EPA 420-R-93-002
JACKFAU-92-413-14
Small Nonroad Engine and Equipment
Industry Study
Final Report
December 1992
Submitted to:
U.S. Environmental Protection Agency
2565 Plymouth Road
Ann Arbor, Michigan 48105
JACK FAUCETT ASSOCIATES
455O MONTGOMERY AVENUE • SUITE 3OO NORTri
BETHESDA. MARYLAND 2O8 1 4
<3O1> 961-8SOO
Bethesda • Maryland Walnut Creek • California
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Although the information described in this report has been funded wholly or in part by the
United States Environmental Protection Agency under contract 68-WO-0014, it has not been
subjected to the Agency's peer and administrative review and is being released for information
purposes only. It may not necessarily reflect the views of the Agency and no official
endorsement should be inferred.
i- o-
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TABLE OF CONTENTS
Chapter Page
1 INTRODUCTION , 1
2 INDUSTRY PROFILE 4
2.1 EQUIPMENT INDUSTRIES AND SIC CODES 6
2,2 MEASURES OF SIZE 18
2.3 GEOGRAPHIC CONSIDERATIONS 31
2.4 COMMODITY INPUTS 34
2.5 NEW CAPITAL EXPENDITURES 38
2.6 CAPITAL INTENSITY 40
2.7 CONCENTRATION RATIOS 45
2.8 CAPACITY UTILIZATION 47
2.9 DEBT AND PROFITABILITY 50
2.10 INDUSTRIAL OUTLOOK 52
3 COMPETITIVE FEATURES 67
3.1 PRODUCT FLOW AND DISTRIBUTION NETWORKS 68
3.1.1 Engine Manufacturers 68
3.1.2 Equipment Manufacturers 71
3,1.3 Lawn & Garden Equipment Manufactures 73
3.1.4 Recreational Vehicle Equipment Manufacturers 76
3,1.5 Farm Equipment Manufacturers 77
3.1.6 Construction, Commercial, and Industrial Equipment
Manufacturers 79
3.2 VERTICAL AND HORIZONTAL INTEGRATION 81
3.2.1 Vertical Integration 83
3.2.2 Horizontal Integration , 86
3.3 BARRIERS TO ENTRY , , 87
3.3.1 Advertising and Product Differentiation 87
3.3.2 Legal and Institutional Factors 90
3.3.3 Economies of Scale 92
3.3.4 Large Capital Requirements 93
3.3.5 Scarce Resources and Control for Inputs 94
3,4 MARKET POWER 94
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TABLE OF CONTENTS
Chapter Page
3.4.1 Relationship Between Engine Producers and Equipment
Producers 101
3.4.2 Relationship Between Component Producers and
Equipment Producers 104
3.4.3 Relationship Between Equipment Producers and
Distributors 104
3.4.4 Relationship Between Equipment Producers and
Retailers 105
3.4.5 Relationship Between Component Producers and
Enginer Producers 105
3.4.6 Relationship Between Distributors and Retailers 106
3.4.7 Conclusions Regarding Market Power 106
3.5 SUBSTITUTE POWER SOURCES AND EQUIPMENT 107
3.6 U.S. COMPETITIVE POSITION 110
3.7 CHARACTERISTICS OF END-USERS 117
3.7.1 Lawn & Garden Equipment 117
.3.7.2 Recreational Vehicles 121
3.7.3 Light Commercial, Industrial, Construction and
Agricultural Equipment 123
3.8 SECTION SUMMARY 123
4 TECHNOLOGY AND MARKET STRUCTURE 127
4.1 SMALL NONROAD EQUIPMENT AND THE ENGINES THAT
POWER THEM 130
4.1.1 Lawn and Garden Equipment 138
4.1.2 Airport Service Equipment 146
4.1.3 Recreational Vehicles 148
4.1.4 Light Commercial and Industrial Equipment 154
4.1.5 Light Construction Equipment 158
4.1.6 Light Agricultural Equipment 163
4.2 CONCENTRATION IN THE PRODUCTION OF SMALL NONROAD
ENGINES 166
4.3 FINANCIAL AND PRODUCT LINE PROFILE OF MAJOR
MANUFACTURERS 1 "72
4.3.1 Briggs & Stratton 1 "~
4.3,2 Tecuinseh
4.3.3 Teledyne Total Power
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TABLE OF CONTENTS
Chapter Page
4.3.4 Yanmar . 182
4,3.5 Kubota 183
4.3.6 Honda Motor Co 185
4.3.7 Black & Decker 187
4.4 SECTION SUMMARY 189
5 MARKET-BASED EMISSION REDUCTION STRATEGIES APPLIED TO SMALL
NONROAD EMISSIONS 194
5.1 CATEGORIES OF MARKET MECHANISMS 194
5.1.1 Introduction 195
5.1.1.1 A Continuum of Approaches 195
5.1.1.2 Efficiency Versus Cost-Effectiveness 198
5.1.2 Taxes or Fees Based on Emissions or Emission
Potential 200
5.1.2.1 Fees Levied on Consumers 200
5.1.2.2 Fees Levied on Producers 203
5.1.2.3 Examples of Fees 204
5.1.3 Subsidies to Purchase or Produce Lower Emitting
Equipment to Utilize Alternative Alternatives 205
5.1.3.1 Concepts 205
5.1.3.2 Examples 207
5.1.4 Trading of Emission Reduction Credits or Emission
Allocations 209
5.1.4.1 Trading of Emission Reduction Credits
(ERCs) 209
5.1.4.2 Trading Emission Allocations 211
5.1.4.3 Examples: Incorporating Nonroad
Engine Emissions in Emission Trading
Programs 212
5.1.5 Influencing the Market for Small Nonroad Engines
Through Increased Consumer Awareness
in
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TABLE OF CONTENTS
Chapter Page
5.1.5.1 Concepts 214
5.1.5.2 Examples 216
5.2 ANALYSIS OF MARKET-BASED EMISSION REDUCTION
STRATEGIES 216
5.2.1 Identification of Market-Based Emission Reduction
Strategies Relevant to Emissions Small Nonroad Engines 217
5.2.1.1 Market Niches 218
5.2.1.2 Dynamic Considerations 220
5.2.1.3 Delineation of Market-Based Emission
Reduction Strategies 221
5.2.2 Evaluation of Market-Based Emission Reduction Strategies 224
5.2.2.1 Strategy 1 - Fee-bates, Education and
Labelling 224
5.2.2.2 Strategy 2 - Subsidies for
Maintenance .'....... 228
5.2.2.3 Strategy 3 - Emission Fees for
Estimated Annual Emissions from
Fleets of Rental Mowers 230
5.2.2.4 Strategy 4 - Emission Trading Using
Fleet Emission Reductions 233
5.2.2.5 Strategy 5 - Flexible Emission
Standards 235
5.3 SECTION SUMMARY
APPENDIX A: POWER SYSTEMS REARCH
APPENDIX B: RELATIONSHIP BETWEEN GDP AND 4-DIGIT INDUSTRIES
APPENDIX C: TECHNOLOGY PENETRATION RATES BY EQUIPMENT AND FUEL TYPE
APPENDIX D: OPEI HORSEPOWER DISTRIBUTION FOR SELECTED LAWN AND GARDEN
EQUIPMENT
APPENDIX E: DEFINITION OF FINANCIAL RATIOS AND TERMS
IV
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LIST OF TABLES
Table
2-1 Concordance Between PSR Applications and SIC Industries 9
2-2 Unit Sales by SIC Industry and PSR Application II
2-3 Internal Combustion Engines, by Type of Engine; 1990 15
2-4 Number of Companies and Establishments, by Industry, 1982 and 1987 , 19
2-5 Value of Shipments, by Industry, 1984-1990 21
2-6 Value of Shipments, by Industry, 1984-1990 22
2-7 Value Added by Manufacturer, by Industry, 1990 28
2-8 Value of Shipments as Percent of Gross Domestic Product, 1984 and 1990 30
2-9 Employment and Value of Shipments, by Industry, 1984 and 1990 32
2-10 Industry Group Statistics by State: 1987 , 33
2-11 The Make of Commodities by Industries, 1982 35
2-12 Costs of Materials and Components for Outdoor Power Equipment Manufacturers 37
2-13 New Capital Expenditures, by Industry, 1982-1990 39
2-14 New Capital Expenditures for Plant and Equipment, 1990 41
2-15 Value of Shipments and Gross Book Value of End of Year Assets, 1987 42
2-16 New Capital Expenditures and Net Capital Stocks, 1986 44
2-17 Concentration Ratios, by Industry: 1987, 1982 and 1977 46
2-18 Capacity Utilization Rates, by Industry: Fourth Quarters 1985-1990 48
2-19 Financial Data by Industry, 1980 and 1988 52
3-1 Horizontal and Vertical Integration in the Utility Engine and Equipment Industry 84
3-2 U.S. Imports and Exports for Selected Industries, 1987-1991 112
4-1 Engine Manufacturers 128
4-2 Equipment Manufactures 129
4-3 Equipment Categories and Equipment Types . , 132
4-4 Engines Sales by Equipment Category 133
4-5 Differences Betwseen SIC Based and EPA NEVES Equipment Classiication Schemes ... 136
4-6 Lawn and Garden Equipment Sales 139
4-7 Technology Penetration Rates for Selected Lawn and Garden Equipment 142
4-8 Sales and Technology Penetration Rates for Airport Service Equipment 147
4-9 Sales Trends for Recreational Vehicles 150
4-10 Technology Penetration Rates for Selected Recreational Vehicles 151
4-11 Estimated New Retail Sales of Off-Highway Motorcycles and ATVs 152
4-12 Sales Trends for Light Commercial and Industrial Equipment 155
4-13 Technology Penetration Rates for Selected Light Commercial Equipment 156
4-14 Sales Trends for Light Construction Equipment 160
4-15 Technology Penetration Rates for Selected Light Construction Equipment . 161
4-16 Sales Trends for Light Agricultural Equipment 164
4-17 Technology Penetration Rates for Selected .ight Agricultural Equipment 165
4-18 Utility Engine Sales and Market Shares for the Eight Biggest Manufacturers 167
4-19 Sales bv Engine Seement for Selected Years 169
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LIST OF TABLES
Table Page
4-20 Engine Sales for the Major Manufacturers in the Gasoline Segments ] 70
4-21 Engine Sales for the Major Manufacturers in the Diesel Segments 171
4-22 Financial Profiles of the Utility Engine Manufacturers 174
4-23 Financial Profiles of the Utility Equipment Manufacturers 175
4-24 Briggs & Stratton Engine Line by Model 179
5-1 Options for Mowing by Size of Lawn 197
5-2 Five Niches in the Lawn Mowing Equipment and Services Market 219
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LIST OF FIGURES
2-1 GDP and Selected Industries 1958-1982 , 25
2-2 GDP and SIC code 3524 1958-1982 26
3-1 Engine Manufacturer — Product Distribution Network 69
3-2 Lawn and Garden Manufacturer — Product Distribution Network 74
3-3 Recreational Equipment Manufacturer — Product Distribution Network 78
3-4 Farm Equipment Manufacturer — Product Distribution Network 80
3-5 Construction/Commercial/Industrial Equipment Manufacturer — Product Distribution
Network 82
3-6 Firm Facing a Downward Sloping Demand Curve 95
3-7 Firm Facing a Horizontal Demand Curve , 97
3-8 Short-run and Long-run Average Cost Curves 99
3-9 Relationships Between Components of Nonroad Production and Distribution Network ... 102
3-10 Depiction of Demaand Characteristics of Residential vs. Commercial Consumers 120
VII
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SECTION 1
INTRODUCTION
The 1990 amendments to the Clean Air Act required that EPA conduct a study to determine
the contribution of nonroad equipment and engines to the emission inventories of
nonattainment areas. In an effort to assess this contribution, EPA conducted its Nonroad
Engine and Vehicle Emission Study (NEVES) which concluded that only on-highway
vehicles, electric generation, and solvent evaporation have NOX and/or VOC emissions that
exceed those of nonroad engines and equipment. Results from NEVES further show that
within the nonroad category, small nonroad engines are the largest source contributing to VOC
inventories. As a result, the U.S. EPA is investigating the feasibility of controlling emissions
from small nonroad engines and equipment.
As a prelude to economic impact assessments for possible control scenarios, an evaluation of
the small nonroad engine and equipment industry needs to be conducted. Such an evaluation
will assure that conditions specific to the industry will be considered in the development of
emission mitigation strategies, and that economically and technologically feasible control
strategies will be promulgated.
The purpose of this study is to describe and analyze the structure, conduct, and performance
of the small nonroad engine and equipment industry and to assess the technologies represented
by the most common engines and equipment. The small nonroad engine and equipment
industry is defined as the market, or markets, in which engines under 50 horsepower are
produced and/or incorporated into new or used nonroad equipment. Examples of the types of
equipment in which utility engines are installed include lawnmowers, cement mixers, 2-wheeI
tractors, generator sets, all terrain vehicles, and many other types of equipment used in various
applications. Engines below 50 horsepower are also found in many marine applications, such
as outboard sailboat auxiliary engines. However, marine encines are excluded from this studv.
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Section 2 of this report presents an overview of the small nonroad engine and equipment
industry. This industry profile draws on data available from the U.S. Department of Commerce
to quantify the market in terms of production, value added, and other economic indicators.
Section 2 aiso introduces the most common market segments of the industry (e,g,, lawn and
garden equipment) and the respective Standard Industrial Classification (SIC) codes that
partially account for this fragmented industry.
Section 3 analyzes the competitive features of the small nonroad industry, discussing issues
such as horizontal and vertical integration, product flow, barriers to entry, substitute power
sources and equipment, international trade, and customer profiles. This section draws heavily
on information available from industry associations and previous literature. The analysis is
mostly qualitative since data, or statistics, necessary for formal economic analyses were not
available — for example, time series data on prices and quantity were unavailable for a formal
derivation of price and cross-price elasticities. Nevertheless, this section provides the reader
with a sound description of the competitive features of the industry and hopefully will facilitate
a future economic impact assessment of regulations.
Section 4 of this report provides a description of the nonroad engine and equipment industry's
structure. This overview describes the types of small nonroad equipment most common in the
marketplace and the engines that power them, analyzes engine technology penetration, and
discusses sales and engine technology trends. A detailed product line and financial profile of
various engine and equipment manufacturers is also provided in this section, including a
quantitative assessment of market concentration based on unit sales data purchased from Power
Systems Research (PSR). PSR's Engindata database is the source of manufacturer specific
engine sales and technology penetration analyses presented in this report. Equipment
manufacturer unit sales data were not available from the many sources investigated for this
study. As a result, only qualitative and anecdotal assessments of market shares and
concentration are provided for the equipment segment of the industry. Of course, many
manufacturers are vertically integrated and produce both the equipment and the engines that
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power them. In such cases, PSR's engine sales data provides some insight on equipment
manufacturers as well.
Finally, Section 5 investigates the feasibility of market based incentives to mitigate emissions
from small nonroad engines and equipment. The conceptual framework for market based
approaches is reviewed, and an analysis of various approaches for this complex industry, or
compilation of industries, is presented.
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SECTION 2
INDUSTRY PROFILE
Regulations that are aimed at reducing the harmful emissions of small nonroad engines, will,
in all likelihood, have an impact on the industries that produce, distribute, sell, and use these
engines and the products that employ these engines as components. In order to design efficient
regulations that maximize health and environmental benefits while minimizing costs to
businesses and consumers, it is crucial that policymakers become familiar with the conduct,
structure, and performance of the industries involved.
To develop this understanding, a number of data sources and modes of analysis will be used
throughout the course of this report. Since this section is primarily concerned with the industry
and its economic characteristics, the emphasis will be on the general economic data collected
by the Bureau of the Census, the IRS, trade associations, and others. In later chapters, the
emphasis will shift more to the technological aspects of the market. In those parts of the
report, data sources such as Power Systems Research (PSR) will become the primary focus.
Data that characterizes the small nonroad engine and equipment industry directly and
completely are not available. This is due to the fact that EPA has defined the small nonroad
engine and equipment industry to include many diverse products that do not together fall under
a conventional industry classification scheme, such as the Standard Industrial Classification
system maintained and developed by the U.S. Department of Commerce. Given that the
products included in the small nonroad engine and equipment industry are represented by many
SIC codes (i.e., by many different industries) a straight-forward profile of this makeshift
industry was not possible for this study. Section 2.1 attempts to develop a linkage between the
individual types of equipment that use small nonroad engines and the industries that produce
them.
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In Sections 2.2 through 2.9, a variety of data that describe the conduct, structure, and
performance of these selected industries are provided. Data that describe key issues that are
of importance for analyzing regulatory impacts receive special attention in these sections. The
economic indicators reviewed that profile the various industries in which small nonroad engines
and equipment are produced are described below:
Industry size data, measured by the number of firms (establishments) operating
in the industry, by the employment level, by the value of shipments, and by
value added, will provide policymakers with the information that is necessary
to determine the relative importance, with respect to other industries and the
economy as a whole, of those industries that may be influenced by regulatory
action.
Geographic distribution data on production by region or State in terms of value
added, value of shipments, and employment, will help policymakers to better
estimate the regional economic impacts of regulation,
Commodity inputs information, or the importance of intermediate products to the
production of small nonroad engines and equipment, helps policymakers to
identify secondary industries that may be affected by regulation.
New capital expenditures, the level of which allows for an evaluation of how
firms in the various industries spend capital, provide important information to
a policymaker if regulation influences the capital input of the production
process, while capital intensity measures the importance of capital to the
production process,
Concentration in the production process provides valuable information about the
industry's structure. If only a few manufacturers account for the bulk of sales.
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then one can argue that the industry in question is not a perfectly competitive
one, and that firms may have opportunities to price their product above the
marginal cost of producing it. Therefore, assessing the concentration level in
those industries that comprise the small nonroad engine and equipment industry
provides valuable information to a policymaker about the potential effects of
regulation.
Capacity utilization rates provide an indication of the health of an industry by
measuring an industry's potential output to its actual output level. Through
demand effects, regulation may influence capacity utilization. So, relevant
information will help policymakers to assess the potential economic impact of
regulatory efforts.
Debt and profitability statistics also provide important data on the financial
health of the industries in question.
2.1 EQUIPMENT INDUSTRIES AND SIC CODES
EPA has the task of deciding whether or not to regulate emissions from nonroad engines with
power ratings of less than or equal to 50 horsepower. However, while this categorization is
convenient from an emission control perspective, these engines are usually not the final product
but merely a component to a variety of final products. Consumers, for example, buy
lawnmowers, not 5 horsepower gasoline engines. As such, the manufacture of small nonroad
engines, their use as a component in the fabrication of a variety of equipment, and their
subsequent distribution to end-user industries and consumers involves a host of diverse
industries. Moreover, not only are a large number of industries involved, but their degree of
involvement varies. Quite often, these industries sell products that are powered by means other
than gasoline or diesel engines, or by gasoline or diesel engines larger than 50 horsepower.
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For example, the lawn and garden industry also sells equipment that is hand or electric
powered.
For the purposes of this industry profile, industries are defined using the most rigorous and
commonly used system of industry categorization: the Standard Industrial Classification (SIC).
The SIC system was developed by the Federal government to provide uniformity and
comparability in the collection and presentation of statistical data collected by various agencies
of the U.S. government, state agencies, trade associations, and private research organizations.
One of the most important characteristics of the SIC system is that it classifies each
establishment1 based on its primary activity, which is determined by its principal product or
group of products produced or distributed, or services rendered. The structure of the SIC
classification system makes it possible to tabulate, analyze, and publish establishment data on
a division, a 2-digit major group, a 3-digit industry group, or a 4-digit industry code basis. The
4-digit industry code basis can be thought of as a subset of the 3-digit industry group, which
itself is a subset of the 2-digit major group. The broader division classification basis has been
designed to characterize major sub-sectors of the economy's manufacturing sector. A given
sub-sector (e.g., Division A - Agriculture, Forestry, and Fishing) imbeds the 2-digit, 3-digit,
and 4-digit industry classifications relevant to that type of manufacturing activity. Finally, data
is also available for the complete manufacturing sector, or All Manufacturing Industries.
The small nonroad engine and equipment industry should be viewed as a chain of industries
that begins with a variety of raw materials and converts them into engines and equipment and
then transports, distributes, and sells them to end-user businesses and consumers. The first
industry that is a truly important part of this chain is the Internal Combustion Engine industry
(SIC 3519). where the engines themselves are produced. While other industries provide
components to this industry, it is here where these components become part of a product which
can clearly be identified as an engine of 50 horsepower or less. Moreover, for industries
'An establishment is an economic unit, generally at a single physical location, where business is
conducted or where services or industrial operations are performed.
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earlier in the distribution chain, the importance of engine products to output will be very low,
although firms specializing in the manufacturing of nonroad engine components, such as
Walbro Co., may be an exception. However, even for the Internal Combustion Engine
industry, small engines of less than 50 horsepower represent only a portion of the engine
industry as defined by the SIC system.
The engines produced in the Internal Combustion Engine industry are then incorporated into
a multitude of equipment types by a variety of industries. These industries, which include the
Lawn and Garden Equipment industry (SIC 3524) and the Construction Machinery industry
(SIC 3531), among others, are generally defined by the type of equipment that are produced.
Identifying, in a rigorous fashion, which industries produce equipment that incorporate
significant numbers of engines under 50 horsepower was accomplished using the following
methodology. The first step was to identify products which incorporate small nonroad engines.
For this purpose a special tabulation of PSR's Engindata database2 was developed. This
tabulation provided the number of units for each of the detailed PSR application codes. The
PSR application code names are provided in the first column of Table 2-1 while 1991 unit
sales, as estimated by PSR, are provided in column 2. Each code was then thoroughly
researched using the SIC Manual. First, the SIC Manual's alphabetic index was searched to
see if there was a listing that matched the application code name. Where a match was not
found, the product listings given as part of the description of the SIC codes were searched for
matches. When matches were found by either method, the relevant SIC and product
description were recorded (see columns 3 and 4 of Table 2-1). In many cases, several SIC
Manual product descriptions are available for each PSR application. In these cases, each of
the descriptions is listed, with the description that was believed to be the most accurate, or that
account for the largest share of the PSR application code, provided first.
2See Appendix A for a description of PSR's Engindata database.
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TABLE 2-1
CONCORDANCE BETWEEN PSH APPLICATIONS
AND SIC INDUSTRIES
Application
CHAINSAWS
CHIPPERS/GRINDERS
COMM TURF
FRONT MOWERS
LEAF BLOW/VACS
LN MOWERS
LN/GDN TRACTORS
OTH LN GDN
REAR ENG RIDER
SHREDDERS
SNOWBLOWER
TILLERS
TRIM/EDGE/CUTTER
WOOD SPLTR
AIRCRAFT SUPPORT
TERMINAL TRACTORS
ALL-TERRAIN VEHICLES
GOLF CARTS
SNOWMOBILE
SPEC VEH/CARTS
AIR COMPRESSORS
GAS COMPRESSORS
GENTRSETS
PRES WASHERS
PUMPS
WELDERS
AERIAL LIFTS
FORKLIFTS
OTH GEN INDUST
OTH MAT HD
SCRUB/SWPH
BORE/DRILL RIGS
CEM/MTH MIXERS
CONCRETE/INO SAWS
CRANES
CBUSH-'PROC EQUIP
Sales (Units)
1991
844,849
4,433
230,747
72,179
222,828
5,444,874
1,018,515
29,125
362,714
14,696
532,996
87,859
3,069,770
10,474
655
23
91,831
58,494
114,143
16,485
37,117
184
483,302
73.992
148,868
47,824
3,773
10,322
6,044
69
6,210
700
18,467
',1.422
349
527
4-Digit
SIC
Mfg.
3546
3541
3523
3531
3546
3523
3524
3524
3564
3524
3524
3524
3524
3524
3524
3523
3524
3524
3524
3524
3531
3537
3S37
3537
3537
3799
3799
3799
3799
3799
3S44
3563
3563
3621
3532
3561
3S48
3531
3537
3537
3537
3589
3711
3533
3531
3531
3531
3531
3531
3537
3536
3531
3523
3532
3531
Source/Comments
SIC listing: Chain saws, portable
SIC index: Commercial Chippers
SIC index: Grinders and crushers, feed (Agricultural machinery) j
SJC index: Grinders, stone (portable) ]
SIC index: Grinders, snagging I
SIC index: Turf equipment commercial
SIC index; Lawnmowers, hand and power: residential
SIC index: Blowers, residential lawn ;
SIC index: Blowers, Commercial and industrial
SIC index: Vacuums, residential lawn '
SIC index: Lawnmowers, hand and power: residential
SIC listing: Tractors, lawn and garden
SIC listing: Mulchers, residential lawn and garden j
SIC listing: Seeders, residential lawn and garden
SIC index: Lawnmowers, hand and power: residential
SIC index: Shredders (Agricultural machinery)
SIC index: Snowblowers and throwers: residential
SIC index: Hototillers (Garden machinery)
SIC Index: Trimmers, hedge: power
SIC Index: Lawn edgers, power
SIC Index: Log splitters
SIC listing: Aircraft engine cradles
SIC listing: Hoists, aircraft loading
SIC Listing; Tractors, industrial (except mining): for freight, baggage, etc
SIC Listing: Tractors, industrial; for use in plants, depots, docks, and terminals
SIC index: AH terrain vehicles (A TV)
SIC index: Golf carts, powered
SIC index: Snowmobiles
SIC Listing: Gocarts, except childrens
SIC Listing: Autos, midget: power driven
SIC Listing: Gocarts, children's
Entire SIC 3563 (Air and gas compressors)
Entire SIC 3563 (Air and gas compressors)
SIC index: Generator sets: gasoline, diesei. and dual fuel
SIC index: Washers, aggregate and sand; stationary type
Entire SIC 3561 (Pumps and pumping equipment)
Welding and cutting apparatus, gas or electnc
SIC index* Aerial work platforms, hydraulic/electnc truck or earner mounted truck
SIC index: Forklift trucks
Entire SIC 3563 (industrial trucks, tractors, trailers, ana stackers}
Entire SIC 3563 (Industnal trucks, tractors, trailers, and stackers)
SIC index: Scrubbing machines
SIC index: Sweepers, street (motor vehrdes)
SIC Listing: Drill rigs, alt types
SIC index* Cement making machinery
SIC index: Concrete mixers and finishing machinery '<
SlC index: Cranes, construction
SIC index: Crane earners
SIC index. Cranes, except industrial plant
SIC index: Cranes, n-iooile industrial true*
SIC index; Cranes, overnead traveling
SIC index: Crushers, mineral: ponable
SIC index* Crushers, feed (Agricultural rnachrne'y**
SIC index: Crushers, mineral: stationary*
SIC listing* Rock Crushing machinery, portable
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TABLE 2-1 (cont)
CONCORDANCE BETWEEN PSR APPLICATIONS
AND SIC INDUSTRIES
Application
CRWLR DOZERS
DUMPERSfTENDERS
LT PLANTS/SIGNAL BDS
OTH CONST
PAVERS
PAVING EQ
PLATE COMPACTORS
R/T LOADER
ROLLERS
ROUGH TRN FORKLFTS
SIS LOADER
SURFACING EQUIP
TAMPERS/HAMMERS
TRAC/LDR/BCKHOE
TRENCHERS
2-WHEEL TRACTORS
AG MOWERS
AG TRACTOR
HYD POWER UNIT
OTH AG/EQ
SPRAYERS
TILLERS
SHREDDERS
DIST LOOSE
EXPTS-INO/CONST ENG
IRRG SETS
OIL FLD EQ
Sales (Units)
1991
19
1,688
3,531
458
1,557
19,494
6,683
154
3,585
152
18,137
8,258
2,616
742
6,473
2,145
644
5,761
5,149
644
11,688
247,255
32,551
793.775
2,966,984
4,068
1,308
REFRIGERATION/AC 31,169
RLWY MAINT
1,842
i
TACT MIL EQUIP j 3,384
UNDRGND MINE EQUIP 44
4-Digit
SIC
Mfg.
3531
3531
3531
3532
3531
3531
3531
3531
3531
3531
3531
3531
3531
3523
3531
3532
3524
3537
3523
3531
3531
3531
3531
3531
3531
3531
3531
3523
3531
3531
3531
3537
3523
3523
3523
3523
3523
3523
3523
3523
3519
3519
3523
3533
3585
3531
3743
3795
3532
3535
Source/Comments
SIC index: Tractors, crawler
SIC index: Dozers, tractor mounted: material moving
SIC index: Bulldozers, construction
SIC index: Dumpers, car: mining
Entire SIC 3531 (Construction machinery and equipment)
Entire SIC 3531 {Construction machinery and equipment)
SIC index: Pavers
SIC listing: Planers, bituminous
SIC index: Pavers breakers
SIC listing: Finishers, concrete and bituminous: powered
SIC listing: Road construction and maintenance machinery
SIC index: Compactors, soil: vibratory
SIC index: Loaders, shovel
SIC index: Loaders, farm type (general utility)
SIC index: Rollers, road
SIC index: Rollers and levelers, land (agricultural machinery)
SIC index: Lawn rollers, residential
SIC index: Forklift trucks
SIC index: Loaders, farm type (general utility)
SIC index: Loaders, shovel
SIC listing: Surfacers, concrete grinding
SIC listing: Finishers, concrete and bituminous: powered
SIC listing: Planers, bituminous
SIC listing: Road construction and maintenance machinery
SIC listing: Tampers, powered
SIC listing: Backhoes
SIC listing: Trenching machines
SIC index: Tractors, wheel: farm type
SIC index: Tractors, construction
SIC index: Tractors, crawler
SIC index: Tractors, tracklaying
SIC index: Tractors, industrial: for use in plants, depots, docks, and terminals
SIC index: Turf equipment, commercial
SIC index: Mowers and mower conditioners, hay
SIC index: Tractors, wheel: farm type
SIC index: Irrigation equipment, self-propelled
Entire SIC 3563 (Farm machinery and equipment)
SIC index: Spraying machines (Agricultural machinery)
SIC index: Field type rotary tillers (Agricultural machinery)
SIC index: Shredders (Agricultural machinery)
SIC index: Engines, internal combustion: except aircraft and nondeisei automotive
SIC index: Engines, internal combustion: except aircraft and nondeisei automotive
SIC index: Irrigation equipment, self-propelled
SIC index: Oil and gas field machinery and equipment
SIC index; Refrigeration machinery and equipment, industrial
SIC index: Railway track equipment: e.g., rail layers, ballast distributors
SIC index: Railway maintenance cars
SIC description: self propelled weapons I
SIC index: Mine machinery and equipment, except oil and gas field
SiC index: Mine conveyors
10
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
In Table 2-2 these descriptions are converted to the SIC basis, thereby providing an estimate
of unit sales by manufacturing SIC code. Engine industry sales represent only loose engines.
Transfers and sales to other manufacturing plants for use in original equipment are not
provided. It should also be noted that only manufacturing industries are covered in this
analysis, although this methodology could be extended to wholesale and retail industries,
Similarly, the remainder of the industry profile does not include detailed data on wholesale and
retail industries. However, the importance of these industries to the distribution and service
of small nonroad engine and equipment products are discussed in Section 3, along with some
discussion of the impacts that regulation might have on these industries.
Of the eighteen manufacturing industries shown in Table 2-2, eleven were deemed to be
important enough to be analyzed at the industry level. The remaining SIC's were dropped
from consideration for the following reasons. Several SIC's, including 3533, 3541, 3589 and
3795, had sales of under 20,000 units and were thus felt to be unimportant to the overall
analysis of utility engine products. For three other SIC's, including 3532, 3548 and 3585, all
of a relatively modest amount of sales (30,000 to 75,000 units), are accounted for by a single
product whose assignment to the given SIC is questionable enough to require further research,
SIC 3548, for example, included only the PSR application code for electric and gas welders.
However, no listing for welders that require gasoline or diesel engines is provided in the SIC
Manual.
The selected SIC's include the Internal Combustion Engine industry (SIC 3519) and ten SIC's
that manufacture equipment. Of the ten SIC's, nine were taken from the analysis presented
in Tables 2-1 and 2-2, A tenth, Motorcycles, Bicycles, and Parts (SIC 3751) was included
although such equipment is outside the scope of the PSR database. This is because the PSR
database does not include imported equipment with the engine already installed. Since no off-
road motorcycles are built in the U.S., no sales are shown in the PSR database. This SIC
includes the production of motorcycles made strictly for off-road use as well as mini-hikes.
The final list of SIC's that are believed to have significant involvement in the manufacture of
U.S. Environmental Protection Agency 11
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TABLE 2-2
UNIT SALES BY SIC INDUSTRY
AND PSR APPLICATION
4 -Digit
SIC
Mfg.
3519
3523
3524
3531
Application
EXPTS-IND/CONST EN
DIST LOOSE
TOTAL
TILLERS
COMM TURF
SHREDDERS
S/S LOADER
SHREDDERS
SPRAYERS
AG TRACTOR
HYD POWER UNIT
IRRG SETS
2-WHEEL TRACTORS
AG MOWERS
OTH AG/EQ
TOTAL
LN MOWERS
TRIM/EDGE/CUTTER
LN/GDN TRACTORS
SNOWBLOWER
REAR ENG RIDER
LEAF BLOW/VACS
TILLERS
FRONT MOWERS
OTH LN GDN
TOTAL
PAVING EQ
CONCRiTE/IND SAWS
WOOD SPLTR
SURFACING EQUIP
PLATE COMPACTORS
TRENCHERS
AERIAL LIFTS
ROLLERS
LT PLANTS/SIGNAL BD
TAMPERS/RAMMERS
RLWY MAINT
PAVERS
TRAC/LDR/BCKHOE
CRUSH/PROC EQUIP
OTH CONST
CRANES
R/T LOADER
CRWLR DOZERS
CEM/MTR MIXERS
TOTAL
1991
Unit
Sales
2,966,984
793,775
3,760,759
247,255
230,747
32,551
18,137
14,696
1 1 ,688
5,761
5,149
4,068
2,145
644
644
573,485
5,444,874
3,069,770
1,018,515
532,996
362,714
222,828
87,859
72,179
29,125
10,840,860
19,494
11,422
10,474
8,258
6,683
6,473
3,773
3,586
3,531
2,616
1,842
1,557
742
527
458
349
154
19
18.467
100,425
Source/Comments
SIC index; Engines, internal combustion: except aircraft and noncteisel automotive
SIC index: Engines, internal combustion: except aircraft and nondeisel automotive
SIC index: Field type rotary tillers (Agricultural machinery)
SIC index: Turf equipment, commercial
SIC index: Shredders (Agricultural machinery)
SIC index: Loaders, farm type (general utility)
SIC index: Shredders (Agricultural machinery)
SIC index: Spraying machines (Agricultural machinery)
SIC index: Tractors, wheel: farm type
SIC index: Irrigation equipment, self-propelled
SIC index: Irrigation equipment, self-propelled
SIC index: Tractors, wheel: farm type
SIC index: Turf equipment, commercial
Entire SIC 3563 (Farm machinery and equipment)
SIC index: Lawnmowers, hand and power: residential
SIC Index: Trimmers, hedge: power
SIC listing: Tractors, lawn and garden
SIC index: Snowblowers and throwers: residential
SIC index: Lawnmowers, hand and power: residential
SIC index: Blowers, residential lawn
SIC index: Rototillers (Garden machinery)
SIC index: Lawnmowers, hand and power: residential
SIC listing: Mulchers, residential lawn and garden
SIC listing: Planers, bituminous
SIC index: Concrete mixers and finishing machinery
SiC Index: Log splitters
SIC listing: Surfacers, concrete grinding
SIC index: Compactors, soil: vibratory
SIC listing; Trenching machines
SIC index: Aerial work platforms, hydraulic/electric truck or carrier mounted truck
SIC index: Rollers, road
Entire SIC 3531 (Construction machinery and equipment)
SIC listing: Tampers, powered
SIC index: Railway track equipment: e.g., rail layers, ballast distributors
SIC index: Pavers
SIC listing: Backhoes
SIC index: Crushers, mineral: portable
Entire SIC 3531 {Construction machinery and equipment)
SIC index: Cranes, construction
SIC index: Loaders, shovel
SIC index: Tractors, crawler
SIC index: Cement making machinery
12
-------
TABLE 2-2
UNIT SALES BY SIC INDUSTRY
AND PSR APPLICATION
4-Digit
SIC
Mfg.
3532
3533
3537
3541
3546
3548
3561
3563
3563
3585
3589
3621
3795
3799
3799
3799
3799
Application
PRES WASHERS
DUMPERS/TENDERS
UNDRQND MINE EQUIP
TOTAL
OIL FLO EQ
BORE/DRILL RIGS
TOTAL
FORKLIFTS
OTH GEN INDUST
AIRCRAFT SUPPORT
ROUGH THN FORKLFTS
OTH MAT HD
TERMINAL TRACTORS
TOTAL
CHIPPERS/GRINDERS
CHAINSAWS
WELDERS
PUMPS
AIR COMPRESSORS
GAS COMPRESSORS
TOTAL
REFRIGERATION/AC
SCRUB/SWPR
GENTR SETS
TACT MIL EQUIP
SNOWMOBILE
ALL-TERRAIN VEHICLE I
_
SPEC VEH/CARTS |
1991
Unit
Sales
73,992
1,688
44
75,724
1,308
700
2,008
10,322
6,044
855
152
69
23
17,265
4,433
844,849
47,824
148,868
37,1 17
184
37,301
31,169
6,210
483,302
3,384
114,143
91,831
58,494
16,485
Source/Comments
SIC index: Washers, aggregate and sand: stationary type
SIC index: Dumpers, oar: mining
SIC index: Mine machinery and equipment, except oil and gas field
~ ~ ~
SIC index: Oil and gas field machinery and equipment
SIC listing: Drill rigs, all types
SiC index: Forktift trucks
Entire SIC 3563 (Industrial trucks, tractors, trailers, and stackers)
SIC listing: Aircraft engine cradles
SIC index: Forklift trucks
Entire SIC 3563 (Industrial trucks, tractors, trailers, and stackers)
SIC listing: Tractors, industrial: for use in plants, depots, docks, and terminals
SIC index: Commercial Chippers
SIC listing: Chain saws, portable
Welding and cutting apparatus, gas or electric
Entire SIC 3561 (Pumps and pumping equipment)
Entire SIC 3563 (Air and gas compressors)
Entire SIC 3563 (Air and gas compressors}
SIC index: Refrigeration machinery and equipment, industrial
SIC index: Scrubbing machines
SIC index: Generator sets: gasoline, diese!, and dual fuel
SIC description: self propelled weapons
SIC index' Snowmobiles
SIC index: All terrain vehicles (ATV)
SIC index: Golf carts, powered
SIC listing: Gocarts, except childrens
'TOTAL
280,953
13
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Jack Faucett Associates
DO NOT CITE OR QUOTE
December 1992
nonroad mobile sources of 50 horsepower or less, along with their 1991 unit sales as reported
in the PSR database, includes the following SIC's.
