Apparatus, Equipment

Fire Industry Outlook: 10 Years After the Great Recession

Issue 12 and Volume 23.

As 2018 comes to a close, it is hard to believe that just 10 years ago the United States was entering a recession that would severely impact the fire market.

Although much of the fire industry has rebounded during the past 10 years, there hasn’t been a return to the same numbers in terms of units sold as pre 2008. That being said, it’s easy to see that things are not overly “bad,” however.

One obvious indicator is the trade show circuit. Even with continued consolidation, companies are not using this as an excuse to spend less money. A short walk through FDIC International 2018 was all it took to see that the fire service vendors are expanding their booth space vs. contracting it. I think I saw more fire trucks in 2018 than I did in my previous 12 FDICs. Additionally, firefighters nationwide are identifying problems that need solutions and are developing products to provide them. Not only are they designing and developing the products, but they are starting companies to produce and sell them. And, these companies are lining the aisles at FDIC International with their booths. But, trade shows are not the only indicator.

During 2018, we received countless press releases from apparatus manufacturers announcing orders or deliveries—often multiple unit orders and deliveries. There were several large orders for equipment like self-contained breathing apparatus (SCBA). And, apparatus and equipment manufacturers continued to bring new products to market as well as new versions of previous products. Companies were hiring—always a good sign.

We also received news on numerous companies expanding their facilities. I have always felt that a good indicator of a company’s health is whether or not it is reinvesting in itself, and 2018 proved that the health of the industry as a whole is good.

That is not to say that we should not be looking at the future, and indeed there are indicators that the fire service and its suppliers must prepare for different contingencies. For example, one area that has received attention not only in the fire service but in manufacturing in general is a shortage of trade labor. Not as many young adults are choosing to enter a trade anymore. And, it’s hard to ignore talk of tariffs on steel and aluminum and other products that could impact pricing for the goods we need to do our jobs. So, as we end 2018, where are we, and how do things look for 2019?

TEN YEARS LATER

Prior to 2008, fire apparatus manufacturing was at its peak. When the recession hit, municipalities had to readjust their capital expenditure plans, but there is typically a lag between when a recession starts and when fire service suppliers are impacted.

Comparing 2008 with 2018, Paul Darley, chairman, chief executive officer, and president of W.S. Darley & Co., says, “It is encouraging to see the uptick in the market following the catastrophic drop in new trucks following 2008. Although the market has not returned to prerecession numbers, it is still a healthy and respectable market nonetheless. I would consider it a new normal.”

Jim Kirvida, owner and president of CustomFIRE, says, “2018—of course I’m looking at it from a manufacturer’s standpoint—has been a busy year with many more opportunities and many more successes than were present in 2012 through 2016.” One difference Kirvida notes is that in 2008, deliveries were weighted toward commercial chassis. “If anything, the primary difference would be that there is less concern about price,” he says. “And, this has really driven an increase in custom chassis application. We’ve reached a new level of price psychology. Today, relationships start at a half million dollars, and 10 years ago that was a remote concept.” Kirvida further comments, “Sales have been decent in 2017 and 2018. But, 2007 and 2008 sales were good too. In going back and looking at some of the records, I don’t remember 2007 and 2008 being as good as they actually were. I remember [the industry’s] numbers dropping from almost 6,000 trucks per year to almost 3,000. And, on the other hand when we look at our records, it must be because of the smaller size of our company that we weren’t affected as drastically as the larger companies were. We built a few projects for nonfire service organizations, and they filled some gaps.” These projects included mechanics’ trucks with cranes on them, and they allowed the company to be flexible and “jump on its feet.”

From a business standpoint, looking ahead to 2019, Darley says he expects the market to be about flat to a lower single-digit uptick. “There is still pent-up demand. We don’t anticipate a recession until at least 2020, and even if it hits us before, there is traditionally an 18- to 24-month lag before it hits apparatus new order sales,” he says. “The good news is that the manufacturers serving the fire service have time to prepare for it. The bad news is that manufacturers are negatively impacted for a year or two after markets have rebounded.”

