Ron DeFeo, Terex Corp’s CEO and Chairman introduced his company as a lifting and materials handling company that does business in about the 7.1-7.3 billion dollars per annum range in 80 countries. It is headquartered in Westport and has four divisions. Basically it manufactures very large equipment in many categories, but excludes those items manufactured by the Caterpillar Corporation. It has grown significantly through acquisitions with the majority of these occurring in the years 1995-2011. 80% of Terex’s business takes place in categories where it is one of the three largest players. The business is geographically widely diversified. Much of Terex’s business is associated with infrastructure rebuilding and replacement.
Mr. DeFeo pointed out that the global economy has undergone some major transformations in the past due to infrastructure changes. He gave as examples the Erie Canal, the intercontinental railroad, interstate roads, the autobahn and European high speed railways. These all contributed to economic improvement. Mr. DeFeo equates investment in infrastructure to prosperity. But he stated that there have also been some debacles when programs carry the guise of infrastructure investment, but don’t really provide for change. Some examples of these are: “shovel ready” projects when nothing was shovel ready; the American Recovery Act that just shifted costs from the federal government to the states; and the Highway Trust Fund that is based on an 18.4 cent gas tax established in 1993 and was never indexed for inflation or changed in ensuing years. Mr. DeFeo also gave examples of infrastructure neglect or burdens placed on it that curtailed their usefulness. These included: the Connecticut River RR Bridge (over 100 years old); long-term Tappan Zee Bridge stagnation; regional freight rail restrictions and the misnomer of calling Bridgeport Harbor a harbor when no big ships dock there.
He pointed to the GNP spending amounts allotted to infrastructure investment ranging from .2% in 1963 to a high in 1982 of .7% and now falling back to .45% in 2014. The trend is downward along with the trends in spending for national resources and environment and defense spending. Meanwhile, entitlement spending is up to 11% of GNP and trending upward.
According to Mr. DeFeo, we need to define what the future state will look like, marshal an investment strategy to meet the anticipated needs and then match it with the political will to streamline approvals. In other words have a plan and a realistic way to implement that plan. We also have to be cognoscente that technology is providing new ways to approach these problems, which may have been insolvable using old techniques.
Inaction will be costly. As an example, Connecticut will likely be reduced to a totally service economy. Any industry requiring modern infrastructure will invest elsewhere. But such issues require tough choices and strong leadership and politicians hate tough choices.
Questions and Answers
Q. What percentage of Terex’s equipment is produced outside the U.S.?
A. About 70%, but 65% is also sold outside the U.S. so things are in balance.
Q. Would you favor tolls on highway 95?
A. You have to improve how goods move on 95. Tolls would just shift the problem to some other area of the state and not resolve it.
Q. Doesn’t Japan have the highest corporate tax in the world, not the U.S.?
A. We shouldn’t aspire to be like Japan where it has had no growth in 15 years. But right now we are headed there. We need growth.
Q. Can’t we keep attention on these problems without having some disaster bring them to the fore?
A. We know where the problems are. We are just under-investing. We need to take care of maintenance and plan for the future.
Q. Isn’t Congress to blame for the under-investment?
A. Only partially. All administrations and both political parties have lacked leadership on these issues for a long time. There is plenty of blame to share.
Q. What can be done in Connecticut to fix things?
A. If we don’t do something we will lose population and much of the state’s economy. We will probably have to look to technology to help find solutions.
Q. With a lackluster economy, why can’t Terex cut overhead?
A. Our business prospects looked very good for the year. We were looking for significant improvement. They still look good for the upcoming year. And you don’t want to cut overhead when you will probably have to reverse those cuts in a year.
Q. Connecticut lacks freight trains. Will the new Tappan Zee Bridge help with that?
A. No. The Tappan Zee Bridge will not carry heavy rail traffic and even if it did, what would it connect to?