•lilij&pili
siK-jjjSss^yvss:
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Internal Combustion Engines (Loose)
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.3
3,760,759
573,485
10,840,860
100,425
17,265
844,849
148,868
37,301
483,302
N.A,
280,953
Several items should be noted about this list and the unit sales data that are provided. First,
the list includes 99 percent of the total sales of 17,258,819 units reported in the PSR database.
Second, the unit sales provided for SIC 3519 (Internal Combustion Engines) includes only
loose engines, thereby avoiding double counting.
3n.e,c. stands for "not elsewhere classified".
U.S. Environmental Protection Agency
14
413-14
-------
TABLE 2-3
INTERNAL COMBUSTION ENGINES
BY TYPE OF ENGINE; 1990
(thousands of dollars)
Product D.SCnr,,.,,,,
! oMI
Gasoline (except outboard, aircraft, and automotive)
Under l 1 tip
11 to 21 >ip
21 to under 61 hp
NonauSornotive diesel (except aircraft)
Under 101 np
Autornot've diesel
Natural Gas ar-,d LPG
Production of under SOhp engines (known range)
Low
High
Number of
Companies*
22
18
9
9
13
9
9
7
Engines
Produced
Quantity
17,127,728
16,490,828
14,724,920
1,548,151
180,076
199,905
19,701
432,955
4,040
16,273,071
16,476,888
Percent
Fuel Type
100-0
B9.3
9.4
1.1
100.0
9,9
100.0
100.0
Total Shipments and
Interplant Transfers
Quantity
(D)
(D)
182,712
432,955
(D)
Value
f.o.b.
Plant
5,878,190
1,525,091
1,584,466
2,673,554
115,078
Shipments to
Other Companies
Quantity
(D)
(D)
134,078
12,356
322,880
(0)
Value
f.o.b.
Plant
4,758,374
1 .384,478
805,514
409,035
11,261
1,160,189
47,685
2,098,628
115,079
1,214,609
1 ,388,634
Percent
Fuel Type
100.0
58.2
29,5
0.8
1000
4.1
100.0
100.0
interplant Transfers
Quantity
(D)
CD)
48,634
110,075
(D)
Value
f.o.b.
Plant
1,119,816
140,613
404,277
574,926
(D!
Source, u S Department of Commerce Current Industrial Reports, 1990
(D) Data vY'tniis-ld to avoid disclosing figures for individual companies
* Number o! companies refers to the number of companies which make their product in the U.S.
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
An important question concerns how well the PSR database agrees with alternative estimates
of unit sales, shipments or production. Table 2-3 presents estimates of engine production and
shipments for SIC 3519 collected by the Bureau of the Census. While the total production
estimate of 17,127,728 is within one percent of the PSR estimate of 17,258,819, significant
adjustments must be made to place both estimates on a comparable basis.
One problem is that the Census data includes engines of all sizes, while the PSR tabulations
only include engines of 50 horsepower or less. While the Census data provides some
information on engine size (provided in Table 2-3), not enough detail is available to develop
an exact estimate of unit sales. Fortunately, however, engines sales in the size classes around
50 horsepower are sufficiently low that unit sales may be estimated fairly accurately. For
example, only 180,076 or approximately one percent of the 16,490,828 gasoline engines fall
in the 21 to 61 horsepower range. Thus, the proportion of engines below 50 horsepower can
be estimated within one percent, the high end of the range assuming all engines in the 21 to
61 horsepower range are over 50 horsepower and the low end assuming they are all under 50
horsepower. For this second best estimate, automotive diesels are all assumed to be over 50
horsepower and natural gas and LPG engines under.
Note that while the spread between the low and high estimates of the unit sales range is very
small (about 1.3 percent), the range is fairly significant in terms of dollar sales (about 14.3
percent). This is because the larger engines, those in the 20 to 100 horsepower range, have
a much higher unit value (Le,, price) than the smaller engines of less than 20 horsepower.
After adjusting the Census data to exclude engines with power ratings of over 50 horsepower,
Census indicates the production of engines between 0 and 50 horsepower to be in the range
of 16.3 to 16.5 million units, approximately one million less than the number of small engines
estimated by PSR's database. However, the PSR database includes loose engines imported
from abroad. The Current Industrial Reports shows imports into the United States for
consumption to be 1,437.919 nonautomotive diesel. gasoline, natural gasoline, and LPG engines
U.S. Environmental Protection Agency 16 413-14
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Jack Faucet t Associates DO NOT CITE OR QUOTE December 1992
of all sizes. If approximately one million of these engines are under 50 horsepower, then the
PSR and Current Industrial Reports are in close agreement. Neither Census nor PSR
estimates, however, account for engines imported into the United States already installed in
equipment.
The PSR and Census data indicate that approximately 17.3 million pieces of equipment and
loose engines (excluding off-road motorcycles) were produced or imported into the U.S. in
1990. Almost all of these engines are gasoline engines of 20 horsepower or less, and are
incorporated into equipment produced in eleven 4-digit SIC industries. However, it should be
noted that the eleven 4-digit SIC industries found to be of relevance are not entirely comprised
of small nonroad engine and equipment manufacturers. This is directly due to the fact that the
small nonroad engine and equipment industry has been arbitrarily defined for regulatory
purposes and analysis and includes diverse products that are employed in many uses. JFA's
meticulous analysis to link these products to 4-digit SIC industries, for which economic data
are available, has resulted in the best possible identification of those industries in which small
nonroad engine and equipment are produced.
As shown above, the Internal Combustion Engines industry (SIC 3519) closely represents those
manufacturers engaged in the production of small nonroad engines. Similarly, products
produced in the Lawn and Garden Equipment industry (SIC 3524) can almost entirely be
considered as small nonroad equipment, since most, if not all, lawn and garden equipment are
under 50 horsepower. On the other hand, only chainsaws can be considered as small nonroad
equipment in the Power-Driven Hand Tools industry (SIC 3546). As a result, the economic
indicators relevant to SIC 3546 should be interpreted with caution, since the chainsaw market
may be different to the markets for the other products produced in that industry.
Although the products produced in the Farm Machinery and Equipment industry (SIC 3523)
and those produced in the Construction Machinery industry (SIC 3531) can be classified as
nonroad equipment, many are likely to fall above the 50 horsepower criteria that defines the
U.S. Environmental Protection Agency 17 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
small nonroad engine and equipment industry. This observation extends to the other 4-digit
SIC industries relevant to this analysis as well. A quantitative analysis that assesses the
contribution of small nonroad engines and equipment to the value of shipments, or to output,
of the relevant 4-digit SIC industries was not performed in this study, largely because of the
extensive resources that would be necessary to compile sales weighted price data for each
equipment type - assuming that such price data was available to begin with. Nevertheless, a
review of the Standard Industrial Classification Manual, which presents the products that are
included in each 4-digit SIC industry, highlights the fact that some of the products included
under the 4-digit SIC industries relevant to this study (with the possible exception of the Lawn
and Garden Equipment industry and the Internal Combustion Equipment industry) are likely
to be powered by engines with ratings above 50 horsepower. Moreover, other products
included in some of the 4-digit SIC industries cannot be classified as nonroad engines or
equipment.4 With these caveats in mind, profiles of the eleven industries in which small
nonroad engines and equipment are produced are provided in the following sections.
2.2 MEASURES OF SIZE
Information on the size of the eleven potentially impacted different industries is a necessary
first step in understanding the industries and in assessing the economic impact of regulation.
Such data can also lead to a better understanding of the current overall structure of the
industries and recent performance trends. This section will analyze the size of the industries
as measured by different factors, including the total number of firms, the number of employees,
the amount of output produced by each industry as well as what value they add to the product.
and output as a percent of Gross Domestic Product (GDP).
Table 2-4 shows the number of companies for the eleven industries most likely to be affected
by regulation for the period 1982-1987. Data on overall manufacturing activity and the two-
4The reader is referred to the latest Standard Industrial Classification Manual for a listing of the
products under each of the eleven 4-digit SIC industries included in this study.
U.S. Environmental Protection Agency 18 413-14
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TABLE 2-4
NUMBER OF COMPANIES AND
ESTABLISHMENTS, BY INDUSTRY
1982 AND 198?
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
1987
Number of
Companies
310,341
48,900
13,523
9,158
224
1,576
149
872
448
183
333
223
349
242
617
All Establishments
Total
368.897
52,091
15,922
10,505
278
1,634
165
954
467
199
405
259
462
246
635
With 20
Employees
or more
126,294
13,849
7,544
4,269
150
464
81
422
173
68
226
136
302
56
174
1982
Number of
Companies
298,429
49,091
13,701
8,229
202
1,787
151
817
463
180
516
239
349
269
408
All Establishments
Total
358,061
52,912
16,453
9,443
253
1,903
175
939
489
302
626
282
472
273
425
with 20
Employees
or more
123,163
14,264
7,834
3,800
159
620
84
444
175
74
325
144
325
67
120
Percent Increase, 1982-1987
Number of
Companies
4.0
-0.4
-1.3
11,3
10.9
-11.8
-1.3
6.7
-3.2
1.7
-35.5
•6,7
0,0
-10.0
51.2
All Establishments
Total
3.0
•1.6
-3,2
11.2
9.9
-14,1
-5.7
1.6
•4.5
-34.1
-35.3
-8.2
-2.1
-9.9
49.4
with 20
Employees
or more
2.5
-2.9
-3.7
12.3
-5.7
-25.2
-3.6
-5.0
•1.1
-8.1
-30.5
-5,6
-7.1
-16.4
45.0
Source: Census of Manufacturers, General Summary, 1987 and 1982.
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Jack Fauceti Associates DO NOT CITE OR QUOTE December 1992
digit SIC industries which encompass the eleven selected 4-digit SIC industries are also shown
for comparative purposes. When each industry is analyzed in isolation, the information on the
percentage increases in the number of companies and establishments provides an indication of
that industry's economic health, all other things being equal. If entry and exit into and out of
the industry are free, the existence of net economic profits5 in the industry should induce other
profit-seeking firms to enter the market. Theoretically, entry will continue until economic
profits are entirely competed away and the inducement for more new firms to enter disappears.
As a result, if the number of companies and establishments in a given industry has been
increasing, then it may indicate that the industry has been, or is, economically healthy,
assuming that economic profits translate into economic health.
In terms of the change in the number of companies and establishments, the Pumps and
Pumping Equipment industry (SIC 3561) has contracted the most, showing a decrease of 35.5
percent, while the Transportation Equipment, n.e.c. industry (SIC 3799) has seen growth of
51.2 percent. The largest industry, in terms of the number of companies, is the Farm
Machinery and Equipment industry (SIC 3523), with 1576 firms, while the smallest is the
Lawn and Garden Equipment industry (SIC 3524), with 149 companies. The Internal
Combustion Engines industry (SIC 3519), which may face increased costs as a result of
regulation, has seen an increase in the number of companies, thereby indicating that the
industry is attracting new entrants and that it may be reaping economic profit.
Output figures for the period 1984 to 1990 are provided in Table 2-5 and Table 2-6. Data are
presented for the eleven 4-digit SIC industries in both current dollars (Table 2-5) and constant
5Economic profits are not the same as accounting profits, since the former refers to that return with
which a firm retains Us investors. Formally, economic profit (or loss) is defined as the difference in
revenues received from the sale of output and the opportunity cost of the inputs used to make the output.
U.S. Environmental Protection Agency 20 413-14
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TABLE 2-5
VALUE OF SHIPMENTS
BY INDUSTRY, 1984-1990
{in millions of current dollars)
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
tent
it
e.c.
1990
2,873,501.6
256,344.7
194,847.9
367,926.7
12,224.2
11,546.2
4,910.0
16,069.6
2,727.5
2,805.8
4,830,3
3,806.9
7,672.2
1,475.8
2,241.5
1989
2,792,689.0
253,642.1
192,292.2
365,980.7
12,803.2
10,418.9
4,577.5
15,349.4
2,841.3
2,617.5
4,520,0
3,537.3
8,072.8
1,369.6
2,095.4
1988
2,682,508.9
243,260.6
186,950.8
354,047.8
12,432.4
8,731.7
4,828.4
14,476.8
2,826.6
2,505.0
4,497.8
3,485.7
7,601.4
1,056.8
1,779.1
1987
2,475,901.0
217,669.9
171,286.4
332,935.7
11,122.6
6,879.9
4,594.4
12,767.7
2,440.2
2,161.8
3,998.3
3,050.9
6,753.1
1,062.6
1,642.1
1986
2,260,314.6
208,523.9
196,245.2
313,825.1
10,896.2
6,745.4
3,647.0
12,987.1
2,330.2
2,142.4
5,433,6
2,817.5
6,608.1
1,032.0
1 , . o.2
1985
2,280,183.8
215,238.6
193,368.6
301,386.0
11,286,5
8,211.6
3,439.6
6,625.9
2,300.0
2,155.1
5,617.5
3,077.5
6,583.6
1,044.0
1,180.2
1984
2,253,847.2
210,408.3
1 87,995.2
280,241.0
1 1 ,869.7
9,858.1
3,239.8
12,692.7
2,255.8
2,016.3
5,680,1
3,108.9
6,760.5
1,152.6
1,196.9
Percent
Increase,
1984-1990
27.5
21.8
3.6
31.3
3.0
17.1
51.6
26.6
20,9
39.2
-15.0
22.5
13.5
28.0
87.3
Average
Annual
Percent
Increase*
4.6
3.6
0.6
5.2
0.5
2.9
8.6
4.4
3.5
6.5
-2.5
3.7
2.2
4.7
14.5
Source. Annual Survey ot Manufactures, Statistics for Industry Groups and Industries,
1990, 1988, 1986, and 1984.
•Calculated as [(1990 Value of Shipments - 1984 Value ot Shipments)/(1984 Value of Shipments)]/6 (i.e. a linear average).
-------
TABLE 2-6
VALUE OF SHIPMENTS
BY INDUSTRY, 1984-1990
(in millions of constant 1984 dollars)
SIC
cods
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
Ail Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
1990
2,509,608.4
225,061.2
178,923.7
318,275.7
10,732.4
10,137.1
4,310.8
14,108.5
2,394.6
2,463.4
4,240.8
3,342.3
7,045.2
1,276.6
1,939.0
1989
2,548,073.9
229,125.7
179,544.5
326,477.0
11,565.7
9,411.8
4,135.0
13,865.8
2,566,7
2,364.5
4,083.1
3,195.4
7,537.6
1,221.8
1,869.2
1988
2,569,453.0
228,628.4
1 78,729.3
328,430.2
1 1 ,884.6
8,206.5
4,538.0
13,606.0
2,656.6
2,354.3
4,227.3
3,276.0
7,267.1
980.3
1 ,650.4
1987
2,453,816.7
210,920.4
165,814.5
314,386.9
10,777.7
6,666.6
4,451.9
12,371.8
2,364.5
2,094.8
3,874.3
2,956.3
6,537.4
1,003.4
1,550,6
1986
2,297,067.7
204,435.2
192,208,8
300,598.8
10,682.5
6,613.1
3,575.5
12,732.5
2,284,5
2,100.4
5,327.1
2,762.3
6,472.2
988.5
1,251.1
1985
N/A
N/A
N/A
N/A
11,031,2
8,196.1
3,375.8
6,544.7
2,266.5
2,070.5
5,551.3
3,035.4
6,359.0
1,050.0
1,158.5
1984
2,253,847.2
210,408.3
187,995.2
280,241,0
11,869.7
9,858.1
3,239.8
12,692.7
2,255.8
2,016.3
5,680.1
3,108.9
6,760.5
1,152.6
1,196.9
Percent
Increase
1984-1990
11.3
7.0
-4.8
13,6
-3.6
2.8
33.1
11.2
6,2
22.2
-25.3
7.5
4.2
10.8
62,0
Average
Annual
Percent
Increase
1.9
1.2
-0.8
2.3
-1.6
0,5
5.5
1.9
1.0
3.7
-4.2
1.3
0.7
1.8
10.3
N/A: Not Available
Source: Annual Survey ot Manufactures, Statistics for Industry Groups and Industries,
1990, 1988, 1986, and 1984.
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
1984 dollars (Table 2-6). Output is measured by the value of shipments.6 Constant, or real,
dollar figures account for changes in inflation to give a better indication of whether or not
sales, or output, have increased. In periods of high inflation, such as the late 1970's, the value
of shipments may have increased for a given firm or industry. However, if this increase was
less than the inflation rate, then that firm's output would not have kept pace with other price
changes in the economy, and real output may have actually declined.7
Table 2-6 shows that for the industries included in this study, the largest constant output
increase for the period 1984-1990 occurred in the Transportation Equipment, n.e.c, industry
(SIC 3799), which exhibited a growth of 62 percent. The largest decrease occurred in the
Pumps and Pumping Equipment industry (SIC 3561), whose output decreased by 25.3 percent.
These two industries had the largest and smallest growth in the number of companies,
respectively, as previously noted. Table 2-6 also shows that constant dollar output is up for
both the Industrial Machinery and Equipment industry (SIC 35) and the Transportation
Equipment industry (SIC 37), while it has declined some for the Electronic and Electric
Equipment industry (SIC 36).
The Internal Combustion Engines industry (SIC 3519) has had a decline in constant dollar
output of 9.6 percent over the 1984-1990 period. This compares unfavorably with All
Manufacturing Industries (11.3 percent growth) and SIC 35 (7.0 percent growth). Although
such a result may seem inconsistent in light of the earlier discussion of how the number of
firms has increased for this industry, it should be noted that Table 2-4 is for the period 1982-
6Value of shipments, as defined in the Annual Survey of Manufactures, "covers the received or
receivable net selling values, freight-on-board (f.o.b.) plant (exclusive of freight and taxes), of all
products shipped, both primary and secondary, as well as all miscellaneous receipts, such as receipts for
contract work performed for others, installation and repair, sales of scrap, and sales of products bought
and resold without further processing." These sales include exports but not imports, since the figures
represent U.S. shipments.
The Producer Price Index, provided by the Bureau of Labor Statistics at the Department of Labor.
for the three 2-digit SIC code industries and for All Manufacturing Industries, was used to convert to
constant 1984 dollars.
U.S. Environmental Protection Agency 23 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
1987 while Table 2-6 is for the period 1984-1990. As a result, recent trends may not
necessarily be reflected in the data that describes the number of companies operating in a given
industry.
In contrast to the Internal Combustion Engines industry, the Lawn and Garden Equipment
industry grew by just over 33 percent in constant dollars from 1984 to 1990. After a 25
percent increase from 1986 to 1987, however, industry shipments declined in the 1988 to 1990
period, as depicted in Table 2-6.
For certain industries, one might expect to see a relationship between industry output and
fluctuations in the national economic output. In particular, sales may depend on disposable
income, should consumers spend more during periods of expansion and less during a recession.
If an industry's sales vary directly with Gross Domestic Product (GDP), then the industry is
often said to be cyclical. Figures 2-1 and 2-2 give an indication of how three industries,
Internal Combustion Engines (SIC 3519), Farm Machinery and Equipment (SIC 3523). and
Lawn and Garden Equipment (SIC 3524) are related to the output of the entire economy.
(Similar figures for the other industries included in this analysis are provided in Appendix B).
All figures are in constant 1982 dollars, thereby accounting for the effect of inflation on prices
and, thus, on value of shipments. The Y-axis on the left hand side of the graph measures the
value of shipments for each industry while the secondary Y-axis measures GDP for the period
1958-1986. While these three industries do not necessarily have the same characteristics as
the other 4-digit SIC industries relevant to this study, they do produce a large percentage of
the engines and equipment that would be affected by regulation (e.g., engines under 50
horsepower). As shown in Figure 2-1, the Internal Combustion Engines industry (SIC 3519)
follows a somewhat more cyclical pattern than the Farm Machinery and Equipment industry
(SIC 3523). Both have increased with GDP, but neither has, as of yet, fully recovered from
the effects of the recession of 1981-1982. In fact, the effect was more pronounced on the
latter, whose real output for 1986 was less than the corresponding figure for 1958.
U.S. Environmental Protection Agency 24 413-14
-------
Figure 2-1: GDP and Selected Industries
1958-1986 (in Constant 1982 dollars)
I
25000T
S 200001
o
Q
c
O
i 15000H
c
0)
I 10000
lc
CO
o
0)
-i
(0
5000
0
T f r
1958
1964
1970
~I T
n ( r 1 j ! f—1 r
1976 1982
4000
3500
C/)
i_
JS
3000 o
c
g
5
2500 ~
Q
O
2000
1500
Year
GDP
SIC code 3519 *— SIC code 3523
-------
5000
_ 4500H
I 4000-
o
c 3500-
g
1 3000-
f 2500
0)
.1 2000
| 1500
Q)
= 1000
(0
500
Figure 2-2; GDP and SIC code 3524
1958-1986 (in Constant 1982 dollars)
1958
1 964
1 970
1976
1982
4000
3500
-3000
2500
-2000
500
CO
o
Q
c
.9.
S,
CL
Q
O
Year
GDP
SIC code 3524
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
As for the Lawn and Garden Equipment industry. Figure 2-2 indicates a pattern that is roughly
cyclical. Real output peaked in 1979 and then fell dramatically until 1981, when the trend was
reversed. The relatively flat economic growth of the late 1970's, coupled with high inflation
rates, may have had detrimental effects on this industry. However, the growth of the 1980's.
particularly the high real growth rate of 7 percent for 1984 GDP, has helped to increase sales.
In addition, weather is an important factor in determining the sales of equipment in this
industry. Although data were not compiled for a quantitative analysis of the relationship
between precipitation and sales, one would expect these two factors to be related to each other
(Le., all else being equal, sales would be higher in periods of high precipitation).
Seasonality is also an important factor in sales of lawn and garden equipment. According to
a 1989 report by the Outdoor Power Equipment Institute (OPEI)8, 29.7 percent of walk behind
lawnmower sales occurred in May and 21.4 percent in April (1988 data). In addition, sales of
snow throwers for the same year were concentrated in the winter months of November and
December, at 27.7 percent and 28.4 percent, respectively. These figures give an idea of the
seasonality of sales for some equipment types included in the small nonroad engine and
equipment industry.
Another way to measure the output of an industry is through an evaluation of value added.
Value added measures the contribution of each industry to the overall value of their product.
and is calculated by subtracting the cost of various inputs, such as materials and supplies, from
the value of shipments. For example, if one industry purchases engines from another in order
to make their product, then value added would account for this purchase by subtracting the
purchase from the value of shipments. A consideration of this measure is important because
it measures the true contribution of an industry to the economy by excluding items merely-
purchased and repackaged. Table 2-7 shows value added for 1990 for the eleven 4-digit SIC
industries as well as for the major industrial groups (Le,, SIC 35, SIC 36. SIC 37, and All
"OPEI, "Profile of the Outdoor Power Equipment Industry," 1989.
U.S. Environmental Protection Agency 27 413-1-
-------
TABLE 2-7
VALUE ADDED BY MANUFACTURER,
BY INDUSTRY, 1990
(millions of 1990 dollars)
K)
Oo
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Purnps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
Value Added
1,326,361.7
132,165.8
106,983.9
146,916.3
4,899.8
5,978.5
2,006.5
6,797.3
1 ,036.7
1,471.8
2,552.8
1 ,769:9
4,005.3
570.8
798.3
Value of
Shipments
2,873,501.6
256,344.7
194,847,9
367,926.7
12,224.2
1 1 ,546.2
4,910.0
16,069.6
2,727.5
2,805.8
4,830.3
3,806.9
7,672.2
1 ,475.8
2,241.5
Value Added
as Percent
of Value
of Shipments
46.2
51.6
54.9
39.9
40.1
51,8
40.9
42.3
38.0
52.5
52.8
46.5
52.2
38.7
35.6
Source: Annual Survey of Manufactures, Statistics
for Industry Groups and Industries, 1990.
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
Manufacturing Industries). In 1990, value added was highest for the Construction Machinery
industry, at $6,797 million, and smallest for the Motorcycles, Bicycles and Parts industry, at
$570.8 million.
The third column of Table 2-7, however, provides a basis by which one can evaluate the
relevance of value added data. In particular, it indicates the percent of the value of an
industry's output for which it is responsible. On the low end of the spectrum, the
Transportation Equipment, n.e.c. industry accounts for 35.6 percent of the value of its output,
while at the other extreme, firms in the Pumps and Pumping Equipment industry are
responsible for slightly over half of the value of their output. This may reflect the fact that the
Transportation Equipment industry merely assembles previously manufactured parts. The Lawn
and Garden Equipment and Internal Combustion Engine industries both account for about 40
percent of the value of their shipments. Table 2-7 indicates that these industries make
significant contributions to the value of their output. In this sense, then, their production costs
are an important part of how their prices are determined. As such, regulations affecting
production costs may have some effect on the price of their output.
The output of the eleven 4-digit SIC industries relative to the overall output of the U.S.
economy is the focus of Table 2-8. Gross Domestic Product (GDP) is used to measure the
output of the economy and is measured here in constant 1984 dollars. In 1990, manufacturing
as a whole (Le., All Manufacturing Industries) accounted for about 63 percent of the U.S. GDP.
up from 59.7 percent in 1984. With the exception of two industries, Pumps and Pumping
Equipment and Internal Combustion Engines, the 4-digit SIC industries relevant to this study
accounted for either slightly more or the same proportion of U.S. GDP in 1990 as in 1984.
Of these eleven 4-digit SIC industries, the Construction Machinery industry contributed most
to GDP in 1990, 0.36 percent of the national value of shipments, while the Motorcycles,
Bicycles, and Parts industry contributed least, only 0.03 percent. Although the Internal
Combustion Engines industry accounted for less of GDP in 1990 than in 1984, it was still
among the larger industries relevant to this studv in terms of its overall contribution, at 0.27
U.S. Environmental Protection Agency- 29
-------
TABLE 2-8
VALUE OF SHIPMENTS AS PERCENT OF
GROSS DOMESTIC PRODUCT
1984-1990
(in millions of constant 1984 dollars)
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c,
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
1990
Value
of Shipments
2,509,608.4
225,061.2
178,923.7
318,275.7
10,732.4
10,137.1
4,310.8
14,108.5
2,394.6
2,463.4
4,240.8
3,342,3
7,045,2
1,276.6
1,939.0
GDP
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
3,937,341.9
As Percent
of GDP
63.74
5.72
4.54
8.08
0.27
0.26
0.11
0.36
0.06
0.06
0.11
0.08
0.18
0.03
0.05
1984
Value
of Shipments
2,253,847.2
210,408.3
187,995,2
280,241,0
11,869.7
9,858,1
3,239.8
12,692.7
2,255.8
2,016.3
5,680.1
3,108.9
6,760.5
1,152.6
1,196.9
GDP
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135,0
3,775,135.0
3,775,135.0
3,775,135.0
3,775,135.0
As Percent
of GDP
59.70
5.57
4.98
7.42
0.31
0,26
0.09
0.34
0.06
0,05
0.15
0.08
0.18
0.03
0.03
Sources: Appendix C, Annual Energy Review, 1991, and Table 2-6
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
percent. On the other hand, the Lawn and Garden Equipment industry (SIC 3524) increased
its contribution to GDP from 0.09 percent in 1984 to 0,11 percent in 1990.
As an important aside, Table 2-9 measures the individual contribution of each worker to the
output of its industry for 1984 and 1990. An initial analysis of the data in this table yields an
interesting result: the output per worker for each individual industry, as well as All
Manufacturing Industries, declined from 1984 to 1990. The largest decrease occurred in the
Power-Driven Handtools industry, while the smallest decrease was in the Farm Machinery and
Equipment industry. These trends indicate that individual workers have become less important
in the overall production process. If a firm can save money by investing in capital equipment
and laying off workers, then employment in these industries would decline, thereby resulting
in higher unemployment in the economy as a whole if these workers are not integrated into
other industries. As shown in Table 2-9, total employment has declined for most industries
relevant to this study, which may signify that these industries have already turned to more
capital intensive measures to minimize their labor costs while maximizing their profits. The
end result of regulation on employment levels would depend not only on the contribution of
each individual worker, but also on how much a firm needs to invest in new capital in order
to meet the goals of regulation, if any regulations are promulgated.
2.3 GEOGRAPHIC CONSIDERATIONS
The geographic distribution of industries is important in assessing the regional impacts of
alternative regulatory strategies. Differing regional impacts can occur both because relative
shifts in input costs favor one region over another, or because a particular industry is
concentrated in one or more locations.
Table 2-10 shows employment value added by manufactures, and value of shipments for three
industry groups relevant to this study at the 3-digit SIC level. Beyond providing totals for the
industry groups of Engines and Turbines (SIC 351), Farm and Garden Machinery (SIC 352),
U.S. Environmental Protection Agency 31 413-14
-------
TABLE 2-9
EMPLOYMENT AND VALUE OF SHIPMENTS,
BY INDUSTRY, 1984 AND 1990
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
1990
Total
Employment
(1,000)
18,840.3
1,876.7
1.497.4
1,773.7
61.3
69.6
24,5
89.9
20.1
18.3
37.4
24.5
72.6
9.4
16.0
Value of
Shipments
(millions
of constant
1984 dollars)
2,509,608.4
225,061.2
178,923.7
318,275.7
10,732.4
10.137.1
4.310.8
14,108.5
2,394.6
2,463.4
4,240.8
3,342.3
7,045.2
1,276.6
1,939.0
Number of
Employees
Per 100,000
Dollars
of Output
0.75
0.83
0.84
0.56
0.57
0.69
0.57
0.64
0.84
0.74
0.88
0.73
1.03
0.74
0.83
1984
Total
Employment
(1,000)
19,139.7
2,051.9
2,033.3
1,709.3
78.2
75.4
23.2
95.8
21.6
20,0
57.5
27.8
84.2
10.4
12.1
Value of
Shipments
(millions
of constant
1984 dollars)
2,253,847.2
210,408.3
187,995.2
280,241.0
11,869.7
9.858.1
3.239.8
12,692,7
2,255,8
2,016.3
5,680.1
3,108.9
6,760.5
1,152.6
1,196.9
Number of
Employees
Per 100,000
Dollars
of Output
0.85
0.98
1.08
0.61
0.66
0.76
0,72
0,75
0.96
0.99
1.01
0.89
1.25
0,90
1.01
Percent Increase, 1984-1990
Total
Employment
-1.6
-8.5
-26.4
3.8
-21.6
-7.7
5.6
-6.2
-6.9
-8.5
-35.0
-11.9
-13.8
-9,6
32.2
Value of
Shipments
11.3
7.0
-4,8
13.6
-9.6
2.8
33.1
11.2
6.2
22.2
-25,3
7.5
4.2
10.8
62,0
Number of
Employees
Per 100,000
Dollars
of Output
-11.6
-14.5
-22.6
-8.6
-13.3
-10.2
-20.6
-15.6
-12.3
-25.1
-12.9
-18,0
-17.3
-18.4
-18.4
Source: Annual Survey of Manufactures, Statistics for Industry Groups and Industries, 1984 and 1990, and Table 2-6.
-------
TABLE 2-10
INDUSTRY GROUP STATISTICS BY STATE, 1987
(in millions of 1987 dollars)
SIC
code
351
352
353
Industry
Engines and Turbines
Farm and Garden Machinery
Construction/Related Machinery
State
California
Connecticut
Illinois
Indiana
Maryland
Massachusetts
Michigan
New York
North Carolina
Ohio
Wisconsin
California
Georgia
Illinois
Indiana
Iowa
Kansas
Minnesota
Nebraska
Ohio
Tennessee
Wisconsin
Alabama
California
Florida
Illinois
Indiana
Iowa
Kansas
Kentucky
Michigan
Minnesota
Mississippi
New York
North Carolina
Ohio
Oklahoma
Oregon
3ennsylvania
Texas
Virginia
Washington
Wisconsin
Employment
(1,000)
7.0
7.7
5.8
FF
FF
FF
FF
6.5
3.5
3.0
17.9
3.5
2.9
10.0
FF
11.1
4.2
2.9
4.1
3.4
FF
9.4
2.6
7.8
2.8
24.3
4.2
12.2
3.9
4.8
8.8
4.6
2.7
FF
4.1
12.6
6.8
2.5
13.2
23.3
4.0
2.8
9.9
Value Added
by Manufacturer
7,039.5
347.7
635.3
983.5
D
D
D
D
616.6
309.4
214.9
1,276.2
5,625.4
166.2
181.7
889.4
D
856.6
162.8
209.6
243.0
180.1
D
1.001.7
11,344.1
108.2
391.3
147.1
1,963.6
266.2
1,113.8
224.2
322.0
577.1
224.7
99.3
D
214.4
698.3
311.1
147.9
823.7
1,105.6
225.6
143.8
619.6
Percent
of Total
4.9
9.0
14.0
0.0
0.0
0.0
0.0
8.8
4.4
3.1
18.1
3.0
3.2
15.8
0.0
15.2
2.9
3.7
4.3
3.2
0.0
17.8
1.0
3.4
1.3
17.3
2.3
9.8
2.0
2.8
5.1
2.0
0.9
0.0
1.9
6.2
2.7
1.3
7.3
9.7
2.0
1.3
5.5
Value of
Shipments
14,570.4
730.6
1,140.3
1,817.3
D
D
D
D
1,027.5
658.9
502.7
2,532.9
11,474.3
313.5
441.9
1,563.4
D
1,530.7
345.6
401.6
481.0
464.9
D
2.058.9
24,622.3
263.1
917.7
281.4
4,483.2
517.2
2,471.9
529.7
797.9
1,275.6
565.1
234.1
D
559.6
1.444.4
668.2
308.5
1,496.3
2,533.3
460.4
296.6
1.317.9
Percent
of Total
5.0
7.8
12.5
0.0
0.0
0.0
0.0
7.1
4.5
3.5
17.4
2.7
3.9
13.6
0.0
13.3
3.0
3.5
4.2
4.1
0.0
17.9
1.1
3.7
1.1
18.2
2.1
10.0
2.2
3.2
5.2
2.3
1.0
0.0
2.3
5.9
2.7
1.3
6.1
10.3 i
1.9
1.2
5.4
FF: 2,500 employees or more
D: Data not reported
States shown are those with total number of employees in given industry of 2,500 and above.
Source: Census of Manufactures, General Summary, 1987.
33
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
Construction and Related Machinery (SIC 353), Table 2-10 shows those States for each
industry group which have total employment of 2,500 or more. Data in Table 2-10 is limited
to only 3-digit SIC's because State level 2-digit SIC industry groupings were too broad to be
of relevance when dealing with large aggregates such as value of shipments and value added,
while State level data at the 4-digit SIC level were incomplete due to extensive withholding
and disclosure constraints for individual firms operating in a given State.
Of the industry groups provided in Table 2-10, the concentration of companies in terms of
employment, value added, and value of shipments, is in the Mid-West, specifically the States
of Wisconsin, Illinois, Iowa, and Ohio. Engine manufacturing companies originally developed
in this area during the 1800's because of the region's access to raw materials and proximity
to the Great Lakes. Though it can be argued that modern day transportation and inventory
techniques have made the advantages of operating in this region virtually non-existent, several
large engine manufacturers such as Briggs & Stratton (located in Milwaukee, Wisconsin) and
Kohler (located in Kohler, Wisconsin), along with a wide variety of supporting and interrelated
industrial facilities, have been established and still remain in this region. The advantages of
locating in this region may no longer exist to the extent that they once did, but the region has
certainly not become disadvantageous. As a result, there is no apparent economic reason for
firms to incur the costs of relocation away from this region. The States mentioned above may,
therefore, be affected by regulation more significantly and directly than most other States
which participate in these industries.
2.4 COMMODITY INPUTS
When analyzing regulatory impacts on industries which involve a series of transactions from
purchases of supplies to the delivery of products, it becomes important to examine the
economic impacts which will inevitably extend well beyond those of the regulated industries.
