SIC 3531
CONSTRUCTION MACHINERY AND EQUIPMENT



This industry includes establishments primarily engaged in manufacturing heavy machinery and equipment used primarily by the construction industries, such as bulldozers, cranes (except industrial plant overhead and truck-type cranes), dredging machinery, pavers, selfpropelled backfillers, backhoes, aggregate spreaders, construction plows, and power shovels. This industry also includes establishments primarily engaged in manufacturing forestry equipment and certain specialized equipment, not elsewhere classified, similar to that used by the construction industries, such as elevating platforms, ship cranes and capstans, aerial work platforms, and automobile wrecker hoists. Establishments primarily engaged in manufacturing mining equipment are included in SIC 3532: Mining Machinery and Equipment, Except Oil and Gas Field Machinery and Equipment ; those manufacturing industrial plant over-head traveling cranes are classified under SIC 3536: Overhead Traveling Cranes, Hoists, and Monorail Systems ; and those establishments manufacturing industrial truck-type cranes are classified under SIC 3537: Industrial Trucks, Tractors, Trailers, and Stackers.

NAICS Code(s)

336510 (Railroad Rolling Stock Manufacturing)

333923 (Overhead Traveling Crane, Hoist, and Monorail System Manufacturing)

333120 (Construction Machinery Manufacturing)

Industry Snapshot

In the late 1990s, low interest rates and a booming American economy fueled residential, public, and commercial construction in the United States, which in turn boosted demand for construction machinery and equipment. After experiencing its eighth year of consecutive growth in 1998, when the value of shipments reached $24 billion, the construction machinery industry began to weaken slightly. Shipments in 1999 dropped to $21.9 billion, before rebounding to $22.5 billion in 2000. In the late 1990s, 721 establishments were involved in the production of construction equipment, compared to 919 middecade. With 58 facilities, Wisconsin was home to the greatest number of construction equipment manufacturers. California and Illinois followed, with 56 and 51 establishments, respectively.

Organization and Structure

This industry provides several major categories of equipment for use by the larger construction industry. Earthmoving machinery is utilized by companies involved in residential and commercial construction, as well as those involved in highway construction and dambuilding. Caterpillar Inc. is the industry leader in the production of earthmoving machinery, which has historically been the cornerstone of its product line.

Excavators and cranes are used in a variety of construction areas. Excavators are used in most construction jobs and come in a wide variety of sizes and configurations, ranging from small tractor-mounted backhoes to large power shovels. Cranes are used for bridge, highway, large commercial or industrial construction jobs, and in offshore oil drilling. Other construction equipment includes underground mining machinery, asphalt and concrete pavers, air compressors and tools, pumps, hoists, and rock-crushing and screening equipment.

Current Conditions

The burgeoning American economy of the late 1990s bolstered industry growth. With low interest rates fueling a housing boom, the construction business needed equipment and machinery to keep up with demand. Commercial building also fared well. The lowest vacancy rates in office buildings in a decade spurred the construction of office parks and urban commercial buildings. The strong economy also led to the construction of new football stadiums and other sports arenas—again driving sales of earthmovers, scrapers, pavers, and other heavy equipment to complete the projects.

Manufacturers of construction equipment also received a boon from infrastructure projects. In June of 1998, the Transportation and Efficiency Act for the 21st Century passed the U.S. Congress. This bill—the biggest public works bill in U.S. history—set aside $219 billion for transportation needs; $175 billion was earmarked for road and bridge repair and construction alone. The bill's impact on the construction equipment market was extremely positive. As Construction Equipment noted on December 1, 1998, "the Highway Act is one reason the U.S. construction market will feel little pain from global financial cooling." Moreover, bridge-building reached new levels in the late 1990s after the U.S. Department of Commerce reported that over one-third of the country's bridges were in need of repair. Such work requires highly automated bituminous and concrete paving equipment, milling machinery, and high-powered pavement breakers. Other public sector projects included the construction of urban pollution control facilities, such as solid waste disposal and wastewater treatment facilities.

The outlook for the construction equipment industry was not entirely rosy, however. The Asian economic crisis of the late 1990s cut into American firms' exports. In the wake of the collapse, construction projects for new housing, roads, and offices slowed dramatically, dragging down demand for construction machinery. Russia's economic collapse in the late 1990s also hurt the American industry. Total industry shipments fell from $24 billion in 1998 to $22.5 billion in 2000.

