EGSA “Pulse” Report: 2009

John HoeftAdvanced Marketing & Technology Insight

Market Trends Committee

•Survey Need

•Methodology

•Results

•Conclusions

•Outlook

•Market Trends Committee Tools

Topics

•Direction and objectives •Develop the plan •Target companies/members

– 1368 Members– 700 member companies– 15% participation

•Obtain approval•Conduct the market research•Analyze and summarize

Methodology

Estimated Power Generation: 2008 Sales

48

26

7

5

13

5

0 10 20 30 40 50 60

Less than $10 million

$11 to $30 million

$31 to $60 million

$61 to $100 million

$101 to $500 million

Greater than $500million

Estimated power generation related sales in 2008?

EGSA Respondent Business Types

41

45

6

4

8

0 10 20 30 40 50

Manufacturing/OEM

Distributor/Dealer

Manufacturer's Rep

Consultant/Engineer

Other

Which of the following best describes your business?

The majority (81.8%) of the respondents are from an OEM or in an OEM’s dealer network (n = 105).

EGSA Respondent Position Types

51

40

1

4

5

0

0 10 20 30 40 50 60

Owner, GeneralManager, Exec

Sales & Marketing

Operations &Manufacturing

Engineering

Product Support &Service

Other

Which of the following best describes your role?

The majority of the participants (91%) are in executive management or sales & marketing related positions.

Company Employee Growth, Past 6 Months

0

1

20

18

37

17

10

0

1

0 5 10 15 20 25 30 35 40

61% or greater Reduction

31-60% Reduction

11-30% Reduction

1-10% Reduction

0% Change

1-10% Growth

11-30% Growth

31-60% Growth

61% or greater Growth

Company's employee growth (or reduction) in the past 6 months?

Company Employee Growth, Next 12 Months

0

0

4

17

39

36

7

0

1

0 5 10 15 20 25 30 35 40 45

61% or greater Reduction

31-60% Reduction

11-30% Reduction

1-10% Reduction

0% Change

1-10% Growth

11-30% Growth

31-60% Growth

61% or greater Growth

Company's employee growth (or reduction) in the next 12 months?

Company's Power Gen Related Sales Growth: 2009 vs 2008

0

6

22

21

10

32

10

1

2

0 5 10 15 20 25 30 35

61% or greater Reduction

31- 60% Reduction

11- 30% Reduction

1- 10% Reduction

0% Change

1- 10% Growth

11- 30% Growth

31- 60% Growth

61% or greater Growth

Company’s anticipated power-gen sales growth: 2009 vs 2008?

Company's Capacity Change: Past 6 Months

0

1

3

4

66

18

6

1

5

0 10 20 30 40 50 60 70

61% or greater Decline

31-60% Decline

11-30% Decline

1-10% Decline

0% Change

1-10% Growth

11-30% Growth

31-60% Growth

61% or greater Growth

Company’s capacity changes (i.e. floor space, assembly, machinery): past 6 months?

Company's Capacity Change: Next 12 Months

0

0

4

2

62

21

11

1

3

0 10 20 30 40 50 60 70

61% or greater Decline

31-60% Decline

11-30% Decline

1-10% Decline

0% Change

1-10% Growth

11-30% Growth

31-60% Growth

61% or greater Growth

Company’s capacity changes (i.e. floor space, assembly, machinery): next 12 months?

Competitor5%

Respected Company

11%

Customer4%

Sub Supplier24%

OEM: Genset23%

OEM: Switchgear & Controls

9%

Don’t Understand Question

4%

No Comment20%

Other than your own company, whom do you consider to be your best supplier/vendor of power gen related equipment and/or services?

Products 15%

Price7%

Delivery10%

Quality: Reliable9%

Sense of Urgency7%

Service17%

Integrity2%

Creative & Innovative

6%

Name Recognition & Capacity

5%

Marketing & Sales Support

11%

Contracted Dealer Agenda

11%

Why is this supplier/vendor the best in your opinion?

The respondents from the EGSA survey represented a wide cross section of the market. Survey responses displayed a good distribution of the data. Many of the business related answers were “unchanged” (neutral) responses.

As expected, sales are down in most cases. The impact of the weakened power gen market seems significant with over 54% of respondents indicating either no change or negative sales growth from 2008 to 2009.

The major engine and genset manufacturers have collectively laid-off thousands of assemblers and office personnel. They have implemented furloughs or rolling layoffs in an effort to conserve cash flow and avoid additional layoffs of additional key company talent.

Based on indications from declining employee growth, changes in sales from 2008 to 2009 and capacity changes over the past year, it appears the power generation market is down as much as 30%.

Survey respondents do, however, seem relatively optimistic that the market for power generation will rebound somewhat in the coming year. This conclusion is supported by the fact that over 41% of respondents expect their employee workforce to increase during the next year and 34.3% are planning for capacity increases.

SURVEY CONCLUSIONS

“Trough” - hit between April and August depending on where you are in the power gen supply chainBottoming in the July-August time frame

Quoting activity is increasingEven More Optimism than “Pulse” ReportExpecting a “flat-reverse” with 2010 vs 20092011 Emissions Rules: “Another game

changer”

Outlook

Outlook: Global Economic Indicators

11 Indicators: Real federal fund rates, Interest rate yield curve, Corporate bond spread, Hours worked, Building Permits, Non-defense capital goods orders, Money supply, Stock prices, Stock prices, ISM export orders index, Crude oil prices, Light vehicle sales

Outlook: Baltic Exchange Dry Index (BDI)

Outlook: Copper (London Metal Exchange)

Survival Tips in (or on the way out of) a Recession

Stick to fundamentals. Know your customer base. Get out in the field more. Don’t forget to define longer term strategy during these difficult times.

Stop wringing your hands and get out there, understand what the current needs are and find ways to reconfigure your expertise to serve those needs.

Look for affordable ways to get the message out… grassroots marketing. Do not lower prices but add value to what you are doing. Those who live by price will die by price.

Measure. Measure. Measure. Wouldn’t invest in anything without a clear metric for success.

A Special “Thank you”

Market Trends Committee• Brian Berg – Bergari Solutions

• John Hoeft – Advanced Marketing &TI

• Kyle Tingle – John Deere

• Chuck Westhofen – Atlas Copco

• Roddy Yates – Baldor

• Joe Zirnhelt – Power Systems Research

• Greg Linton – JRS Custom Fabrication

All of the Participants

Winner of the $200 Gift Card: Tom Clifford, Clifford Power Systems