As evidenced in Table 2-11, purchases from other industries (intermediate inputs) by the
Engines and Turbines industry, the Farm and Garden Machinery industry, and the Construction
U.S. Environmental Protection Agency 34 413-14
-------
TABLE 2-11
THE MAKE OF COMMODITIES BY INDUSTRIES, 1982
(in millions of dollars)
Industry Number
Commodity:
Agricultural, forestry, and fishery services
Coal mining
Repair and maintenance construction
Food and kindred products
Apparel
Lumber and wood products, except containers
Paper and allied products, except containers
Paperboard containers and boxes
Printing and publishing
Chemicals and selected chemical products
Paints and allied products
Petroleum refining and related industries
Rubber and miscellaneous plastics products
Stone and clay products
Primary iron and steel manufacturing
Primary nonferrous metals manufacturing
Heating, plumbing, and fabricated structural metal products
Screw machine products and stampings
Other fabricated metal products
Engines and turbines
Farm and garden machinery
Construction and mining machinery
Metalworking machinery and equipment
General industrial machinery equipment
Miscellaneous machinery, except electrical
Electric Industrial Equipment
Electric lighting and wiring equipment
Miscellaneous electrical machinery and supplies
Motor vehicles and equipment
Scientific and controlling instruments
Engines and Turbines
43
S
1
4
61
1
2
8
15
10
4
6
35
67
81
1.793
582
135
141
290
1,104
100
277
341
529
(*)
147
14
2
Optical, opthamalmic.and photographic equipment '< A
Miscellaneous manufacturing 2
Transportation and warehousing : 135
Communications, except radio and TV 67
Private electric, gas.water, and sanitary expenses : 208
Wholesale and retail trade : 660
Finance and insurance ; 67
Real estate and rental ' 24
Hotels;personal and repair services(except auto) • 19
Business and professional services except medical
Eating and drinking places
Automobile repair services
Amusements
Health, educational, social services and nonprofit organizations
Federal Government enterprises
259
30
28
1
%
0.01
0.05
083
0.01
0.03
0.00
0.11
0.20
0.14
0.05
0.08
0.48
0.92
1.11
24.49
7.95
1.84
1.93
3.96
15.08
0.00
0.00
1.37
3.78
4.66
7.23
0.00
2.01
0.19
0.03
0.05
0.03
1.86
0.92
2.84
9.02
0.92
0.33
0.26
3.54
0.41
0.38
0.01
4 0.05
17 I 0.23
i !
State and local government enterprises
Noncomparable imports
Scrap, used, and secondhand goods
Total Intermediate Inputs
Total Industry Output
Intermediate Inputs as % Total Industry Output
4 0.05
19
24
7,321
12,217
60
0.26
Farm and Garden
Machinery
44
$
2
4
97
1
(*)
45
3
29
10
14
43
24
483
34
1,183
107
237
102
729
1,259
49
427
314
34
7
93
56
3
4
2
221
43
176
1,081
52
22
17
455
46
8
C)
4
31
%
0.03
0.05
1.28
0.01
0.00
0.59
0.04
0.38
0.13
0.18
0.57
0.32
6.36
0.45
15.58
1.41
0.00
3.12
1.34
9.60
16.58
O.OO
0.65
5.62
4.14
0.45
0.09
1.22
0.74
0.04
0.05
0.03
2.91
0.57
2.32
14.24
0.68
0.29
0.22
5.99
0.61
Construction/Mining
Machinery
45
S
1
8
217
1
1
21
5
3
22
52
35
74
477
1 15
3.109
125
542
95
576
459
1.221
168
746
311
202
1
12
14
d
8
9
266
129
393
1,243
119
%
0.01
0.07
1.82
0.01
0.01
0.18
0.04
0.03
0.18
0 44
0 29
0.62
399
0.96
26.03
1 05
4 54
080
4.82
3 84
0.00
10.22
1.41
6 25
2.60
1.69
0.01
0.10
0 12
0 03
0.07
008
2 23
1 OS
3.29
10.41
1.00
71 0.59
43 0 35
799
88
0.11 20
0.00 1
0.05
0.41
2
25
0.33 15
! 7,592
12,598
60
0.03
0.33
0.20
5
33
4
87
8
11,942
23,736
6 69
0.74
0.17
001
0.04
0.28
0.03
0.73
0.07
50 ! .
Source: Survey of Current Business, by Department of Commerce, Bureau of Economic Analysis, 1991
(*) Less than $500,000
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
and Mining Machinery industry comprise 60, 60, and 50 percent, respectively, of each
industry's total industry output. It is, therefore, important to consider the secondary effects
which regulation might have on these intermediate input industries.
Total requirement input-output tables (only readily available at the 2-digit SIC level) are very
effective in illustrating the extent of these secondary effects — where these secondary effects
apply to those intermediate industries which supply products to the three 3-digit SIC industries
shown in Tables 2-10 and 2-11. Input-output tables can be used to specify the cumulative
impact of a change in a primary industry's output on all other industries, including the
interindustry transactions required to meet the changes in the structure of demand. Moreover,
these tables can be used to examine the pattern of inputs to the industries; an important
consideration in examining the market power of suppliers. A portion of one of these tables,
which illustrates the dollar inputs purchased by three of the 3-digit SIC industries relevant to
the small nonroad engine and equipment market, is shown in Table 2-11. The products most
purchased by these industries are those of the primary iron and steel manufacturing industry.
The industries for whom data is provided in Table 2-11 and the interindustry goods — Engines
and Turbines, Farm and Garden Machinery, and Construction and Mining Machinery —
purchase 24.5 percent, 15.6 percent, and 26.0 percent of their intermediate inputs from the
primary iron and steel industry, respectively.
A survey conducted by the Outdoor Power Equipment Institute (OPEI) provides another
glimpse into input patterns and potential secondary impacts of potential regulatory policy.9
OPEI's survey of members results offer a simplified look at commodity inputs by splitting
inputs into cost of materials and cost of components. The results of this survey are illustrated
in Table 2-12. Finished goods producers reported that a total of 9.5 percent of the value of
shipments was accounted for by raw materials, and 42.7 percent by components. OPEI's study
shows that the percentages for specific .raw materials, such as steel and plastics, changed little
9OPEI, "Profile of the Outdoor Power Equipment Industry," 1989.
U.S. Environmental Protection Agency 36 . 413-14
-------
TABLE 2-12
COSTS OF MATERIALS AND COMPONENTS
FOR OUTDOOR POWER EQUIPMENT MANUFACTURERS
Cost of Materials
Steel
Plastices
Cartons
Paint
Aluminum
Magnesium
Other
Total
*Less than $1 million
Cost of Components
Engines
Transmissions
Wheels
Attachments
Tires
Belts
Seats
Batteries
Bags
Other
Total
1988
Percent
48.5%
19.1%
1 6.3%
5.7%
4.2%
0.1%
6.1%
1 00%
1988
Percent
52.4%
7.6%
4.6%
3.0%
2.9%
1 .8%
1 .4%
1 .4%
1 .2%
23.7%
1988
Millions
$174
$69
$59
$20
$15
*
$22
$359
1988
Millions
$ 841
$ 122
$ 74
$ 48
$ 47
$ 29
$ 22
$ 22
$ 19
$ 381
1983
Percent
52%
21%
5%
2%
11%
1%
8%
100%
1983
Percent
58%
9%
6%
NA
NA
NA
NA
2%
2%
23%
1978
Percent
44%
13%
11%
2%
11%
*
19%
1 00%
1978
Percent
66%
3%
7%
NA
NA
NA
NA
1%
1%
22%
100%
$1,605 100%
100%
Source: OPEI Industry Survey, 1978, 1983, 1988
37
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
from 1983 to 1988. Although these data indicate a continuing decline in the value of engines
as a percent of all components, the relatively high percentage of components as part of total
value of shipments, a little over 22 percent, maintains engines as a major industry expenditure.
Overall, the OPEI member manufacturers spent 52.2 percent of their total value of shipments
on raw materials and components combined. The similarity in these results compared to the
range of 50 percent to 61 percent of total inputs illustrated in the interindustry input-output
table (Le., Table 2-11), and the fact that both also list steel and engines as the two major
inputs, lends credence to the data provided in this study.
2.5 NEW CAPITAL EXPENDITURES
How firms spend capital is an important part of the production process. A firm which needs
to invest heavily in new capital as a result of regulatory actions may find that their production
costs will rise. As a result, consumers may see these costs passed on in the form of higher
prices. Regulation may thus increase the capital expenditures of industries which need to
invest in new equipment to meet the regulatory goals.
Table 2-13 shows new capital expenditures over the period 1982-1990, and presents average
expenditure figures for the eleven 4-digit SIC industries considered in this study. For
comparison purposes, data for All Manufacturing Industries, as well as for the more aggregate
2-digit SIC industries, are also included. In general, new capital expenditures for the eleven
4-digit SIC industries have increased in conjunction with the 2-digit SIC industries and All
Manufacturing Industries. While most 4-digit SIC industries have had relatively stable growth
in their new capital expenditures, a few have recently had higher expenditures than their
average expenditures for the period 1982-1990. In particular, the Lawn and Garden Equipment
industry spent $127.1 million on new capital in 1989 and $111.2 in 1987. For this industry,
these yearly expenditures were about $40 million above their average yearly capital
U.S. Environmental Protection Agency 38 413-14
-------
TABLE 2-13
NEW CAPITAL EXPENDITURES,
BY INDUSTRY, 1982-1990
{in millions of current dollars)
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Purnps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
1990
101,953,1
8,293.8
9,237.1
10,578.7
524.6
210.1
82.2
638.1
49.0
98.4
146.2
60.3
238 8
24.0
43.0
1989
97,186.7
8,051,5
8,664.1
9,966.7
439.0
183.0
127.1
633.3
53.0
66.2
99.8
49.2
215.5
25.9
57.1
1988
80,567.3
6,854.6
7,972.4
7,147.3
467.3
179.7
97.4
462.8
55.2
59
102.2
70 7
205.2
16,7
26.5
1987
78,647.8
6,954.6
6,875.1
10,779.7
529.1
200.2
111.2
335.8
37.5
46.2
95.8
68.8
201.6
30,7
37.6
1986
76,354.5
6,690.6
9,059.8
11,295.3
338.0
138.9
54.0
296.0
30.8
72.1
142.9
68.0
232.7
21.4
29.0
1985
83,058.3
8,323.0
10,466,3
10,377.7
404.9
163.5
70.7
301 8
45.7
80.3
184.5
110.3
262.5
23 4
30.2
1984
75,185,8
8,035.2
9,992.3
8,026.3
417.3
158.7
65,9
248.1
36.3
50.6
175.5
115.3
244.9
20.3
20.8
1983
62,204.3
6,425.2
7,260.6
5,061.0
375.6
143.7
43.2
323.4
55.2
45.4
151.1
94.8
204.6
26.5
16.5
1982
74,561.6
8,537.2
7,542.4
7,214.4
599.9
341.2
51.1
419.4
80.3
68.1
227.5
118.1
275.4
23,1
15.0
Average
annual
Average growth rate
1982-1990 1983-1990
81,079.9
7,574.0
8,563.3
8,938.6
455.1
191.0
78.1
406.5
49.2
65.1
147.3
83,9
231.2
23.6
30.6
9.13
4.15
3.89
15.57
5.67
6,60
12.90
13.90
-1.60
16.68
-0.46
-5.20
2.39
-1.35
22.94
Source: Annual Survey of Manufactures, Statistics lor Industry Groups and Industries, 1990, 1988, 1986, 1984, and 1983.
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
expenditures for the period in question.
Table 2-13 also contains a measure of the average growth rate of new capital expenditures for
1983-1990. In general, the annual growth in capital expenditures is highest for the Lawn and
Garden Equipment industry and the Construction Machinery industry. Six 4-digit SIC
industries are characterized by growth in capital spending, while four have experienced little
or even negative growth. Although the Internal Combustion Engines industry enjoyed a
moderate current dollar growth rate of 5.67 percent over the period 1983-1990, this industry
spent most on new capital in 1982. This fact is even more striking given that the estimates in
Table 2-13 have not been adjusted for inflation.
Yet total capital expenditures alone do not indicate how regulation could impact an industry.
The breakdown of capital expenditures between machinery and buildings is also of
significance. Table 2-14 shows that machinery and equipment account for the bulk of capital
expenditures for the eleven 4-digit SIC industries included in this analysis. This table includes
data from 1990 to give an overview of how firms allocate capital. In general, firms included
under All Manufacturing Industries together spend a substantial portion of their capital on
machinery and equipment (about 84 percent). For the individual 4-digit SIC industries, the
percentages range from 92.4 for the Internal Combustion Engines industry to 73.3 for the
Pumps and Pumping Equipment industry. The high percentage of capital expended on
machinery and equipment emphasizes the capital intensity of these industries.
2.6 CAPITAL INTENSITY
Capital intensity is a measure of what portion of a firms' resources are spent on capital, and
is often measured by the ratio of capital to output. The total value of capital is presented in
Table 2-15 and is estimated as the gross book value of an industry's assets at the end of a
given year (which in this case is 1987). Output is measured in Table 2-15 by. the value of
shipments for the year. The ratio of assets to value of shipments provides an indication of
U.S. Environmental Protection Agency 40 413-14
-------
TABLE 2-14
NEW CAPITAL EXPENDITURES
FOR PLANT AND EQUIPMENT, 1990
(in millions of 1990 dollars)
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
Total
New Capital
Expenditures
101,953.1
8,293.8
9,237.1
10,578.7
524.6
210.1
82.2
638.1
49.0
98.4
146.2
60.3
238.8
24.0
43.0
Buildings
and other
structures
16,284.9
1,437.6
1,484.6
1,866.4
39.7
24.1
14.1
72.6
9.9
17.0
38.0
14.8
27.0
4.9
6.2
Percent
of Total
16.0
17.3
16.1
17.6
7.6
11.5
17.2
11.4
20.2
17.3
26.0
24.5
11.3
20.4
14.4
Machinery
and
Equipment
85,668.1
6,856.2
7,752.5
8,712.3
484.8
186.0
68.1
565.5
39.1
81.4
108.1
45.5
211.8
19.1
36.8
Percent
of Total
84.0
82.7
83.9
82.4
92.4
88.5
82.8
88.6
79.8
82.7
73.9
75.5
88.7
79.6
85.6
Source: Annual Survey of Manufactures, Statistics for Industry Groups and Industries, 1990.
-------
TABLE 2-15
VALUE OF SHIPMENTS AND GROSS BOOK VALUE
OF END OF YEAR ASSETS, 1987
(in millions of 1987 dollars)
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electric and Electronic Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipement, n.e.c.
Gross Book Value of Assets, End of Year
Total
921,657.8
79,952.1
66,566.1
89,000,9
5,672.8
3,038.9
861.6
5,465.2
662.8
647,7
1,546.3
1,154.4
2,643.4
252.6
370.9
Buildings
and Other
Structures
207,741.6
19,926.4
17,026.9
22,874.7
1,327.1
716.5
222.8
1,549.3
215.4
113.8
377.9
326.1
544.5
61.0
129.6
Machinery
and
Equipment
713,916.2
60,025.7
49,539.2
66,126.1
4,345.7
2,322.5
638.8
3,915.9
447.4
533.9
1,168.4
828.4
2,098.9
191.6
241.3
Value of
Shipments
2,475,901.0
217,669.6
171,286.4
332,935.7
11,122.6
6,879.9
4,594.4
12,767.7
2,440.2
2,161.8
3,998.3
3,050.9
6,753.1
1,062.6
1,642.1
Assets as
Percent
of Value of
Shipments
37.2
36.7
38.9
26.7
51.0
44.2
18,8
42.8
27.2
30.0
38.7
37.8
39.1
23.8
22.6
Source: Census of Manufactures, Industry Series, 1987.
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whether or not an industry is capital intensive. For example, Table 2-15 shows that All
Manufacturing Industries had an asset to output ratio of about 37 percent. The capital intensity
of the 4-digit SIC industries relevant to this study can be determined by comparing their capital
to output ratios to those of All Manufacturing Industries and to those of the 2-digit SIC code
industries. The ratios range from 18.8 percent for the Lawn and Garden Equipment industry
to 51 percent for the Internal Combustion Engines industry. While some industries seem to
be more capital intensive than others, it should be noted that if regulation impacts the capital
characteristics of the production process it is more likely to have an impact on engine
manufacturers rather than equipment manufacturers, since the Internal Combustion Engine
industry is the most capital intensive of the 4-digit SIC industries considered in this study.
In addition to capital intensity, the rate of capital turnover is also an important factor to
consider when conducting an economic impact assessment of regulation. All other things being
equal, if regulatory efforts induce retooling and investment in new capital, then those industries
that replace capital stocks quickly are likely to be less influenced by regulation. Table 2-16
presents new capital expenditures, as a percent of total capital stock, and capital turnover rates
for the industries relevant to this study. Capital turnover rates are calculated as follows:
Capital Expenditures x CTR = 100%
as a % of Capital Stock
where, CTR is the capital turnover rate and represents the number of years that it would take
an industry to replace 100 percent of its capital stock given the current capital expenditures to
capital stock ratio. Table 2-16 shows that the capital turnover rates for the 4-digit SIC
industries included in this analysis range from 12.7 years in the Power-Driven Hand Tools
industry to 32.1 years in the Industrial Trucks and Tractors industry. The Internal Combustion
Engines and Lawn and Garden Equipment industries have rates of 18.6 years and 15.7 years,
respectively, above the 13.5 year rate for All Manufacturing Industries, which can be
considered as the average capital turnover rate in the manufacturing sector.
U.S. Environmental Protection Agency 43 413-14
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TABLE 2-16
NEW CAPITAL EXPENDITURES AND
NET CAPITAL STOCKS, 1986
(in millions of 1986 dollars)
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Industrial Machinery and Equipment
Electric and Electronic Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipement, n.e.c.
Net Capital
Stocks,
Plant
350402.0
35427,0
31190,0
34091,0
2107.3
1645.0
369.4
3445.0
514.6
291.6
1012.6
496,3
1072.1
94.5
170.7
Net Capital
Stocks,
Equipment
680401.0
57634,0
51565.0
60603.0
4170.3
2321.1
476.6
4393.8
472.7
622.7
1796.6
896,3
2138.1
198.1
193.2
Total
Net Capital
Stocks
1030803,0
93061.0
82755.0
94694.0
6277.6
3966.0
845.9
7838.7
987.4
914,3
2809,2
1392,6
3210.2
292,6
363.8
New
Capital
Expenditures
76354.5
6690.6
9059.8
11295.3
338.0
138.9
54.0
296.0
30.8
72.1
142.9
68.0
232.7
21,4
29.0
Capital
Expenditures
as Percent
of Capital
Stock
7.4
7,2
10.9
11.9
5.4
3.5
6.4
3.8
3.1
7.9
5.1
4.9
7.2
7.3
8.0
Years
for
Capital
Replacement
13.5
13.9
9.1
8.4
18.6
28.6
15.7
26.5
32.1
12.7
19.7
20.5
13.8
13.7
12.5
Sources: Annual Survey of Manufactures, Statistics for Industry Groups and Industries, 1986, and Jack Faucett Associates,
Capital Stocks Data Update, JACKFAU-374-90, March 1990
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2.7 CONCENTRATION RATIOS
The type of competition which exists in an industry can have important implications in
assessing the impact of regulation, including both traditional command and control type
regulations and economic incentive approaches. Although the number of firms could be used
as a crude measure of what type of competition exists within an industry, it does not explain
how different firms impact the market. For example, an industry could have over two thousand
firms, but if only four firms account for 80 percent of total sales, then the market would seem
to be characterized by imperfect competition. Concentration ratios measure the relationship
between the sales of the entire industry and the sales of the largest firms. The higher the
concentration ratio, the further the industry is from the economic concept of a competitive
market. Noncompetitive markets often result in higher prices, lower output and misallocation
of resources. Moreover, the impact of regulation will differ depending on the degree of
competitiveness in the industry.
Table 2-17 shows concentration ratios for the eleven industries for the period from 1977 to
1987. In the Lawn and Garden Equipment industry, the 8 largest companies accounted for
over 70 percent of the value of shipments, while the 20 largest companies controlled 92 percent
of the market. The concentration ratios in the Internal Combustion Engines industry also
indicate that oligopolistic conditions (a situation where a few firms control the market) may
be present. In particular, the eight largest companies account for 74 percent of the market.
Over time, these two industries have become more concentrated, with the increase more
prevalent in the latter. Even the Farm Machinery and Equipment industry, which has the
largest number of companies and lowest concentration ratios of the eleven 4-digit industries
considered in this report, does not seem to be close to the competitive model. In general, these
industries exhibit characteristics of high concentration and imperfect competition.
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TABLE 2-17
CONCENTRATION RATIOS, BY INDUSTRY
1987, 1982, AND 1987
(as measured by share of Value of Shipments)
SIC
code
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipment, n.e.c.
Number of
companies
1987 1982 1977
224 202 187
1,576 1,787 1,868
149 151 137
872 817 807
448 463 450
1 83 1 80 99
333 516 515
223 239 148
349 349 343
242 269 343
617 • 408 408
4 largest
companies
1987 1982 1977
52 48 49
45 53 46
52 40 30
48 42 47
35 36 45
45 55 50
19 19 17
36 41 45
36 36 42
66 59 66
29 24 35
8 largest
companies
1987 1982 1977
74 66 70
52 62 61
71 57 51
56 52 59
44 51 61
66 73 70
31 30 29
50 57 64
49 50 55
74 79 81
41 33 46
20 largest
companies
1987 1982 1977
90 87 88
60 69 70
92 86 82
66 69 75
59 66 75
89 90 95
51 51 52
74 79 86
67 67 72
82 88 89
58 52 63
50 largest
companies
1987 1982 1977
97 97 98
69 77 78
98 97 96
79 81 86
76 80 86
96 97 99
77 77 78
91 92 96
84 84 86
90 94 94
70 72 79
Source: Census of Manufactures, Concentration Ratios in Manufacturing, 1987 and 1982,
Note: For SIC codes 3537, 3561, and 3569, data for 1982 and 1977 are from the 1982 report.
According to the 1987 report, the SIC codes for these industries have not changed from the 1972 system.
However, the defintion and content of these industries has changed greatly.
See Appendix C and the Industry Series report for these industries for
a comparison of the old and new SIC codes.
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2.8 CAPACITY UTILIZATION
Capacity utilization rates measure an industry's potential output as compared to its actual
output. In particular, these rates are measured as the ratio of the actual level of operations to
the full production level. A low ratio would imply that an industry has excess capacity and
is not operating near their maximum output level. Regulation could result in lower capacity
ratios if demand slackens or if, for example, a firm in the Internal Combustion Engines
industry incurs additional costs in conforming engines to meet the requirements of regulation.
If demand decreases (as a result of increased prices for the end-product), a firm may face
higher levels of inventory and, thus, lower its production rate. A lower production rate implies
lower capacity utilization.
Table 2-18 shows capacity utilization rates for the eleven 4-digit SIC industry categories
relevant to this study, as reported in the 1990 and 1988 Survey of Plant Capacity published by
the Commerce Department. Also provided, for comparison purposes, are data for AH
Manufacturing Industries, for durable goods manufacturers, and for the 2-digit SIC industries
encompassing the eleven 4-digit SIC industries relevant to this study. It is important to note
that the 1990 study used data on full capacity rates, while the 1988 study included practical
rates. Despite the change in terminology, however, the figures are both broadly defined as the
maximum level of production an establishment could attain under normal operating conditions.
The similar definitions imply that one can use the earlier data as an indication of general trends
of how capacity utilization rates have changed in the years from 1985 to 1990. The publishers
of the capacity utilization rates note, however, that many companies report capacity utilization
rates with 100 percent capacity based on production at 24 hours a day, 7 days a week. Yet
because most plants, including those operating at full production levels, do not operate every
day of the week for 24 hours, actual capacity utilization may be somewhat understated in Table
2-18,
U.S. Environmental Protection Agency 47 413-14
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TABLE 2-18
CAPACITY UTILIZATION RATES, BY INDUSTRY:
FOURTH QUARTERS 1985-1990
SIC
code
35
36
37
3519
3523
3524
3531
3537
3546
3561
3563
3621
3751
3799
Industry
All Manufacturing Industries
Durable Goods
Industrial Machinery and Equipment
Electronic and Electric Equipment
Transportation Equipment
Internal Combustion Engines, n.e.c.
Farm Machinery and Equipment
Lawn and Garden Equipment
Construction Machinery
Industrial Trucks and Tractors
Power-Driven Handtools
Pumps and Pumping Equipment
Air and Gas Compressors
Motors and Generators
Motorcycles, Bicycles, and Parts
Transportation Equipement, n.e.c.
1990
76
73
71
72
72
61
66
73
72
70
72
82
66
71
62
80
1989
77
75
73
76
73
63
66
73
83
73
80
85
66
78
61
84
1988
73
69
66
66
68
62
54
60
69
83
86
59
54
68
61
N/A
1987
70
67
63
67
67
55
43
78
61
73
66
57
58
61
55
N/A
1986
68
64
55
67
69
50
24
73
46
75
56
52
49
54
52
N/A
1985
68
65
59
66
67
59
37
72
48
76
68
59
49
58
47
N/A
Average
72
69
65
69
69
58
48
72
63
75
71
66
57
65
56
82
N/A: Not Available
Note: Capacities for 1989-90 are full production rates,
while capacities for 1985-88 are practical rates.
These two types of rates have similar definitions.
Source: Current Industrial Reports, Survey of Plant Capacity, 1990 and 1988
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An analysis of Table 2-18 indicates that capacity utilization rates have gradually increased
since 1985 in most of the industries relevant to this study.10 The largest increase occurred
in the Farm Machinery and Equipment industry, from 37 percent in 1985 to 66 percent in
1990. Such increases seem to correspond to the economic growth of the mid to late 1980's
following the long recession of the early 1980's. In general, these rates are in line with the
capacity utilization rates of All Manufacturing Industries and Durable Goods. Because an exact
measure of the efficient rate of capacity utilization is unknown, the capacity utilization ratios
for All Manufacturing Industries and Durable Goods are provided as the best available measure
of efficient capacity utilization. When a comparison is made between individual 4-digit SIC
industries and All Manufacturing Industries, only two 4-digit industries seem to be operating
with excess capacity: the Internal Combustion Engine industry and the Motorcycles, Bicycles.
and Parts industry, at 61 percent and 62 percent, respectively. From the available data, then,
it does not appear that the eleven 4-digit SIC industries exhibited particularly low capacity
utilization ratios in 1990, based on time-series or cross sectional comparisons.
More recent industry based information, however, appears to contradict this finding. For
example, an article in the July-August 1992 issue of Power Equipment Trade magazine reports
that excess capacity exists in the outdoor power equipment industry. The author, Robin
Pendergast, a representative from a power equipment industry public relations firm, notes that
this problem has existed in the industry for several years. He points out that, although low
precipitation levels in the ..Northeast and Midwest may have some effect on industry sales, the
real cause for this decline stems from structural problems within the power equipment industry.
In addition, while such an indication seems inconsistent with the data in Table 2-18, the recent
recession may have caused capacity utilization rates in the Lawn and Garden Equipment
Industry, which seemed to have been fairly constant since 1985, to decline since 1990.
According to the author, current economic conditions have reduced the likelihood of consumers
purchasing the amount of goods that manufacturers need to sell in order to make a profit. In
'"Data were not available for the Transportation Equipment, n.e.c. industry on capacity utilization
rates from 1985 to 1988.
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short, the opinions of the author suggest that the loss of profits means that some manufacturers
will be forced to shut down operations, causing firms to exist the market.
Recent restructuring and consolidating actions taken by several producers provide additional
evidence supporting the view that excess capacity exists. Companies such as Fuqua Industries
(Snapper) have consolidated three manufacturing facilities into one while reconfiguring and
modernizing the same plant in 1991. Toro has streamlined its Lawn-Boy operation (which it
purchased from Fuqua) and reduced overhead by closing a plant, eliminating some low volume
product lines, and restructuring its parts fabrication processes. In its 1991 financial statements,
Tecumseh had a provision of $15.5 million for the estimated costs of consolidating certain
manufacturing operations. Furthermore, JI Case and International Harvester, both owned by
Tenneco, have combined operations under the name Case IH. Deere & Co. reported
restructuring costs in its agricultural equipment, industrial equipment, and lawn and grounds
care business segments of $128 million, $44 million, and $10 million respectively. The effect
of individual company operations restructuring on the industry-wide capacity situation is not
yet clear. More consolidating may occur across different companies as well as within
companies.
2.9 DEBT AND PROFITABILITY
The financial status of an industry likely to be impacted by regulation will be of interest to
policymakers. If firms are very profitable, then the cost of regulation may not have detrimental
effects. On the other hand, if the firms have low profitability rates or are unprofitable,
regulation could cause some firms to exit the market. The profitability of a firm is often
measured by the average return on equity. The amount of debt that the firm carries, as
compared to its total assets, is another important factor that should be examined since high debt
to assets ratios imply that a firm's assets are heavily financed by debt. This may make it
difficult for the firm to acquire additional credit for investments in new capital to meet
regulatory goals. If the debt to equity ratio is closer to the average for the major industries,
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it may be easier for such a firm to get loans to finance new capital expenditures. Furthermore,
as a result of recent declines in interest rates, companies may be more inclined to finance
purchases of new capital. It should be noted, however, that interest rates fluctuate according
to the monetary policy of the Federal Reserve, and thus current trends may change in the
future.
Table 2-19 shows the average return on equity and the average debt to assets ratio for 1980
and 1988, and the percent change for All Manufacturing Industries and seven minor industries.
The minor industries are divided by Statistics of Income Classification Codes instead of SIC
codes because of the differences in the reporting processes between Census data and IRS
financial data. Statistics of Income Classification Codes roughly correspond to 3-digit Standard
Industrial Classification Codes (SIC)." The debt and profitability data presented in this
section should, thus, be interpreted with caution, since industries may be included in the
profitability analysis which are not part of the nonroad small engine and equipment industry.
For example, Statistics of Income Classification Code 3598 (Other Machinery, Except
Electrical) is partly based on SIC Code 351 and includes financial information on automobile
engines (SIC Code 3511).
With this caveat in mind, for All Manufacturing Industries, the average return on equity
decreased from 14.1 percent in 1980 to 13.2 percent in 1988. Four of the seven minor
industries also experienced a decline in the average return on equity. For the General Industrial
Machinery industry, this return fell from 11.9 percent to 11.3 percent, only two percentage
points below the average for All Manufacturing Industries. The average return on equity fell
by 6 percent for the Metalworking Machinery industry and by 4.3 percent for the Other
Electrical Equipment industry. A larger decline took place in the Construction and Related
Machinery industry, a decrease of 6 percent from 17.3 percent in 1980 to 11.3 percent in 1988.
"The reader is referred to "A General Description of the Corporation Source Book," published by
the Department of Treasury, for a detailed mapping of Statistics of Income Classification Codes, Standard
Industrial Classification Codes, and Enterprise Standard Industrial Classification Codes.
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TABLE 2-19
FINANCIAL DATA BY INDUSTRY, 1980 AND 1988
Statistics
of Income
Ciassifiction
Code
3520
3530
3540
3560
3598
3698
3798
Industry
Ail Manufacturing Industries
Farm Machinery
Construction and Related Machinery
Metalworking Machinery
General Industrial Machinery
Other Machinery, except Electrical
Other Electrical Equipment
Other Transportation Equipment
1988
Average Average Debt
Return to Assets
on Equity (ratip)
13.2 31,8
17.9 42.0
11.3 28.5
11.6 30.5
11.3 25.6
13.0 41.0
12.1 35.6
13.5 42.4
1980
Average Average Debt
Return to Assets
on Equity (ratio)
14.1 25.2
3.7 43.4
17.3 25.7
16.1 23.7
11.9 20.7
10.2 23.8
16.4 25.9
3.3 33.4
Percent Change, 1980-1988
Average Average Debt
Return to Assets
on Equity (ratio)
-0.9 6,6
14.1 -1.4
-6.0 2.8
-4.5 6.8
-0.6 5.0
2.8 17.2
-4.3 9.6
10.2 9.0
(SJ
Source; Statistics of Income, Corporation Source Book, Internal Revenue Service, 1980 and 1988.
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The large decline in the average return on equity for the Construction and Related Machinery
Industry could be due to the current oversupply of commercial buildings, changes in the 1986
tax act, and the natural tendency for construction to be a boom-and-bust industry. Yet three
of the seven minor industries saw a rise in their average return on equity between 1980 and
1988. In particular, the Farm Machinery industry had an increase from 3.7 percent to 17.9
percent, while the Other Transportation Equipment industry also experienced a marked
increase, from 3.3 percent to 13.5 percent. The rise in Other Machinery, except Electrical
industry was more modest, from 10.2 percent to 13.0 percent, only a 2.8 percent increase.
In general, the average return on equity ratios for the seven minor industries were quite
healthy, the lowest being 11.3 percent. However, five of the seven minor industries.
Construction and Related Machinery, General Industrial Machinery, Other Machinery, except
Electrical. Metalworking Machinery, and other Electrical Equipment, had average returns on
equity below the average for All Manufacturing Industries. The Farm Machinery and Other
Transportation Equipment industries had average returns on equity higher than that for
manufacturing as a whole.
Although cash flow, quick ratios, coverage ratios, and other liquidity constraints arc often used
by lenders to evaluate firms, the average debt to assets ratio is the best readily available
industry level indicator on the availability of credit for capital investment. Table 2-19 shows
that the debt to assets ratio for All Manufacturing Industries rose from 25.2 percent to 31.9
percent between 1980 and 1988. The average debt to assets ratios also rose for six of the
seven minor industries during this time. For Farm Machinery, the ratio fell from 43.4 to 42.0
percent, a 1.4 percent decrease. The largest increase, at 17.2 percent, occurred in the Other
Machinery, except Electrical industry. Because manufacturing as a whole was using more debt
to finance new capital purchases in 1988 than in 1980, an indication of whether or not these
industries have high debt to assets ratios depends on how they compare with All Manufacturing
Industries. The Farm Machinery industry financed 40 percent of the purchases of assets with
debt. As a result, this industry may have difficulty in obtaining the financing needed to
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purchase new machinery and equipment. Yet obtaining credit depends in some part on an
industry's earning potential. A profitable company with a high ratio of debt to assets would
have less difficulty in getting financing than an unprofitable company. Thus, when considering
how industries finance their purchases, it is important to consider the profitability of these
industries as well.
2.10 SECTION SUMMARY
This section summarizes each 4-digit SIC industry's structure, conduct, and performance
through a compilation of the economic indicators discussed in earlier parts of Section 2.
Summaries of economic indicators are provided for each of the 4-digit SIC industries in
isolation. Three general areas are discussed that provide a thorough profile of each relevant
industry. These are:
• Relative industry size: in terms of its contribution to GDP, trends in output, and
trends in employment levels.
• Relative capital intensity: as described by assets to output (or value of
shipments) ratios and capital turnover rates.
Relative performance (health): as described by industry concentration, capacity
utilization, and profitability. It should be emphasized that profitability data may
be misleading given that estimates are derived via Statistics of Income
Classification codes that do not often map well to 4-digit SIC codes.
Where available from the Department of Commerce's U.S. Industrial Outlook, an indication
of the long term prospects for a given industry is provided as well.
£7.5. Environmental Protection Agency 54 413-14
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Internal Combustion Engines, n.e.c. (SIC 3519)
The Internal Combustion Engines industry is among the larger of the eleven 4-digit SIC
industries, as output in 1990 was 0.27 percent of GDP. Yet constant dollar sales declined 9.6
percent from 1984 to 1990, which compares unfavorably to All Manufacturing Industries
(which exhibited an increase of 11.3 percent) and SIC 35 (which increased by 7.3 percent).
Value added can also provide an indication of the value of an industry's output for which it
is responsible. The Internal Combustion Engine industry accounted for about 40 percent of
the value of its product, less than the corresponding figures for All Manufacturing Industries
(46.2 percent) and Industrial Machinery and Equipment (51.6 percent). However, its own
contribution is nonetheless important, indicating that their production costs are an important
part of how their prices are determined.
Relative to All Manufacturing Industries and the Industrial Machinery and Equipment industry,
which had assets to output ratios of 37.2 percent and 36.7 percent, respectively for 1987, the
Internal Combustion Engines industry, with a ratio of 51 percent, is highly capital intensive.
This result implies that capital is a significant part of the production process for this industry.
Capital turnover rates may also be important should investment in new capital be necessary,
all else being equal. The Internal Combustion Engine industry takes 18.6 years to replace its
capital stock, which is longer than the corresponding figure for All Manufacturing Industries
(13.5 years) and SIC 35, Industrial Machinery and Equipment, (13.9 years).
The Internal Combustion Engines industry seems to also exhibit characteristics of imperfect
competition, as the 8 largest companies controlled 74 percent of the market in 1987.
Furthermore, niche markets within the Internal Combustion Engines industry also appear to be
highly concentrated. As shown in Section 4 of this report, different manufacturers appear to
control different segments of the small nonroad engine industry (e.g. Briggs & Stratton
dominates unit sales in the 0-25 horsepower gasoline segment). In addition, the Internal
Combustion Engines industry exhibits excess capacity, since it operated at only 61 percent
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capacity in 1990. As for the profitability of this industry, the average return on equity for
1988 was slightly less than the corresponding figure for All Manufacturing Industries. Yet it
should again be noted that the financial data indicated in Table 2-19 may include industries not
included in the small nonroad engine and equipment industry.
Farm Machinery and Equipment (SIC 3523)
While this industry is the largest of the eleven 4-digit SIC industries included in this study, in
terms of the number of companies (1,576 in 1987), it is the third largest in terms of its overall
contribution to GDP. In particular, it accounted for 0.26% of GDP in 1990, slightly less than
the Internal Combustion Engines industry. Constant dollar shipments were up slightly by
2.3%, less than the increases for All Manufacturing Industries and the Industrial Machinery and
Equipment industry (SIC 35). Value Added as a percent of output was 51.8 percent in 1990,
which illustrates that the industry accounts for over half of the value of its product.
The Farm Machinery and Equipment industry appears to be capital intensive, with an assets
to output ratio of 44.2%. Capital thus plays an important role in the production process.
Capital turnover rates are also high for this industry, as it takes 28.6 years for the industry to
replace its entire capital stock. As illustrated by Table 2-16, this figure is more than twice as
long as it would take All Manufacturing Industries to replace their capital stock. It should
again be noted that these figures are important if retooling is necessary as a result of regulatory
action.
