How is LiuGong North America adapting to the future of workforce and supply chain constraints?
If the last few months of supply chain problems, rising inflation and global instability have reminded us of anything, it’s that business is business, no matter where you find yourself on the map. Andrew Ryan may work at a Chinese-owned company, but most of his 25 years in the construction industry are with an American company, Caterpillar.
Now, as the president of LiuGong North America, he takes a wider perspective. “Globally, the economy’s moving at different paces. China’s construction industry will be off about 10% this year as they work through some of the reasonably well-publicized real estate bubbles that have been building in that country for the last couple years.” For LiuGong North America, it’s simply an opportunity. “We’re uniquely positioned because our supply chain is designed to support the China market – that’s where the principal volume of our sales is – so as the China market has slowed down a bit, we’ve actually opened up quite a bit of capacity to take care of growth outside of China, including North America, so we’re really well positioned right now to take care of our dealers and our customers.”
Ryan and his VP of Sales, Michel Marchand, are looking ahead not only to LiuGong NA’s future, but that of the industry as a whole. Marchand, also an industry veteran who formerly worked at CNH Industrial, points out that in addition to organic growth in construction worldwide, there is significant new spending by many governments, especially the U.S. The recent passage of the Infrastructure Investment and Jobs Act (IIJA) is a perfect example – but it’s not the only one. “In parts of Canada and the U.S., there’s already been a significant level of spending earmarked,” says Marchand. “Some provinces, like Quebec for instance, will likely stay a strong construction market for the next decade, based on the commitments they’ve made to infrastructure spending, particularly roads and bridges.”
Some of those commitments are the result of shifts in the political will in provincial government, brought on by unfortunate and highly public failures of specific roads and bridges. But though the motivation for such spending may be reactive, the effects will take longer to unfold, making them part of a broader trend upward in publicly funded construction projects. “When you look at the time span, although the dollars may have been earmarked in the short term, the actual projects themselves will take a decade to roll out,” Marchand observes. “So as far as the contractors and the suppliers are concerned, they will continue to see that demand curve through that ten-year period.”
Ten years might feel like ages as the U.S. economy slowly crawls out from under the pandemic, but Ryan and Marchand are looking farther ahead than that in a number of ways, one of which is the shift to electric and autonomous vehicles.
As many experts have pointed out elsewhere, adoption of electric vehicles on a large scale depends on the availability of charging stations, a relatively tiny handful of which exist right now. For consumer vehicles, a whole new network will need to be built – a huge shift from the current fossil fuel distribution system currently in place. For construction vehicles, a similarly big change is coming, according to Ryan.
“The world is trending toward electrification, probably for some really good reasons.” Not all of those are environmental, in his view – there are purely mechanical ones, as well, performance advantages such as “infinitely variable power distribution – you’re not locked into gears in a transmission.” And there are other advantages for buyers, like the durability and interchangeability of many electric machines. “It’s a bit disruptive to the traditional industry model of, you know, sell a machine and sell parts forever,” says Ryan with a wry smile. “There aren’t a lot of parts that follow behind an electric vehicle. Our industry needs to understand that and adapt our business models accordingly as EVs become more of a norm.”
Rather than worrying that the industry will resist these shifts, though, Ryan sees many moving toward them proactively, finding their own good reasons to participate in the shift toward electrification. “We’re seeing the most significant demand in industries that have traditionally had negative perception or negative image from a social or environmental perspective. I think this is a way that they want to move their companies and show a signal that they’re working on their end to try to make investments that are more in line with sustainable businesses and sustainable environmental practices.” Many major firms in other big industries, like aviation and power generation, have taken similar postures already, often doing so where governments are reluctant or unable to do so.
Some, of course, are quicker than others to adapt to the coming energy future. “I think we’ll see that the mining industries and the extractive resources will provide the biggest and most significant demands,” says Ryan. “Over time the construction industry may follow, but they’ll come a little bit slower.” For construction companies, adopting electric vehicles will be particularly challenging, given the short-term, mobile nature of the work. “I don’t imagine that many contractors would sign up for having to haul their equipment back to their yard every night to charge it and then return it to the job site the next day,” Ryan quips. But as early adopters build their own energy capacities, other industries may be brought along: “The link between these two conversations is fixed infrastructure.”
