Financial impact, employee health, and cancelled and delayed orders: the top three challenges faced by US equipment manufacturers
The equipment manufacturing industry in the United States supports 2.8 million jobs and contributes roughly $288 billion to the economy every year. To understand the impact of the COVID-19 pandemic on equipment manufacturing, the Association of Equipment Manufacturers (AEM), the North American-based international trade group representing off-road equipment manufacturers and suppliers, conducted a survey of member company executives (presidents, CEOs, and owners). The survey was conducted from 16 to 27 April, 2020, among 105 respondents who weighed in on the effects on the economy, the industry, their companies, supply chain and manufacturing operations, their financial expectations, as well as the challenges they face and specific ways the federal government can keep equipment manufacturing strong and ensure the nation’s economic resilience.
Just over half (54.3%) of the companies that participated in the survey manufacture heavy equipment, while about 17% build light equipment, and 25.5% make components and/or attachments. More than 83.9% of the companies identified construction as their primary segment, 45.2% cited agriculture as their primary segment, and 31.2% indicated mining as their primary segment. Half of the companies (50.6%) employ fewer than 250 employees, while 24.2% employ more than 1,000 employees.
For equipment manufacturers and suppliers, it is not business as usual. The respondents overwhelmingly agreed on the same three challenges with respect to the COVID-19 pandemic: the financial impact on their business, including effects on results of operations, future periods, and liquidity and capital resources; employee health and well-being; and cancelled and delayed orders.
Nine out of 10 (91%) of respondents said that the impact of the COVID-19 pandemic on the overall economy is very negative. While their outlook on the impact on the industry and individual equipment manufacturers is less bleak, more than 56% said that the impact on the industry is very negative (44% percent said it is moderately negative) while 42% said that the impact on individual companies is very negative (another 52% said it is moderately negative).
More than 91.3% of respondents identified a decrease in demand (new orders) as the primary impact of the current crisis. In addition, almost 74% cited supply chain disruptions as a primary impact, while more 64.4% pointed to the financial impact on their business as another primary impact. Other impacts cited include reduced production effectiveness (51.9%), increased employee absenteeism (50%), and non-scheduled shutdowns of manufacturing operations (48.1%).
With regard to their supply chains and manufacturing operations, the outlook is equally negative. Seven out of 10 (68%) of respondents said the impact on their supply chain is moderately negative (24% percent said it is very negative), while 65% said the impact on manufacturing operations is moderately negative (28%). Finally, nine out of 10 (93%) of respondents said that the impact on sales is either moderately negative or very negative.
Looking ahead to the rest of the year, almost 58% of respondents said it will improve. Only 11% of respondents said that they plan to lower their financial outlook by more than 30%, but 61% said they still plan to reduce their financial outlook by 11-30%.
If the COVID-19 pandemic lasts another three to six months, it will take many equipment manufacturers until the end of the year before they can resume normal operations. Less than five percent (4.8%) of respondents said that they would be able to immediately resume normal operations; 44.2% said they can resume normal operations within three months, while 42.3% stated that they can resume normal operations within the year.