For Kirvida, his primary concerns will be continued consolidation of suppliers and competition, continued supplier price increases, and continued employable labor shortages. “The people are there,” he says, “but the experience isn’t.” He adds that it is a little easier to find skilled labor than it is to find good engineers. “The most difficulty that we’re experiencing, even today, is trying to grow our engineering department. Trying to find somebody who is a tenured engineer and has any kind of sheet metal experience is very difficult.” For example, CustomFIRE uses software called Pro E or Creo. “You can find people all day long who have operated SolidWorks, Solid Edge, and AutoCAD 3D, but try to find somebody who is well learned in Pro E—it’s next to impossible.” It typically costs CustomFIRE between $5,000 and $20,000 to get an engineer up to speed with the more robust software.

THE TARIFF SITUATION

During 2018, Washington, D.C., announced that it would be imposing tariffs on imports from various countries. Since they were first announced, it has been hard to visit any news Web site or watch any news program and not read or hear something about these tariffs. The list of what the tariffs cover is expansive, but of most interest to fire apparatus purchasers is what impact, if any, steel and aluminum tariffs will have on fire apparatus pricing heading into 2019.

For the U.S. market, Darley says there won’t be too much of an impact on U.S. OEMs but cautions about exports. “There will most likely be a negative impact on exported fire apparatus,” he says, “as China and perhaps other countries counter our tariffs.” But, Darley cites the United States’ agreement with Canada and Mexico as a sign that the impact on domestic apparatus sales will be minimal. “Thankfully, the agreement with our friends in Canada and Mexico has been renewed, so we hope this leads to a softer impact from the aluminum tariff with much of our aluminum needs emanating from Canada,” he says. “But, we still have the tension with China, and this may lead to some higher costs in the near term. Hopefully, the market can find alternatives without too much disruption.” To help soften the blow, Darley says that U.S. OEMs will work hard to find a cost-effective supply chain from suppliers in North America. “We also hope that the long-term relationship with China and Asia is resolved, as it hurts our export sales to China,” he adds.

On the pump side, Darley says, “Darley pumps are made 100 percent in the United States, and we don’t use imported products in our pumps. As a result, we don’t expect to see too much of a cost increase.”

Kirvida states that recently CustomFIRE has experienced significant increases in the cost of stainless steel piping, pipe fittings, and flanges. As an example, one restocking quotation has a material increase of 22 percent over a previous (Spring 2018) purchase of identical items, and the quotation includes the following notation: “DUE TO GOVERNMENT TARIFFS, QUOTES ARE GOOD FOR 48 HOURS FROM RECEIPT.” “We typically order these materials six months after bidding for the project,” says Kirvida, “so there can be a significant margin loss due to material price increases.” Prior to recent tariffs and surcharges, Kirvida mainly attributed increases in apparatus costs to employee costs, among them increased labor costs, increased health care costs, and so on. “To some degree, only employers can relate to the cost of employees,” he says.

FINAL THOUGHTS

As I wrote this, a new press release came through e-mail for a new order for 17 fire apparatus from a California fire department. The order calls for seven tractor-drawn aerials and 10 pumpers. And, I am writing this in early November, so the good news for the fire market we’ve experienced throughout 2018 continues. And, based on comments from Darley and Kirvida, we can expect this momentum to carry into 2019.

But what does all this mean to the end user—this news of a healthy market that has rebounded largely from the Great Recession? That question can be answered with one word: choice. When a market is healthy and thriving, there is competition among manufacturers to provide customers with the best products available, which means the fire service will continue to have choices in 2019—and not only for fire apparatus but for other products we rely on daily to protect us. The press releases I mentioned before covered personal protective equipment, SCBA, thermal imaging cameras, fire apparatus truck orders and product enhancements, facilities expansions, new hires, extrication equipment, and more. And with each one came a new choice for the American fire service.

Yes, there has continued to be consolidation in the industry but as of yet not to the detriment of having a choice. The fire service has never been and never will be a one-size-fits-all service. Response requirements in the United States are too diverse for standardization across the board.

So, enjoy the rest of 2018, and look forward to 2019 as another solid year for the American fire industry. Keep an eye on things for 2020, and know that, as Darley said, if a recession comes sooner, there will be an 18- to 24-month buffer before it will impact whether or not you can replace a rig or make a major equipment purchase.


CHRIS Mc LOONE, senior editor of Fire Apparatus & Emergency Equipment, is a 25-year veteran of the fire service currently serving as a safety officer and former assistant chief with Weldon Fire Company (Glenside, PA). He has served on past apparatus and equipment purchasing committees. He has also held engineering officer positions, where he was responsible for apparatus maintenance and inspection. He has been a writer and an editor for more than 20 years.