04.03.2010

Merlo takes the long view

Merlo is investing heavily in its business and taking a larger share of the world telehandler market.

When the current recession began to bite Merlo was almost certainly the world’s fourth largest telehandler manufacturer, behind Manitou, JCB and JLG (SkyTrak, Lull, JLG + Deutz-Fahr and CAT) today it could well be in the top three and much closer to the top two than ever before.
Please register to see all images

Merlo is still producing at a strong pace

The company, which is based in Cuneo, Northern Italy, is owned by the Merlo family which chooses to plough most of the firm’s profits back into the business. It says that revenues for 2009 fell 20 percent from €395 million in 2008, of which more than 85 percent was telehandlers, to €315 million with telehandlers now representing between 75 and 80 percent.

In spite of the sales drop, more modest than most, if not all of its competitors, the company actually increased its headcount in 2009 by more than two percent and is investing 9.5 percent of its revenues – around €30 million in Research & Development on new products and plant automation processes.
Please register to see all images

Merlo is investing heavily in its production facilities

It is also undergoing a significant capital expenditure programme adding new robotic production lines for its axles and transmissions all of which it produces in house. It is also increasing the overall size of the plant from 15 to 17 hectares as it prepares to add a new logistics and replacement parts building.

The facility is still very active, producing an average of between 20 and 22 telehandlers a day- its current capacity for a single shift. It says that it built over 5,000 telehandlers last year out of a total production of over 6,000 machines.

Assuming that these numbers are accurate, it puts the company closer to the three largest producers than ever and possibly marginally ahead of one of them?

How has it managed to do this? There are a number of reasons; first of all it derives a far larger portion of its sales from agriculture than the other three a market that has generally remained solid.

It is also the largest producer of 360 degree telehandlers- Rotos – and this market has in fact grown during the slowdown, as rental companies look at niche markets and products. Finally Merlo was never particularly successful with the larger rental companies which have virtually stopped buying, so has been less affected by the collapse in that sector.
Please register to see all images

Dozens of new products are in the pipeline

Merlo knows that the telehandler market will sooner or later bounce back and is investing heavily in new models and technology, while stepping up its marketing and distribution efforts. It is hoping of course, that its long view strategy will enable it to make a significant leap forward in comparison to its competitors, particularly as the market begins to pick up.

At this weeks press conference in Cuneo, to launch several new telehandlers along with some new technology, founder and chief executive Amilcare Merlo announced that his daughter Silvia, already in the business for 17 years, would be taking a more significant role in the company and represents the family’s future in the business. He also introduced the company’s senior managers –a tiny group compared even smaller competitors, with a strong focus on Engineering, manufacturing technology, marketing and sales.
Please register to see all images

Silvia Merlo with father Amilcare introducing her to the press

Vertikal Comment

When the big rental companies start replacing their fleets some of Merlo’s market share gains are likely – no certain – to be pruned back, but the company is ‘on a mission’ and, depending on their strategies its competitors are likely to face increased pressure from Merlo as it looks to increase its share of the rental market.

Merlo is also looking to expand its operations and market coverage more aggressively that it has in the past, this is a major change for a company which has traditionally sold all that it can build. There is no question that it will not have the products, the quality and the range to win new customers and new dealers. What it will need to do is make sure that its product support and brand awareness is as good as the companies that it is trying to catch or overtake.

And here it is up against some heavyweight global brands such as JCB and CAT, not to mention Manitou and JLG all four of which have product support organisations that have an almost flawless image. Merlo needs to create the same image if it is to move and that involves a heavy investment in the function and communications. This week’s event suggests that it is ready to do this.