Is the Current Financial Scene Good or Bad for U.S. Manufacturers?
John Van Horn
This article was written for Parking News, the magazine of the British Parking Association, and is reprinted here by permission. --Editor.
The markets are going wild – up one day, down the next. The credit markets are uncertain. The pessimists are out-yelling the optimists. In this time of financial flux, how are American parking equipment manufacturing companies doing? Are they debt burdened, like some in the UK? Will some or all survive the times? Is consolidation happening or going to happen?
First, let’s discuss the marketplace in general. The need for parking control equipment, particularly on-street, has never been greater. Cities are raising parking fees and need new high-tech equipment that handles cards as well as cash. This market is not changing; it’s getting hotter. Therefore, companies in this business should have a rosy future.
As for off-street, the conversion from pay-on-exit to pay-on-foot is in full swing. The American market usually follows the European parking market by at least a decade, and the concept of pay-on-foot – a commonplace occurrence in Europe in the 1990s – is only in the past five or so years becoming common in North America.
That means there are literally thousands of parking operations that have older systems and need upgrading. Usually the cost to do that can come from labor savings, and parking operators are looking to this technology to compete. The off-street manufacturers should be healthy.
Companies are motivated to lower their payrolls, and technology is the way to go. The rifle has been loaded – companies and municipalities for years have been toying with new ways to collect and increase revenue while lowering ongoing costs. Economic pressures will provide the catalyst for them to pull the trigger.
Cities, particularly, are feeling the pain of the burst of the housing bubble and lower property values through lower tax (rates) revenues. They are looking to other areas to raise that revenue. And parking is becoming a major revenue source in many a municipality. But they need the proper equipment to collect it.
There are not a large number of manufacturers of parking equipment in the U.S. Most are based in Europe or Japan and sell .into the U.S market. However, the weak dollar has made this difficult, and local manufacturers, including foreign ones that assemble in America, have a distinct advantage.
There has been a bit of consolidation, with four companies (Reino, Duncan, Enforcement Technologies and Citation Management) now under the Duncan banner. This is an on-street company rolling technology, citation writing and collection all into one group. It’s a soup-to-nuts solution, and the new company is wrestling with all the issues that come with trying to blend four company cultures.
McGann, a U.S. firm that provides revenue control software basically that runs on Amano equipment, has merged with Amano USA to form Amano McGann. This, too, appears to be a good match, based not so much on financial pressure as on a synergy that existed between the two companies.
Beyond that, most transactions have involved manufacturers buying their dealer or distributor operations. This has happened at least half a dozen times in the past year, indicating that manufacturers believe a direct operation will enhance their bottom line.
The question remains: How does a weaker economy affect manufacturers? In my opinion, if they are properly marketed, not much. In fact, the pressure to decrease ongoing costs in the face of a downturn and increase revenue makes switching to newer technology all the more important.
Economic downturns, particularly in the U.S., are notoriously short-lived. Many are predicting that the bulls will be back in less than a year. Well-run companies will take advantage of the market and prosper during this uncertain time.
As for available credit, the U.S. Federal Reserve has lowered interest rates, making short-term credit more readily available to firms in need. That process, along with some tax changes made in a recent stimulus package from the government, should give most companies a breather and entice others to invest and grow.
All these factors make for a parking equipment market in the U.S. that is primed for steady growth, and for companies that treat it right to be very successful in the near and far term.
John Van Horn is editor of Parking Today. He can be reached at email@example.com.
Article Abstract from April, 2008