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Volvo, JLG and Manitowoc going strong as tariffs take effect

Written by Jim Hook/The Chambersburg Public Opinion | Aug 9, 2018 4:33 AM
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Photo by Markell DeLoatch, Public Opinion Online

(Chambersburg) -- Franklin County manufacturers of construction equipment are selling more machines despite the start of a trade war and the lack of a national transportation bill.

Volvo Construction Equipment, Manitowoc Cranes and Oskosh Corp. all report a boost in sales for their most recent quarterly earnings. They are the major players in the region's manufacturing economy. They directly employ thousands and support a network of local supply shops.

"The companies are operating in a very strong economy," said L. Michael Ross, president of the Franklin County Area Development Corp. "There's a tremendous amount of investment taking place. Fortunately, we build the equipment to do that work."

Volvo makes road rollers. Manitowoc makes mobile cranes. Oskosh makes mobile work platforms and lifts. They use aluminum, steel and other products whose import has been hit with new tariffs.

The most recent U.S. tariffs came this week -- a 25 percent tax on 279 products imported from China. Steel and aluminum from the European Union, Mexico and Canada also are subject to tariffs. The nations have retaliated with tariffs or quotas on U.S. products. Farm products top the Canadian and EU lists.  

"With tariffs there's been far more speculation on what could happen than what is happening," Ross said.

The Trump administration's tariff plan and trade negotiations have drawn criticism from business groups:

  • The U.S. Chamber of Commerce says the tariffs threaten $1.7 billion of annual exports from Pennsylvania. The state's $1.2 billion of exports to Canada would be hardest hit, including $74 million in bread and pastries.
  • Uncertainty from the trade war has wiped out billions of dollars in farm cash receipts, according to the American Farm Bureau.
  • "This is just another step toward throwing away the benefits of tax reform that have given our nation's economy a badly needed boost," National Retail Federation President and CEO Matthew Shay said. "These tariffs might be part of an effort to bring about fair trade with China, but as we've said before all we have seen so far is a huge risk for American consumers and workers with no endgame in sight."

The nation's economy, however, continues to roll through a decade of mostly steady expansion.

"Key markets continue to show signs of recovery, particularly in North America," said Barry L. Pennypacker, president and CEO of the Manitowoc Company. "In spite of the well-documented increased input costs, such as tariffs and steel costs, we remain committed to delivering on our financial targets and transforming Manitowoc into a world-class crane manufacturer while continuing to improve the returns for our shareholders."

Manitowoc makes mobile hydraulic and crawler cranes at its Grove U.S. plant in Shady Grove. The corporation's sales for the most recent quarter were up 26 percent from a year earlier. Crane shipments improved across all regions, especially in the U.S. and European markets.

Oskosh reported that access equipment sales increased 18 percent because of improved demand for telehandlers and aerial work platforms, primarily in North America. JLG makes the equipment at factories in Shippensburg, McConnellsburg and Greencastle. Net sales for the entire corporation were up nearly 7 percent compared to the third quarter of 2017. The strong demand for access equipment was partly offset by expected lower sales in the defense segment.

 Wilson R. Jones, president and chief executive officer of Oshkosh Corp., parent of JLG Industries, said: "Despite the uncertainty surrounding the impact of trade policies, market fundamentals for our businesses are positive."

Volvo Construction Equipment's net sales for the most recent quarter were up by almost a third compared to a year earlier.  Sales in North America were up 17 percent. Orders worldwide increased 41 percent. It's North American headquarters is in Shippensburg.

Volvo is closely monitoring the impact of tariffs on the commodities the company uses to build its products, according to Meg Christenson, company spokeswoman. The products will be more expensive to make and their prices will be higher.

Construction equipment giant Caterpillar has put a number on the impact of tariffs. Like local manufacturers, Illinois-based Caterpillar is expecting a strong year. No. 65 on the Fortune 500 list, Caterpillar has raised its annual earnings forecast --- despite the estimated damage from tariffs at $100 to $200 million in the second half of the year. That amounts to about 3 percent of the company's forecasted full-year profit.

For now, the growing economy and strong demand for construction services appear to be offsetting the increased costs caused by significant labor shortages and newly-imposed trade tariffs, according to Stephen E. Sandherr, CEO of the Associated General Contractors of America.

Franklin County employers have been coping with the labor shortage.

Local workers have many opportunities, and employers already have raised wages to recruit and to hold onto employees, Ross said.

Franklin County businesses in June employed a record 61,600 people, up 1,700 employees from a year ago, according to the state labor department. Unemployment was very low -- 3.5 percent seasonally adjusted.

Even record employment, Ross is calling for a major investment in the nation's highways, water and sewer systems, railroads and electrical grid to support the current growth in private investment. He points to congested Interstate 81 through the Cumberland Valley.

 "We need an infrastructure bill in this country," Ross said. "We need to support the level of investment that is taking place."

An infrastructure bill would be a boon to the three local major equipment makers and their suppliers.

Manufacturing companies in Franklin County employ 8,800 workers, about 100 more than a year ago, according to the Pennsylvania Department of Labor and Industry. Employment at factories in Fulton County has remained stable at 1,800 people. Manufacturing employment is up nearly 4 percent in nearby Cumberland and Dauphin counties.

President Trump has promised an infrastructure bill, and U.S. Rep. Bill Shuster, chairman of the House transportation committee, recently unveiled a plan that has received little fanfare. Shuster, R-Everett, represents Franklin County and is retiring in January.

"We also need to figure out an immigration bill that allows for a predictable workforce and that employers understand," Ross said. "We clearly do not have the workforce for the investment that is already taking place. If we get an infrastructure bill without an immigration bill, I don't know how we're going to handle it."

 

This story comes to us through a partnership betwen WITF and The Chambersburg Public Opinion

Published in Adams County

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