Executive Says Truck Manufacturers Could Be Missing Out
Kay ross-baker's presentation at the NTEA's Economic Outlook Conference in Dearborn, Michigan, could be boiled down to this: The government market, made up of municipal, county, state, and federal jurisdictions, is important to the truck industry - probably more important than her audience was willing to admit.
Ross-Baker, who as advertising director for the Penton Government Media Group, has worked closely with the major US truck manufacturers to determine the strength of the government market as it relates to fleets, noticed at the end of the seminar that some members of the audience appeared to be skeptical.
But she hammered home her point. She said that discussions with Navistar, GM, Freightliner, Ford, and Sterling have revealed that their chassis sales to government accounts for 26.4% of their business - and, she adds, that's a conservative figure.
"So this market is a huge market, and one you can't ignore if you're in the truck-body manufacturing business," she said. "Even if it makes up 10-15% of your bottom line, it's going to be there year in and year out, because the government is going to continue to spend."
She said the government market is the largest purchaser of truck and automotive equipment in the US, with local, state, and federal entities combining to operate nearly 3.7 million vehicles (3,212,925 at the state, county, and municipal level, 461,573 at the federal level). In addition, she said, in-house facilities are used to repair 88% of government fleets.
"That number is very important because if you think about it, if they maintain their own vehicles, parts availability is going to become very important," she said.
Multiple-Award Contracts Ross-Baker said that up until 1998, the federal government had one manufacturer and one contract for its Standard Trucks Available Now (STAN) program: Boyer Ford-Sterling Trucks.
"Now they made a determination that user agencies across the country could not be expected to pick one chassis manufacturer or one body manufacturer that has contracted with Boyer Ford and expect to fit every mold across the United States," she said. "So they opened it up into a multiple-award contract. So you've got four manufacturers or dealers that hold those contracts for them, competing in the marketplace. There are actually price differentials of up to $6,000 to $9,000 between these chassis."
She said that Ron Dixon, who runs STAN for the Government Services Administration, told her they can choose the chassis and body, and it's dependent on the user agency and the budget they have. The multiple chassis choices and body options include aerial lifts/digger derricks, ambulances, buses, fire trucks, fuel tankers, light trucks (4x2 and 4x4), medium- and heavy-duty trucks, sedans and station wagons, trailers, and wreckers and rollbacks.
According to her statistics on the government fleet market, the value of aftermarket product purchases are: $1.62 billion for mechanical, $1.5 billion for motor oil and fluids, $1.08 billion for vehicle exteriors and frames, $666 million for electrical (including batteries), and $625 million for electronic.
In a poll of NTEA members (53.7% distributors, 46.3% manufacturers), 74.8% said they do business with the government. She said she was surprised that the number was so low, given that government accounts will be consistent.
"They're not going to go away," she said. "They have to maintain our infrastructure. The good news is that that 25% is not excluded from the marketplace - unlike private industry, which has over the last number of years reduced the number of vendors who do business with the government. The government can't do that because it's our money. They don't have the option of excluding someone or saying, `Listen, we already have enough vendors and don't want to do business with anyone else.' So this is a marketplace that is always open to anyone that wants to do business with it."
Light-Duty, the Largest Seller The poll also revealed these numbers from those NTEA respondents who sell to government: 94.3% sell to the local level, 80.9% to the state, 61.9% to schools and colleges, 45.9% to the federal, and 39.7% to the military. And they sell to the following departments: 88.5% to public works, 71.7% to parks and recreation, 66.5% to water/wastewater, 62.8% to transportation, and 52.4% to police/fire.
Light-duty trucks account for the largest sales (40,914), followed by heavy-duty (28,743), mid-size (9,565), and medium-duty (6,862).
According to a Government Product News study, dump trucks lead the vocation list at 6,883, followed by snowplows (3,253), vans (2,788), utilities (2,296), flat beds (1,119), buses (1,076), refuse (981), tractors (784), street sweepers (570), tankers (371), sewer (181), and recycler (78).
Ross-Baker said 60-65% of all federal money is spent between July and September, before the new fiscal year begins in October. Of all the months, July is when the most money is budgeted for vehicles, and October is the busiest for issuing bids for vehicles.
Ross-Baker said that because government makes purchasing and budget decisions throughout the year, normal sales practices don't apply.
"Now, I've talked to a lot of sales guys who go sell to the government, and they said that typically, in years past, they knew exactly the day and time to call on any one of the jurisdictions, because everything was done at a specific time and they didn't have to see them at any other time of the year," Ross-Baker said. "That's changed in government. We ask them when they are going to replace and they say, `When it breaks down.' And that's something that they can't typically determine."
Differing Views of Importance Government respondents in the survey said the quality of the vehicle was most important, followed by price, parts availability, service, warranty, life-cycle cost, prior experience with the manufacturer, the reputation of the dealer, and the location of the dealer.
Contrast that with NTEA respondents who believe that price and direct contact with the jurisdiction are the major factors that influence the decision to purchase trucks. Quality ranked fifth, behind distributor reputation and service.
"If you look at 6,000 municipalities and 3,000 counties (that comprise the US), you cannot say `The government does ...' or `The government is ...,'" Ross-Baker said. "We've got jurisdictions that are hundreds of years old and jurisdictions that are just babies. If you think about it, you can't expect them all to be run the same. So (the NTEA's) perception has to change. Because government has changed."
How healthy is the market? She said that 57% of government respondents indicated that they have included new trucks in their 2001 fleet budgets, according to a June survey. She said there has been significant growth in Class 3, 4, 6, and 8 trucks.
In the construction market, 41% plan to increase their fleets over the next five years, and 58% plan to remain the same.
How big is the market? She said the government owns 25% of all the fleets and 28% of all the trucks - making it, in her estimation, "too big to ignore."