Fire Truck Manufacturers
Just in case you missed a developing story initially reported on April 15 in Firefighter Close Calls, I have copied and pasted portions of that article to save some space but get an awareness underway of some not-so-special activity behind the current challenges with new fire trucks. The items that are in quotes were taken from the article.
“Private equity roll-ups of fire truck manufacturers create sky-high prices and manufacturing backlogs, putting firefighters and communities in danger.” “While CEOs and shareholders pad their pockets, consolidation in the industry impedes fire fighters’ ability to do their jobs safely and effectively, squeezes fire departments’ budgets, and forces taxpayers to bear the consequences.”
“Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Jim Banks (R-Ind.) opened a bipartisan investigation into the harm of private equity roll-ups of fire truck manufacturers. The lawmakers wrote to the International Association of Fire Fighters (IAFF), seeking information about the adverse impact of private equity consolidation on firefighters and communities across the country”. It was reported that “consolidation in the industry impedes fire fighters’ ability to do their jobs safely and effectively, squeezes fire departments’ budgets, and forces taxpayers to bear the consequences. These include delivery delays, defective parts, and price increases.”
“In 2006, private equity group American Industrial Partners (AIP) began rolling up independent fire equipment manufacturers, eventually consolidating four smaller companies into the REV Group. Today, as a result of additional acquisitions, REV Group owns about a third of the fire truck manufacturing market, the largest share of any company. Meanwhile, independent companies account for only 20% of the market”.
So, I went looking for more information. If you go to revgroup.com and start scrolling, you will find they own E-One, Ferrara, KME and Smeal plus Spartan, LTI and 5 well-known ambulance brands. They include Horton, AEV, Road Rescue, Wheeled Coach and Leader. If this does not grab your attention, then please re-read this and ponder that these brands (companies) are controlled by a single CEO who per the April 15th article is totally focused on shareholder value and returns. Now consider what they could become if they acquire just two more major brands. The warning light on this one was a little late coming on, but here we are.
The April 15th article went on with the following.
“Large fire truck manufacturers may be exploiting their market power to raise fire truck prices and restrict the supply of fire trucks. In 2013, a pumper truck cost $500,000, and a ladder truck cost $900,000. Today, these prices have skyrocketed to nearly $1 million and $2 million respectively, far outpacing inflation for heavy-duty truck manufacturing over that time period. Some manufacturers also use FLOATING PRICES, increasing the final price of a truck after it goes into production and even withholding the delivery of the vehicle if fire departments do not agree to the REVISED price increases.”
They listed several examples of paying $20-30-K more than the bid/contract price. The April 15th article went on to state:
“At the same time, companies like REV have permanently shut down their own manufacturers’ plants, reducing manufacturing capabilities and leading to a nationwide backlog in fire truck delivery”.
“Rising costs and longer delivery times for fire apparatus and ambulances are hurting fire departments and communities. Firefighters report they are forced to use outdated fire trucks because their department can’t afford new trucks.”
Lawmakers wrote: – “Private equity is padding shareholders’ wallets at the expense of public safety, then went on to say on a shareholder’s call, REV Group’s CFO noted that manufacturing backlogs benefit the company, saying ‘strong backlogs’ provide the “visibility and opportunity to drive significant shareholder value.”
The senators warned that private equity’s serial roll-ups may be allowing companies to increase their market share while evading antitrust scrutiny. The Federal Trade Commission and the U.S. Department of Justice clarify that when a merger is part of a series of multiple acquisitions, these federal agencies may examine the whole series. Well, Let’s hope so.
I will try to keep an eye on this, but it will likely play out in very slow motion, and REV is not going to just roll over and give up on what they have accomplished. Thank you for your time!
FFAM