Like other firms within the nonroad engine and equipment industry, this industry seems to be
characterized by imperfect competition. While the industry has the lowest concentration ratio
of the eleven 4-digit SIC industries in terms of the percent of the market controlled by the 50
largest companies, it nonetheless does not seem close to the competitive model. In particular,
the 50 largest companies controlled 69 percent of the market in 1987. According to Table 2-
18, the Farm Machinery and Equipment industry is operating with some excess capacity,
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although its capacity utilization rates have increased to 66 percent capacity in 1990 from only
24 percent in 1986. Excess capacity implies that the industry may be maintaining plants that
are not used as part of the production process and, thus, that this process is not efficient.
Because the Statistics of Income Classification code relevant to the Farm Machinery and
Equipment industry includes both 4-digit SIC codes 3523 and 3524, the profitability analysis
for the Farm Machinery and Equipment industry also applies to the Lawn and Garden
Equipment industry. For 1988, profitability for this industry seemed quite good, with the
average return on equity up to 17.9 percent, a 14.1 percent increase from 1990. The average
debt to asset ratio, however, is among the higher of the seven minor industries considered in
Table 2-19, at 42 percent.
According to the U.S. Industrial Outlook for 1992, the outlook for the Farm Machinery and
Equipment industry is not easy to predict, depending in large part on the global economy,
global weather, and foreign and domestic agricultural policies. While the number of farms has
declined over the last four decades, from 5,399,437 in 1950 to 2,104,560 in 1991, farms have
become larger and agriculture has become more mechanized. Farm machines will be designed
with faster work cycles and more attachments for different jobs. In addition, unspecified
environmental regulations could increase costs for manufacturers.
Lawn and Garden Equipment (SIC 3524)
Table 2-8 shows that the Lawn and Garden Equipment industry accounted for 0.11 percent of
GDP in 1990, a higher contribution than 5 of the eleven 4-digit SIC industries and a lower
contribution than 4 industries (equal to the same contribution of Pumps and Pumping
Equipment, SIC 3561). Constant dollar shipments have increased sharply, with a 33.1 percent
increase from 1984 to 1990. Table 2-4 shows that roughly the same number of companies
were responsible for the increased output, indicating that new firms entering the industry may
not have been responsible for higher output. Value added as a percent of output for the
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industry in 1990 was 40,9 percent, roughly the same as the Internal Combustion Engines
industry.
This industry does not seem to be capital intensive, as assets were only 18.8 percent of output
in 1990, less than the corresponding percentages for All Manufacturing Industries and the
Industrial Machinery and Equipment industry (SIC 35). In addition, capital turnover rates are
15,6 years, slightly above the average for All Manufacturing Industries, As a result, should
regulation result in new purchases of capital, the industry may not have as much difficulty as
other industries in adapting to regulatory actions.
Concentration in this industry is high, as the 8 largest companies control 71 percent of the
market. These companies may have the ability to influence the price of their products. Yet
the industry does not seem to have excess capacity, with a capacity utilization rate of 73
percent. This figure is slightly less than the 76 percent rate for All Manufacturing Industries
but is higher than the 71 percent rate for the Industrial Machinery and Equipment industry (SIC
35). Profitability, as noted earlier, was covered in the summary section for the Farm
Machinery and Equipment industry (SIC 3523),
Constant dollar shipments are expected to grow at an annual rate of 2 percent over the next 5
years for the Lawn and Garden Equipment industry. The U.S. industrial Outlook attributes this
increase to several factors, first among them are demographic changes in the U.S. population.
In particular, the fastest growing age group, 44-54, will be near their maximum earning
potential, which should result in larger expenditures on lawn and garden equipment. The report
also notes that many of these consumers will be more inclined to upgrade their current
properties, which may entail landscaping. The removal of trade barriers in Mexico and Canada
as a result of the proposed North American Free Trade Agreement (NAFTA) should give
companies in the three North American countries the opportunity to expand their exports. In
addition, the report mentions that possible environmental standards may have an impact on
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sales, but the report does not give a clear indication of whether or not these regulations will
cause sales to increase or decrease.
Construction Machinery (SIC 3531)
The Construction Machinery industry is the largest contributor to GDP of the eleven 4-digit
SIC industries, given that shipments in 1990 accounted for 0.36 percent of GDP. In particular,
shipments in constant 1984 dollars were $14,108.5 million, an 11.2 percent increase from 1984,
The industry's value added as a percent of output was 42.3 percent in 1990, illustrating that
it is responsible for a substantial portion of the value of its products.
This industry also appears to be capital intensive. In 1987, it had an assets to output ratio of
42.8 percent. In fact it is one of three industries (along with SIC's 3519 and 3523).of the
eleven 4-digit SIC industries to have a ratio of over 40 percent. The capital turnover rate for
the industry is also high, at 26.5 years. The high turnover rate can be attributed to the fact that
new capital expenditures are a small percentage of the capital stock for the industry.
Within the industry, the 50 largest companies control 79 percent of the market. Capacity
utilization, however, seems to be relatively efficient, as the Construction Machinery industry
had a capacity utilization rate of 72 percent for 1990.
Profitability has decreased somewhat for the Statistics of Income Classification Code relevant
to this industry (i.e., 3530)12, from an average return on equity of 17.3 percent for 1980 to
11.3 percent in 1988. While profitability has declined, the industry has seen a slight increase
of 2.8 percent in its average debt to assets ratio. However, this 28.5 percent figure is still less
than the 31.8 percent ratio for All Manufacturing Industries.
l2Statistics of Income Classification Code 3530 also pertains to the Industrial Trucks and Tractors
Industry (SIC 3537).
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According to the U.S. Industrial Outlook, the Construction Machinery industry is expected to
see a 2.2 percent increase in sales for the period of 1992 to 1996. Increased expenditures in
infrastructure, as well as construction of new power generating plants, resource recovery plants,
and water treatment facilities are given as potential reasons for the increase in sales in this
industry. The report also notes that construction machines will be more efficient, meaning that
fewer machines will be required. Such changes could serve to reduce the amount by which
the industry is expected to expand.
Industrial Trucks and Tractors (SIC 3537)
While not the smallest of the eleven 4-digit SIC industries, this industry only accounted for
0.06 percent of GDP in 1990. In addition, constant dollar shipments increased a moderate 6.2
percent from 1984 to 1990. The industry accounts for 38 percent of the value of its output,
which is less than the other eleven 4-digit SIC industries except the Transportation Equipment
industry. Yet this figure indicates that their production costs are nonetheless an important part
of how price is determined within this industry.
The Industrial Trucks and Tractors industry is not as capital intensive as some of the other
eleven 4-digit SIC industries but did have an assets to output ratio of 27.2 percent for 1990.
The capital turnover rate for this industry is the highest of the eleven industries, as it takes the
industry 32.1 years to replace its entire capital stock, given their level of new capital
expenditures.
Although concentration ratios have declined somewhat from 1982 to 1987, the fifty largest
companies in 1987 controlled 76 percent of the market, probably indicating a state of imperfect
competition, though not as much so as other industries. Capacity utilization rates are about
average as compared to Industrial Machinery and Equipment (SIC 35), as the rate was 70
percent for 1990. Profitability, as already noted, was discussed in the summary for
Construction Machinery.
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Power-Driven Handtools (SIC 3546)
This small industry, which accounted for 0.06 percent of GDP in 1990, had a 22.2 percent
increase in constant dollar shipments for the period of 1984 to 1990. Value added as a percent
of value of shipments shows that the industry is responsible for over half of the value of its
output. In particular, this figure was 52.5 percent for 1990. To reiterate, only chainsaws, from
the multitude of products produced in this industry, are relevant to the small nonroad engine
and equipment industry, however.
The industry does not seem particularly capital intensive, with a capital to output ratio of 30
percent for 1990. In addition, it would take the industry only 12,7 years to replace its entire
capital stock.
High concentration ratios also characterize the Power-Driven Handtools industry, with the 20
largest companies controlling 89 percent of the market in 1987. The industry also does not
seem to have excess capacity since its capacity utilization rate for 1990 was 72 percent.
Profitability was down 6 percent as the average return on equity fell to 11.6 percent. However,
the average debt to assets ratio increased by 6.8 percent, which compares unfavorably with the
decrease in profitability.
The U.S. Industrial Outlook states that this industry will expand by a compound annual rate
of 1.5 percent in constant dollars over the next five years. Expanding residential and
nonresidential building construction could play a part in obtaining this growth rate. The report
points out that more people will use power tools, attracting new consumers to the industry.
Pumps and Pumping Equipment (SIC 3561)
This industry had the same 0.11 percent contribution to GDP in 1990 as the Lawn and Garden
Equipment industry. However, the Pumps and Pumping Equipment industry has contracted the
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most of the eleven 4-digit SIC industries in terms of the percent decrease in the number of
companies, a decline of 35.5 percent from 1982 to 1987. The industry was responsible for
52.8 percent of the value of its output in 1990, which is the largest contribution of the eleven
4-digit SIC industries included in this study. Employment has also fallen dramatically, by 35
percent from 1984 to 1990, which corresponds with the decrease in the number of companies.
This industry's assets to output ratio in 1990 stood at 38.7 percent, which is slightly above
average for All Manufacturing Industries. In addition, the industry would take 19.7 years to
replace its capital stock, about 4 years longer than the corresponding figure for the Lawn and
Garden Equipment industry (SIC 3524). However, this latter industry is less capital intensive
than the Pumps and Pumping Equipment industry.
Despite the large decline in the number of companies within the industry, the 50 largest
companies still controlled 77 percent of the market in 1987, the same concentration level as
in 1982. This industry has apparently become more efficient, as illustrated by the capacity
utilization rate in 1990 of 82 percent, up from 59 percent in 1988.
Because the Statistics of Income Classification code 3560 includes 3-digit SIC 363, the analysis
of profitability for the Pumps and Pumping Equipment industry also applies to the Air and Gas
Compressors industry (SIC 3563). In particular, profitability has remained fairly constant at
11.3 percent while the average debt to asset ratio increased slightly by about 5 percent, to 25.6
percent. Both figures are lower than those for All Manufacturing Industries, which indicates
that, by this standard, the industry appears to be relatively healthy.
Air and Gas Compressors (SIC 3563)
In terms of its contribution to the overall economy for 1990, the Air and Gas Compressors
industry accounted for 0.08 percent of GDP. In contrast to the Pumps and Pumping Equipment
industry, the Air and Gas Compressors industry had an increase of 7.5 percent in constant
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dollar sales from 1984 to 1990. This industry also was responsible for 46,5 percent of the
value of its output in 1990,
Capital intensity for the industry is about the same as that for the Pumps and Pumping
Equipment industry. In particular, the assets to output ratio of the Air and Gas Compressors
industry was 37.8 percent in 1990. Thus, the industry seems to be somewhat capital intensive.
According to Table 2-16, it would take the industry 20,5 years to replace its capital stock.
The industry seems to be highly concentrated, as demonstrated by the fact that the 20 largest
companies controlled 74 percent of the market in 1987. In addition, the industry had a below
average capacity utilization rate of 66 percent in 1990, which, while up from a level of 49
percent for 1986, is still less than the level for All Manufacturing Industries and the Industrial
Machinery and Equipment industry (SIC 35).
Motors and Generators (3621)
This industry, which has not seen any change in the number of companies from 1982 to 1987,
is among the larger of the eleven 4-digit SIC industries in terms of its overall contribution to
GDP (about 0.18 percent in 1990). In contrast to the 4.8 percent decline for the Electronic and
Electric Equipment industry (SIC 36), the Motors and Generators industry had an increase of
4.2 percent in constant dollar value of shipments. The Motors and Generators industry also
accounts for 52.2 percent of the value of its output, which is among the higher percentages of
the eleven 4-digit SIC industries.
In 1987, the industry had an assets to output ratio of 39.1 percent, roughly the same as the
corresponding value for the Electronic and Electric Equipment industry (SIC 36). The capital
turnover rate for the Motors and Generators industry does not seem especially high, as it would
take the industry 13.8 years to replace its entire capital stock.
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While the 20 largest companies controlled 67 percent of the market in 1987, the 50 largest
companies controlled 84 percent of the industry. Thus, the Motors and Generators industry
seems to also be characterized by imperfect competition. Capacity utilization seems is average
at a capacity utilization rate of 71 percent in 1990. The average return on equity has fallen by
4.3 percent for the industry, while the debt to asset ratio has increased by 9.6 percent, to 35.6
percent. As a result, the industry may have 'difficulty in financing new capital expenditures.
•
The U.S. Industrial Outlook notes that the industry is expected to grow at a compound annual
rate of 2 percent from 1992 to 1996. The increase is attributed to future growth in U.S.
industrial production, as well as an increase in new construction. Higher energy costs will
increase the demand for more efficient motors. The report also points out that motors are
responsible for over half of the total power costs of the average industrial user.
Motorcycles, Bicycles, and Parts (SIC 3751)
The Motorcycles, Bicycles, and Parts industry is the smallest industry of the eleven 4-digit SIC
industries since it contributed only 0.03 percent to GDP in 1990. While the number of
companies has declined by 10 percent from 1982 to 1987, constant dollar sales increased by
10 percent from 1984 to 1990. Value added as a percent of value of shipments was 37.7
percent for the industry slightly less than the figure for Transportation Equipment (SIC 37),
which was 39.9 percent for 1990.
The Motorcycles, Bicycles, and Parts industry does not seem to be capital intensive, with an
assets to output ratio of 23.8 percent for 1990. In addition, it would take the industry 13.7
years to replace its capital stock. These two figures imply that the industry would have less
difficulty adapting to regulatory actions resulting in new capital expenditures than an industry
which is capital intensive.
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Within the industry, the 50 largest companies control 90 percent of the market. The
Motorcycles, Bicycles, and Parts industry has some excess capacity, demonstrated by the below
average capacity utilization rate of 62 percent in 1990.
Profitability increased dramatically in the Statistics of Income Classification Code (3798)
relevant to this industry,b from an average return on equity of 3.3 percent in 1980 to 13.5
in 1988. Yet this increase coincided with an increase in the average debt to asset ratio, which
rose from 9 percent to 42.4 percent during this period. This latter figure implies that acquiring
credit may be difficult for the industry, although the increase in the average return on equity
may indicate that the industry may be in relatively good financial health.
Due in large part to strength in the export sector, domestic product shipments will, according
to the U.S. Industrial Outlook, increase at an annual rate of 2 percent from 1992 to 1996. Yet
the report notes that consumption on the domestic level will not increase, in part as a result of
the safety concerns of consumers about motorcycle riding. In addition, NAFTA, by lowering
tariffs, may help augment foreign demand for U.S. motorcycles.
Transportation Equipment, n.e.c. (3799)
The Transportation Equipment industry is slightly larger than the Motorcycles, Bicycles and
Parts industry, contributing 0.05 percent to GDP in 1990. The Transportation Equipment
industry can thus be considered one of the smaller of the eleven 4-digit SIC industries. Both
constant dollar sales and the number of companies have increased dramatically in this industry,
however, with a 62 percent increase from 1984 to 1990 for the former and a 51.2 percent
increase from 1982 to 1987 for the latter. The industry also accounted for 32.2 percent of the
value of its output in 1990.
°SIC 3799, Transportation Equipment, n.e.c., is also included under this Statistics of Income
Classification Code.
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Capital intensity seems low for this industry, which had an assets to output ratio of 22.6
percent for 1990. In addition, it would take the industry 12.5 years to replace its capital stock,
less time than any of the eleven 4-digit SIC industries. Thus, should regulation result in new
capital expenditures, the effect on the Transportation Equipment industry may not be as large
as it may be for more capital intensive industries.
While the industry is less concentrated than most of the other eleven 4-digit SIC industries, the
50 largest companies nonetheless controlled 70 percent of the market in 1987. In addition, the
production process appears to be efficient, with a capacity utilization rate of 80 percent for
1990.
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SECTION 3
COMPETITIVE FEATURES
As discussed in the summary to Section 2, many of the eleven 4-digit SIC industries
encompassing the small nonroad engine and equipment industry are characterized by significant
value added, fairly high concentration, growth in the value of shipments, capital intense
production processes, high capital turnover, and relatively efficient capacity utilization. These
basic industry trends determine the competitive nature of the industry and condition the
interactions of the firms that form these industries with suppliers, consumers and each other.
The purpose of this section is to analyze selected competitive features of the small nonroad
engine and equipment industry. This analysis is designed to aid in developing an
understanding of the market that will be useful in designing a regulatory policy towards
emissions.
Seven subjects are discussed in this section. Section 3.1 examines the product distribution
networks, illustrating and discussing the flow of goods and services from raw material
producers to retail customers. Section 3,2 discusses vertical and horizontal integration, which
examines the competitive nature between supplier and customer or producers of similar
products. Section 3.3 examines barriers to entry, which are advantages held by existing firms
over those firms that might potentially produce in a given market. Section 3.4 examines the
market power found in the various relationships between components of the small nonroad
engine and equipment industry. Section 3.5 discusses substitute power sources and equipment,
examining the feasibility and possible penetration of hand, electric, and clean fuel powered
technologies. Section 3.6 examines the U.S. competitive situation with respect to the global
small nonroad engine and equipment industry. Section 3.7 examines the characteristics of end
users and the factors that influence demand for small nonroad equipment.
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3.1 PRODUCT FLOW AND DISTRIBUTION NETWORKS
As discussed earlier, the small nonroad engine market is best described as a chain of industries
that: convert raw materials into components, engines, and equipment; distribute the final
product to end users; and, provide service and parts as required. The establishment of
regulation or alternative market based regulatory approaches will impact this chain of industries
in a variety of ways. The structure of this chain, and the characteristics of the industries that
comprise it, will influence how successful alternative control strategies will be in practice. The
purpose of this section is to describe this chain of industries with particular focus on the
current structures and projected trends that may be important to regulatory design and impact
analysis.
This section begins with a focus on the engine manufacturers and the distribution of their
product to export markets, end users, and the equipment industry. The analysis then shifts to
the equipment industry focusing first on distribution common to the industry. Finally, the
peculiarities of the distribution networks for general equipment subgroups are discussed.
Included are sections covering lawn and garden equipment, recreational vehicles, farm
equipment, and small equipment for construction, commercial, and industrial end users.
3.1.1 Engine Manufacturers
Figure 3-1 provides a schematic of the relationships and flow of goods for engine
manufacturers. To begin the process, raw materials and components are purchased from
suppliers. Necessary raw materials include the steel and aluminum required to manufacture
engine parts. Purchased components might include spark plugs, carburetors, mufflers, filters,
and other parts. The amounts and types of purchased components will vary from one
manufacturer to another. Some engine manufacturers make their own parts, others purchase
components. Die-cast molds are used to forge parts. The finished parts and components are
assembled into engines on an assembly line.
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Figure 3-1: Engine Manufacturer-Product Distribution Network
Raw Material
Suppliers
-Steel
-Aluminum
-Other
Component
Suppliers
-Spark Plugs
-Carburetors
-Mufflers
-Filters
-Other
Engine
Manufacturers
Equipment
Manufacturers
Distributors
Exports
Large-Scale
End Users
(replacement engines)
Dealer/Retailer
Service Outlets
(replacement engines)
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Complete engines are sent to one of three places; equipment manufacturers, distributors, or
export markets. A great deal of engines are sold directly to equipment manufacturers. In cases
where engine manufacturers are vertically integrated, these sales would be recorded as intra-
company transfers. Direct sales to equipment manufacturers is particularly common for high
volume consumer equipment and for technically demanding equipment for the commercial
market. The large volume engine manufacturers such as Briggs & Stratton and Tecumseh sell
directly to mass merchandiser equipment manufacturers such as Murray Ohio Mfg. and
American Yard Products. Price and economies of scale14 are the primary factors of
competition for engine sales to mass merchandisers. For direct sales to equipment
manufacturers producing mid-range and premium priced equipment, engineering and design
cooperation is essential. In these cases, the engine manufacturers also work closely with the
equipment manufacturers to develop superior products.
For smaller equipment manufacturers, or for some of the cases where there is no need for
technical cooperation, it is usually not cost effective for the engine manufacturer to sell engines
directly to the equipment manufacturer. In these cases, engine manufacturers often ship
engines to independent wholesale distributors. As independent businesses, these distributors
carry engines from multiple manufacturers. The distributors then sell the engines to original
equipment manufacturers (OEM's) to be installed as product components. Distributors also
sell "loose" engines as replacement parts. Large-scale end-users and dealers/retailers who
provide service on used equipment are the most frequent purchasers of replacement engines.
Engines not sold to equipment manufacturers or domestic distributors are shipped as exports.
Detailed information and analyses on the current engine exports situation and forecasted trends
are provided in a later section of Section 3.
l4An economy of scale is said to exist when larger output is associated with lower average cost,
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3.1.2 Equipment Manufacturers
Manufacturers of nonroad equipment utilizing internal combustion engines of 50 horsepower
or less rely primarily on unaffiliated retail outlets to sell their products. Although the
manufacturers choose the dealers that represent them and have certain controls over them, these
dealers are almost exclusively independent businesses. Only a few manufacturers are able to
retain exclusive dealerships. Stihl, for instance, retains dealers that sell only their products.
Most dealers not only sell multiple vendor product lines, but directly competing lines as well.
This structure may be beneficial in helping individual dealers cope with the impact of
regulation, especially in the case where one manufacturer's equipment becomes significantly
less competitive in the post regulatory environment.
Dealers have traditionally maintained a vital interface between the manufacturers and end-users.
In addition to selling products, dealers service and repair equipment. Service is essential,
particularly for commercial customers who depend on this equipment for their businesses. This
is still true today although the importance of dealers has been declining for smaller equipment,
particularly consumer models. This is primarily caused by a price driven shift of sales towards
mass merchandiser and discounter retail outlets. Because these larger retail outlets have much
lower overhead per unit sold, profit margins can be maintained at significantly lower prices.
Moreover, since these mass merchandisers capture sales but do not provide service, the ratio
of dealer service/sales revenue is rising. Although, in isolated cases individual dealers may
refuse to service equipment that was purchased elsewhere, most dealers will service any
equipment, no matter where it was purchased. It should be noted that the trend away from
dealers for consumer equipment may have an adverse effect on the emissions from those
equipment. Dealers often provide a free tune-up to customers to ensure the equipment is
running properly, or at minimum, provide a knowledgeable resource on how to maintain
equipment. These types of services are typically not available from mass merchandisers.
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In every segment of the utility industry, equipment manufacturers must decide whether to use
"two-tiered" distribution channels or to interface directly with their dealer network. In a two-
tiered distribution system, an independent wholesale distributor acts as an interface between
the equipment manufacturers and the dealer network. Distributors add value by providing
service to both the equipment manufacturers and the dealers. Distributors remove a great deal
of the inventory burden from dealers. Because dealers generally do not have the facilities or
financial strength to maintain large inventories, they must frequently order parts for repair.
Successful distributors can usually provide parts within 24 hours. In the absence of a
distributor, parts must be shipped from the equipment manufacturers by package delivery
services (such as UPS). This can take several days or more, depending on manufacturer
location and the availability of the part. Furthermore, because many dealerships are small
businesses, they often rely on their distributors for bookkeeping and general business support.
Enhanced service provided by the distributors improves the reputation of the equipment
manufacturers. Also, distributors provide market information to manufacturers because they
are closer to the customers and are often able to identify emerging trends faster than the
manufacturers themselves.
Despite the added value that distributors provide for both dealers and manufacturers, they are
declining in numbers and importance. This shift is generally attributed to the ever increasing
price competition in the consumer market place. The value added by distributors must be
offset by the profit margin required by the additional tier in the distribution chain. Although
distributors will remain important, particularly for premium line equipment, their impact on the
market is projected to continue to decline.
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3.1.3 Lawn & Garden Equipment Manufactures
The distribution system for lawn and garden equipment manufacturers is probably the most
diverse and complex in the utility market. This is primarily due to the different needs of the
commercial and consumer markets. The bulk of all lawn and garden unit sales go to consumer
end-users.15 However, commercial customers represent .too large a market to ignore, and
some equipment manufacturers and members of the distribution chain focus strictly on the
commercial business. Balancing the commercial customers need for performance and service
with the consumer customers need for a low price is the challenge facing manufacturers and
the distribution channels they have developed.
Figure 3-2 provides a schematic of the relationships and flow of goods from the viewpoint of
the lawn and garden equipment manufacturers. These manufacturers design and manufacture
their own parts and/or purchase components. The finished parts and components are assembled
into end-user equipment. Finished goods are sent to one of three places: wholesale
distributors, dealers or other retail establishments, or shipped for export.
Some manufacturers use a direct (i.e., one-tier rather than two-tier) distribution system, dealing
directly with dealers or other retail establishments. The larger the manufacturers and the larger
the retail unit, the more likely that this link will be direct. Mass merchandiser manufacturers
deal directly with mass merchant and discount retail outlets. Some manufacturers deal directly
with all types of retail outlets. The trend towards direct distribution is expected to continue,
as is the trend towards the mass merchandisers. These trends serve to keep prices low, foster
price based competition, and put a squeeze on distributors and local dealers. The average
service dealer makes $100,000 to $250,000 in sales per year. There are 300 dealers that bring
in over $1,000,000 in revenues annually. There are also a great many dealers that have less
than $100,000 annual revenues. Dealers are extremely dependent on service revenue to stay
l5For example, OPEI estimates that 90 percent of walk behind lawnmower sales go to the residential
market.
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Figure 3-2: Lawn and Garden Manufacturer-Product Distribution Network
Raw Materials
Supplier
-Steel
-Plastics
-Canons
-Paint
-Aluminum
-Magnesium
-Olher
Component
Manufacturer
• Engines
-Transmission
-Wheels
-AUachments
-Tires
-Etc,
Equipment
Manufacturer
Wholesaler/
Distributor
(C)
(a) Primarily commercial and mid-range/riigh-end consumer equipment
(b) Primarily sales by large manufacturer* to large Dealer/Retail outlets
(c) Primarily lower end consumer equipment
Dealer/Retailer:
-Hardware Store
-Lawn and Garden Cent
-Farm Supply
-Home Cenler
-Other
National
Merchandiser
-Montgomery Wards
-Sears
Discounter
-KMart
-Walmart
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in business. Approximately 50 percent of the average dealers revenues are realized through
parts and repair work.16
As emission requirements force small nonroad engines to be more complex, more will be
expected of small engine technicians. The situation is similar to automobile dealers who must
perform vehicle emission compliance work. Jeff Voelz, Marketing Director at Onan Corp.,
noted that, "dealers will have to get savvy and understand that this is the future."17 As in
the automotive industry, emission control advances are likely to reduce the user's maintenance
abilities and require an increase in small engine technician skills.
Although two-tier distribution is declining, it is still an important feature of the distribution
network. According to a survey of its members, OPEI found that 41.4 percent of shipments
were distributed through wholesale distributors in 1988. Many manufacturers use two-tier
distribution for virtually every type of retail establishment, although distributors are generally
bypassed when shipments go to mass merchandisers and discounters. Because of fierce price
based competition, the pressure is on distributors to prove their ability to add value in order
to maintain their volumes of business in the future.
Most manufacturers choose to focus on either the consumer or commercial market. This factor,
in turn, influences their choice of distribution channels. Manufacturers that focus strictly on
the consumer market, especially at lower end prices, generally retail exclusively through mass
merchandisers. Manufacturers that focus strictly on the commercial market, generally rely
exclusively on dealers. Mid-range manufacturers and other manufacturers that wish to compete
at the commercial or top-end consumer market and the low-end consumer market face a
difficult choice. It is tempting to use both mass merchandisers (for sales volume) and dealers
(for value added service). However, this creates tremendous conflict within the channels.
16North American Equipment Dealers Association.
l7Telephone conversation on June 8, 1992.
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particularly for the dealers. The dealers cannot match mass merchandisers on price, and
frequently end up as repair shops, merely servicing the equipment that they can no longer sell.
The solution to this situation that has been most successful is to sell separate lines of products,
restricting the mass merchandisers from selling the higher quality product lines. McCullough
has been able to do this successfully. Toro tried to do this, but eventually withdrew from mass
merchandiser outlets. Toro is now trying the mass merchandisers again with its Lawnboy
subsidiary.
This discussion of lawn and garden manufacturer distribution channels primarily addresses
nonhandheld equipment manufacturers, although, in general, it applies to handheld equipment
manufacturers as well. There are, however, some unique facets of the handheld manufacturers
distribution networks that have not been previously addressed. The major difference is that the
handheld manufacturers all make their own engines. This changes the mixture of raw materials
and components they purchase as well as their manufacturing and design processes. A separate
engine market would not suffice for handheld manufacturers because of the size, performance,
and design restrictions placed on their products by the unique end-user requirements for
handheld equipment.
There are only a handful of nonhandheld equipment manufacturers that are vertically
integrated. Honda is the most important of these, producing a broad line of premium engines
and products from its North Carolina plant. Kubota is also another example of a major
manufacturer of both engines and equipment.
3.1.4 Recreational Vehicle Equipment Manufacturers
Recreational vehicles have a relatively simple distribution system, more streamlined than that
of any other segment of the utility market. The manufacturers use a direct distribution system
and rely on independent dealers to interface with customers, sell their products, and provide
service. The 1990 Motorcycle Statistical Annual published by the Motorcycle Industry Council
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estimates there were 10,704 retail outlets selling motorcycles and related products in the U.S.
in 1990, Of those, 34 percent were franchised to sell motorcycles, scooters, or ATVs. The
remaining 66 percent sold motorcycle related parts, accessories, riding apparel, used vehicles,
or service, but were not franchised to sell new vehicles. Although less detail is available for
snowmobiles and other recreational vehicles in the utility industry, they also generally follow
a direct distribution pattern.
The franchised dealers, as well as nonfranchised accessory dealers, are independent businesses.
Although some sell only one manufacturer's product line, the majority are not exclusive
dealerships. Although they represent a significant portion of the public image of the
manufacturers, the dealerships are allowed a great deal of independence. An exception to this
is warranty repairs, which must be cleared through the manufacturers. In general though, the
dealers operate autonomously. Figure 3-3 shows the product distribution network used by the
recreational vehicle manufacturers.
3.1.5 Farm Equipment Manufacturers
The main aspect of the farm equipment distribution network is the independent franchised
dealer system. These dealers all run independent businesses, separate from the company
operations. Franchises are not on an exclusive basis. One franchise may carry tractors made
by more than one manufacturer. Also, there is likely to be more than one dealer carrying the
same manufacturer's products in a single geographic area. This depends on dealer availability
and the extent of local demand.
Dealers sell the equipment to farmers at the retail level. Service is very important with this
equipment, and is provided by the dealers. This relationship is independent of the
manufacturers except for the authorization of some warranty repair claims. Because of the
importance of service, the vast majority of retail sales are through dealers. However, some
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Figure 3-3: Recreational Equipment Manufacturer-Product Distribution Network
Raw Material
Supplier
-Steel
-Plastics
-Cartons
-Paint
-Aluminum
-Magnesium
-Other
Component
Manufacturer
-Engines
-Transmission
-Wheels
-Attachments
•Tires
-Etc.
Recreational
Equipment
Manufacturer
Independent
Dealers
End-Users
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smaller equipment types are now being sold at agricultural co-op and discount stores. Because
these stores provide no service, larger machinery will remain the exclusive domain of dealers.
The larger manufacturers (e.g., Deere) work directly with their dealer network. Smaller
manufacturers use independent wholesalers or independent manufacturers representatives as
intermediaries between themselves and the independent dealer network. These intermediaries
are leaving the market at a rapid rate. They are consolidating or going out of business as
individual dealers get larger and interface directly with the manufacturers.
The trend, particularly in the 1980's and continuing into the 1990's but at a slower rate, has
been for the number of farms to decline and the remaining farms to be larger. Consequently,
the number of dealers are following the same trend. There are approximately 6,000 dealers
in 1992, Only 10 to 15 years ago there were more than 10,000 dealers'8.
This trend towards a smaller number of larger dealers is shifting some market power from the
manufacturers to the dealers. However, there is no threat to the manufacturers dominance of
the channels nor is there likely to be one in the future. Figure 3-4 represents the relationships
and flow of goods from the viewpoint of the farm equipment manufacturers.
3.1.6 Construction, Commercial, and Industrial Equipment Manufacturers
This category includes a broad range of firms from construction equipment producers to firms
that manufacture primarily lawn and garden equipment. There are also many firms that only
produce specific applications such as compressors, pumps, generator sets, and pressure washers.
For the most part, these companies have distribution channels similar to that of the farm
equipment manufacturers. There are some differences that are discussed below.
"North American Equipment Dealers Association.
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Figure 3-4: Farm Equipment Manufacturer-Product Distribution Network
Raw Material
Supplier
-Steel
•Plastics
•Cartons
-Paint
-Aluminum
-Magnesium
-Other
Component
Manufacturer
-Engines
-Transmission
-Wheels
-Attachments
-Tires
-Etc.
Independent
Wholesale
Distributor
Independent
Manufacturing
Representative
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Wholesale distributors are probably more important in this category than in the farm equipment
industry. This is because the agricultural industry is so well established that farm equipment
manufacturers are more likely to have complete direct dealer networks in place. Because the
manufacturers are unlikely to have a nationwide dealer network for light construction,
commercial, and industrial equipment, the distributor is essential. Even if these manufacturers
wanted to deal only with their dealers, they lack adequate geographic coverage to be able to
do so. The lack of nationwide dealer coverage has forced some manufacturers to open factory
stores in some areas. Although independent dealers are preferred to company owned stores,
manufacturers have not always been able to find a dealer to work through. Figure 3-5 shows
the distribution relationships from the perspective of construction, industrial, and commercial
equipment manufacturers.
3.2 VERTICAL AND HORIZONTAL INTEGRATION
Vertical and horizontal integration measure the extent to which companies in the small nonroad
engine market perform multiple functions in the market place. Vertical integration refers to
the situation where a particular firm is both a supplier and a customer. A small nonroad
equipment firm with full vertical integration would manufacture components, engines and
equipment, as well as provide product distribution, retail and service functions. Horizontal
integration refers to a single firm that manufactures or sells several similar products, such as
farm equipment and lawn and garden equipment, that are sold in different markets.
Emission control regulations may require substantial retooling and other changes to the
production processes over a relatively short period of time. Firms that are vertically integrated
over engines and equipment may be able to respond to such changes both faster and more
efficiently. Such regulations will also impact industries unevenly, with firms producing
products with elastic demand facing larger impacts. In such a situation, firms that are
horizontally integrated may be in a stronger competitive situation than those that are not.
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Figure 3-5: Construction/Commercial/Industrial Equipment Manufacturer—Product Distribution Network
Raw Material
Supplier
-Steel
-Plastics
-Cartons
-Paint
-Aluminum
-Magnesium
-Other
Component
Manufacturer
-Engines
-Transmission
-Wheels
-Attachments
-Tires
-Etc.
Original
Equipment
Manufacturer
Wholesale
Distributor
End-Users
-Construction
-Commercial
-Industrial
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3.2.1 Vertical Integration
The level of vertical integration in the small nonroad equipment industry is rather small, and
to the extent that it does exist, it occurs in the manufacture of engines and equipment. Engine
manufacturers generally do not produce components such as spark plugs and mufflers or
provide their own raw materials such as steel or aluminum. Moreover, equipment
manufacturers do not tend to be involved in distributing, retailing or servicing equipment.
Where their names are used by dealers, it is almost exclusively through franchising.
Vertical integration between engine and equipment manufacturers is concentrated in three areas:
foreign lawn and garden engine and equipment manufacturers, foreign recreational engine and
equipment manufacturers and handheld lawn and garden equipment manufacturers. Table 3-1
provides a listing of companies that make both engines and equipment in five broad product
categories (lawn and garden, recreational, agricultural, construction and light-commercial and
industrial).
Most of the vertically integrated manufacturers are foreign companies, including Honda and
Kubota for lawn and garden engines, and equipment; and Honda. Kawasaki, Susuki and
Yamaha for recreational engines and equipment. The major exception for recreational
equipment is Bombardier a domestic maker of snowmobiles.
The other important category of vertically integrated manufacturers is producers of handheld
engines and equipment. As discussed in an earlier section, handheld equipment manufacturers
tend to produce their own engines due to size and design restrictions. Important vertically
integrated handheld equipment manufacturers include Poulan. Stihl, and Textron (i.e.,
Homelight and Jacobsen).
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TABLE 3-1
HORIZONTAL AND VERTICAL INTEGRATION IN THE UTILITY ENGINE
AND EQUIPMENT INDUSTRY
VERTICALLY INTEGRATED MANUFACTURERS
Bombardier
(U.S.)
Honda
(Japan)
Kawasaki
(Japan)
Kubota
(Japan)
Mitsubishi
(Japan)
Poulan
(U.S.)
Stihl
(German)
Suzuki
(Japan)
Textron
(Homelight & Jacobsen)
(U.S.)
Yamaha
(Japan)
— Recreational Engines and Equipment
— Recreational Engines and Equipment
— Lawn & Garden Engines and Equipment
— Recreational Engines and Equipment
— Lawn & Garden Engines and Equipment
— Agricultural Engines and Equipment
— Construction Engines and Equipmem
Lawn & Garden Engines and Equipment
Lawn & Garden Engines and Equipment
Light Commercial & Industrial. Engines and Equipment
Recreation Engines and Equipment
Lawn & Garden Engines and Equipment
Recreational Engines and Equipment
HORIZONTALLY INTEGRATED ENGINE MANUFACTURERS
Briggs & Stratton
(U.S.)
Honda
(Japan)
K oliler
(U.S.)
Lawn & Garden Engines
Construction Engines
Light Commercial & Industrial Engines
Lawn & Garden Engines
Recreational Engines
Agricultural Engines
Lawn & Garden Engines
Light Commercial & Industrial I'nviiu'x
Lawn & Garden Engine";
Auriculiural linuines
84
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TABLE 3-1 (coat.)
Onan
(U.S.)