Industry Leaders

The world's leading manufacturer of construction equipment, with total sales and revenues in 1998 of nearly $21 billion, is Caterpillar Inc., of Peoria, Illinois. Construction machinery and equipment accounted for $13 billion of its sales that year. Ranked 58th among the Fortune 500 companies, 1998 marked Caterpillar's seventh consecutive year of growing revenue and profits. Originally incorporated in 1925 as the Caterpillar Tractor Company, the company boasts more than two dozen major production facilities in 22 countries, as well as 195 dealerships. After suffering significant losses during the 1980s, the company embarked on a series of changes to regain its previous form, cutting its workforce from 90,000 to 60,000, closing 30 percent of its plants, introducing new machinery, and moving aggressively into foreign markets. After completing the massive restructuring in 1993 that automated more facets of production, Caterpillar was able to better withstand labor disputes, such as the 1994 United Auto Workers (UAW) strike in which two-thirds of Caterpillar's workforce went on strike. The transformation was at times a painful one, but the company emerged stronger and able to meet market needs quickly. For instance, in the 1980s, Caterpillar offered little paving equipment; by 1999, it was the industry leader in this segment of the market. After reaching a contract agreement with UAW in 1998, the company acquired Veratech Holdings, Handling Crane Systems, and Wrightech.

The second-largest construction equipment company in the world is Komatsu International Ltd. The Tokyo-based company's American subsidiary, Komatsu America International Company, was a strong performer. Based in Vernon Hills, Illinois, Komatsu America conceives, manufacturers, sells, and maintains earth-moving machinery for North American construction and mining firms. The company's forte is in dump trucks and crawler bulldozers. Sales in 1998 were above $8 billion.

Incorporated in 1868, Deere and Company is one of the largest agricultural and industrial equipment manufacturers in the United States. An industry innovator since founder John Deere introduced the first successful self-cleaning steel plow in 1837, the company has factories throughout the world and distributes its products through independent retail dealers. In 1998, Deere and Company employed 37,000 people and achieved sales of over $11.0 billion. Construction equipment accounted for 19 percent—about $2.6 billion—of total sales. John Deere produced backhoe loaders, crawler bulldozers, and drive train components, in addition to engines, excavators, motor graders, and scrapers. The company was hit hard by the economic collapse in Asia and Russia. In 1998, John Deere announced that 2,400 workers would be laid-off because of dwindling exports.

Workforce

The industry employed 71,777 in 2000, down from 78,200 in 1995. The number of production workers also dropped substantially from 53,300 in 1995 to 48,139 in 2000. Increasing automation in the construction equipment industry led to the declining number of workers. Production workers toiled an average of 39 hours per week. Average earnings in 2000 were $18.06 per hour. Illinois was home to the greatest number of workers in this industry in 1997—with 12,740. Iowa followed with 9,290 and Wisconsin with 7,539.

Labor is a huge part of operating expenses for leading domestic construction equipment manufacturers such as Deere & Co. and Caterpillar. Labor at both companies is represented by the United Auto Workers, and both companies had their share of labor disputes in the 1990s.

Research and Technology

Construction equipment itself has often been considered relatively "low-tech," but "intelligent" machinery is increasingly being developed for field work. Kraft Tele Robotics of Kansas, for instance, is testing Haz-Trak, an excavator and materials handler that can be operated by remote control from hundreds of yards away, allowing operators to handle dangerous materials such as radioactive waste from a safe distance. The excavator, it was hoped, can eventually be operated from even greater distances.

Another trend in the industry is the quest for automated construction equipment, which, as Construction Equipment explained, would "reduce operating costs and increase productivity on the construction site and in the mine." The magazine predicted that, within 15 years, a fleet of machines could be operated by a single human operator. Armed with the latest in technology these machines of the future should be able to "detect problems and then proactively inform the human overseer."

Further Reading

Bares, John. "Coming Next Decade: More Machine Automation." Construction Equipment , 1 August 1999.

"Caterpillar Inc." The Wall Street Journal , 4 April 1997, C30.

Merwin, Donald. "Construction Headed for 8th Year of Growth." Construction Equipment , 1 December 1998.

United States Census Bureau. 1994 County Business Patterns. Washington: GPO, 1996.

United States Census Bureau. "Construction Machinery Manufacturing." Available from http://www.census.gov/prod/ec97/97m3314c.pdf October 1999.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

"U.S. Machinery Exports Decline." Gulf Construction , 1 May 1999.

1995 Annual Survey of Manufactures. Washington: GPO, 1997.



User Contributions:

Comment about this article, ask questions, or add new information about this topic:

CAPTCHA