Plant manufacturers slash output by 50%

Many European plant manufacturers have slashed production of construction machinery in half, a straw poll conducted by contractjournal.com has found.

The news comes the week after JCB announced that it was cutting a further 684 jobs and revealed that production in the first three months of this year will be 75% lower than last year.

The first half of 2009 will be particularly difficult for plant manufacturers and dealers, according to Colin Timms of  construction machinery research company, Off-Highway Research.

“Because of the backlog situation last year, dealers were required to place their orders very early. Those machines have been built and dealers now have too much stock so they are ordering almost nothing from the manufacturers and exacerbating the situation.

“The problem is that demand dropped very suddenly - but you can’t turn off a manufacturing process like a tap,” he said.

JCB has been particularly badly hit because many of its sales are in the UK, Ireland and Spain – the three worst performing markets in Europe.  Its volume sales are also in machinery like mini excavators, telehandlers and backhoe loaders which have a close association with the housing market.

Meanwhile Volvo told its shareholders its plants had cut jobs, shuts down production on certain days and in December its production "essentially came to a halt".

Timms expects the situation for most manufacturers will ease in the second half of the year as dealers slowly reduce their stock levels and begin ordering machines. However, he said the current state of the market must be seen in context: “We are coming off a massive high in the market.”

So despite the fact that sales volume in 2009 may be 50% lower than in 2008, he still thinks this year will be the fourth largest on record. Oddly enough, he also raises the spectre of backlogs in the future saying: “You can’t turn production back on like a tap either.”