For extractive industries in particular, charging stations make sense. “Generally, a mine or a quarry site can have a fixed location and invest in a fixed asset to provide rapid charging,” he says. The idea of an electric haul truck carrying stone or coal from a mine site with its own charging stations may be hard to imagine in the current political climate, since the two major parties often present jobs in energy and mining as mutually exclusive with working to combat climate change. But as the passage of the IIJA showed, there is bipartisan support for building things, including renewable energy infrastructure like electric vehicle charging stations.
For construction businesses, politics typically play second fiddle to logistics, and according to Ryan there’s simply no viable alternative to fixed electric charging infrastructure. “Mobile solutions have to become more robust and have to become more economical,” he says. “Folks have been trying to use generators, solar power, or hybrids for mobile charging stations, but not much adoption yet.”
Similarly, he sees automated vehicles as a medium- or long-term development in construction, which will only become common as the need for them, or the advantages of using them, become more obvious. “Our industry has had the ability to run a haul truck autonomously on a mine site since 1997, so this is not a new concept. It’s something that’s gone through steps and phases. The challenge has been finding customers that are willing to put the capital in to make it work.
Because it’s not just what’s on board the machine, it’s the management environment and the mine-site planning and operations offices changing the way that they work.”
The changing nature of work in the industry is something that is very much top of mind for Ryan and Marchand, both of whom see a powerful need for members of associations like AED to redouble their efforts to build the labor force. “The industry really needs to start wrapping its head around how to attract new talent into this business.
Both from the contractor’s standpoint – how do they get the raw labor force – and then in the technical trades, how do we get highly skilled people into this business,” says Marchand. “As we start looking at the age gap, and all of the expertise that will be retiring over the new decade, we need to train their replacements and new entrants into the industry to make sure that we don’t have a labor shortage.” That expertise, in his view, ranges from engineering and land management to specific trades, like electricians, plumbers, and more: “I challenge you to find me a good stonemason.”
LiuGong NA’s position in regard to this shortage might look strange to some. Even as Ryan and Marchand advocate for more training programs and education to attract workers to the construction industry, their company is also in the business of selling machines that can bridge that same labor gap. “A big part of what’s driving the growth of our business is the mechanization of work that was formerly done by people,” admits Ryan. “It’s not full-on automation – kiosks at McDonald’s – but it’s requiring fewer people to do the same jobs. Not zero, but fewer. I think that’s a trend that’s happening in our business that we all see on some level.”
So while he and Marchand agree that “we need to make the industry more interesting” to younger generations, in order to keep the industry sustainable, in the short term there are still certain undeniable economic facts. “There’s a recognition that as there’s a scarcity of labor, labor becomes more expensive,” says Ryan. “That’s a big part of what’s driving the increase with compact equipment – mini excavators, et cetera.
You can’t find a guy to dig a trench, then you buy a machine to dig a trench.” Perhaps once the current crisis in labor is solved, this perspective will shift, and the tension between human and machine will evolve into something more like a partnership. “In certain parts of our industry, there may be a future for full automation, but that’ll be a fairly narrow segment,” Marchand says. For most, automation will be “a partial solution to assist the operator in the efficient and accurate performance of their task.”
Whatever the future may hold for the construction industry as a whole, LiuGong North America’s outlook is bright. “We’re really experiencing some pretty significant growth. We grew by 80% in 2021,” says Ryan, adding that he expects the company to grow another 60-70% by the end of 2022. They are doing so by carefully selecting dealers in North American cities to come on board, and offering those dealers some of the competitive advantages they enjoy due to their unique position in the global supply chain. One of those: an essentially unrestricted inventory.
“We have one or two individual models that we still have some constraints on, based on model changeovers, but if I have a dealer or a customer who says they want it, I can give them basically as many as they want.”
He sees LiuGong’s product line itself as a selling point, in comparison to competitors “that have no open territories” and whose product lines have “matured.” Theirs is growing, and as the company reinvests in it, dealer partners will have plenty of opportunity to grow with them.
“We are moving into the top ten global manufacturers of construction equipment and industrial equipment,” Ryan says – and the responsibility that implies is as much on his mind, and Marchand’s, as the opportunities.
“Without it, we will lag behind other global markets.” Even as they expand their own company’s footprint, these industry leaders are thinking about how to grow the construction business as a whole by attracting new talent and adapting to new technologies. LiuGong NA is here to stay – and they want new partners.
- JOSH FLACCAVENTO