Upfront: Industry leaders weigh in on stimulus bill

By Steve Noe

Outdoor Power Equipment and its sister publications — Landscape and Irrigation, SportsTurf and Arbor Age – recently asked several green industry leaders to share their thoughts about the passage of the American Recovery and Reinvestment Act of 2009 (a.k.a. “stimulus bill”). I posed essentially the same questions separately to both Dan Ariens, president of Ariens Company, and Paul E. Kindinger, president/CEO of the North American Equipment Dealers Association (NAEDA). Following are some of those questions and their responses:

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

Ariens: I don’t think the stimulus is good for anyone, including the OPE industry. I would have supported business-like incentives to make consumers both grow in their confidence in their economic future, and provide consumers the opportunity to make the economic decisions on which industries/products/companies will survive. As this stimulus works, we now have the federal government deciding which companies will survive or fail, based on who gets the money.

My incentive would be a tax reduction going to all consumers (wealthy or not); let them spend their own money on the products they choose. That’s a free enterprise solution. Second, I would run the government like a business, and when the revenues fall, unfortunately so does the number of employees; the government needs to cut cost. I realize this is an old-fashioned remedy — but I’m an old-fashioned guy.

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: How has the recession affected dealers most acutely?

Ariens: Credit. Both floor plan and consumer credit. Dealers are facing a new reality in their balance sheet strength, and need to be vigilant about managing their inventory, and matching that with the demand of the marketplace. Be very careful with your relationship with the floor plan company; we all need to work together to manage through this recession.

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 dealers during this economic downturn?

Ariens: This is where business relationships that are true partnerships for a long-term relationship versus those which are just business transactions make a difference. In our business, we help our dealers manage inventory, move slow items to where they are going to sell, and don’t stuff it down the throats of our customers. We match our plant output with real-time demand. Lean manufacturing has been a way of life for us for over 10 years now, and our partners know that in the long run, this is the most effective way to match demand to inventory.

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.

To read more about what Ariens, Kindinger and several other green industry leaders had to say about the passage of the stimulus bill, visit www.outdoorpowerequipment.com/stimulus.

OPE Editor Steve Noe
snoe@m2media360.com