil.”
The company needs to achieve this goal, said Etchart, “because the business in 20 years will be very different from the situation in the current landscape. It’s very critical for Manitowoc to have its product range at the forefront of the industry.”
The effort to break into these markets has required a huge amount of capital expenditure, to establish sales and aftermarket organisations, train staff, and – in some countries – build manufacturing facilities.
As a recognised brand, Manitowoc could not afford a policy of having service and support follow sales. Selling the first crane can be easy, says Etchart, but selling the second crane depends on the ability to support the product with service, after market and spare parts availability.
“You have to be ahead of the curve in putting in technicians, and training and spare parts, far beyond the existing fleet, because you have to make sure that those very first cranes carry the reputations, and that you have these ambassador customers who will make the noise that your machine is very good and well-supported.
“That’s a real investment, and it’s what we have done in most of the emerging markets, by hiring technicians and training them, probably far above the existing fleet, in order to be able to sustain the future growth.”
But while breaking into new markets may be capital-intensive, it has been largely successful, and Etchart says that the company is number one or two in most emerging markets.
China is one market where Manitowoc has not achieved this position. But Etchart says the company is determined to continue its push. “In China certainly we cannot claim to be 1 or 2 or 3, given the competition. We still have a long way to go, but we are very determined to get there.”
Part of Manitowoc’s emerging market model that it follows around the world includes finding strong distributors for its products.
“We believe in distribution. We’re not a company that likes to go direct to customers, we like to use distribution,” says Etchart.
In the GCC its products are represented by distributors including NFT Cranes (Potain), Kanoo Machinery (Grove), and its Dubai-based subsidiary, Manitowoc Cranes Middle East, provides support across the Middle East and Africa.
“In tower cranes, in the Middle East I think we’re probably number one. We have a very strong dealer that covers the region [NFT Cranes] and he has a rental fleet of about 600 towers. He’s very active, and very well-connected through the network,” Etchart told PMV.
“[Our approach in the Middle East] would be very consistent with what happens elsewhere. What we try to have is a local presence, for example in the Middle East we have our office in Dubai with about 25 people, we have our spare parts, our technicians, and the sales people live in the region, so we can be very reactive and meet customers quite often, instead of being based in Europe and travelling.”
However while the Middle East and Africa are important emerging markets, Manitowoc’s strategy here differs from the larger, more populous markets – Russia, India, China, Brazil – where local production plays a part.
“That’s not an option for the Middle East, it’s a market I do not believe would support local manufacturing,” explains Etchart.
“There is a lot of volume, but it’s kind of up and down. And you don’t have any barrier to sell in Saudi Arabia or the UAE, you can very freely import the machines, so we don’t have any plans to do anything in the Middle East.
“When it comes to India, Russia or Brazil, the sheer size of what the market is
going to be requires local manufacturing.”
Manitowoc’s localisation strategy includes establishing production facilities, as well as sourcing of componentry from local suppliers. Lean production principles means that as many components as possible should be produced locally.
In China, where Manitowoc has a factory in Zhangjiagang which produces tower cranes, the company started by importing all the mechanisms from their factory in France, and then began producing the structure in China, namely the mast, jib, and camweight, while they worked to identify local suppliers who could provide good quality bearings, and other mechanisms.
“The real challenge is finding the right supplier, and helping them develop their process so that you can have the quality and the reliability,” said Etchart. “Here in China if you have to import the mechanisms, you have to pay the custom duties, which is about 10-15% on those parts, it takes 5-6-7 weeks for the mechanisms to come here, so you carry that inventory.”
Commenting on the market in the Middle East, Etchart sees positive prospects. “We enjoyed a lot of mega projects in Saudi Arabia in 2010-11. We didn’t have any big business in 2012, but we see a lot of these bigger projects coming online for 2013, so we should be in good shape to get some of those projects.”
“In 2013, I think we should see more activity for towers in Saudi Arabia, probably a little bit in Abu Dhabi , and I expect Qatar to pick up. There’s a lot to do in Qatar.”
Asked whether the Middle East a safe spot for growth, given the parlous state of many of the global markets, Etchart says that, “because of the geopolitical incidences, you cannot bet on one country”.
“You’ve got to hope that things will get better, but you’ve got to have a presence. Iraq, we should see more things happening because reconstruction will take place. I think we should see more projects in the UAE [in 2013] than we have seen since the financial crisis.
Saudi Arabia has so many big projects such as railways, they had a little bit of a slow down on towers, but mobile cranes have been very active.
“Africa has been a very good story for us in 2012. Algeria, for example, didn’t buy a lot of new equipment in years. Suddenly there were a couple of tenders, and they started buying equipment.”
Of other markets globally, he’s picking Brazil as a country which will see significant growth. “I think Brazil is going to be tremendous. It’s not about the World Cup, it’s not about the Olympics, it’s all their resources, oil and gas, and ship yards. This is already a very big market, but I think the growth we are going to see in Brazil in the next decade will be tremendous.”