Stihl
(Germany)
Yamaha
(Japan)
Lawn & Garden Engines
Construction Engines
Light Commercial & Industrial Engines
Lawn & Garden Engines
Light Commercial & Industrial Engines
Recreational Engines
Light Commercial & Industrial Engines
HORIZONTALLY INTEGRATED EQUIPMENT MANUFACTURERS
Allied Products
(U.S.)
Caterpillar
(U.S.)
Deere & Co.
(U.S.)
Echo
(U.S.)
Gehl
(U.S.)
Honda
(Japan)
Kubota
(Japan)
SCAG
(U.S.)
Stihl
(Germany)
Textron
(Ilomclight & Jacobscn)
(U.S.)
— Agricultural Equipment
— Light Commercial & Industrial Equipment
— Agricultural Equipment
— Construction Equipment
— Lawn & Garden Equipment
— Agricultural Equipment
— Construction Equipment
— Lawn & Garden Equipment
— Light Commercial & Industrial Equipment
— Agricultural Equipment
— Construction Equipment
— Light Commercial & Industrial Equipment
— Light Commercial & Industrial Equipment
— Recreational Equipment
— Lawn & Garden Equipment
— Agricultural Equipment
— Construction Equipment
— Lawn ,5c Garden Equipment
— Light Commercial & Industrial Equipment
— Lawn & Garden Equipment
— Light Commercial & Industrial Equipment
— Lawn & Garden Equipment
•- Light Commercial & Industrial Equipment
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3.2.2 Horizontal Integration
Horizontal integration, as analyzed here, is based on five broad equipment groups. Different
conclusions may have resulted if equipment groups were more narrowly defined. For example,
an alternative would be to define horizontal integration based on engine horsepower or any
number of other criteria.
Horizontal integration is quite common among the engine manufacturers. In fact, as Table 3-1
shows, most of the major engine manufacturers produce products for several applications. This
is due, in part, to the fact that a single engine design is often used in many applications.
However, not all engine manufacturers sell to multiple applications. Tecumseh, for example,
is highly dependant on lawn and garden sales, although a small number of their engines are
used in light commercial and industrial applications. Homelight and Poulan are examples of
manufacturers who exclusively serve the lawn and garden industries.
Horizontal integration is much less common among equipment manufacturers. Among the
equipment manufacturers that are horizontally integrated are large U.S. companies such as
Caterpillar and Deere that serve agricultural, construction and lawn and garden customers.
Foreign producers such as Honda and Kubota produce both lawn and garden and other
equipment types. Compared to the large number of companies that produce for a single
market, however, the number of horizontally integrated firms is quite small. A comparison of
the percent of the small nonroad engine and equipment market which is horizontally and/or
vertically integrated can be performed from PSR's database but was not conducted in this study
due to resource constraints.
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3.3 BARRIERS TO ENTRY
A barrier to entry is simply any advantage held by existing firms over those firms that might
potentially produce in a given market. Barriers to entry include factors such as advertising and
product differentiation, legal-institutional factors, scarce resources, scale economies and large
capital requirements. Barriers to entry are important because in the long run existing firms will
be able to persistently earn economic profits only if the entry of new firms is somehow
barricaded. If it is easy for new firms to enter an industry or market (Le., there are no barriers
to entry), then the degree of pricing discretion for established firms in the industry may be
limited. However, if established firms are successful in mounting barriers to new firm entry,
then it is possible that the industry will be characterized by prices that are higher than marginal
production costs, or long-run excess economic profits will be accrued by existing firms.
Established firms, therefore, have market power and are able to set prices at higher levels than
under a perfectly competitive market. The welfare of end-users of the product, or consumers,
suffers as a result. In this respect, barriers to entry may result in the inefficient allocation of
resources. The sections that follow discuss major categories of barriers to entry and the degree
to which they exist in the markets under observation.
3.3.1 Advertising and Product Differentiation
Firms in oligopolistic industries tend to use advertising and variation in product characteristics,
more than price, as competitive weapons. When a firm advertises, it attempts to attract more
customers and sell more of its product at a given price. Advertising may also help a firm to
change the preferences of existing customers so that at a given price more of its product will
be demanded. The object is to build brand loyalty which allows a firm to charge a premium
for its product. Clearly, brand names play an important role for many of the products that
employ small nonroad engines. Data on advertising outlays at the 4-digit SIC industry level
are not collected, or reported, by the Bureau of the Census in its Census of Manufacturers.
However, The Department of Treasury, Internal Revenue Service's Source Book: Statistics of
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Income does provide data on advertising expenditures for the various Statistics of Income
Classification Codes relevant to this study. As mentioned in Section 2.9, these Statistics of
Income Classification Codes roughly correspond to the 3-digit SIC codes used by Census. For
example, Statistics of Income Classification Code 3520 — Farm Machinery maps directly to
SIC Code 352 — Farm and Garden Machinery and Equipment. On the other hand, Statistics
of Income Classification Code 3598 — Engines and Turbines, Service Industry Machinery, and
Other Machinery, Except Electrical includes SIC Codes 358 — Refrigeration and Service
Industry Machinery, 351 — Engines and Turbines, and 359 — Miscellaneous Machinery.
Except Electrical. As a result, the reader should interpret data presented at the Statistics of
Income Classification Code level with caution, since these codes do not map directly with
either 3-digit SIC codes or, more importantly, the 4-digit SIC codes that comprise the small
nonroad engine and equipment industry. Nevertheless, a review of advertising outlays at the
Statistics of Income Classification Code level may be fruitful.
The following provides advertising intensity ratios for each Statistics of Income Classification
Code found to be relevant to this study.
Statistics of Income
Classification Code
3520
3530
3540
3560
3598
3698
3798
Farm Machinery
Construction and Related Machinery
Metalworking Machinery
General Industrial Machinery
Other Machinery, Except Electrical
Other Electrical Equipment
Other Transportation Equipment
Advertising Intensity
(1988)
0.019
0.004
0.011
0.008
0.010
0.011
0.008
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Advertising intensity is defined as:
Advertising Outlays
Total Revenue.
This ratio provides an indication of the relative importance of advertising across various
industries. Clearly, Statistics of Income Classification Code 3520's advertising outlays
represent the largest shares of total revenue (Le., total receipts) of those industries presented
above. As mentioned earlier, this industry corresponds directly to SIC 352 — Farm and
Garden Machinery and Equipment.
Advertising outlays are likely to also be quite substantial Tor the lawn and garden industry and
brand identification is especially important for premium products. Premium lawnmower (e.g.,
Toro, Honda) and chainsaw (e.g., Stihl, Poulan) brands, for example, are well known to most
consumers and may serve as strong barriers to entry. On the other hand, for low-end
equipment, price, rather than brand, is the basis for competition. In addition to product
differentiation, advertising is also effective in eliciting a premium price for recreational
equipment due to the cultivation of brand loyalty. The major motorcycle makers (including
Honda, Suzuki and Yamaha) can clearly charge a higher price than an unknown entrant. The
pattern is repeated for farm equipment companies such as Caterpillar and Deere.
On the other hand, most of the broad markets contain a variety of niches that allow a new
company to establish itself. For example, Technic Tool, although only three years old, is
already a leader in the tree pruning market because it discovered a niche market for a
telescoping chainsaw and accessories. Other manufactures have developed new products for
new markets. Ferris, Scag, Dixon Chopper, Walter and Grasshopper, for example, have
successfully developed and marketed new products for the growing professional lawn
maintenance market.19
'Power Equipment Trade, "Struggling Industry...Or New Realities?", July-August 1992.
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Although distinct in terms of conceptual frameworks, advertising and product differentiation
can serve as strategies to obtain and/or maintain market power. Product differentiation20
usually characterizes a monopolistically competitive industry in which elements of competition
and monopoly coexist. This means that while a monopolistically competitive firm has some
power over price, it may still face a price sensitive demand for its product. Yet because of the
fact that product differentiation facilitates price setting behavior, firms often employ this
strategy in an effort to obtain and maintain some degree of market power. For example, if
consumers are loyal to established brands and companies as a result of product differentiation
and. concurrently, skeptical about new, untried brands, entry is more difficult than it otherwise
would be.21 On the other hand, advertising is often used as a strategy to maintain market
power (Le., solely as a barrier to entry). Once a firm has obtained a position of market power,
advertising is often used to insulate against encroachment.22
3.3,2 Legal and Institutional Factors
Important legal and institutional barriers to entry include patents, tariffs, limited or exclusive
operating rights and licensing. Such measures may decrease the competitiveness of an industry
by providing productive advantages to selected manufacturers. Once competitiveness has
decreased, these measures help established firms holding patents, for example, to maintain
market power and deter entry.
The existence of important patents can allow the holder, or those who purchase or lease the
rights, the ability to regulate entry. At present, however, there do not appear to be any current
patents that are restricting entry. The most advanced technology in use, the overhead valve
20 A general class of product is differentiated if any significant basis exists for distinguishing the goods
(or services) of one seller from those of another.
2lAsch, Peter, "Industrial Organization and Antitrust Policy," 1983.
22Scherer, P.M., Ross, D., "Industrial Market Structure and Economic Performance,"1990.
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engine, is not patent restricted. This is especially important because this technology has lower
emissions than side valve engines and as such should become increasingly important. The
orbital engine, a low emission two-stroke, is heavily patented. However, the durability or
feasibility of orbital technology has not been demonstrated in small nonroad engine
applications.23
Ryobi recently announced a major technological breakthrough in the development of a new
proto-type of portable gasoline engine that is heralded as the first to meet all proposed clean
air emission standards, including 1999 California Air Resources Board (CARB) regulations.
Ryobi's Clean Air Engine is designed to power portable utility and lawn and garden tools, such
as trimmers. The engine features a 1 horsepower, 4-stroke engine, and it is the first 4-stroke
engine small enough for hand-held applications.24 Given that Section 308 of the Clean Air
Act provides the federal government with a mechanism to require licensure of patents under
certain conditions, such innovations may provide certain manufactures with effective barriers
to entry if regulations are imposed to control emission from small nonroad engines.
Tariffs or other import restrictions applied to imported engines or equipment can serve as an
entry barrier to foreign firms. No evidence was found, however, that any important tariffs or
import restrictions apply to the small nonroad engine and equipment market.
Government can also serve to restrict entry through a variety of other schemes. One type of
barrier to entry is that which grants operating rights, a familiar example being taxi franchises.
Government intrusion of this sort does not apply to the industries under examination here.
Another type of barrier caused by government intervention includes licensing or other
regulations that slow or delay the ability to enter the market. Nuclear power generation serves
23Orbital is currently developing a non-patented system which is generally referred to as the "low-
cost" system. This technology may be able to compete competitively in small engine applications.
24Coots, F., Elisco & Herrman PR, "RYOBI news". Actual manufacturing of this engine will not
commence until late 1993. Patents are currently pending on Ryobi's new technology.
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as a good example of how such factors can serve as entry barriers. While these types of
barriers (Le., operating rights and licensing) may exist to some degree in the small nonroad
engine and equipment markets, they are likely to be neither particularly strong nor do they
apply uniquely to these industries.
3.3.3 Economies of Scale
Economies of scale may deter entry if they are sufficiently important in a given industry; since
they imply that a new entrant must come into the market, or industry, at a relatively large size
in order to operate efficiently (i.e., the market will support only a small number of big firms).
Such large-scale entry, however, will have two effects in the market, both of which will be
detrimental to the new firm. First, large-scale entry will tend to push up the prices of
production inputs (e.g., capital and labor) by raising their demand. Second, large-scale entry
will push down the price of outputs (Le., the products that are purchased) by increasing their
supplies.25
A quantitative assessment of the degree of economies of scale in the industries representing
the small nonroad engines and equipment industry was not conducted for this study. However,
various qualitative remarks can be made.
Economies of scale are likely to be important in the small nonroad engine industry where seller
concentration and capital intensity are high. As shown in Section 4, Briggs & Stratton and
Tecumseh alone account for roughly 63 percent of unit sales in the small nonroad engine
industry. Such high seller concentration may indicate that the small nonroad engine market
can support only a few large firms. In this context, economies of scale may be a stronger
barrier to entry in niche markets of the small nonroad engine industry. For example, as shown
in Section 4, Briggs & Stratton and Tecumseh account for over 64 percent of the sales of
BAsch, Peter, "Industrial Organization and Antitrust Policy," 1983.
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gasoline engines between 0 and 25 horsepower, while Kubota and Yanmar account for about
62 percent of the sales of diesel engines between 0 and 25 horsepower. Furthermore, as shown
in Section 2, the Internal Combustion Engine industry is highly capital intensive, suggesting
that new entrants much invest heavily on capital goods that are necessary for the production
process. Large capital requirements as a barrier to entry are discussed below.
Unlike the small nonroad engine industry, the small nonroad equipment industry is likely to
be less influenced by economies of scale as a barrier to entry, although entry into specific
market niches may be hampered by this economic phenomenon. For example, entry into the
mass merchandiser lawn and garden equipment market may be limited because of the large-
scale operations that are required to adequately supply mass merchandisers. This large-scale
requirement may have perpetuated the relative importance of Murray Ohio, MTD, or American
Yard, each of which is an important supplier to mass merchandisers. However, in order to
accurately and fully assess the importance of economies of scale as a barrier to entry, data on
average production costs are required. Such data are extremely difficult, if not impossible to
come by at the firm level.
3.3,4 Large Capital Requirements
Another barrier to entry is the requirement that a firm build and maintain a large complicated
and expensive plant. It is, for example, extremely difficult to obtain the hundreds of millions
of dollars required to build a modern automobile or steel plant. In addition to building a plant,
another dimension of the large capital requirement barrier are the related functions and tasks
that are required in industries where large-scale operations are predominant. For example,
skilled personnel, although there may be an oversupply of such workers, must still be found
and hired, distribution channels established, and parts and repairs guaranteed. While the cost
of building plant and equipment for the small nonroad engine and equipment market is not
negligible, neither is it prohibitive. For example, according to the 1987 Census of
Manufacturers, the book value of depreciable assets per establishment was $25.3 million for
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SIC 3519 (Internal Combustion Engines), $1.9 million for SIC 3523 (Farm Machinery and
Equipment), and $5.8 million for SIC 3524 (Lawn and Garden Equipment). Each of these is
significantly less than the $53.6 million in assets per establishment for SIC 3721 (Aircraft).
There also appears to be numerous multi-product distributors such that a new entrant would
have no need to build their own distribution network.
3.3.5 Scarce Resources and Control for Inputs
A more obvious barrier to entry is the unavailability of natural resources. This factor is often
cited to explain monopoly behavior in nickel, sulfur, diamonds and bauxite. It would not.
however, appear to be a significant factor for the small nonroad engine and equipment markets.
3.4 MARKET POWER
In this section, the types of market power found in the various relationships between
components of the nonroad engine and equipment industry are identified. Market power is the
ability of a firm to set prices; it occurs when a firm faces a downward sloping demand
curve26 as is illustrated in Figure 3.6. This allows the firm, in some circumstances, to collect
excess, or economic, profits. However the firm may also suffer losses if its demand curve lies
entirely below its total average cost curve2'. When a portion of the demand curve lies above
the total average cost curve, the firm can choose to set the price at the profit maximizing
level28 or at another level that does not lead to losses.
26 A demand curve shows the quantity of a product that can be sold by an industry at each price.
Industry demand curves are nearly always downward sloping. A firm in a competitive industry faces a
horizontal demand curve because price is set at an industry level and the individual firm is unable to
influence it.
27A curve depicting total costs divided by total quantity. This is sometimes referred to as unit cost.
The horizontal axis is quantity produced.
28'
The level of output at which a Firm's profits are maximized.
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Price, Costs
800
700
600
500
FIGURE 3.6 FIRM FACING A DOWNWARD
SLOPING DEMAND CURVE
400
c
300
200
100
0
TOTAL AVERAGE COST
MARGINAL COST
4
8 10 |12 14 16 18 20 22
Quantity
DEMAND
MARGINAL REVENUE
By producing at quantity
Q', at which marginal reve-
nue equals marginal cost,
the firm maximizes profits.
The demand curve shows the
price at each level of output,
Price is the value society
places oil the additional unit,
that is, the marginal value.
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There are two reasons to consider market power in this study. One is that market power leads
to inefficient economic outcomes.29 To see this, consider that a firm maximizes its profit by
producing a quantity of product such that its marginal cost30 is equal to its marginal
revenue/1 The condition for economic efficiency is that marginal value32, represented by
the demand curve, equals marginal cost. A competitive firm, in effect, faces a horizontal
demand curve as shown in Figure 3.7 so that marginal revenue equals both the price and the
marginal value of the product. Hence, the marginal cost equals marginal revenue, ensuring
profit maximization for the firm and simultaneously ensuring that marginal cost equal marginal
value.
When a firm faces a downward sloping demand curve as in Figure 3.6. marginal revenue is
less than marginal value so that when marginal cost equals marginal revenue it does not equal
marginal value. The marginal cost of the resources used in the product of a firm with market
power is less than the marginal value society places on the product. Whenever a firm faces
a downward sloping demand curve and, therefore, has the power to manipulate prices, it is not
producing the socially optimal quantity1" of the product.
The second reason for considering market power is that knowing of its existence will help
predict the manner in which costs that may result from regulation are passed through by
producers to consumers.
29Any outcome other than the perfectly competitive outcome.
30The cost of producing one more unit of a product.
31
The revenue gained by selling one more unit of a product.
32The additional benefit to society if an additional unit of a product is made available. Marginal value
equals price.
MThe quantity of the product that would be made if all production and distribution decisions for all
products were optimal,
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Price, Costs
800
700
600
igure 3.7
400
p'
qnn
200
1 00
0
Firm Facing a Horizontal
Demand Curve
2 4 6 8 10 12 1)4 16 18 20 22
1 Quantity
Q'
TOTAL AVERAGE COST
MARGINAL COST
DEMAND
In this case marginal revenue
also equals the price of the
product which is also its
marginal value.
By producing at quantity
Q', at which marginal reve-
nue equals marginal cost,
the firm maximizes profits.
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In this analysis, only two market models are considered: perfect competition and imperfect
competition. Perfect competition is the case in which there are a large number of identical
firms producing identical products in a situation where each one of a large number of buyers
has complete knowledge of the price of all products. In perfect competition a firm has no
market power. Imperfect competition is when one or more of these conditions is not present.
For example, imperfect competition may be characterized by a small number of firms, by firms
that are not identical, by firms that compete by differentiating their product or through
advertising, or by price information not being universally available. Under imperfect
competition a firm has market power.
Frequently textbooks refer to five models of an imperfectly competitive industry: monopoly
(single producer in the industry); oligopoly (small number of producers); monopolistic
competition (product differentiation); monopsony (single purchaser): and oligopsony (small
number of purchasers). These industry structures comprise imperfect competition because they
each result in an economic outcome that is not efficient (i.e.. the perfectly competitive price
and quantity levels are not attained).
It may further be noted that the recent economic literature contains a great deal of discussion
of the notion, put forward by William Baumol, of contestable markets. If a market is
contestable, competitive pricing (/.e., price equal to marginal value and to minimum long run
average cost)34 can occur even if there is a monopoly. Minimum long run average cost is
illustrated in Figure 3.8. Within this literature there is also discussion that in many markets,
the price tends to equal the minimum long run average cost and, therefore, it also equals the
marginal cost, meeting the criterion for economic efficiency. This happens because, as the
empirical evidence shows in many cases, the long run average cost curve has a large horizontal
34The lowest cost at which a product can be made. It occurs if the right sized plant is used and all
production decisions are optimal. When the economy is operating in its most efficient way, all firms are
producing at minimum long run average cost. Costs include fair compensation to all inputs including
labor and management.
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340
320
300
Figure 0.8 Short-run and Long—run
Average Cost Curves
8 10 12 14 16 18 20
Quantity
SHORT RUN AV COST 1
SHORT RUN AV COST 2
SHORT RUN AV COST 3
•e-
LONG RUN AV COST
The long run average cost
curve envelopes the short
run average cost curves,.
It depicts the lowest average
cost at which the product
can be produced.
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segment at its bottom, and all along this segment the marginal cost equals the long run average
cost. According to contestable market theory, if a firm sets its price above long run average
cost, it is inviting a competing firm to enter the market at a price closer to the minimum long
run average cost.
There are very few cases in which market power arises naturally. It is generally created by
a legal document such as a grant of monopoly (e.g., to an electric utility), a patent for a
product or production technique, or the deed to most of a natural commodity. Firms also
attempt to create market power through advertising and product development, which induce
product differentiation (i.e., monopolistic competition). In the absence of these circumstances,
however, it can be assumed that price tends towards minimum long run average cost.
As the preceding discussion indicates two basic circumstances can prevail. First, if the industry
is competitive there is no market power. If a regulatory action increases cost to firms in a
competitive industry, each firm will raise its price by an amount equal to the increase in its
long run average cost. The entire cost of the regulation is passed through to the purchaser of
the product. Second, if the industry is not competitive there will be market power. The
amount of added cost passed through as price increases is, within limits, decided by the firm.
In the small nonroad engine and equipment industry, there is no exact replication of the
conceptual models referred to above. However, these models still provide insight about
economic behavior. Furthermore, many of the conceptual results of these simplified models
have been empirically verified. Actual economic markets are difficult to demarcate. The
definitions of markets are, therefore, imprecise. Various firms operating in the small nonroad
engine and equipment industry overlap market definitions and are organized in numerous ways.
For example, firms may be vertically integrated, producing each component and owning the
distribution network, horizontally integrated, selling many types of engines or equipment, or
firms produce a single product in a specialized market segment. All three of these forms of
industrial integration may be either perfectly or imperfectly competitive.
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Figure 3-9 illustrates the relationships between the components of the small nonroad engine
and equipment industry. There are six relationships; in each, there is the opportunity for
market power. The nature of these relationships is described below.
3.4.1 Relationship Between Engine Producers and Equipment Producers
Three types of relationships between engine producers can be identified.
a) Both engine producers and equipment producers can be owned by the same parent
company.
In this case market power is a moot issue because the firm is selling to itself. Any
inefficiencies in this transaction hurt the firm directly.
b) Engine suppliers and equipment producers are in separate firms, but in their market
segment there are only a small number of engine suppliers.
The example in the small nonroad engine and equipment industry that fits this relationship is
the mass market for equipment, such as lawnmowers, sold through chain stores and discount
stores. Two engine manufacturers, Briggs & Stratton and Tecumseh Products Inc., account for
over half the engines produced for that market. The rest of the market is served by smaller
firms. Each of the two major engine manufacturers in this market and some of the smaller
ones are capable of making engines to fit any piece of equipment. Often the design of
equipment is such that a standard engine will fit the equipment. Equipment designers know
the standard designs, such as the horsepower and the configuration of drive shaft, and often
design equipment to use standard designs. However, they may also ask for a custom design
of engine specifications to accommodate a new equipment design. While it may be difficult
to switch the engine supplier after the design phase, during the design stage an equipment
producer can choose any engine supplier it wishes. These decisions are made based on
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Figure 3-9: Relationships Between Components of Nonroad Production and Distribution Network
Engine
Producers
5
Component
Producers
1
2
Equipment
Producers
3
Distributors
4
6
Retailers
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satisfaction with past performance, cost, and the design features of the proposed competing
engines.
With respect to the presence of market power in this market, there are competing factors. The
argument that prices will be competitive rests on the presence of two large firms and a number
of smaller ones fully capable of producing engines of these types. Any time an equipment
manufacturer is dissatisfied with an engine manufacturer, it can switch to a different one. This
means that engine manufacturers cannot set prices too high, or they will loose their business.
This conclusion is in keeping with the contestable market concept. Bolstering this view is the
fact that the market in which the "low end" equipment is sold is very price competitive,
consisting of chain stores and discount outlets.
The argument that prices are not competitive and that market power exists rests on the fact that
some firms have worked to develop a reputation for high quality engines. To the extent that
they can convince equipment manufacturers of their superiority, they have market power and
can set a price higher than the competitive price. However, on balance, any such price
differential will be limited by the competitive pressures of supplying the very competitive retail
outlets that sell these items. Hence, it is unlikely that significant market power exists in this
market segment. Increases in cost are therefore very likely to be passed through to consumers.
c) Engine suppliers and equipment producers are independent, and, in their market,
consumers can choose what engine is in the equipment purchased.
In this market, which includes many of the miscellaneous categories of small nonroad
equipment, there is ample opportunity to switch engine manufacturers, guaranteeing a
competitive market. Many pieces of equipment in this group, such as chippers, are sold
without an engine and the consumer can choose the brand, horsepower, and fuel type of the
engine. In other cases, the same equipment is advertised with any one of several engine
options, often including engines from different manufacturers. Consumers who prefer a
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particular brand of engine can demand that brand directly, while consumers seeking the least
costly configuration can directly demand the least costly engine. In this setting, engine
producers can be expected to make the engine available at the minimum long run average cost.
This is the competitive price of the engine.
3.4.2 Relationship Between Component Producers and Equipment Producers
Component producers supply equipment producers with all components except engines and
those items fabricated by equipment producers. This includes the inputs, such as steel and
paint, that equipment producers use in their fabrications. It also includes, as appropriate,
transmissions, wheels, tires, handles, levers, hubs, brakes, belts, washers, nuts, and so on.
Many of these components are supplied to many other industries in the same form. In general,
this relationship is competitive.
3.4.3 Relationship Between Equipment Producers and Distributors
Equipment producers may relate with equipment distributors (wholesalers) in one of two ways.
They may be part of a single parent company or they may market their product to independent
distributors. Sales by equipment producers to distributors accounts for a small but significant
portion of output. Total sales of small nonroad equipment to wholesalers/distributors was 14.8
percent of total output in 1988.35
As stated above, sales between firms that are part of the same parent company are not subject
to market power analysis because they are all in-house. Sales to independent distributors are
very likely to produce competitive prices. Independent distributors choose equipment that they
believe they can sell to their dealers based on price, quality, and features of the equipment
itself. If one producer set his price too high the distributor could find another product that
35 Outdoor Power Equipment Institute, Profile of.the Outdoor Power Equipment Industry. 1989. p.
3.
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could do the job and promote it to his dealers. Therefore, the relationship between equipment
producers and distributors is a competitive one.
3.4.4 Relationship Between Equipment Producers and Retailers
In many cases, equipment producers deal directly with wholesalers/distributors. However,
about half (48 percent) of small nonroad equipment factory output was sold directly to retail
outlets (general merchandisers - 16.8 percent, discounters - 13.9 percent, retailers/dealers - 12.0
percent, and home centers - 5.3 percent) in 1988.36 This market relationship reflects larger
retailers dealing directly with the factory, or a relationship involving joint ownership in which
both firms are owned by the same parent company.
When mass marketers bargain with producers, they are likely to get a low price for the product.
First, they deal in large quantities and can order definite quantities. They sometimes order
special paint and logo designs or even negotiate for some design changes in the equipment.
Because they deal in volume and can often offer a stable relationship with a producer, the
producer can cut his costs by producing optimal size batches of equipment. Furthermore, the
producer is unlikely to seek a return on its investment above normal levels. In short, a large
purchaser goes through a one on one negotiation process with a large producer. Both have the
option of dealing with another firm. Neither is likely to be able assert market power.
3.4.5 Relationship Between Component Producers and Engine Producers
Components provided to engine producers include belts, spark plugs, wiring, fuel lines, hoses,
nuts, bolts, washers, and so on. These are often stock items not made especially for engine
producers. On the other hand, some parts are fabricated to specifications. For each of these
36
Ibid.
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items, there are numerous firms capable of bidding on and filling the engine producer's orders.
In general, this relationship is competitive.
3.4.6 Relationship Between Distributors and Retailers
The distributor to retailer route is the chief route by which independent retailers get their
products. Up to 41.4 percent of small nonroad equipment production reaches retailers through
distributors. Another 48 percent of small nonroad equipment production reaches retailers
directly from the producers.37
Much of the business that goes through this route is the "upscale" or "premium" equipment.
It includes larger equipment, such as riding mowers, and equipment needed to care for larger
properties, and hence a wealthier clientele. The companies that supply this segment are often
smaller ones, and there are many competitors. Although the equipment produced by these
firms is differentiated in design, and manufacturers strive for brand loyalty, it is unlikely that
they are able to produce much of a price markup over their minimum long run average costs.
This market is best characterized by the contestable market concept discussed above. Prices
are likely to equal long run average costs. The distributor to retailer route is a competitive one.
3.4.7 Conclusions Regarding Market Power
Although there are many forms of interfirm relationships represented in these markets, none
of those examined here clearly point to the existence of market power. In each case, there is
a clear option for the purchaser to switch to another firm fully capable of providing a viable
product. Retailers have a wide choice of firms from which to purchase.
37 Ibid.
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3.5 SUBSTITUTE POWER SOURCES AND EQUIPMENT
A regulatory framework structured to mitigate emissions from small nonroad engines and
equipment should recognize the feasibility and penetration of clean fuels or technologies. The
small nonroad industry is characterized by a spectrum of available products that employ
electricity, LPG, CNG, or human muscle for power. Electric and hand-powered equipment are
particularly prevalent in the lawn and garden segment, while various light commercial and
industrial equipment use internal combustion engines that are fueled by LPG or CNG, The
bulk of the equipment included in this industry, however, are powered by diesel and gasoline
engines (see Section 4 of this report). But, a review of the availability of substitute power
sources and equipment is worthwhile, since various applications within this industry currently
employ or are well suited to alternative fuels. More importantly, emission control regulations
based on command and control strategies are likely to increase the cost of conventionally
powered nonroad utility equipment, which, in turn, may increase the penetration of alternatively
powered equipment. Economic incentives may also be introduced that help to promote the
penetration of clean fuels into the market place.
Given that the lawn and garden market is such a large portion of the small nonroad engine and
equipment industry, and that substitute power sources and equipment are currently prevalent
in the market place, the discussion in this section focuses on those equipment types included
in this segment. However, the penetration of LPG and CNG equipment in the light commercial
and industrial markets is discussed in Section 4 of this report.
The power sources available in the lawn and garden equipment market include diesel, gasoline.
electricity, and/or human muscle. While gasoline and diesel engines are common in virtually
all equipment, the types of equipment that are electrified or powered by human muscle are
limited to those employed in residential applications. The following demonstrates those engine
powered equipment for which hand powered and electrically powered alternatives exist.
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ENGINE "DRIVEN
Chainsaws
Lawnmowers
Hedgers
Trimmers
Edgers
Tillers
B lowers/Vacuums
ELECTRIC:
CONFIGURATION
Cord
Cord or Battery
Cord or Battery
Cord or Battery
Cord or Battery
Not Available
Cord or Battery
HAND POWERED
Hand Saws
Push Mowers
Hand clippers
Grass shears
Push Edgers
Coarse Rakes or Shovels
Lawn Rakes
Electrification is not a new concept in the lawn and garden equipment industry. However,
electric substitutes for the equipment shown above have generally not been as successful in the
market place as gasoline or diesel products. Data on the distribution of shipments by power
base were not available for most of the equipment types shown above. OPEI did, however.
provide data for lawnmowers and string trimmers which show that 44 percent of string trimmer
and 4 percent of lawnmower 1991 shipments were electric units. The penetration rates of
electric chainsaws, edgers, and hedgers are likely lower than that of trimmers.
The sale of electrified lawn and garden equipment is hampered by various factors, not
necessarily related to price. For example, the long extension cords necessary for the operation
of electric equipment are inconvenient to the user, since electric outlets are often not readily
available within reach of an extension cord. Lawn and garden contractors (professional users
of lawn and garden equipment) usually do not have access to electric outlets at job-sites. As
a result, electrically powered equipment have generally not penetrated the comme-vial market.
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Use of battery packs could potentially solve the marketing constraints brought about by
extension cords. However, this technology is new and relatively expensive.
On the other hand, electric equipment is preferred by many residential consumers that dislike
the noise levels of gasoline products and manipulating gasoline canisters or gasoline itself, and
are attracted by the lower weight, ease of start of electric equipment, and by the relatively
fewer repairs/maintenance procedures that electric equipment require.
The major manufacturers of electrically powered lawn and garden equipment include Black &
Decker, Paramount, McCulloch, Weed Eater, Ryobi, Toro, Homelite, and MTD. Black &
Decker offers the following electric product lines: edgers, string trimmers, lawnmowers, hedge
trimmers, and blower/vacuums. Toro, on the other hand, concentrates its efforts on electric
lawnmowers, while the others produce generally the same types of electric equipment as Black
& Decker. Honda also has an electrically powered lawnmower, marketed to upscale
consumers.
As with electrically powered equipment, hand powered tools are also not a viable option for
most commercial and professional users. Such users rely on the performance and labor saving
attributes of engine driven products. However, many small residential applications are well
suited to hand powered equipment. For example, push mowers are a viable and inexpensive
alternative for consumers with small lots, such as those found in central cities or townhomes.
Reel mowers are recommended for yards of 1/2-acre or less and for trimming. They average
under $100, roughly $153 less than the average price of a walk-behind power mower (OPEI
provided data that showed the average price of walk-behind lawnmowers to be $253). This
price difference and environmental, safety, and noise concerns have led to an increase in
demand for reel mowers. In 1991, demand for reel mowers handcrafted by the American Lawn
Mower Company/Great States Corporation increased by 30 percent from the previous year.
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Since 1985, demand for this company's reel mowers has increased by 135 percent.38 Hand
saws, push edgers, hand clippers, and other hand held equipment are also prevalent in the
market place and specially well suited for small jobs. These tools are mostly sold through
mass merchandisers (such as Sears or Wall Mart) and home improvement stores.
The feasibility of alternative fuels, such as propane, LPG, or CNG, for application in lawn and
garden equipment is constrained by a number of factors specific to small nonroad engines, the
most important of which is price. Lawn and garden equipment are generally thought of as a
disposable consumer item. As a result, consumers expect the prices of these products to be
relatively low. The cost of producing small alternatively fueled small nonroad engines is likely
to be very high at the outset, and thus the marketability of alternative fueled equipment is
questionable. Moreover, various technical, fuel supply, and safety constraints must be
overcome prior to the introduction of alternative fuels into the la\vn and garden equipment
market/9
3.6 U.S. COMPETITIVE POSITION
According the Department of Commerce's 1992 U.S. Industrial Outlook, the United States is
experiencing increasing trade surpluses for the industries of interest to this study.40 Beyond
this, it is important to gain an understanding of the United States's world economic standing
in these industries. An analysis of the value of U.S. imports versus exports and a discussion
of foreign and domestic economic conditions of relevance to these industries serves to gain this
perspective. Economic conditions on the whole seem to portent increases in world trade for
1992. The International Monetary Fund predicts world trade volumes will expand by 5 percent
38Ann Arbor News, "Reel Mowers Really Selling," May 14, 1992.
39Stephanides,Steve, "Low Emission Alternatives for Small Utility Engines". South Coast AQMD,
Technology Advancement Office, June 1990.
^A trade surplus results when industry exports are greater than imports. The amount of this
differential determines the size of this surplus.
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through 1992. World trade volumes can be looked at as either the sum total of all exports or
the sum total of all imports, since these two sums must necessarily be equal if all world trading
transactions are considered. Economic performance of the United States' major trading
partners in the industries of Farm Machinery, Lawn and Garden Equipment, Construction
Machinery, Recreational Vehicles, and Internal Combustion Engines has been slightly better
than that of the world economy since 1978 (both GNP and GDP growth) and their GDP
growth is expected to continue to grow above world levels through 1992. Projected growth
rates for the ten major countries (Canada, Japan, Mexico, United Kingdom, Germany, France,
Netherlands, South Korea, Taiwan, and Australia) is nearly twice as great as in 1991.
Therefore, markets for U.S. exports to these countries are likely to expand, and U.S. exports
can be expected to increase. The United States has been operating at a trade surplus in each
of these industries from 1987 through 1991 and though value of exports is expected to decline
in some industries in 1992, value of imports is declining as well, therefore maintaining a
positive trade balance over all industries. More specifically, U.S. price competitiveness has
been favorable based on the usual international comparisons of prices, exchange rates, and
productivity growth. Though exchange rates gained some value in early 1992 they fell back
again and are not projected to change significantly enough throughout 1992 to effect the
competitive position of U.S. exports in 1992.
The Lawn and Garden Equipment industry is a good example of the overall decline of value
of shipments combined with growth of U.S. trade surplus. As illustrated in Table 3-2, constant
dollar product shipments decreased in 1991 by 6 percent and U.S. imports decreased by $46
million (40 percent). U.S. exports however, increased $31 million (6.4 percent). This resulted
in a U.S. trade surplus increase of $77 million (21 percent over 1990) and an increase of 2.7
percent of exports as a percent of shipments. This follows with the general trend of U.S.
imports falling at an estimated compound annual rate of 29 percent since 1987. This is due
in large part to the increase in 1989 of production in the United States by firms with facilities
in Japan, Canada, and the United States. The European Community (EC) is the largest market
for U.S. exports of Lawn and Garden Equipment. The EC accounted for 42 percent of U.S.
