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Midterm Vote Results Impact Material Handling

This year’s midterm election results will potentially have a far-reaching impact on every industry. The material handling industry is no different. From changes to the supply chain to a difference in environmental thinking from the past four years, a new Congress will play a role in the industry for the foreseeable future. Many MHEDA distributors we interviewed for the 2011 Industry Forecast felt that the results of the election could be the most important factor in the industry and economy improving. So how will the new Congress impact MHEDA companies? A couple of possible examples are below.

Environmental Regulations

The climate bill that passed through the House of Representatives in 2009 could be in serious jeopardy. H.R. 2454, American Clean Energy And Security Act of 2009, passed through the House on June 26, 2009, by a 219 to 212 mark but never reached the Senate due to fear of a Republican filibuster. The goal of the bill was to reduce greenhouse gases in the United States to 17 percent below 2005 levels by 2020, and 83 US Capitalpercent by 2050. On page 123 of the 743 page bill, the material handling industry was specifically named in a section assessment of electric motors and the electric motor market: “Characterize and estimate the opportunities for improvement in the energy efficiency of motor systems by market segment including opportunities for expanded use of process control, pumps, compressors, fans or blowers and material handling components.” The passage was very contentious, especially along party lines. Of the 219 votes to support the bill, 211 of them were Democrats. The midterm saw the Republicans take control of the House and ensured that any bill that passes through the House would need far more than eight Republican votes to succeed.

The major divisive issue in the bill is the cap-and-trade system that sets a limit on overall emissions of heat-trapping gases. Republican and Democratic opponents of the bill claim that the legislation would raise costs for American companies that companies outside of the United States would not incur. “I don’t deny the fact that we need to clean up carbon emissions, but the approach is questionable,” says Richard Sinclair, president/CEO of Jefferds Corporation (St. Albans, WV). “Our economy is going to suffer, we’re really not going to make a marked difference in the environmental construction of the world, and it’s going to put a lot of West Virginians out of work. That’s not going to help my business.”

At the time of its passage, Republicans dismissed the bill as a national energy tax. “No matter how you doctor it or tailor it it is a tax,” said Representative Joe Pitts (R-PA). Republicans predicted on the day of the bill’s passage that it would be a measure Democrats would pay for in 2010.

The California Air Resources Board (CARB), which often sets the standard for the remainder of the country, proposed a similar law—recently delayed due to miscalculation of pollution levels—that would vastly reduce carbon levels in the state. The regulation, called the “In-Use Off-Road Diesel Vehicle Regulation,” was adopted in July 2007 as part of California AB32. It aims to cut the amount of emissions released by diesel vehicles that aren’t operated on roads and highways, such as forklifts, cranes, bulldozers and dump trucks. Peter Lauder, president of McCombs-Wall, (Orange, CA) believes such legislation deters people from doing business in California. “Our biggest challenges are regulations, government spending, EPA requirements and restrictions. It’s everything you can think of that would discourage a business from investing in California. If we don’t make some changes in the government I don’t see any quick resolution of these significant problems.”

In the midterm election, Californians were given the option to vote down AB32 by voting for Proposition 23. Proposition 23 was defeated. However, proponents of the measure are challenging that vote because of what they claim was prejudiced wording on the ballot. A Sacramento Supreme Court judge ruled that the ballot must refer to “major sources of emissions” rather than “major polluters” as it was originally written. However, Fresno County did not make the change to the ballot in time. CARB aims to complete work on another enforcement extension during a December 16-17 meeting. If passed, this regulation could damage internal combustion forklifts’ position in the marketplace and negatively impact sales of used forklifts. “When customers do replace equipment, they tend to go more electric now. We’ve seen a drop in our used equipment sales with those that have fleets of four or more trucks because they’ve got to buy late-model units to comply,” says Jay Waugh, president of Gray Lift (Fresno, CA), said in a previous article on the subject. And it’s not just California who should be paying attention, says Patrick Stemper, vice president/general manager of Badger ToyotaLift (New Berlin, WI). “EPA basically follows CARB’s lead, so it’s only a matter of time before those regulations are in place in some form throughout the country.”

Taxes

Another hot-button issue leading up to the election was the possible expiration of the Bush tax cuts, set to run out at the end of the year. Business leaders were hesitant to plan and make forecasts for next year because they felt that elected officials weren’t providing direction as to how they should prepare to do business next year. “It’s amateur hour in Washington,” says Cliff Anglewicz, CEO of Yes Equipment and Services Inc. and its JCB division, in an interview given to The Columbus Dispatch.  “They keep talking about jobs, jobs, jobs. They have no empathy for what it takes to hire people and what it takes to pay for all the benefits and the taxes and what little bit is left over for the person who takes the risk.”

Another major factor companies must consider is how the new healthcare legislation will impact costs. Economist Barry Asmus, who will address the 2011 MHEDA Convention in May, says, “I recently spoke to the governor of Arizona, who said the health care reform bill will mean Armageddon for the state of Arizona. It’s going to drive Medicare through the roof and there is already a tremendous unfunded liability.” Whether that will actually happen remains to be seen. But with the House of Representatives no longer in Democratic control, changes to the health care legislation may be forthcoming.

Whether somebody identifies themselves as a Republican, Democrat or Moderate, it is undeniable that the 2010 midterm results will impact the business climate in a significant way. How will MHEDA companies be affected?

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