NAEDA advises dealers to focus on basics during these tough times

Outdoor Power Equipment and its sister publications — Arbor Age, Landscape and Irrigation, and SportsTurf — have embarked on an editorial quest to provide you with information about the current economy, the stimulus package, and what it all means to the green industry. Our findings will be presented during the coming weeks on our Web sites, followed by in-depth articles in our upcoming print editions.

In this installment, we interviewed Paul E. Kindinger, president/CEO, North American Equipment Dealers Association (NAEDA).

OPE: Would you say that the passing of the economic stimulus is positive or negative for the outdoor power equipment industry, and why?

 Kindinger: So many analysts say it may be a mixed bag for any industry. We’re taking the higher road. We think new money for infrastructure and other construction projects will provide near-term employment and long-term improvements that are sorely needed. This could stimulate equipment sales and rentals in some areas. With more people working, these projects figure to help people earn money to purchase outdoor power equipment.

The stimulus includes accelerated bonus depreciation, which NAEDA worked hard to get included in the package. This is a one-year extension of capital investment incentives that expired at the end of 2008. Bonus depreciation can be useful — and has been useful in the past — to stimulate equipment sales.

Regrettably, since bonus depreciation was not extended at the end of last year, some equipment buyers may have put off making purchases during the first few months of the year. We’re hopeful it’s a benefit that will be used as the year progresses.

Since more than 70 percent of our GDP is based on consumer spending, we’re optimistic that when consumers have money, needs and confidence in the economy, they will spend.

OPE: What type of feedback are you receiving from your members regarding the stimulus?

Kindinger: NAEDA’s OPE Dealer Council recently met, and many of its members expressed their aggravation over the reported 8,000 pork barrel spending projects in the bill. Much of the spending will not create new jobs or encourage consumer spending. Dealers, like most business owners, are doing everything they can to reduce expenses and control costs to keep lights on and people working.

When we read the stimulus authorizes spending $21 million to re-sod the National Mall from the damage caused during this year’s inauguration, it’s a little difficult to accept. Of course, some people view bonus depreciation as pork. Opinions vary. But what will stimulate consumer spending — tax savings from bonus depreciation on new equipment sales or putting down new grass in Washington, D.C.?  Maybe both — someone will need to install and maintain the new grass.

OPE: How has the recession affected your members most acutely?

Kindinger: For OPE dealers, new equipment sales may be down. However, some dealers are doing well in areas where snowblower sales went through the roof, especially if equipment was available. With spring around the corner, grass will be growing and lawn care needs will follow, which will drive parts sales and service opportunities.

The tightness of the credit market is a big obstacle for consumers, and that’s a problem for dealers. As noted previously, consumers will spend when they have needs and confidence in the economy. Currently, many equipment buyers are having a difficult time getting retail financing or they’re being asked to accept loan amounts below funding needs. Also, we are hearing that acceptable consumer credit scores are on the rise, thus making it more difficult for them to get approval for financing.

OPE: What are you recommending to your members — or doing for your members — during this economic downturn?

Kindinger: I think dealers know what to do. They’re reducing business expenses, eliminating unnecessary costs, and working to stay visible in their markets. They really need to focus on business basics such as controlling overhead and inventory and keeping a close eye on cash flow.

OPE: What is your outlook on the economy long term?

Kindinger: I recently wrote in my monthly association column that we have been on a wild spending spree for a long time, and now we are seeing the consequences. I recently read where the practice of putting something on layaway is making a comeback with some retailers. Layaway went on the endangered list the minute the first credit card was issued. If layaways do come back, it may be a sign that people are now pulling back to live within their means. Have we gone full circle? If this in fact is indicative of the new reality, then the shrinkage in wealth may be an indicator of how much we were living beyond our means.

Consequently, the new market reality may suggest fewer new homes and autos will be sold, that even with the stimulus we may not return to previous levels of spending.

Having said that, like any past recession, once the adjustments are made and confidence is restored, I feel we will be stronger coming out on the other side.