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Table 3-2
U.S. Imports and Exports for Selected Industries
1987-1991
(millions of current dollars)
Lawn and Garden Equipment (SIC code 3524)
Year
1987
1988
1989
1990
1991
Exports
267
415
449
484
515
Imports
219
273
111
116
70
Trade
Balance
48
142
338
368
445
Percent
Increase
in Trade
Balance
N/A
195.8
138.0
8,9
20.9
Value of
Shipments
4,594
4,828
4,578
4,910
4,092
Exports
as Percent
Value of
Shipments
5.8
8.6
9.8
9.9
12.6
Farm Machinery and Equipment (SIC code 3523)
Year
1987
1988
1989
1990
1991
Exports
1,580
1,911
2,900
3,165
2,858
Imports
1,835
2,207
2,300
2,551
2,190
Trade
Balance
-255
-296
600
614
668
Percent
Increase
in Trade
Balance
N/A
-16.1
302.7
2.3
8.8
Value of
Shipments
6,880
8,732
10,419
1 1 ,546
1 1 ,241
Exports
as Percent
Value of
Shipments
23.0
21.9
27.8
27.4
25.4
Construction Machinery (SIC code 3531)
Year
1987
1988
1989
1990
1991
Exports
Imports
2,551 i 2,535
3,371
4,008
4,667
2,695
2,891
3,121
4,815 ! 2,500
Trade
Balance
Percent
Increase
in Trade
Balance
Value of
Shipments
16 ' N/A 12,768
676
1117
1546
2315
4125.0
65.2
38.4
49.7
14,477
15,349
16,070
16,620
Exports
as Percent
Value of
Shipments
20.0
23.3
26.1
29.0 ,
29.0
112
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Table 3-2 continued
Motorcycles, Bicycles and Parts (SIC code 3751)
Year
1987
1988
1989
1990
1991
Exports
137
241
245
420
633
Imports
1,343
1,298
1,318
1,199
1,331
Trade
Balance
-1206
-1057
-1073
-779
-698
Percent
Increase
in Trade
Balance
N/A
12.4
-1.5
27.4
10.4
Value of
Shipments
1,063
1,057
1,370
1,476
1,621
Exports
as Percent
Value of
Shipments
12.9
22.8
17.9
28.5
39.0
Internal Combusion Engines (SIC code 3519)
Year
1987
1988
1989
1990
1991
Exports
933
1,106
1,306
1,426
Imports
807
895
1,010
918
—
Trade
Balance
126
211
296
508
Percent
Increase
in Trade
Balance
N/A
-67.5
-40.3
-71.6
Value of
Shipments
5,752
6,389
6,295
5,878
Exports
as Percent
Value of
Shipments
16.2
17.3
20.7
24.3
Sources; U.S. Industrial Outlook, U.S. Department of Commerce, International Trade
Administration, 1992 and Current industrial Reports, US. Departments of Commerce,
Bureau of Census, 1988, 1990
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exports in 1991 and exports to the EC increased in 1991 over 1990 by about 15 percent,
Canada is the largest single country market for lawn and garden equipment though their down
turning economy in 1991 overcame the positive impacts of lower tariffs due to the U.S. -
Canada Free Trade Agreement of 1991 and caused an actual 3 percent decrease in U.S. exports
to Canada in 1991. The trade agreement however has helped U.S. manufactured products to
be more cost competitive in Canada and is expected to help boost U.S. exports to Canada as
their economy improves. Similarly the North American Free Trade Agreement is expected to
provide opportunities in Mexico to U.S. exporters. Potential introduction of unified EC
standards is also anticipated to boost exports to the EC of lawn and garden equipment.
Overall, constant dollar production is forecasted to increase by 3.2 percent in 1992 and
apparent consumption is expected to rise by 7 percent.
The farm industry, according to the 1992 U.S. Industrial Outlook, paints a slightly less
optimistic picture for the U.S. in terms of international competitiveness. Shipments in constant
dollars fell 6 percent in 1991 due to the draught in California, low rainfall in the grainbelt, low
milk prices, and the Persian Gulf crisis. Bumper crops in competing countries, which have
made the international market for farm machinery more competitive, also contributed to the
decline in constant dollar shipments. Due to the high crop yields in other countries, U.S.
exports of grain decreased causing a decline in the domestic market for farm machinery and
the slack was not picked up by increases in exports of farming machinery to those countries
experiencing boom crops. In fact, exports of farm machinery declined by 10.7 percent in 1991.
Exports to the EC however, increased markedly, approaching $700 million in 1991 which
bodes well for the future of farm machinery exports. Table 3-2 shows that imports and exports
were almost even in 1990 with exports only $6.6 million higher. Imports were expected to
decline to $2.2 billion in 1991, with exports declining to $2.9 billion. Prospects for this
industry domestically are not good due to the decrease by Congress of the 1990-1995 form bill
from S54 billion to $45 billion which is half of the amount allotted by the 1985-1990 farm bill.
Farm land values lagging 'behind inflation rates, and lower crop yields and commodity exports
aiso lend to the projected decrease in domestic consumption. Areas of optimism for both the
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domestic farm machinery industry and exports of farm machinery lie in increases in live hog
and beef prices and proposals for food and equipment support of the Soviet Union throughout
1992. An increase in farm equipment sales of 1.5 to 2.0 percent in constant dollars is expected
for 1992,
Similarly, the construction machinery industry is experiencing an overall down-turn in both
foreign and domestic marketplaces. U.S. shipments decreased by one percent in constant
dollars in 1991 due to the sharp decline in commercial and industrial contracting. The
recession hit the construction machinery industry at a more base level as well in that decreases
in construction lead to decreases in mining and therefore a decline in the market for surface
mining machinery which is included in the construction machinery industry. U.S. imports
decreased 20 percent due to the increased domestic competition in the recessionary U.S.
market. A major decline in this industry was averted however, by a modest growth in
infrastructure and public works projects such as highways, bridges, public schools and public
utilities. Despite a slowdown in foreign markets, U.S. exports, primarily to Canada, Mexico,
Australia, Japan, South Korea, France, and Germany, increased in 1991 by 3 percent. Table
3-2 shows how this industry aggressively markets overseas with exports accounting for 30
percent of production in 1991. Many of the major manufacturers have established foreign
subsidiaries or joint ventures in a major trading bloc such as the European Community. Such
activities have helped U.S. multinational firms hedge against fluctuations in currency
valuations. The future growth of this industry depends greatly on the domestic political
environment with current talk of focusing on infrastructure and the rebuilding of U.S. cities
looming brightly.
The United States has historically not been very competitive in the recreational vehicle
industry. In the motorcycle and ATV market, the four firms with the largest U.S. market share
are all Japanese companies. As illustrated in Table 3-2, the trade gap in this industry however
has been decreasing over the last two years. Constant dollar product shipments.increased 2.7
percent in 1991 due to a 38 percent increase in exports. Exports are the driving force behind
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increases in domestic production as U.S. apparent consumption actually decreased 1.8 percent
in 1991. The export to shipment ratio climbed to 50 percent in 1991 and is expected to reach
52 percent in 1992. Harley Davidson, the sole American owned manufacturer of motorcycles.
increased its production capacity and efficiency in 1991 to sell more to foreign markets.
Japanese subsidiaries manufacturing motorcycles in the United States also had success
exporting from the United States in 1991. U.S. exports have increased 41 percent annually
from 1986 to 1991 which has helped bring the trade deficit down from $812 million in 1986
to $86 million in 1991. Germany represents the United States' largest export market with
Japan running second and Canada and the U.K. being influential markets as well. U.S. imports
of motorcycles, with Japan being the largest supplier at 81 percent, increased by 13 percent to
$509 million in 1991. Exports are expected to continue being the driving force in domestic
production of motorcycles in 1992, though U.S. apparent consumption is expected to increase
5.5 percent after two successive years of decline at a compound annual rate of 9 percent.
Constant dollar product shipments are projected to increase 3.9 percent with exports increasing
11.8 percent. Imports are expected to increase 7.1 percent with Japan maintaining its
dominance of market share.
The U.S. has maintained a positive trade balance in the internal combustion engine industry
since 1987 as illustrated in Table 3-2. In the years 1987 to 1990 this industry has seen
increases in exports from $933 to $1426 million which has accounted for the increase in the
trade balance of $126 million to $508 million. The period 1989 to 1990 showed an especially
large jump, 72 percent, in the increase of the trade balance. These years also marked an
increase of 3 percent in exports as a percent of value of shipments; this despite the fact that
value of shipments actually declined from $6295 million to $5878 in these years. It should he
noted here that value of shipments data for engines presented in Table 3-2 represent value of
shipments f.o.b. plant of production quantities shipped as engines including interplant transfers
whereas value of shipment quantities for other products presented in Table 3-2 represent
received or receivable net selling values, f.o.b. plant of all products shipped, both primary and
secondary.
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3.7 CHARACTERISTICS OF END-USERS
Integral to any industry profile is a description of the users of the given industry's final
product. The small nonroad engine and equipment industry is characterized by a diverse
spectrum of machinery that serve many functions. Regulations aimed at reducing the emission
contribution of small nonroad equipment may inevitably affect users of equipment through
either price changes or changes in the available product mix. Therefore, an understanding of
the factors that influence the demand for nonroad utility equipment will facilitate the
performance of economic impact assessments for regulatory options. This section profiles the
end-users of nonroad utility equipment, and provides qualitative assessments of the forces that
create shifts in demand and the likely effects of price changes.
3.7.1 Lawn & Garden Equipment
The lawn and garden equipment market caters to two types of consumers: residential users and
commercial, or professional users. Residential consumers include home owners (or renters)
that maintain their own lawns. Commercial consumers generally include lawn and garden
contractors that provide lawn maintenance services to difference customers including home
owners(or renters), apartment or office complexes, and commercial businesses. Lawn and
garden equipment are also purchased by federal, state, and local government agencies (e.g.,
Parks, recreation) that maintain public space, airports, golf course maintenance crews, and other
miscellaneous public utility users.
The types of equipment that are utilized by residential users include "conventional" walk-
behind rotary mowers, riding mowers, lawn tractors, rotary tillers, snowblowers, and virtually
all types of portable hand-held equipment. Unlike residential end-users, commercial users
depend on the labor-saving characteristics of multi-spindle walk-behind mowers and other,
larger, commercial turf equipment. However, commercial users also employ what can be
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characterized as predominantly residential types of lawn and garden equipment, such as those
described above.
Data on the distribution of sales by end-use category were not available for riding mowers,
lawn and garden tractors, snowblowers, tillers, and various other equipment types. OPEI41
and PPEMA42 did, however, provide sales split estimates for other types of equipment which
are shown below.
Sales Breakdown by
Type of User
Equipment Type
Trimmers/Cutters
Hand blowers
Back Blowers
Hedgers
Chainsaws
Lawnmowers
% Residential
84
95
5
21
75
90
%• Commercial
16
5
95
79
25
10
Commercial users are also major customers of snowblowers, clippers/grinders, wood splitters.
and shredders—equipment which are generally more expensive and serve more specific needs
than the typical residential machinery.
4lOutdoor Power Equipment Institute.
42Portable Power Equipment Manufacturers Association.
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Optimally, how price changes translate to changes in sales of lawn and garden equipment
would be assessed through econometric models that estimate price elasticities of demand,43
Unfortunately, historical price data for the equipment types in this category were not available.
As a result, developing a quantitative relationship between price and sales was not possible.
However, qualitative relationships can be formulated based on an understanding of the
interactions between sellers and buyers and of the types of product that are sold in the market
place. For instance, residential users of lawn and garden equipment are generally more price
sensitive than commercial consumers. This follows from the fact that most equipment targeted
to residential users is marketed as consumer items, while those targeted to commercial users
are considered as inputs to the production of a service. Figure 3-10 provides an example of
the demand curves that may drive price/quantity relationships for these products and types of
consumers. Note that the demand curve for commercial users is steeper, suggesting that these
consumers may be less sensitive to price changes. Therefore, regulations that increase the price
of a predominantly residential type of equipment can be expected to have larger effects on
demand than an equal price increase on commercial equipment. Residential users are likely
to better maintain their equipment and postpone purchases of new more expensive machines.
On the other hand, commercial users are likely to pass on the price increases to their clients,
which may have a detrimental effect on the lawn maintenance industry. In either case, the
magnitude of demand effects are difficult to estimate without further quantitative research, or
more importantly, without an actual regulatory framework from which price changes may be
estimated. For example, regulatory actions that impose emission certification standards may
result in price increases at the equipment level which will be directly borne by end-users. Such
regulatory actions would cause a movement along the demand curves shown in Figure 3-6
(such as a movement from point A to point B), and thus the corresponding decreases in
quantity demanded. On the other hand, regulatory actions that cause changes in consumer
43Such models would determine the functional relationship between a products demand and its price
level. The estimated coefficients for the price variables would determine price elasticities (defined as
Change in Quantity divided by Change in Price times Price divided by Quantity. A good is said to be
price elastic if a change in price leads to a proportionally bigger change in quantity demanded. A good
is said to be price inelastic if the opposite holds true.
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Figure 3.10
Depiction of Demand Characteristics
of Residential vs. Commercial Consumer:
P2
P r : r. fi
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preferences (e*g.t consumer education programs that inform users about the detrimental effects
of gasoline lawnmowers on the environment and about the environmental benefits of electric
lawnmowers) may cause the entire demand schedule to shift. For instance, if the residential
user demand curve in Figure 3-10 represents his/her demand for gasoline powered
lawnmowers, regulatory actions that promote electric lawnmowers may cause the residential
user's demand curve to shift inwards, so that less gasoline mowers are demanded at a given
price than before the shift took place (Q3 < Q, at P,). The effects of regulatory actions that
cause movements along the demand curve will have different effects than those actions that
cause structural changes in demand.
While price changes are reflected in movements along a demand curve, there are other factors
which may cause structural changes in demand or shifts of the demand curve itself. Such shifts
may be represented in the market place through sales trends. According to OPEI, sales of lawn
and garden equipment have generally followed the path of the overall United States economy.
This relationship was established in Section 2 of this report, as well. However, other factors
may also have significant effects on the sale of lawn and garden equipment: trends in the
housing sector of the economy which directly impact the sales base for equipment, and weather
shocks which directly and usually temporarily cause demand to either contract or expand. For
example, unexpected snow storms often cause sales of snowblowers to dramatically increase.
Again, however, the quantification of the magnitude of effects that shift demand requires
modelling techniques that are beyond the scope of this study.
3.7.2 Recreational Vehicles
Although data on the sales split for recreational vehicles between residential and commercial
users was not available, conversations with industry members (such as, retailers) suggest that
the bulk of recreational vehicles sales are to recreational users — specifically with respect to
ATVs, minibikes, snowmobiles, and off-road motorcycles. However, commercial usage of
ATVs and off-road motorcycles is also important (for example, in agricultural applications)
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while golf cart sales and the sale of specialty vehicles and carts are predominantly to
commercial users, as well.
Economic impact studies to determine the affects of emission regulatory strategies on
recreational vehicles should focus on ATVs, off-road motorcycles, and snowmobiles given their
relative importance, in terms of sales and emission contributions, to this equipment category.44
As a result, a review of the factors that influence demand for these vehicles is warranted,
Given that ATVs, off-road motorcycles, and, to a lesser extent, snowmobiles, are manufactured
outside the United States and imported for sale, foreign exchange rates have a direct, and often
significant, effect on demand. Sales of ATVs and off-road motorcycles, for example, decreased
sharply during the late 1980's largely as a result of unfavorable exchange rates vis-a-vis the
Japanese Yen. As the U.S. dollar weakened in value with respect to the Yen, prices of
imported goods from Japan, such as off-road motorcycles and ATVs, increased. Price
increases, together with a weakening economy, contributed to the drop in sales of these
recreational vehicles. This indicates that regulations which increase price that are placed on
this market will have a significant sales effect, assuming that prices increase by a substantial
amount. Given the current state of this market, such additional price increases may have
further detrimental effects, especially if the value of the U.S. dollar relative to the Yen
continues to drop. As "luxury items"45, ATVs off-road motorcycles, and snowmobiles are
price-sensitive (Le., price elastic) items. Recent concerns with safety have also been important
in the decreasing sales of recreational vehicles, particularly ATVs.
^Section 4 of this report shows that these vehicles account for over 90 percent of sales in this
category, while EPA's NEVES shows the emission contributions of these equipment types.
45Formally a luxury good is defined as a strongly "superior" good which is purchased much more
heavily as income increases.
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3.7.3 Light Commercial, Industrial, Construction
and Agricultural Equipment
With the exception of generator sets, the majority of light commercial, industrial, construction,
and agricultural equipment sales are to "professional" users. Therefore, events in the industries
in which these equipment are employed drive demand changes. For instance, light commercial
equipment are generally employed in wholesale trade activities while industrial equipment are
utilized in manufacturing applications. Also, to the extent that such activities rely on these
equipment, trends in the wholesale and manufacturing industries drive sales trends for light
commercial or industrial machinery. Price increases that may result from regulation are not
likely to have a significant effect on the overall demand for these equipment, but may cause
sales shifts toward relatively inexpensive brands.
3.8 SECTION SUMMARY
This section has expanded on the industrial organization concepts that were developed in
Section 2. Specifically, the competitive features of the small nonroad engine and equipment
industry have been reviewed. These features include: channels of product distribution, the
levels of vertical and horizontal integration across engine and equipment manufacturers
supplying the nonroad engine and equipment industry, the types and extent of barriers to entry
that may exist in this industry, the degree of market power inherent in the nonroad engine and
equipment industry at various levels of producer interactions, the availability and importance
of substitute power sources for internal combustion engines, the global competitive position
of U.S. firms in this industry, and characteristics of end-users which drive the demand for the
various products that are sold in the small nonroad equipment industry. Such a comprehensive
description of this industry's competitive features has revealed various interesting results which
should be summarized.
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First, the level of vertical integration in the small nonroad engine and equipment industry
appears to be rather small. Where present, vertical integration is concentrated in three areas
of the industry: foreign lawn and garden engine and equipment manufacturers, foreign
recreational engine and equipment manufacturers, and handheld lawn and garden engine and
equipment manufacturers. For example, Honda produces both the engine and equipment
components of their lawn and garden products, while Suzuki produces both the engine and the
other major components that make-up its off-road motorcycles. In fact, most of the vertically
integrated manufacturers are foreign companies.
Horizontal integration, on the other hand, is common among engine manufacturers in the small
nonroad engine and equipment industry. This follows directly from the fact that a single
engine design is often used in many small nonroad equipment applications. As later shown
in Section 4, Tecumseh and Briggs & Stratton engines, for example, are employed by various
types of equipment including lawn and garden equipment, light commercial and industrial
equipment, light agricultural equipment, and others.
Second, advertising and product differentiation, economies of scale, and large capital
requirements appear to be the only forms of barriers to entry that may characterize the small
nonroad engine and equipment industry. However, the effectiveness of these phenomena is
difficult to assess. Nevertheless, advertising plays an important role in the lawn and garden
equipment industry, as shown by its relatively high advertising intensity ratio. Similarly,
product differentiation is important in this market as evidenced by the large number of brands
and product models that are offered for different equipment types, such as lawnmowers or
chainsaws. Another market where advertising and product differentiation appear to be
important marketing strategies is the recreational vehicles market, which largely serves a
consumer, rather than professional, clientele.
Economies of scale and large capital requirements, on the other hand, are likely to be more
important at the engine manufacturing level of the industry, since this level is capital intensive
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and characterized by few dominant sellers. It should also be noted that patents may play an
important role in deterring new firm entry as a result of Section 308 of the Clean Air Act.
Ryobi, for example, may clearly have a competitive advantage if its new 4-stroke CleanAir
Engine is protected through patent.
Third, Section 2 has shown (and Section 4 will show) that one general characteristic of the
industries that comprise the small nonroad engine and equipment industry is high levels of
seller concentration. Empirically, high seller concentration has been shown to perpetuate
product pricing that is above the marginal cost of the products production.46 As discussed
in Section 3.4, results that are characterized by this pricing outcome are economically
inefficient, and display the market power, of at least the market leaders, in the industry.
However, although the small nonroad engine and equipment industry is generally characterized
by seller concentration, the discussion in Section 3.4 demonstrates that the various relationships
between the economic agents operating in this industry are not characterized by significant
levels of market power. Much of the reasoning behind this conclusion centers on the concept
of contestable markets, which is reviewed in detail in Section 3.4. The fact that the small
nonroad engine and equipment industry is not characterized by market power implies that if
regulatory actions increase the production costs of the firms producing in this industry, then
these incremental costs will likely be passed on to consumers, or end-users, in the form of
higher prices. Moreover, the likelihood that market power is not prevalent in the small
nonroad engine and equipment industry implies that economic profits are not being accrued in
the long run. This in turn suggests that entry into the market is relatively free. Although some
aspects of barriers to entry may exist (such as product differentiation, advertising, and
economies of scale), their effectiveness at deterring entry is not necessarily evident.
Fourth, the prevalence of substitute power sources and equipment that displace equipment
powered by internal combustion engines is most evident in the lawn and garden equipment
^Curry, B., George, K.D., "Industrial Concentration: A Survey", The Journal of Industrial
Economics, March 1983.
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market where electrically powered machines have been common for many years. However,
the sale of electrified lawn and garden equipment is hampered by various factors. For
example, the long extension cords necessary for the operation of electrified equipment are
cumbersome, while electrified lawn and garden equipment are generally not a viable option for
commercial users. However, use of battery packs could potentially resolve some of the
detrimental user oriented externalities associated with electrically powered lawn and garden
equipment.
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SECTION 4
TECHNOLOGY AND MARKET STRUCTURE
The small nonroad engine and equipment industry is comprised of many manufacturers
specializing in the production of engines or equipment, but usually not both. Such
specialization in the manufacturing process does not allow for a traditional approach to
describing the industry's organization. That is, unlike most industries (e.g., the automobile
industry), a single "snapshot" of the small nonroad engine and equipment industry does not
suffice. Rather, manufacturers that specialize in either the production of engines or of
equipment should be analyzed separately when assessing the industry's structure and
competitiveness.
Table 4-1 provides a listing of most of the engine manufacturers that sell some, or all, of their
product in the small nonroad engine and equipment industries.47 Unlike most other industries,
however, some of these manufacturers are not in direct competition with one another. Many
engine manufacturers supply engines to specific markets within the industry or specialize in
the production of specific engine types. For example, Briggs & Stratton is the world's largest
producer of small (less than 20 horsepower), air cooled gasoline engines for outdoor power
equipment (such as those found in lawn and garden applications), while Yanmar is the world's
largest diesel engine manufacturer, in terms of units, offering engines between 5 and 5000
horsepower. Such specialization decreases the likelihood that Briggs & Stratton and Yanmar
will directly compete for market share.
Similarly, equipment manufacturers (the largest of which are shown in Table 4-2) also service
specific segments of the utility equipment industry. Some specialize in the production of lawn
and garden equipment (such as Toro), while others specialize in construction or industrial
equipment (such as JI Case).
47For a complete listing of the engine manufacturers included in PSR's Engindata database see
Appendix A.
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TABLE 4-1
Engine Manufacturers
Compan y
ACME
AJAX
Allis-Chambers
Belarus
Black & Decker
Bombardier, Inc.
Sriggs & Strattoo
China Qiesai
Clinton
Columbia
Cummins Engine
Cushman
Cuyuna
Daihatsu Motor Co,
Deutz
Emerson Electric Co.
Enshu, Ltd,
Fuji Heavy Industries
Hercules Engine, Inc.
hUno
HomeSite
Honda Motor Co,
Inertia Dynamic Co,
Parent
KHD Deutz of America
Subsidiaries
Onan
SMF Investments, Inc.
Division /Brands
Sk(!
Location
Italy
United States
Japan/United States
Russia
Baltimore, MO
Montreal, Quebec
Milwaukee, Wi
China
United Stales
United Stales
Cctijfinbus, !N
Jmted States -
Untted States
Ikeda City, Jacan
Norcross, GA
Si. LOUIS, MO
Jaoan
Japan
Canton, OH
Japan
Textron, Inc j Providence R! ;
Tokyo, Japan
|
Isuzu j
Kawasaki
Kohl er Co, j
Kubota Corporation i
Lister-Petter H,S. Investments, Inc,
Lomoardmi USA
Mitsubishi Heavy industries (MHI)
Nissan Diesel Motor Co-
Onan Corp,
Outocard Marine Corp,
Perkins
Poulan
Hotax
Sachs AG
C+jKj If}-*
Susuki Motor Corp,
Tecurnseh Products Co,
Teiedyne
Toyota Industrial Equipment
Volkswagen of America
Volvo
Yamaha Motor Corp,
Yanmar Dieset Engine
Cuirsmins Ersgine
White Coosoiidal^d Ind,
Jfiited Slates
Japssr
1
Mitsubishi Motors
Japan
Kohier, Wi
Osaka, Japan
Ciathe, KS
Duiuth. GA
Japan
J2D<3n
Minneapc-Ms, MN
Waukegan, IL
Massey Ferguson ; England
.Cleveland, OH
Austria
' Munich Gar'-nonv
; Japan
I ' TeC'^fn5eri *.'
; Wisconsin/Continental Los Ange'es CA
| Japa-.
1
| Sweden
Japan
j ; Tokyo, J^nar;
128
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TABLE 4-2
Equipment Manufacturers
Company
Agco Corp.
Ai fa-Laval
Allied Products Corp,
Allied Signal, Inc.
American Yard Products
Arctco, Inc.
Ariens Company
BSount, inc.
Bun ton Co,
Caterpillar
Clark Equipment Co.
Cotter & Co.
Cub Cadet Corp.
Cushman, Inc.
Deere &. Company
Dixon Industries
Dresser Industries
Echo, Inc.
Eiectrolux
Exmark Mfg. Co.
Ferns Industries
Ford Motor Co.
Fuqua Industries
Garden Way, Inc.
Gehi Co.
General Power Equipment Co,
Gorman Rupp Co.
Hoffco, inc.
ngersoll-fland
JIG Industries
Kionlz
Komatsu Zenosh Co., Ltd,
Kubota Corporation
Kut Kwick Corp.
Lambert Corporation
Latshaw Enterprises
MTO Products, inc.
Maxirn Mfg. Corp,
Murray Ohio Many. Co.
NOMA Outdoor Products
Poians Industries
Po^'lan/Weed Eater
Ransomes America Corp,
SCAG Power Equipment
Sakai Heavy industries
Sarlo Power Mowers
Scotts Co.
Shindaiwa, inc.
Simpiicity Mfg.
Solo, Inc.
Southland Mower Corp,
Stewart & Stevenson Services, Inc.
Stone Construction Equipment
Target Products, fnc.
Tenneco, Inc.
Textron, inc.
Tomkins Corp.
Tornado Products
Toro Company
Trail Mate, Inc.
Wacker Corp,
Wheeler Mfg. Co.
White Consolidated Industries
Yazoo Mfg Co.
Parent
White Consolidated Ind.
MTD Products, Inc.
Ransornes America
Biount, Inc.
Kioritz
Subsidiaries
Tanaka
Dixon Industries
Meiroe, Go
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Section 4.2 provides a review of the types of equipment and engines that constitute the small
nonroad sector. The extremely wide range of equipment types covered in this industry has
resulted in the inclusion of a broad variety of engine types. It is therefore worthwhile to
examine the types of engines used in the different equipment types and characterize the engines
by general design technologies that affect emissions and durability. PSR's data have been used
to provide a detailed technology penetration analysis, as well as equipment specific unit sales
trends. Where possible, the major manufacturers of the various equipment and engines are also
discussed in Section 4.2.
In order to assess the competitive forces in the small nonroad engine market, Section 4,3 also
employs data from Power Systems Research (PSR) to characterize concentration in the
production and sales of small nonroad engines. Section 4.4 provides product line profiles and
financial health analyses for the major engine and equipment manufacturers. Note, however,
that detailed manufacturer specific sales data were not available for the small nonroad
equipment market. But. some qualitative and anecdotal observations are presented in Section
4.2.
4.1 SMALL NONROAD EQUIPMENT AND THE ENGINES THAT POWER THEM
The lower end of the relevant horsepower range is comprised of mostly lawn and garden
equipment powered by air-cooled, 4-stroke or 2-stroke gasoline engines, while the higher end
includes light construction, agricultural, or commercial/industrial equipment often powered by
water-cooled diesels and 4-stroke gasoline engines. Equipment powered by alternative power
sources are also a consideration in assessing the types of equipment included in this industry.
For example, electrically powered lawn and garden equipment have been offered for many
years and present a viable alternative for some applications. Similarly, compressed natural gas
(CNG) and liquefied petroleum gas (LPG) engines are also common in some industrial
equipment. The range and significance of substitute power sources and equipment have been
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dealt with in Section 3 of this report, although some additional insight is presented in this
section regarding LPG and CNG penetration rates.
To present some structure to this fragmented industry, and facilitate its description, small
nonroad equipment have been categorized for the technology analysis into 7 groups. Such a
categorization assures that equipment types with similar engines, uses, or operating
characteristics can be examined as a group. Table 4-3 presents the equipment categories, and
equipment types within each category, that comprise the small nonroad equipment and engine
industry. These categories and equipment types were identified through an analysts of PSR's
Engindata database48 (which provides detailed engine sales data by manufacturer and
equipment type combination) and mostly reflect those developed for EPA's NEVES.49
However, additional categories were created to reflect "loose engines" (defined as those engines
sold by distributors into undocumented applications or replacement engines), exports, and
miscellaneous equipment not included in EPA's NEVES, such as refrigeration/AC equipment.
Table 4-4 provides useful information about the relative volume of engines consumed by each
market category. Although their share has declined in recent years, lawn and garden equipment
account for most of the volume — an average of over 73 percent from 1982 to 1991."°
Exports account for a major, and generally growing, portion of the engine market, roughly 17
percent. The rest of the equipment categories make up the remaining 10 percent of the small
nonroad engine market.
48 A brief description of PSR's Engindata database is provided in Appendix A of this report.
49U.S. EPA, "Nonroad Engine and Vehicle Emission Study - Report", November 1991.
so jhe u 5 Department of Commerce also provides some data about the type of applications that
engines end-up in. Of the estimated 16,490,828 gasoline engines produced in the United States in 1990.
lawn, home, and recreational equipment account for approximately 80% (13,074,023), while chainsaws,
irrigation equipment, and generator sets account for approximately 9%. Although the Commerce
Department does not categorize the equipment applications to exclude large engine industry applications.
these figures reinforce the importance of lawn and garden equipment.
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TABLE 4-3
EQUIPMENT CATEGORIES AND
EQUIPMENT TYPES
Lawn and Garden Equipment
Chainsaws
Chippers/Grinders
Commercial Turf Equip.
Front Mowers
Leaf Blowers/Vacuums
Lawnmowers
Lawn and Garden Tractors
Rear Engine Riders
Shredders
Snowblowers
Tillers
Trimmers/Edgers/Brush Cutters
Wood Splitters
Other Lawn and Garden Equip.
Light Construction Equipment
Bore/Dril! Rigs
Cement/Mortar Mixers
Concrete/Industrial Saws
Cranes
Crushing/Processing Equip.
Crawler Dozers
Dumpers/Tenders
Graders
Light Plants/Signal Boards
Pavers
Paving Equipment
Plate Compactors
Rubber Tired Loaders
Rollers
Rough Terrain Forklifts
Skid Steer Loaders
Surfacing Equipment
Tampers/Rammers
Tractors/Loaders/Backhoes
Trenchers
Airport Service Equipment
Light Agricultural Equipment
Aircraft Support Equipment
Terminal Tractors
2-Whee! Tractors
Ag. Mowers
Ag. Tractors
Balers
Hydro Power Units
Spnr.vrs
Tillers
Other Ag. Equip.
Recreational Vehicles
All-Terrain Vehicles
Golf Carts
Minibikes
Off-road Motorcycles
Snowmobiles
Specialty Vehicles/Carts
Loose (or Replacement) Engines
Exports of Loose Engines
Light Commercial and Industrial Equipment
Miscellaneous Equipment
Air Compressors
Gas Compressors
Generator Sets
Pressure Washers
Pumps
Welders
Aerial Lifts
Forklifts
Scrubbers/Sweepers
Other Material Handling Equip.
Other General Industrial Equip.
Irrigation Sets
Oil Field Equip
Refrigeration/AC Equip.
Railway Maintenance Equip.
Tactical Military Equip.
Underground Mine Equip.
732
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TABLE 4-4
ENGINE SALES BY EQUIPMENT
CATEGORY
Equipment Category
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
Lawn & Garden
Airport Service
Recreational Vehicles
Light Commercial/
Industrial
Light Construction
Light Agricultural
Loose Engines
Exports (Loose Engines)
Miscellaneous
9,332,811
75.64%
663
0.01%
120,476
0.98%
401,880
3,26%
81 ,702
0,66%
298,502
2,42%
555,256
4.50%
1,515,279
12.28%
32,494
0,26%
9,459,838
76.16%
889
0.01%
120,517
0.97%
396,415
3.19%
89,193
0,72%
315,191
2.54%
559,162
4.50%
1,445,251
1 1 ,63%
35,358
0.28%
10,191,752
76.51 %
744
0.01%
141,925
1 .07%
480,284
3.61%
92,958
0.70%
326,346
2,45%
640,703
4.81%
1,401,252
10,52%
44,551
0.33%
1 0,590,656
76.42%
835
0.01%
186,749
1 .35%
513,578
3.71%
102,100
0.74%
267,222
1 .93%
679,785
4.91%
1 ,478,061
10.67%
39,557
0.29%
1 1 ,421 ,802
77.21%
761
0.01%
179,818
1 .22%
564,517
3.82%
105,886
0.72%
258,124
1.74%
669,819
4.53%
1 ,556,000
10.52%
36,291
0.25%
12,377,597
75.76%
755
0.00%
190,238
1.16%
648,940
3.97%
123,888
0.76%
261,059
1.60%
693,291
4.24%
2,003,164
12.26%
38,568
0.24%
12,392,831
71 .49%
735
0,00%
221,637
1 .28%
739,590
4.27%
127,908
0,74%
269,325
1.55%
721,133
4.16%
2,821,197
16.27%
40,502
0.23%
1 1 ,929,845
68.15%
752
0.00%
240,956
1.38%
848,573
4.85%
123,208
0.70%
282,739
1.62%
771,006
4.40%
3,266,962
18.66%
42,232
0.24%
12,469,950
69.13%
672
0.00%
270,607
1 .50%
839,019
4.65%
115,907
0.64%
290,614
1.61%
755,886
4.19%
3,252,240
18.03%
43,714
0.24%
11,978.610
69.41%
678
0.00%
280,953
1.63%
817,705
4.74%
105,013
0.61%
273,286
1.58%
793,775
4.60%
2,966,984
17.19%
41,815
0.24%
Total Utility Engines
12,339,063 12,421,814 13,320,515 13,858,543 14,793,018 16,337,500 17,334,858 17,506,273 18,038,609 17,258,819
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
The equipment classification scheme presented in Tables 4-3 and 4-4 differs from the scheme
that was employed in Section 2 for the industry profile. Equipment categories based on the
Standard Industrial Classification (SIC) system, such as those in Section 2, were needed to
present a structured approach to an economic description of those products that together
comprise the small nonroad engine and equipment industry, but that individually make up
portions of many different SIC industries. When developing the industry profile the main
emphasis was on allocating establishments based on supply side characteristics. Industries are
defined by the Census Bureau in terms of establishments primarily engaged in producing a
product or group of products that are related by production process or by the raw materials
used in production. This is a sensible way of defining an industry insofar as firms using the
same raw materials or production processes are able to switch resources to producing each
other's products and thus influence each other's behavior and performance. Supply side
groupings may, however, lead to industry classifications which do not correspond to the
demand side definition of an industry as a group of products which are close substitutes or
complements to consumers.51 While an SIC system is necessary for an economic analysis
(since virtually all economic data are collected using this system), it does not provide a
consistent framework for a technology analysis, such as the one presented in this section of the
report. This is because equipment with similar engines, usage, and operational characteristics
(the latter two reflecting demand rather than supply factors) will not necessarily be included
in the same SIC category, but should be analyzed as a group when conducting a technology
analysis to assess the impact of emission regulations. This important distinction was
recognized in EPA's NEVES which developed equipment categories based on an engineering
framework, rather than an economic one. The categories developed in this section, and shown
in Table 4-3, follow the system used in NEVES by grouping together those products with
similar engines, usage, and operational characteristics that affect emissions.
"Curry, B., George, K.D., "Industrial Concentration: A Survey," The Journal of Industrial
Economics, March 1983.
U.S. Environmental Protection Agency 134 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
Although the classification schemes between Section 2 and Section 4 differ by design, it is
nevertheless important to assess the differences between them. Table 4-5 highlights the
differences between the two classification schemes on the basis of sales volumes.
It should also be noted that PSR defines engine sales as follows: 1) United States produced or
imported loose engines to an OEM, either through a distributor or factory direct channel, or
2) a piece of equipment containing a United States produced captive engine shipped to the
distributor, or 3) a packaged or retrofitted engine shipped by a United States distributor to the
user. This definition includes exports of United States produced loose engines and excludes
imports of equipment with installed engines. The degree to which the exclusion of imports of
equipment with installed engines affects PSR's estimates of U.S. engine consumption has not
been determined. Similarly, differences between Census' engine and equipment shipments
data, industry shipments estimates, and PSR's engine sales data have not been assessed, but
are the subject of a separate project currently being conducted by Sierra Research and JFA for
the U.S. EPA under a separate contract. However, PSR provides detailed sales data by
manufacturer and engine model, while Census and industry associations do not. Therefore, this
section is mostly based on PSR's data, although references are made to other data sources
when the differences are significant. With this caveat in mind, the remainder of this section
discusses sales and technological trends, as well as the major manufacturers in each of the lawn
and garden, airport service, recreational vehicles, light commercial and industrial, light
construction, and light agricultural equipment categories. Sales statistics are provided for all
small nonroad equipment types. Technology penetration rates, on the other hand, are only
provided for those equipment with the highest sales volumes within an equipment category.
Appendix C, however, provides a comprehensive listing of technology penetration rates for
each equipment type.
U.S. Environmental Protection Agency 135 413-14
-------
TABLE 4-5
DIFFERENCES BETWEEN SIC BASED AND
EPA NEVES' EQUIPMENT CLASSIFICATION SCHEMES
SECTION 2, TABLE 2-2
CLASSIFICATION
SIC 3519- Internal
Combustion Engines, n.e.c.
SIC 3523 - Farm Machinery
and Equipment
SIC 3524 - Lawn and Garden
Equipment
S!C 3531 - Construction
Machinery
I
SIC 3532 - Mining Machinery
! and Equipment, Except Oil
and Gas Field Machinery and
Equipment
| SIC 3533 - Oil and Gas Field
Machinery and Equipment
j
SIC 3537 - Industrial Trucks
and Tractors
!
SECTION 4, TABLE 4-3
CLASSIFICATION
Loose/Export Engines
Light Agricultural
Equipment
Lawn and Garden
Equipment
Light Construction
Equipment
No Independent Category
No Independent Category
No I.'idepeiulent Category
SALES
DIFFERENCE
(SECTION 2 vs
SECTION 4)
3, 760,759 vs
3,760,759
573,485 vs 273,286
10,840,860 vs
11,978,610
100,425 vs 105,013
75,724 vsO
2,006 vs 0
17,265 vsO
|
EQUIPMENT TYPE DIFFERENCES
(SALES)
None
Section 4 does not include in this category "
Commercial Turf Equip. (230,747),
Shredders (41,247), Skid Steer Loaders
(18,137), or Irrigation Sets (4,068) which j
are included under Miscellaneous
Equipment
Section 4 includes in this category
Commercial Turf (230,747), Shredders !
(47,247), Wood Splitters (10,474),
Chainsaws (844,849)
Section 4 includes in this category Skid
Steer Loaders (18,137), Dumpers/Tenders
(1,688), Bore/Drill Rigs (700), Rough
Terrain Forklifts (152)
Section 4 does not include in this category
Wood Splitters (10,474), and Aerial Lifts
(3,773), or Railway Maintenance
under Miscellaneous Equipment
Section 4 includes Pressure Washers
(73,992) under Light Commercial and
Industrial Equipment. Dumpers/Tenders
(1,688) under Light Construction
Equipment, and Underground Mining
Equipment (44) under Miscellaneous
Equipment
Section 4 includes Bore/Drill Rigs (700)
under Light Construction Equipment and
Oil Field Equipment (1,308) under
Miscellaneous Equipment
Section 4 includes Forklitis f 10,322),
Other General Imlii.Mrial Equipment '
(6,044), and Other Material Handling
Equipment (69) under Light Commercial
and Industrial Equipment, Aircraft Suppon
Equipment (655) and Terminal Tra;.Mrs
(23) under Airport Service Equipment.
and Rough Terrain Forkiifls (152) under
Light Construction Equipment
136
-------
TABLE 4-5, cont.
DIFFERENCES BETWEEN SIC BASED AND
EPA NEVES' EQUIPMENT CLASSIFICATION SCHEMES
SECTION 2, TABLE 2-2
CLASSIFICATION
SIC 3541 - Machine Tools,
Mewl Cutting Type
' SIC 3546 - Power Driven
Hand Tools
SIC 3548 - Electric ami Gas
Welding and Soldering
Equipment
SIC 3561 - Pumps and
Pumping Equipment
SIC 3563 - Air and Gas
Compressors
SIC 3585 - Commercial and
Industrial Refrigeration
Equipment
SIC 3589 - Service Industry
Nfachinery, n.e.c.
SIC 3621 - Motors and
Generators
SIC 3795 - Tanks and Tank
Components
SIC 3799 - Transportation
Equipment, n,e,,-.
SIC 3751 - Motorcycles,
Bicycles, and Parts
SECTION 4, TA1JLE 4-3
CLASSIFICATION
No Independent Category
No Independent Category
No Independent Category
No Independent Category
No Independent Category
No Independent Category
No Independent Category
No Independent Category
No Independent Category
No Independent Category
N'o Independent Category
SALES
DIFFERENCE
(SECTION 2 vs
SECTION 4)
4,433 vs 0
844,849 vs 0
47,824 vs 0
148,168 vsO
37,301 vs 0
3t,169vsO
6,210 vsO
483,302 vs 0
3,384 vs 0
280,953 vs 0
Sales cannot he
identified because
PSR's database does
not include sale*
figures for Off-Road
Motorcycles
EQUIPMENT TYPE DIFFERENCES
(SALES)
This SIC is the closest representative of
Chippers/Grinders (4,433) that was
identified, though it is unlikely that
Chippers/Grinders used in Lawn and
Garden Applications are represented by
this SIC code. Section 4 includes these
under Lawn and Garden Equipment.
Section 4 includes Chainsaws (844,849)
under Liwn and Garden Equipment
Section 4 includes Welders (47,824) under
Light Commercial and Industrial
Equipment
Section 4 includes Pumps (148,868) under
Light Commercial and Industrial
Equipment
Section 4 includes Gas Compressors (1S4)
and Air Compressors (37,1 17) under Light
Commercial and Industrial Equipment
Section 4 includes Refrigeration/ AC |
Equipment (31,169) under Miscellaneous 1
Equipment
Section 4 includes Sweepers/Scrubbers ;
(6,210) under Light Commercial and !
Industrial Equipment
1
Secttori 4 includes Generator Sets
(483,302) under Light Commercial and
Industrial Equipment
Section 4 includes Tactical Miliury
Equipment (3,384) under Miscellaneous
Equipment
Section 4 includes Snowmobiles
(114.J43), ATV's (91.831), Gc.lt' Cans
(58,494), and Specialty Vehicle> and C;
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
4.1.1 Lawn and Garden Equipment
Table 4-6 presents PSR's sales estimates for each type of lawn and garden equipment for the
period of 1981 through 1991, Small handheld equipment, specifically chainsaws,
trimmers/hedgers/cutters, and blowers/vacuums account for approximately 35 percent of sales
in the lawn and garden market (1991 figures). According to PSR's data, sales of chainsaws
declined by roughly 70 percent during the ten year period between 1981 and 1991,"2 This
decline was the result of various factors — from generally depressed conditions in the housing,
forest, and construction industries during the early 1980's. to mild weather conditions,
decreases in natural gas and fuel oil prices, the depressed farm economy, and increased imports
of Canadian wood and paper products during the mid-1980's. On the other hand, sales of
trimmers/edgers/cutters have more than doubled during the same period, as decreasing prices
and technological innovations (e.g., anti-vibration devices and lower weight configurations)
have made them more attractive to both residential and commercial users.33
Walk behind lawnmowers have historically accounted for roughly 50 percent of lawn and
garden equipment sales. Sales have remained relatively flat during the 10 year period from
1981 to 1991, reaching a low of 4.5 million in 1983 and a high of 5.9 million in 1987,
However, the recent economic downturn and the associated drop in consumer confidence will
52 Shipment data provided by the Portable Power Equipment Manufacturers Association (PPEMA)
show a 37% decline in the sales of chainsaws for the same period (1,820,000 to 1,153,000), with much
of the decline taking place between 1981 and 1985. Part of the difference between PSR's sales estimates
and PPEMA's shipment data may be due to the fact that PSR's database does not include imported
equipment with captive engines, such as Stihl chainsaws.
53 PPEMA's shipment data for trimmers/brushcutters show an increase of 142% for the period
between 1982 and 1991 (1.25 million to 3.03 million).
U.S. Environmental Protection Agency 138 413-14
-------
TABLE 4-6
LAWN AND GARDEN EQUIPMENT
SALES (1981-1991)
APPLICATION
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
CHAINSAWS
Diesel
Gasoline
CH1PPERS/GRINDER
Diesel
Gasoline
COMM TURF
Diesel
Gasoline
FRONT MOWERS
Diesel
Gasoline
LEAF BLOW/VACS
Diesel
Gasdine
LN MOWERS
Diesel
Gasoline
LN/GDN TRACTORS
Diesel
Gasoline
OTH LN GDN
Diesel
Gasoline
REAR ENG RIDER
Diesel
Gasoline
3HPEDOERS
Diesel
Gasoline
SNOW3LOWER
Diesel
Gasoline
TILLERS
Diesel
Gasoline
'RIM/EDGE/CUTTEH
Diesel
Gasoline
WOOD SPLTR
Diesel
Gasoline
2,783,299
0
2,783,298
172
0
172
90,622
1,349
89,273
0
0
0
112, 441
0
112,441
5.301 ,264
0
5,301.264
481,683
368
481,315
33,887
0
33.887
410,078
0
410,078
724
0
724
145,126
0
145,126
349.097
0
349,097
1,371.001
0
1,371.001
(03.236
0
103.236
1,803.883
0
1 ,803,883
698
0
698
94,145
1,918
92,227
O
0
0
171,170
0
171,170
4,535,285
0
4.535.285
461 .965
329
461 ,656
19,143
0
19,143
309,401
0
30S,40t
S63
0
563
276.198
0
276,198
162,575
0
162.575
1,437.664
0
1,437,664
60.101
0
60,101
1 ,409,269
0
1,409,269
2,533
16
2,5(7
100,211
3.590
96,621
0
0
0
202.347
0
202,347
4,508.080
0
4,508,080
508,345
1.050
507.29S
24,589
0
24,589
250,229
0
250,229
3,317
0
3.317
373,164
0
373.164
137,282
0
(37.282
1.884,783
0
1.884,783
55,689
0
55.689
1.177,832
0
1,177,832
3, (26
22
3.104
112,625
5,330
(07,295
0
0
0
202,165
0
202,165
5.079,259
0
5.079,259
547.269
2,444
544.825
32,215
0
32,215
262,253
O
262,258
7.933
0
7.933
467,359
0
467.359
134.797
0
134,797
2. 105.852
0
2 105. 852
59,062 -
0
59,062
1.079,143
0
1,079.143
3,299
29
3,270
124,452
7,310
117,142
0
0
0
226,363
0
226,363
5,331,562
0
5,331,565
583,997
6,149
577,848
34,651
0
34,651
280,974
0
280,974
11,446
0
1 1 ,446
546,420
0
546,420
99,402
0
99,402
2.224,827
0
2,224,827
44.120
0
44,120
915.343
0
915,343
3.759
53
3,706
143,817
11,014
132,603
0
0
0
188,220
0
188,220
5,488,945
0
5,488,945
796,822
6,659
787,953
34,899
0
34,899
349,578
875
348,703
12,956
0
12,956
603,286
0
603.286
92.432
0
92,432
2,762,680
0
2.762.680
28.065
0
29,065
813,062
0
813,062
4,295
72
4,223
165,460
16.794
148,666
1,401
0
1,401
287,068
0
287,068
5.900.094
0
5,900,094
968,289
7,141
961,148
35.708
26
35,682
453,216
972
452.244
18.983
0
18,933
628.620
0
628.620
58,964
0
68,964
3.019,024
0
3.019.024
13.413
0
13.413
954,232
0
954,232
4,508
75
4,433
202,620
18,244
184.376
34.398
0
34,388
307,194
0
307,194
5,672,242
0
5, 672, 2-12
992.825
8,042
984.783
33,952
54
33.BS8
424093
1.080
423,018
28,598
0
28.SS3
646.217
0
643,217
82.401
d
82,401
2.999.288
0
2,999,288
10,258
0
10.258
818,266
0
818,266
4.473
57
4,416
223,334
20,443
202.391
49655
0
49,655
250,723
0
250.723
5.275.067
0
5.275,067
944.956
6 396
938.570
32,257
54
32.203
320,913
1,200
3(9,713
42.323
0
42 523
633,930
0
683.530
92,373
Q
92,379
3,182348
0
3,182.348
8 941
;
8 Qd!
823,892
0
823 892
4.754
42
4.712
241,017
21,373
219,644
60.149
0
60.149
246,995
0
245.995
5.850,993
3
5,850 9S9
1 ,063.444
5,781
1 063.663
30,657
63
30.S94
334, S4S
'.298
333 347
43.206
0
43.206
543 877
0
£43 677
93,«~7
0
93, *6?
3 M 6 50 '
Q
3,115.601
'0 221
C
••" 227
844,849
0
844,849
4.433
40
4,383
230,747
22.323
208,424
72,179
0
72,179
222,828
0
222,828
5,444,874
0
5.444.874
1.018,515
5,567
1,012,948
29,125
60
29.065
362.714
1,493
381,221
47,247
0
47,247
532,996
0
532.996
87.859
0
87,859
3,069.770
0
3.069,770
10,474
0
10,474-
TOTALS (1.182.630 9,332,811 9.459.838 10.19',752 10.590,656 11.421.802 12,377,597 12.392.831 1 \ .929,375 12469330 11,973.610
Diesel 1,717 2,247 4,656 7,796 13.488 20,811 25.005 27,495 28,(50 28557 29,483
Gasoline 11,180.913 9,330.564 9,455.182 10,183,956 10.577,168 11,400.991 12.352.592 IS. 365.336 11,901.725 12.441.373 11,949,127
139 .
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
likely cause lawnmower shipments to decrease in 199254, stressing the sensitivity of sales to
general conditions in the national economy. In fact, unit shipments of walk behind
lawnmowers followed the path of the overall economy during the 1970's and 1980's.
According to OPEI, units expanded to 6.4 million in 1973, a year in which the economy also
grew. In 1975, as a result of a general economic decline as well as a severe recession in the
housing industry, units shipped fell to 4.7 million, 1.7 million below the 1973 level. Units
shipped increased gradually to 5.9 million in 1979, but then fell again following the economic
slowdowns in 1980 and 1982. During the economic expansion that began in 1983, walk
behind lawnmower shipments grew each year until 1988, when the combined effects of over
two years of drought and a slowdown in housing due to higher interest rates took their toll.
On the other hand, sales of various other types of nonriding equipment {e.g., snowblowers,
shredders, and chippers/grinders) have increased dramatically since 1981, although together
they continue to comprise a small portion of the lawn and garden market. These increases
were partly due to rapid changes in product development that produced higher quality products
at lower marginal costs.
Similarly, riding mowers have become more popular in recent years, shown by the increased
combined sales of lawn and garden tractors, rear engine riders, and front mowers from roughly
892,000 units in 1981 to 1.45 million in 1991.55 As with most lawn and garden equipment,
the sales of riding mowers is expected to be dependent on the general state of the economy.
However, the recession of the early 1980's did not have a significant effect. This may be due
to the fact that the market for these equipment was relatively immature during the early 1980's.
54 The Outdoor Power Equipment Institute estimates that lawnmower shipments will decrease to
roughly 5.17 million in 1992, down from 5.35 million in the previous year. According to OPEI, the
expected downturn reflects cautious attitudes by retailers of outdoor power products about the prospect
of economic growth.
55 OPEI shows a combined sales increase of approximately 53% for riding mowers and garden
tractors for the same period. Their shipment data show 771,000 units shipped in 1981 and 1,177,000
units in 1991.
U.S. Environmental Protection Agency 140 413-14
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Jack Favcett Associates DO NOT CITE OR QUOTE December 1992
Improvements in product development and increased competition from mass merchandisers
may have led the surge in sales. But, as the market matures, the state of the economy will
have a more significant impact on the demand for these products, as shown by the decline in
sales of lawn and garden tractors from 1990 to 1991,
Finally, commercial turf equipment have seen sales expand by roughly 150 percent in the time
span shown in Table 4-6, These equipment include hydro/seeders mulchers, riding turf mowers
(common in golf sources, for example), matchers/aerators, walk-behind multi-spindle mowers.
and other miscellaneous equipment. Increasing sales in recent years reflect the boom in the
lawn maintenance (landscaping) industry, which required firms to incorporate more productive
equipment (such as multi spindle walk behind mowers) in an effort to reduce costs and
maintain a competitive position. Of course, commercial users also do employ predominantly
residential types of lawn and garden equipment, such as chainsaws, trimmers/edgers/cutters,
blowers/vacuums, and conventional lawnmowers (as discussed in Section 3). However.
historical data on the share of sales going to commercial users were not available, so the extent
to which the boom in the lawn maintenance industry influenced sales of predominantly
residential equipment cannot be quantitatively assessed,
One striking conclusion that can be drawn from Table 4-6 is the relative importance of a few
types of equipment to the lawn and garden market. Lawnmowers, trimmers/edgers/cutters, and
lawn and garden tractors together accounted for approximately 80 percent of sales in 1991.
As a result, a review of the types of engines that are employed in these equipment is crucial
to understanding the effect of regulatory options.
Table 4-7 provides a detailed listing of technology penetration rates compiled from PSR's
Engindata database for the most common types of gasoline powered equipment. Lawnmowers
are, and historically have been, predominantly powered by 4-stroke, air-cooled, side valve
gasoline engines. One important trend, however, is the recent shift in lawnmower. sales toward
overhead valve engines, which now account for roughly 7 percent of the total, compared to
U.S. Environmental Protection Agency 141 413-14
-------
TABLE 4-7
TECHNOLOGY PENETRATION RATES FOR
SELECTED LAWN AND GARDEN EQUIP,
(Percent of Gasoline Sales)
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1985
1987
1989
1991
CHAINSAWS
Cooling
Cycle
Fuel Delivery
Valve Configuration
LAWNMOWERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
LAWN & GARDEN TRACTORS
Cooling
Cycle
Fuel Delivery
Valve Configuration
TRIMMERS/EDGERS/CUTTERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
Weighted HP
Air
2-Stroke
Carbureted
Reed Valve
Weighted HP
Air
2~Stroke
4-Stroke
Carbureted
Reed Valve
Side Valve
OHV
Weighted HP
Air
Water
4 Stroke
Carbureted
Side Valve
OHV
Weighted HP
Air
2-Stroke
4-Stroke
Carbureted
Reed
Sid^ Valve
OHV
2.01
100,00
100.00
100.00
100.00
3.52
1 00.00
7.59
92.41
100.00
7.59
92.41
0.00
12.25
99,97
0.03
100.00
100.00
97.88
2.12
1.14
100.00
98.41
1.59
100.00
98.41
1,59
0.00
1.98
1 00.00
1 00.00
1 00.00
100.00
3.63
100.00
5.83
94.17
100.00
5.83
94.17
Q.OO
12.04
100.00
0.00
1 00.00
100.00
99.22
0.78
1.15
100.00
98.79
1.21
100.00
98.79
1.21
0.00
2,00
100.00
100.00
100.00
100.00
3.66
100.00
6.92
93.08
100.00
6.92
93.07
0.01
12.14
100.00
Q.OO
100.00
100.00
99,55
0.45
1.09
100.00
97.78
2.22
100.00
97.78
2.05
0.17
2.10
100.00
100.00
100.00
100.00
3.70
100.00
8.44
91.56
100.00
8.44
86.26
5.31
12.30
99.59
0.41
100.00
100.00
95.75
4.25
1.13
100.00
97.56
2.44
100.00
97.56
2.24
0.20
2.15
100.00
100.00
100.00
100.00
3.75
100.00
8.94
91.05
100.00
8.94
84.05
7.01
12.61
98.71
1 29
100.00
100.00
91.75
8.25
1 .14
100.00
97 10
2.90
100.00
97.10
2 72
0,18
2.1 ",
100.00
100.00
100.00
100.00
3 73
1 00 00
S.25
90,75
1 00 00
S.23
83.53
7 21
12. 58
S8.7S
1 21
1 00 ~-0
90.19
9.3'
1 1 4
1CO.CC
97 20
2 . 8 j
100. CO
97.20
2,54
0 16
142
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
about 2 percent In 1986. This shift largely reflects Honda's penetration into the lawnmower
market, given that Honda is the most significant producer of 4-stroke, overhead valve
lawnmowers (roughly 170,000 units in 1981).
Sales weighted horsepowers were derived for each of the years between 1981 and 1991, and
are also shown in Table 4-7. Clearly, a trend toward more powerful engines has taken place
in the lawnmower market. OPEI recently provided data that showed the percent of shipments
by horsepower ranges for various equipment including lawnmowers. These industry based
estimates are provided in Appendix D and also show a significant shift in lawnmower sales
toward larger engines — for example, in 1986 only 1 percent of shipments included
lawnmowers with engines above 5 horsepower, while by 1991 24 percent of lawnmower
shipments were within this horsepower range. Shifts, such as those reflected in the OPEI data,
in the distribution of sales by horsepower range are likely to result in sales weighted average
horsepower changes similar to those demonstrated by PSR's data..
Unlike lawnmowers, handheld portable equipment, such as trirnmers/edgers/cutters and
chainsaws, are predominantly powered by small, 2-stroke, air-cooled, gasoline engines, as
shown in Table 4-7. Such engines are lightweight and specially suitable for portable handheld
equipment often operated under adverse conditions (e.g., 2-stroke engines are much better
suited for applications that require the operation of equipment at various angles and positions).
Table 4-7 shows that the technological characteristics of trimmers/edgers/cutters and chainsaws
have remained relatively constant since 1981.
Lawn and garden tractors, and other types of riding mowers, are almost exclusively powered
by 4-stroke, air-cooled, side valve gasoline engines. PSR's data demonstrate shifts toward
more powerful engines, particularly rear engine riders. OPEI's data (Appendix D) also indicate
significant shifts toward more powerful engines -— for example, the percent of total sales under
8 horsepower decreased from 30 percent in 1980 to only 3 percent in 1991, while the percent
of sales over 10 horsepower increased from 16 percent in 1980 to 76 percent in 1991. Such
U.S. Environmental Protection Agency' 143 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
major shifts in the distribution of sales across horsepower ranges are likely to result in larger
sales weighted changes than those exhibited by PSR's data. However, the relatively short band
of horsepower options for most lawn and garden equipment emphasize the importance of even
small shifts in sales weighted horsepower.
The lawn and garden engine market is dominated by relatively few firms. PSR's sales database
provides detailed insight about the distribution of sales by engine manufacturer for each
equipment type shown in Table 4-3. According to PSR's data, Briggs & Stratton and
Tecumseh accounted for 56 percent of the engines that were installed into lawn and garden
equipment in 1991, 36.6 percent and 19.4 percent respectively. Although a large portion of
Briggs & Stratton engines are incorporated into lawnmowers (roughly 70 percent), Briggs' also
supplies engines for chippers/grinders, commercial turf equipment, front mowers, rear engine
riding mowers, leaf blowers/vacuums, lawn and garden tractors, shredders, snowblowers, tillers,
trimmers/edgers/cutters, and wood splitters. Tecumseh engines are incorporated into virtually
the same types of lawn and garden equipment, and, likewise, lawnmowers account for the
largest share (over 65 percent).
Homelite and Poulan account for most of the engines that are incorporated into chainsaws and
trimmers/edgers/cutters. Homelite is the third largest engine manufacturer in the lawn and
garden market, with a share (in terms of units) of about 10 percent, while Poulan ranks fourth
with a share of almost 9 percent. Unlike Briggs & Stratton and Tecumseh, Homelite and
Poulan produce the equipment in which their engines are installed. Therefore, these two
manufacturers also account for a substantial portion of portable handheld equipment sales.
Unfortunately, sales data for equipment manufacturers were not available for this report —
other than that which can be inferred from PSR's database. However, some anecdotal
information allows for a qualitative assessment of the major OEM's operating in the lawn and
garden equipment market, and a review of their product lines provides insight as to the engines
(Le., engine manufacturers) that power their equipment.
U.S. Environmental Protection Agency 144 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
Conversations with various industry members and information obtained from the 1992 Outdoor
Power Equipment Expo identified most of the important lawn and garden equipment
manufacturers. Murray Ohio and MTD are major producers of mowing equipment, supplying
their products to mass merchandisers. Murray's product line of walk behind lawn mowers,
lawn tractors, garden tractors, rear engine riding mowers, and tillers are exclusively powered
by either Briggs & Stratton or Tecumseh engines. Although MTD's product line is somewhat
more extensive than Murray's (since it includes log splitters, chippers/shredders, lawn
vacuums/blowers, and tillers/edgers, as well as mowing equipment), MTD's equipment are also
exclusively powered by Tecumseh or Briggs & Stratton engines.56 Given the relative and
growing importance of mass merchandisers as retailers of lawn and garden equipment, Murray
and MTD are expected to continue to play a major role in the mowing equipment segment of
the market.
Unlike Murray and MTD, however, other equipment manufacturers also produce the engines
that power their equipment (See Section 3, Table 3-1), as well as engines for other equipment
manufacturers. Such interactions between equipment and equipment/engine manufacturers do
not allow for a straight-forward assessment of firm specific market power. However, the
problem is somewhat alleviated if one considers that the more vertically integrated equipment
manufacturers mostly produce equipment for a more upscale market, and together represent a
smaller share when compared to mass merchandisers. This follows from the fact that Briggs
& Stratton and Tecumseh alone account for a majority of engine sales and that Murray's and
MTD's equipment are exclusively powered by Briggs and/or Tecumseh engines.
Producers of more upscale (Le., higher priced or premium) lawn and garden equipment include
Toro, Kubota, Snapper, John Deer, Garden Way, Honda, Jacobsen, and others. Honda's lawn
and garden equipment line, for example, includes various models of lawnmowers, lawn tractors,
riding mowers, commercial mowers, tillers, and snowblowers which are powered by Honda's
56
Neither Murray nor MTD produce engines.
U.S. Environmental Protection Agency 145 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
4-stroke, overhead valve gasoline engines (only Honda's F210 tiller and HR173PDA
lawnmower offer a side valve configuration).
4.1.2 Airport Service Equipment
As shown in Table 4-4, the airport service equipment category makes up a very small share
of the nonroad utility engine and equipment industry. In general, airport service equipment
includes aircraft load lifters, de-icing equipment, ground power units, baggage conveyors, push-
back tractors, tow tractors, yard spotters, and heat and start units. PSR's database provides
little detail on sales and engine specifications about each of these equipment types. Rather,
PSR has aggregated sales of low volume equipment into two categories: 1) terminal tractors
which includes push-back tractors, tow tractors, and yard spotters, and 2) aircraft support
equipment which includes the other types airport service equipment mentioned above. As a
result, little can be said about the technology that is represented by baggage conveyors or de-
icing equipment, for example. But, PSR's data is useful for some general observations about
the types of engines that are employed in this category.
Across all horsepowers, airport service equipment can be powered by gasoline, diesel, or LPG
internal combustion engines. Diesel and LPG engines, however, are more common in heavier
(/.£., "non-utility") equipment, such as push out tractors which often use liquid-cooled,
turbocharged diesel engines that exceed 250 horsepower. On the other hand, Table 4-8 shows
that utility aircraft support equipment are predominantly powered by air-cooled, 4-stroke, side
valve gasoline engines, although the penetration of water-cooled diesel engines has increased
in recent years. Anecdotal information provides some insight as to the types of engines used
by specific equipment included in this catch-all "equipment-type". For example, ground power
units are those pieces of equipment that provide power to the aircraft when it is parked at the
terminal. At the lower horsepower end, or utility level, these equipment resemble generator
sets, and are often powered by air-cooled, 4-stroke gasoline engines. Heat and start units, in
U.S. Environmental Protection Agency 146 413-14
-------
TABLE 4-8
SALES AND TECHNOLOGY PENETRATION RATES
FOR AIRPORT SERVICE EQUIP.
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1987
1989
1991
GASOLINE POWERED
AIRCRAFT SUPPORT EQUIP.
Cooling
Cycle
Fuel Delivery
Valve Configuration
GASOLINE POWERED
TERMINAL TRACTORS
Cooling
Cycle
Fuel Delivery
Valve Configuration
DIESEL POWERED
AIRCRAFT SUPPORT EQUIP
Cooling
Cycle
Fuel Delivery
Valve Configuration
DIESEL POWERED
TERMINAL TRACTORS
Cooling
Cycle
Fuel Delivery
Valve Configuration
SALES
Weighted HP
Air
4-Stroke
Carbureted
Side Valve
OHV
SALES
Weighted HP
Air
Water
4-Slroke
Carbureted
Side Valve
OHV
SALES
Weighted HP
Air
Water
4-Stroke
Direct Injection
indirect Injection
OHV
SALES
Weighted HP
Air
Water '
d-Stroke
Direct Injection
Indirect Injection
OHV
62
18.00
1 00.00
100.00
1 00.00
100.00
0.00
0
N/A
0.00
0.00
0.00
0.00
0.00
0.00
0
N/A
0 00
0.00
0.00
0.00
0.00
0.00
735
10.90
16.76
83 24
10000
-14.44
55.56
100.00
416
11.62
100.00
100.00
100.00
100.00
0.00
0
N/A
0.00
O.OO
0.00
0.00
0.00
0.00
119
41.55
13.24
86.76
100.00
13.24
86.76
100.00
354
24.92
7634
23 66
100.00
76.34
23.66
10000
479
11.07
100.OO
100.00
100.00
100.00
0.00
60
18.00
100.00
0.00
100.00
100.00
100.00
0.00
159
32.93
24.50
75.50
100,00
42.38
57.62
1 00.00
137
27.20
67.19
32 81
100.00
6719
32.81
100.00
552
10.75
100.00
100.00
100.00
100.00
0.00
35
27.49
64.86
35.14
100.00
100.00
64.86
35.14
168
33.94
22.16
77.84
100.00
36.22
63.78
100.00
0
N/A
0.00
0.00
000
0 00
0.00
0.00
538
10.75
1OO.OO
100.00
100.00
98.59
1.41
26
36.00
33.33
66.67
100.00
100.00
33.33
66.67
188
31 04
34 01
65.99
100.00
46.26
53.74
100.00
0
N/A
0.00
000
0.00
0 00
0.00
0.00
508
10.86
100.00
100.00
1 00.00
97.83
2.17
23
45.00
0.00
100.00
100.00
100.00
0.00
100.00
147
30,36
38 10
61.90
100.00
47.62
. 5238
10000
0
N/A
0.00
0 00
0.00
0 00
000
0 00
147
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
contrast, are basically large diesel powered compressors and not part of the small nonroad
engine and equipment industry.
PSR's data for utility terminal tractors shows a significant shift toward gasoline powered units
(Table 4-8). It is unclear why such a shift has taken place. One possibility may be that the
share of diesel powered terminal tractors that fall below 50 horsepower has steadily decreased,
as evidenced by the decrease in sales during the early and mid 1980's. This would explain the
decreasing trend in horsepower for these years. Further investigation as to what has caused
this or other technology and sales shifts is not warranted given the minute role that airport
service equipment play in the overall small nonroad utility industry.
PSR's data does, however, provide some useful information about the engine manufacturers
supplying to this relatively small market. Briggs & Stratton account for 40 percent of engines
installed into utility airport service equipment. Kohler also plays a major role with roughly a
20 percent share, while Perkins, Onan, and Teledyne account for approximately 7 percent, 12
percent, and 9 percent of the engines that are installed into these equipment.
4.1.3 Recreational Vehicles
Recreational vehicles also comprise a relatively small portion of the small nonroad engine and
equipment industry. However, this is one area where the exclusion of imported equipment with
installed engines by PSR results in an underestimate of the relative importance of an equipment
market or individual equipment type. For instance, Engindata does not include sales figures
for off-road motorcycles, since all off-road motorcycles are imported into the U.S. from Japan.
Likewise, PSR's sales estimates for ATV's are low given that a number of Japanese
manufacturers export these vehicles to the U.S. Other data sources were, therefore, used in
conjunction with PSR's Engindata to provide some insight as to the types of engines that are
employed by recreational vehicles and the manufacturers supplying engines and/or vehicles to
the market.
U.S. Environmental Protection Agency 148 413-14
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
Tables 4-9 provides PSR's sales trends for golf carts, mini-bikes, snowmobiles, ATV's
(excluding imported vehicles), and specialty vehicles and carts, while Table 4-10 provides
technology trends for the most common types of recreational vehicles. Table 4-11 presents
historical sales for off-road motorcycles and ATV's from the Motorcycle Industry Council
(MIC). As expected, off-road motorcycles, ATV's, and snowmobiles account for a significant
share of the sales in the recreational vehicles market, although golf cart sales steadily increased
from 1981 to 1991.57
As shown in Table 4-11, sales of off-road motorcycles and ATV's have sharply declined in
recent years — a combined 67 percent from 1985 to 1991, with a 39 percent decline over the
last two years alone. MIC attributes this drastic fall-off in sales to over saturation in the
market, concerns over safety (particularly with ATV's), and the decline in the value of the LJ.S,
dollar relative to the Japanese yen. Current MIC projections indicate that a further drop in
sales is likely, although the rate of decline appears to be levelling off.
Nationwide sales by engine type and technology were not available from MIC. However,
information compiled for California in 1990 indicated that roughly 29 percent of the off-road
motorcycle and ATV population in California was powered by 2-stroke gasoline engines, while
the remaining 71 percent were 4-stroke. These estimates included only recreational
motorcycles and ATV's, and excluded" closed course, competition (motocross) motorcycles,
which are virtually all powered by 2-stroke gasoline engines. PSR's database also provides
information for those ATV's that are not imported with installed engines into the U.S. (Table
4-10). These ATV's are mostly powered by air-cooled, 4-stroke, side valve engines, although
water-cooled and overhead valve engines have recently penetrated the market.
57 The International Snowmobile Industry Association estimates lower historical sales of
snowmobiles: 75,000 in 1991, 80,000 in 1990, 78,000 in 1989, 65,000 in 1988, 61,000 in 1987, 58.000
in 1986, 51,000 in 1985, 59,000 in 1984, and 49,000 in 1983.
U.S. Environmental Protection Agency 149 413-14
-------
TABLE 4-9
SALES TRENDS FOR RECREATIONAL
VEHICLES (1981-1991)
APPLICATION
1981 1982 1983 1984 1985 1986
1987
1988 1989 1990 1991
ALL-TERRAIN
GOLF CARTS
MINI-BIKES
VEHICLES
Diesel
Gasoline
Diesel
Gasoline
Diesel
Gasoline
9,726
0
9,726
33,280
0
33,280
19,112
0
19,112
12,853
0
12,853
33,521
0
33,521
15.606
0
15,606
33,695
0
33,695
33,339
0
33,339
9,920
0
9,920
44,231
0
44,231
33,532
0
33,532
4,980
0
4,980
72,206
0
72,206
30,250
0
30,250
0
0
0
59,812
0
59,812
31,928
0
31,928
0
0
0
55,705
0
55,705
33,609
0
33,609
0
0
0
57,604
C
57,604
44,248
0
44,248
0
0
0
58,687
0
58.687
53,216
0
53,216
0
0
0
79,137
0
79,137
54,504
0
54,504
0
0
0
91,831
0
91,831
58.494
n
55,494
0
0
0
SNOWMOBILES 37,472 48,426 33,081 47,288 68,403 69,241 81,010 100,625 111,594 120,152 114.143
Diesel 00000000000
Gasoline 87,472 48.426 38,081 47,288 68,403 69,241 81,010 100,625 111,594 120,152 114,143
SPEC VEH/CARTS
13,834 10,070 5,482 11,894 15,890 13,837 19,914 19,160 17,459 16.314 16,485
Diesel 00000000000
Gasoline 13,834 10,070 5,482 11,894 15,890 18,837 19,914 19,160 17,459 16.814 16.485
TOTALS 163,424 120,476 120.517 141,925 186,749 179,818 190,238 221,637 240,956 270.507 230,953
Diesel 00000000000
Gasoline 163,424 120,476 120,517 141,925 180,354 168,473 175,066 200,657 214,416 237,432 244,853
750
-------
TABLE 4-10
TECHNOLOGY PENETRATION RATES FOR
SELECTED RECREATIONAL VEHICLES
(Percent of Gasoline Sales)
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1985
1987
1989
1991
ALL TERRAIN VEHICLES
Cooling
Cycle
Fuel Delivery
Valve Configuration
GOLF CARTS
Cooling
Cycle
Fuel Delivery
Valve Configuration
SNOWMOBILES
Cooling
Cycle
Fuel Distribution
Valve Configuration
Weighted HP
Air
Water
2-Stroke
4-Stroke
Carbureted
Single OHC
Reed Valve
Side Valve
Weighted HP
Air
Water
2-Stroke
4-Stroke
Carbureted
Reed Valve
Side Valve
OHV
Weighted HP
Air
Water
2-Stroke
Carbureted
Reed Valve
18.00
100.00
0.00
0.00
100.00
100.00
100.00
0.00
0.00
7.96
100.00
0.00
20.69
79.31
100.00
20.69
79.31
0.00
26.83
70.69
29.31
100.00
100.00
100.00
18.00
100.00
0.00
0.00
100.00
1 00.00
100.00
0.00
0.00
8.31
100.00
0.00
19.51
80.49
100.00
19.51
80.49
0.00
26.76
76.16
23.84
100.00
100.00
100.00
17.72
96.46
3.54
8.86
91.14
1 00.00
91.14
8.86
0.00
8.54
100.00
0.00
14.27
85.73
100.00
14.27
85.73
0.00
27.57
58.87
41.13
100.00
100.00
100.00
17.13
89.11
10.89
27.24
72.76
100.00
72.76
27.24
0.00
8.54
100.00
0.00
14.28
85.72
100.00
14.28
85.72
0.00
27.78
54.83
45.17
100.00
100.00
1 00.00
16.55
81.91
18.09
45.22
54.78
100.00
54.78
45.22
0.00
8.81
100.00
0.00
27.99
72.01
1 00.00
27.99
60.01
12.00
27.86
53.25
46.75
100.00
100.00
100.00
17.77
83.41
16.59
39.31
60.69
100.00
38.79
39.31
21.90
9.16
97.13
2.87
27.19
72.81
100.00
27.19
47.81
25.00
27.90
52.28
47.72
100.00
100.00
100.00
151
-------
TABLE 4-11
ESTIMATED NEW RETAIL SALES OF
OFF-HIGHWAY MOTORCYCLES AND ATVs
YEAR OFF-HIGHWAY ATVs
MOTORCYCLES
1970 199,000* N/A
1971 226,000* N/A
1972 233,000* N/A
1973 292,000* N/A
1974 244,000* N/A
1975 247,000* N/A
1976 260,000* N/A
1977 283,000* N/A
1978 326,000* N/A
1979 332,000A N/A
1980 313,000* N/A
198! 370,000* N/A
1982 165,000 250,000
1983 155,000 425,000
1984 150,000 550,000
1985 145,000 550,000
1986 125,000 480,000
1987 100,000 405,000
1988 85,000 290,000
1989 70,000 200,000
1990 84,000 145,000
A. Sales estimates include both off-highway motorcycles and ATVs units.
Source: Motorcvcle Industry Council
752
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
Snowmobiles, on the other hand, are powered by 2-stroke gasoline engines (Table 4-10).58
This design is optimal for snowmobiles because of the requirement for high performance, or
a high horsepower to weight ratio, While some snowmobiles employ one or three cylinder
engines, most use engines with two cylinders. Virtually all engines range in size from 250 to
650 cc., although one 60 cc. children's model is available. Most of the 250 to 488 cc. units
are air-cooled, while larger units are generally water-cooled.
Gasoline golf carts are predominantly powered by 4-stroke, air-cooled, side valve engines,
although the penetration of 2-stroke engines increased from 20 percent in 1981 to about 27
percent in 1991. Moreover, Table 4-9 shows that sales of gasoline powered golf carts have
increased by roughly 75 percent since 1981. This increase partly reflects the growing
popularity of golf as a recreational activity, as well as growth in the resort industry where these
vehicles are used. Many golf carts are also powered by electricity (Le., battery powered).
There are four major manufacturers of golf carts servicing the U.S. market: Yamaha, Columbia,
EZ-GO, and Club Car. Of these, Columbia and Yamaha produce their own engines, while EZ-
GO and Club Car use Fuji and Kawasaki engines, respectively.
Four manufacturers currently produce snowmobiles for the U.S. market: Yamaha. Polaris.
Arcto, and Bombardier. Only Yamaha manufactures it's own engines. The others buy engines
from Fuji, Suzuki, and Rotax, respectively.
Off-highway motorcycles and ATV manufacturers are vertically integrated (i.e., they
manufacture their own engines, install them into their own equipment, and have their own
distribution networks59). According to MIC, Kawasaki, Honda, Suzuki, and Yamaha account
58 One snowmobile model, the Ski-doo Alpine, utilizes a 4-stroke, 2 cylinder engine, but may have
been recently discontinued.
59 The distribution network is relatively simple to describe. Japanese manufacturers, representing
the bulk of the market, distribute through their own networks. Vehicles are shipped from Japan to
individual headquarters in California. Then they are delivered to distributors who supply independent
U.S. Environmental Protection Agency 153 413-14
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
for about 90 percent of the off-road motorcycle and ATV market. The remainder of the market
is comprised of small players like KTM, ATK, MACO, and Polaris (ATV's). Polaris' engines
are manufactured by Fuji, while ATK uses Rotax engines which are manufactured in Austria.
4.1.4 Light Commercial and Industrial Equipment
Table 4-12 presents sales trends for the various commercial and industrial equipment that fail
under 50 horsepower. Generator sets and pumps comprise the bulk of sales, accounting for
approximately 80 percent. Sales of light commercial and industrial equipment are closely tied
to growth in the general economy. These equipment are mostly employed in the manufacturing
and wholesale trade sectors that are adversely affected by periods of slow economic growth,
Therefore, sales of most light commercial and industrial equipment fell during 1982, 1983,
1990, and 1991, years characterized by economic recession.
The types of engines that are installed into the most common light commercial and industrial
equipment are shown in Table 4-13. Many types of engines are offered in this market — from
2-stroke, air-cooled gasoline engines, to 4-stroke, side valve LPG or CNG powered engines.
Generator sets are mostly powered by air-cooled, 4-stroke, side valve gasoline engines ranging
from 3 to 49 horsepower. The sales weighted average horsepower for generator sets has
declined since 1981, partly due to the increasing penetration of Briggs & Stratton engines
ranging between 3 and 18 horsepower. Briggs' engines accounted for roughly 50 percent of
generator sets sold in 1991.
A significant portion of pumps, on the other hand, are powered by air-cooled, overhead valve
gasoline engines. Although utility pumps range from 3 to 48 horsepower, a steady decrease
in sales weighted horsepower has occurred since 1981. The decreasing trend is largely due to
a shift in the mix of engines that power pumps. For instance, the penetration of high
retailers.
U.S. Environmental Protection Agency 154 413-14
-------
TABLE 4-12
SALES TRENDS FOR LIGHT COMMERCIAL AND
INDUSTRIAL EQUIPMENT (1981-1991)
APPLICATION
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
AIR COMPRESSORS
Diesel
Gasoline
GAS COMPRESSOR
Diesel
Gasoline
CNG
GENTR SETS
Diesel
Gasoline
CNG
PRES WASHERS
Diesel
Gasoline
PUMPS
Diesel
Gasoline
CNG
WELDERS
Diesel
Gasoline
AERIAL LIFTS
Diesel
Gasoline
FORKLIFTS
Diesel
Gasoline
LPG
OTH GEN INDUST
Diesel
Gasoline
OTH MAT HD
Diesel
Gasoline
SCRUB/SWPR
Diesel
Gasoline
LPG
TOTALS
Diesel
Gasoiine
CNG
LPG
51,067
1,186
49,881
233
0
0
232
312,436
13,276
298,880
280
1,014
0
1,014
85,206
4,159
81,017
30
69,433
15,985
53,448
1,612
443
1,169
6,182
1,261
1,974
2,947
4,046
288
3,753
172
0
172
4,077
294
3,642
141
535,477
36,892
494,955
542
3088
44,100
1,165
42,935
115
0
0
115
248,066
15,799
232,050
217
2,660
76
2,584
63,693
3,163
60,509
21
31,163
4,836
26,327
1,038
188
850
3,967
712
1,139
2,116
2,575
194
2,381
139
0
139
4,364
609
3,588
167
401 ,880
26.742
372,502
353
2283
42,379
1,092
41 ,287
330
0
0
330
245,173
10,070
234,814
289
10,225
126
10,099
64,218
3,643
60,556
19
21 ,983
2.986
18,997
1,223
223
1,000
3,819
437
1,726
1,656
2,749
216
2,533
137
0
137
4,179
638
3,352
189
396,415
19,431
374,501
638
1845
*!6,348
1,304
«5,044
544
0
0
544
262,945
14,523
248,150
272
12.872
283
12,589
1 1 1 ,049
4,916
106,110
23
31 ,360
5,646
25,714
1,582
385
1,197
4,307
347
2,443
1,517
4,346
183
4,163
152
0
152
4,779
831
3,726
222
480,284
28,418
4.19,288
839
1739
43,683
1,722
41,961
677
0
0
677
266,760
8,274
258,209
277
26,038
361
25,677
121,970
5,465
116,477
28
37,913
6,105
31 ,808
2,106
448
1,658
3,709
338
2,015
1,356
5,449
165
5,284
127
0
127
5,146
951
3,997
198
513,578
23,829
487,213
982
1554
47,009
1,527
45,482
314
0
0
314
290,008
9,522
280,263
223
36,771
374
36,397
131,628
3,310
126,285
31
42,839
9,122
33,717
3,015
546
2,469
1,834
343
1,381
110
5,655
111
5,544
109
0
109
5,337
1,032
4,128
177
564,517
27,887
53S.775
568
287
48,222
1,669
46,553
175
0
0
175
345,022
1 1 ,462
333,379
181
48,662
581
48,081
140,096
4,998
135,065
33
46,217
8,473
37.744
4,482
741
3,741
4,127
248
2,606
1,273
5,920
95
5,325
113
0
113
5,904
1,209
4.549
146
648,940
29,476
617,656
389
1419
46,296
1,988
44,308
136
0
0
136
405,228
13,956
391 ,043
229
57,898
767
57,131
153,625
5,232
148,352
41
51,764
8,370
43,394
5,414
856
4,558
6,784
290
2,116
4,378
5,847
114
5,733
110
0
110
6,488
1,317
5,011
160
739,590
32,890
701.756
406
4538
45,725
2,041
43,684
165
0
0
165
499,830
15,912
483,706
212
62,063
805
61,258
155,937
4,869
151,049
19
55,222
8,790
46,432
5,056
966
4,090
1 1 ,234
295
3,110
7,829
6,779
142
6,537
113
0
113
6,449
1,442
4,836
171
848,573
35.262
804,915
396
8000
42,151
1,928
40,223
176
0
0
176
487,290
14,056
473,020
214
71,746
793
70,953
157,103
4,549
152,537
17
51,754
8,526
43,228
3,837
968
2,869
11,627
684
2,381
8,562
6,715
135
6,580
73
0
73
6.547
1,422
4.959
166
339,019
33,061
796,823
407
8728
37,117
1,719
35,398
184
0
0
184
483,302
12,458
470,645
199
73,992
799
73,193
148,888
4,277
144,575
16
47,824
8,015
39.808
3,773
1,132
2,641
10,322
683
2,110
7,529
6,044
122
5.922
69
0
59
6,210
1,280
4,772
158
817,705
30,486
779,1 33 _
399
7687
155
-------
TABLE 4-13
TECHNOLOGY PENETRATION RATES FOR
SELECTED LIGHT COMMERCIAL EQUIP.
(Percent of Gasoline Sales)
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1985
1987
1989
1991
AIR COMPRESSORS Weighted HP
Cooling Air
Water
Cycle 4-Stroke
Fuel Delivery Carbureted
Valve Configuration Side Valve
OHV
GENERATOR SETS Weighted HP
Cooling Air
Water
Cycle 2-Stroke
4-Stroke
Fuel Delivery Carbureted
Valve Configuration Reed Valve
Side Valve
OHV
PUMPS Weighted HP
Cooling Air
Water
Cycle 2-Stroke
4-Stroke
Fuel Delivery Carbureted
Valve Configuration Reed Valve
Side Valve
OHV
WELDERS Weighted HP
Cooling Air
Water
Cycle 4-Stroke
Fuel Delivery Carbureted
Vaive Configuration Side Valve
OHV
9.97
98.53
1.47
100.00
1 00.00
96.89
3.11
11.16
99.05
0.95
3.04
96.96
100.00
3.04
94.44
2.53
6.73
99.94
0.06
27.22
72.78
100.00
27.22
71.19
1.59
21.58
81.13
18.87
;oo.oo
100.00
61.35
38.65
9.22
99.48
0.52
100.00
100.00
98.24
1.76
12.05
98.55
1.45
2.37
97.63
100.00
2.37
95.40
2.22
6.66
10000
0.00
21,17
78.83
100.00
21.17
77.89
0.95
17.96
93.32
6.68
100.00
100,00
78.16
21,84
9.42
98.89
1.11
100.00
100.00
98.06
1.94
10.27
97.85
2.15
2.34
97.66
100.00
2,34
95.56
2.09
5.91
100.00
0.00
24.79
75.21
100.00
24.79
74.01
1.20
18.48
90,86
9,14
100,00
100,00
79,73
20.27
9.80
96,56
3.44
100.00
100.00
85.59
14.41
10.02
97.99
2.01
1.94
98.06
100.00
1.94
94.79
3.27
5.66
100.00
0.00
23.40
76.60
100.00
23.40
73.58
3.02
18.73
90.44
9.56
100.00
100.00
80.66
19.34
9.94
96,26
3.74
100.00
100.00
84.73
15.27
8,86
98,31
1,69
1 .53
98.47
100.00
1,53
90,60
7,87
5.49
100,00
0.00
22.66
77.34
100.00
22.66
74.01
3.33
18,59
90.87
9,13
100 00
100 00
68.89
31.1 1
9.78
96.68
3.32
100.00
100.00
85.03
14.97
8.87
97.67
2.33
1.49
98.51
100.00
1.49
87.47
1 1 .04
5.47
100.00
0.00
21.84
78.16
100.00
21.84
74.54
3.63
17.45
94.30
5.70
100.00
1 00 00
71.70
28.30
156
-------
TABLE 4-13 (cant)
TECHNOLOGY PENETRATION RATES FOR
SELECTED LIGHT COMMERCIAL EQUIP.
(Percent of Diesel Sales)
EQUIPMENT TYPE
TECHNOLOGY
1983
1985
1987
AIR COMPRESSORS Weighted HP
Cooling Air
Oil
Water
Cycle 4-Stroke
Fuel Delivery Direct Injection
Indirect Injection
Valve Configuration OHV
GENERATOR SETS Weighted HP
Cooling Air
Oil
Water
Cycle 4-Stroke
Fuel Delivery Direct Injection
Indirect Ejection
Valve Configuration Side Valve
OHV
PUMPS Weighted HP
Cooling Air
Oil
Water
Cycle 4-S;roKe
Fuel Delivery Direct Injection
Indirect Injection
Valve Configuration Single CMC
OHV
WELDERS Weighted HP
Cooling Air
Oil
Water
Cycle -1-S:ro
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
horsepower diesel models has decreased, while lower horsepower Briggs & Stratton gasoline
engines have steadily become more prevalent.
Welders and air compressors also make up a significant portion of the light commercial and
industrial equipment category. Welders are predominantly powered by Briggs & Stratton,
Tecumseh, and Kohler gasoline engines, or by Deutz, Kubota, and Perkins diesel engines.
Those welders with Briggs & Stratton and Kohler engines are mostly air-cooled, 4-stroke, side
valve units, while those with Tecumseh engines are overhead valve. The diesel powered
welders are predominantly direct injection, water-cooled units. Air compressors mostly utilize
air-cooled, 4-stroke, side valve engines, although the sale of diesel power units has increased
in recent years. Again, Briggs & Stratton is a major supplier of gasoline engines for air
compressors, accounting for approximately 60 percent of total units, while diesel air
compressors are mostly powered by water-cooled Kubota engines or air-cooled Deutz engines.
Light-duty industrial equipment (Le., industrial equipment with engines mostly above 25
horsepower, such as forklifts, aerial lifts, scrubbers/sweepers, and material handling equipment)
account for a very small portion of the nonroad utility engine and equipment industry.
Nevertheless, note from Appendix B that over 70 percent of light-duty forklift sales are LPG
powered units. Moreover, a significant portion of originally gasoline powered forklifts are
converted to LPG after sale.
4.1.5 Light Construction Equipment
The types of construction equipment found below 50 horsepower are similar to those available
in the heavy-duty market. For example, rough terrain forklifts, crushing/processing equipment.
pavers, rubber tired loaders, and tractors/loaders/backhoes are mostly powered by engines
above 50 horsepower, and thus account for a small portion of the light construction equipment
U.S, Environmental Protection Agency 158 413-14
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
market, as shown in Table 4-14. Paving equipment, skid steer loaders60, cement/mortar
mixers, and concrete/industrial saws, on the other hand, are generally powered by engines
below 50 horsepower, and account for roughly 65 percent of the light construction equipment
category. Sales of these equipment types are directly related to the health of the construction
industry, as are sales of heavy-duty equipment. There is concern in the construction equipment
industry that overdevelopment, both commercial and residential, in the 1980's will have a
detrimental effect on future equipment sales. Moreover, slow growth in the construction
industry is expected to also induce equipment owners to hold on to their equipment for longer
periods of time, rather than to invest on new machinery.
The majority of light construction equipment manufacturers do not produce the engines that
are installed in their equipment. Notable exceptions are Case and Kubota. Table 4-15 shows
the types of engines most common in various light construction equipment. Cement/'mortar
mixers are mostly powered by air-cooled, overhead valve gasoline engines, although side valve
gasoline units are common. Honda's overhead valve engines account for about 50 percent of
the total engines installed in cement/mortar mixers, while Teledyne-Wisconsin's and Briggs
& Stratton's predominantly side valve units account for 18 percent and 24 percent, respectively.
On the other hand, Kohler's air-cooled, side-valve gasoline engines, ranging between 8 to 20
horsepower, power a substantial portion of concrete/industrial saws (about 35 percent). Other
engine makes common in concrete/industrial saws include side valve Briggs & Stratton
engines, overhead valve Honda engines, and Teledyne-Wisconsin gasoline engines ranging
between 3.5 to 37 horsepower.
Unlike concrete/industrial saws or cement/mortar mixers, skid steer loaders are mostly powered
by diesel engines — the penetration of which has steadily increased since 1981. Kubota's
indirect injection dieseis ranging between 16 and 40 horsepower power make up almost 60
percent of the skid steer loaders in PSR's Engindata database. Other diesel engine
Skid steer loaders are also used in agricultural applications.
U.S. Environmental Protection Agency 159 413-14
-------
APPLICATION
TABLE 4-14
SALES TRENDS FOR LIGHT CONSTRUCTION
EQUIPMENT (1961-1991)
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
BORE/DRILL RIGS
Oiral
Gasoline
CEM/MTR MIXERS
Diesel
Gasoline
CONCRETE/INO SAWS
Diesel
Gasoline
CRANES
Diesel
G.»line
CSUSM/PSOC EQUIP
Diesel
Gasoline
CRWLR DOZERS
Diesel
Gasoline
DUMPERS/TENDERS
Diesel
Gasoline
GRAOESS
Diesel
Gasoline
LT PLANTS/SIGNAL BDS
Diesel
Gaso-'ine
07H CONST
Diesel
Gasoline
PAVERS
Diesel
Gasoline
PAVING EQ
Diesel
Gasoline
PLATE COMPACTORS
Diesel
Gasohne
R.T LOADER
Diesel
Gasoline
ROLLERS
Diesel
Gasoline
ROUGH TRN FOHKLFTS
Diesel
Gasoline
S;s LOADER
Diesel
Gasoline
SURFACING EQ'JIP
Oiesel
Gasoline
TAMPFRS-'RAMMERS
D.esel
Gasoline
'RAC.lOR/BCKhOE
3i»s»l
Gasoline
TRENCHERS
Ousel
Gasolme
TOTALS
Diesel
Gasoline
572
153
418
14,767
525
14,272
0
0
0
452
0
452
0
0
0
0
0
0
1,628
8
1,520
36
36
Q
7,172
2.036
5,136
344
344
0
414
98
316
15,816
320
15,496
19,11?
244
18,873
506
122
384
1,050
I 462
2.583
94
11
S3
14.2S4
7.376
6,a?e
5.624
0
5,524
2,434
0
2,434
1.030
375
155
3 850
1.220
8630
96.240
14,830
33.410
587
12S
462
16,364
500
15,864
29
0
29
483
10
473
0
G
0
0
0
0
1.366
5
1.351
37
37
0
5,188
1,706
3.450
219
219
0
427
155
272
12.257
148
12.109
11.354
125
H.659
256
37
'5B
3.024
1,178
i ,346
1 41
31
60
12.79?
6.415
6.382
5,461
G
5,461
2,344
0
2344
1.C72
1.574
93
7. 'S3
',256
5.3-2
31 702
'3 /21
57,931
837
132
SOS
12.4S4
197
12,267
9.334
0
9.334
381
84
W?
21
2!
0
0
0
0
1.296
6
',290
3
0
0
3 330
8.168
1,!S2
241
24 1
0
607
422
185
15,075
167
14.908
10,225
173
10.058
236
IDS
173
2,661
536
1 675
137
75
62
13.123
3905
1,223
3,329
0
3329
0
2.141
i S20
L320
'•>
S.580
1703
4.8/7
89 193
71 5S5
575
139
436
12,452
149
12.303
9.875
2
9.873
324
115
209
99
S9
0
0
0
0
1.187
15
1,172
0
0,
0
3,245
2,516
729
369
3S9
0
BOS
490
315
213,101
167
19,934
S.1S3
118
5,035
305
81
224
3 C58
995
2.063
160
34
76
13,973
9.339
4.634
1C 237
0
'0.237
1.920
0
1,920
2. 1 70
2.170
0
6,950
1.9S2
4.988
92.958
18.810
74.143
S73
140
433
13,020
241
12.779
10,688
S
10.682
365
119
246
110
110
0
1
7
0
1,352
38
1,314
0
0
0
3,909
3,358
55!
383
388
o
1,323
862
461
23.511
161
23,350
S 176
129
6.047
334
73
256
4.146
1,409
2.7.37
232
132
70
14,295
10.031
4.264
10.281
C
10.281
2,122
0
2,122
2.184
2.134
a
7054
1 894
5,190
102.100
21 31?
30,783
772
1*1
S11
15,173
267
14,806
10,984
9
10,975
349
126
223
185
185
0
11
11
0
1,354
21
1,333
0
0
0
4,108
3,726
382
SOS
505
0
1,399
900
499
24,321
145
24,176
6,600
155
6,445
356
as
<71
3,551
1,149
2,402
246
133
58
14,139
10.998
3.191
10.247
0
10,24?
2.639
0
2.639
2,312
2.3!2
0
6535
S.141
4,394
105.886
23 084
82.802
7S3
1S5
828
20.585
314
20,271
13,045
19
13,026
403
2tS
188
262
262
0
17
17
0
1,380
21
1,359
0
0
0
4.392
4,006
3S6
585
585
Q
1,675
1,151
524
24,966
148
24,818
8.958
17?
6.781
371
90
281
3.764
1.226
S.538
272
226
46
'-,
10,685
0
10.685
3 213
C
3 218
3.558
3.553
0
7.384
2.406
4.976
123.888
31,516
92.3/2
728
157
571
20,346
316
20,030
14,650
24
14,626
419
230
189
502
440
62
16
16
0
1.438
22
1,416
0
0
0
4.S30
4,422
408
S43
543
0
1,716
1.211
505
24.266
164
24,102
7,530
198
7,332
376
93
283
4,081
1,270
2.791
257
226
41
2247S
'9 732
2.746
10.487
C
10.437
3.265
0
3 265
2,418
2.418
0
7.572
2.497
5.075
127,903
33.979
93.929
673 713
117 136
55« 577
20.415 18.860
324 304
20,091 18.556
13,191 12,825
13 21
13,1/3 12,804
474 407
286 262
168 145
617 591
402 3SZ
215 20<
16 19
16 15
0 2-
1 .503 1 .648
23 24
1.480 1,624
0 0
0 0
o o
4 874 4.574
4.416 - 238
458 i-'5
518 527
518 537
0 C
1.712 1 707
1,279 V390
433 417
23.574 2-2,112
116 110
23,458 22.CC2
7.622 '.358
252 258
7.370 ?.:~S
352 1 75
83 3
269 17'
4,247 3,9^5
1,213 1.12=
3,034 •;_ 359
29S 'Jl
26 1 175
34 -^
21,346 15 " "2
•S.SO« 17045
?,542 2 727
10,405 93:2
o :
10.405 93i2
3,070 2 265
C C
3 070 2 -HS
369 ^?3
S69 ^23
3 ;
?,435 7.7'J'r
2.587 26'i
4343 4-277
123208 115907
31 534 29 \\g
SI 624 55.5S3
700
134
566
13,467
284
18 183
1 1,422
13
11,403
349
221
'28
527
344
133
•9
19
3
1,538
'A
' ,563
o
C
c
3,531
3 129
422
458
lie
2-
• 557
'.161
155
'3.494
SS
'= 3C'5
4 533
73.'
-, -:s
'54
3
:54
3535
'315
2,371
1 1
'-; 137
'=. '-'-•;.
2 ^55
-, :f".
;1D
0
---'„
,,,
.; j : }
4 : :6
ics.cn
26 347
7° 366
160
-------
TABLE 4-15
TECHNOLOGY PENETRATION RATES FOR
SELECTED LIGHT CONSTRUCTION EQUIP.
(Percent of Gasoline Sales)
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1985
1987
1989
1991
CEMENT/MORTAR MIXERS
Cooling
Cycle
F_dist
V!v_cnf
CONCRETE/IND. SAWS
Cooling
Cycle
F_dist
Viv cnf
PAVING EQUIPMENT
Cooling
Cycle
F_dist
Vlv_cnf
SKID STEER LOADERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
Weighted HP
Air
4-Slroke
Carbureted
Side Valve
OHV
Weighted HP
Air
4-Stroke
Carbureted
Side Valve
OHV
Weighted HP
Air
Water
2-Stroke
4-Stroke
Carbureted
Reed Valve
Side Valve
OHV
Weighted HP
Air
Water
4-$!roke
Carbureted
Side Valve
OHV
5,60
100.00
1 00,00
1 00.00
1 00.00
0.00
N/A
0.00
0.00
0.00
0.00
0.00
6.58
99.82
0.18
26.68
73.32
100,00
26.68
72.44
0.88
24.46
82.60
17.40
100.00
100.00
69.86
30,14
7.05
100.00
100.00
1 00.00
1 00.00
0.00
13.05
100.00
100.00
100.00
90.88
9,12
6.49
99.94
0.06
20.43
79.57
100,00
20.43
78.96
0.60
24.07
87.62
12.38
100.00
100.00
81.27
18.73
7.23
1 00.00
100,00
1 00.00
64.87
35.13
12.56
100.00
100.00
100.00
91,10
8.90
7,30
100.00
0.00
10.83
89.17
100,00
10,83
88.52
0.66
24.92
78.47
21.53
100.00
100.00
73.33
26.67
7.17
100.00
100.00
100.00
52.83
47.17
11.37
100,00
100.00
100.00
79.41
20.59
7.22
100,00
0.00
10.49
89.5!
100,00
10.49
86,46
3.05
23.48
78.39
21,61
100,00
100.00
74.08
25.92
7.35
100.00
100.00
100.00
49.38
50.62
10.91
100.00
100.00
100.00
75.75
24.25
7.24
100.00
0.00
10,44
89.56
100.00
10.44
86.03
3.53
25.90
65.65
3^.34
100.00
100.00
64,91
35.09
7.68
100.00
100.00
100.00
44.71
55.29
10.78
100,00
100.00
100.00
72.72
27.23
7.31
100.00
0.00
10.73
89.22
100.00
10.78
85.14
4.08
28.69
56.50
43 50
1 00 00
100 oo
55.30
44 20
161
-------
TABLE 4-15 (eont)
TECHNOLOGY PENETRATION RATES FOR
SELECTED LIGHT CONSTRUCTION EQUIP.
(Percent of Diesel Sales)
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1985
1987
1989
1991
CEMENT/MORTAR MIXERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
OONCRETE/IND. SAWS
Coaling
Cycle
Fuel Delivery
Valve Configuration
PAVING EQUIPMENT
Cooling
Cycle
Fuel Delivery
Valve Configuration
SKlO STEER LOADERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
Weighted HP
Air
Water
4-Stroke
Direct Injection
Indirect Injection
OHV
Weighted HP
Air
4-Stroke
Direct Injection
OHV
Weighted HP
Air
Oil
Water
4-Stroke
Direct Injection
Indirect Injection
OHV
Weighted HP
Air
Oil
Water
4-Stroke
Direct injection
Indirect Injection
OHV
9.10
1 00.00
0.00
1 00.00
1 00.00
0.00
100.00
N/A
0.00
0.00
0.00
0.00
27.12
100.00
0.00
0.00
100.00
100.00
0.00
100.00
33.72
11.66
0.00
88.34
1 00.00
12.34
87.66
100.00
10.17
100.00
0.00
100.00
100.00
0.00
100.00
N/A
0.00
0.00
0.00
0.00
27.05
100.00
0.00
0.00
100.00
1 00.00
0 00
100.00
32.10
7.61
0,00
92.39
100.00
7.61
92.39
100.00
12.38
86.72
13.28
100.00
86.72
13.28
100.00
35.00
100.00
100.00
1 00.00
100.00
27.58
100.00
0.00
0.00
100.00
100.00
0.00
100.00
31.21
8.56
0.00
91.44
100.00
15 72
84.28
100.00
12.23
82.80
17.20
100.00
82.80
17,20
100.00
28.81
100.00
100.00
100.00
100.00
27.15
100.00
0,00
0.00
100.00
100.00
0.00
100.00
31.11
7,66
0.00
92.34
100.00
14,74
85.26
100.00
11.73
85.19
14.81
100.00
85.19
14.81
100,00
25,39
100.00
100,00
100,00
100.00
31.19
72.41
0.00
27.59
100.00
72,41
27.59
100.00
31.36
5.78
0,00
94.22
100.00
13.79
86.21
100.00
11.61
85.92
14.08
100,00
85.92
14,08
100.00
25.89
100,00
100.00
100,00
100.00
31 22
72 73
0.00
27.27
100.00
72.73
27.27
100 00
31.34
2.95
2.42
94 63
100.00
14.07
85.93
100 00
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
manufacturers supplying the skid steer loader market include Yanmar, Deutz, and Perkins.
Most diesel engines installed in skid steer loaders are water-cooled, indirect (pre-chamber)
injection units, although direct injection units are also common. Kohler, Teledyne, and Onan
account for the bulk of gasoline engines installed in skid steer loaders. Kohler and Onan
engines are predominantly air-cooled, side valve units, while Teledyne engines are mostly air-
cooled, overhead valve units.
4.1.6 Light Agricultural Equipment
Table 4-16 provides historical sales estimates for those equipment types included in the light
agricultural category. Agricultural tractors and balers are typically powered by heavy or
medium-duty engines (Le.t engines rated above 50 horsepower). Sprayers, agricultural mowers,
and tillers are mostly powered by engines rated below 50 horsepower, and, thus, comprise the
bulk of sales in Table 4-16. Tillers alone account for over 90 percent of light agricultural
equipment sales. Tillers below 5 horsepower have been included in the lawn and garden
category, while those above 5 horsepower are included here.
A review of the engines powering tillers, agricultural mowers, and sprayers is provided in
Table 4-17. Tillers are almost exclusively powered by air-cooled, side-valve, 4-stroke gasoline
engines, although one diesel model was offered by Farymann in the early 1980's. Briggs &
Stratton air-cooled, side valve, 4-stroke gasoline engines are found in roughly 90 percent of
tiller sales (one model alone accounts for 70 percent of total units sold in 1991, according to
PSR). Kohler air-cooled, side valve gasoline engines are often installed in sprayers and
agricultural mowers, while Yanmar and Perkins diesel engines are most common in agricultural
tractors below 50 horsepower.
U.S. Environmental Protection Agency 163 413-14
-------
APPLICATION
1981
TABLE 4-16
SALES TRENDS FOR LIGHT AGRICULTURAL EQUIPMENT
(1981-1991)
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991
2-WHEEL TRACTORS
Diesel
Gasoline
AG MOWERS
Diesel
Gasoline
AG TRACTOR
Diesel
Gasoline
BALERS
Diesel
Gasoline
HYO POWER UNIT
Diesel
Gasoline
OTH AG/EQ
Diesel
Gasoline
SPRAYERS
Diesel
Gasoline
TILLERS
Diese!
Gasoline
TOTALS
Diese!
Gasoline
2,855
0
2,855
1,163
0
1,163
4,854
4,824
30
405
0
405
0
0
0
661
479
182
16,839
461
16,378
206,677
206,641
233,454
5,764
227,654
2,826
0
2,826
1,111
0
1,111
8,313
8,286
27
308
0
308
379
16
363
669
405
264
16,747
408
16,339
268,149
0
268,149
298,502
9,115
289,387
3,370
0
3,370
1,159
0
1,159
9,546
9,487
59
203
0
203
1,009
23
936
557
323
234
16,086
452
15,634
283,261
0
233,261
315,191
10,285
304,906
5,720
0
5,720
1,289
0
1,289
9,795
9,732
63
65
0
65
2,231
175
2,056
542
294
248
15,303
148
15,155
291,401
0
291,401
326,346
10,349
315,997
3,787
0
3,78?
1,279
0
1,279
7,880
7,817
63
0
0
0
3,087
249
2,838
546
312
234
13.467
135
13,332
237,176
0
237,176
267,222
8,513
258,709
3,393
0
3,393
1,262
0
1,262
7,017
7,017
0
0
0
0
3,622
280
3,342
388
266
122
12,622
141
12,481
229,820
0
229,820
258,124
7,704
250,420
2,627
0
2,627
1,190
0
1,190
6,616
6,616
0
0
0
0
4,103
332
3,771
404
273
131
12,974
93
12,881
233,145
0
233,145
251,059
7,314
253,745
2,030
0
2,030
1,022
0
1,022
4,920
4,920
0
0
0
0
4,612
389
4,223
641
301
340
16.029
102
15,927
240,071
0
240,071
269,325
S.712
263.613
1,766
0
1,766
625
0
625
5,928
5,928
0
0
Q
0
4.851
409
4,442
6S8
278
380
13,731
105
13,626
255,180
c
255,180
282,739
6.720
276,019
2,078
0
2,078
570
0
570
6.1S4
6,194
0
0
0
0
5,035
432
4.603
704
293
4 1 !
12.595
105
'2,790
263,033
0
263 038
290 514
7 024
233.590
2,145
0
2,145
644
0
644
5,761
5,761
0
0
0
0
5.149
454
4,695
644
273
371
1 1.583
96
1 1 5S2
247,255
0
247,255
273.286
6.534
265. 7C2
164
-------
TABLE 4-17
TECHNOLOGY PENETRATION RATES FOR
SELECTED LIGHT AGRICULTURAL EQUIP.
(Percent of Gasoline Sales)
EQUIPMENT TYPE
TECHNOLOGY
1981
1983
1985
1987
1989
1991
AG MOWERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
SPRAYERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
TILLERS
Cooling
Cycle
Fuel Delivery
Valve Configuration
Weighted HP
Air
4-Stroke
Carbureted
Side Valve
OHV
Weighted HP
Air
Water
4-Stroke
Carbureted
Side Valve
OHV
Weighted HP
Air
4-Stroke
Carbureted
Side Valve
OHV
11.20
100.00
100.00
100.00
100.00
0.00
7.06
100.00
0.00
100.00
100.00
97.50
2.50
5.93
100.00
100.00
100.00
100.00
0.00
11.44
100.00
100.00
100.00
100.00
0.00
6.18
100.00
0.00
100.00
100.00
98.73
1.27
5.75
100.00
100.00
100.00
100.00
0.00
11.53
100.00
100.00
100.00
100.00
0.00
6.96
99.77
0.23
100.00
100.00
97.70
2.30
5.68
100.00
100.00
100.00
100.00
0.00
11.07
100.00
100.00
100.00
98.40
1.60
7.44
99.61
0.39
100.00
100.00
93.70
6.30
5.62
100.00
100.00
100.00
99.97
0.03
9.18
100.00
100.00
100.00
93.44
6.56
7.24
99.57
0.43
100.00
100.00
90.14
9.86
5.56
100.00
100.00
100.00
99.97
0.03
9.27
100.00
100.00
100.00
89.29
10.71
7.13
99.58
0.42
100.00
100.00
89.48
10.52
5.56
100.00
100.00
100.00
99.97
0.03
165
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
4.2 CONCENTRATION IN THE PRODUCTION OF UTILITY ENGINES
The level of competition present in the production of small nonroad engines will be important
in determining how the industry will respond to production cost effects of regulations.
Emission standards, for example, would increase the cost of producing engines through the
following: investment in new test facilities; costs associated with certification and audits,
engine development and design, and the manufacturing of newly designed engines and
components; and, liabilities associated with recall and emission warranties. How these costs
would affect the industry partially depends on the competitive structure present before
regulations are invoked. Therefore, an analysis of the level of concentration in the production
and sale of utility engines is not only necessary to define the industry's structure, but also to
identify which firms are likely to be most influenced by regulations.
PSR's database was used to determine the concentration level in the production and sale of
utility engines, and to identify the largest firms (in terms of units sold). Table 4-18 presents
historical sales and market shares for the eight biggest sellers in 1991. As expected, Briggs
& Stratton alone accounts for over 45 percent of the utility engine market. Tecumseh ranks
second with a 17 percent market share, while Homelite and Poulan rank third and fourth with
market shares of roughly 7 percent each. These four firms accounted for over 75 percent of
utility engine sales in 1991.
Although Table 4-18 provides some insight about the general competitive environment of the
small nonroad engine industry, it does not address the disparity in engine and equipment types,
nor the fact that engine manufacturers may concentrate their efforts in segments of the market.
In order to account for this disparity, the utility engine industry has been divided into four
segments: 1) gasoline engines rated at 25 horsepower or less, 2) gasoline engines rated
between 25.1 and 50 horsepower, 3) diesel engines rated at 25 horsepower or less, and 4)
diesel engines rated between 25.1 and 50 horsepower. Each of these segments captures a
specific portion of the utility equipment market. For instance, most lawn and garden
U.S. Environmental Protection Agency 166 413-14
-------
TABLE 4-18
UTILITY ENGINE SALES AND MARKET SHARES
FOR THE EIGHT BIGGEST MANUFACTURERS
(1981-1991)
MANUFACTURER
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
BRIGGS & STRATTON 6,597,606 5,731,802 5,595,619 6,001,090 6,293,571 6,616,320 7,155,187 7,922,279 8,077,685 8,467,883 7,905,570
45.57% 46.45% 45.05% 45.05% 45.41% 44.73% 43.80% 45.70% 46.14% 46.94% 45.81%
TECUMSEH
2,189,830 2,099,603 2,156,684 2,429,597 2,516,507 2,511,951 2,898,895 2,996,894 3,057,742 3,096,248 2.991,045
15.12% 17.02% 17.36% 18.24% 18.16% 16.98% 17.74% 17.29% 17.47% 17.16% 17.33%
HOMELITE
1,377,791 1,033,155 959,093 920,266 964,339 977,490 1,099,285 1,229,384 1,238,075 1,242,195 1,241,359
9.52% 8.37% 7.72% 6.91% 6.96% 6.61% 6.73% 7.09% 7.07% 6.89% 7.19%
POULAN
832,509 645,200 672,160 757,079 820,403 906,000
5.75% 5.23% 5.41% 5.68% 5.92% 6.12%
1,007,035 1,168,844 1,209,796 1.191,829 1.166.3&8
6.16% 6.74% 6.91% 6.61% 6.76%
INERTIA DYNAMIC
398,878 423,967 559,985 622,670 668,000 714,972
2.75% 3.44% 4.51% 4.67% 4.82% 4.83%
856,304 948,439 1,011,117
5.24% 5.47% 5.78%
997,196 978,115
5.53% 5.67%
STIHL
313,860 264,457 362,609 411,331 437,185 453,667 491,684
2.17% 2.14% 2.92% 3.09% 3.15% 3.07% 3.01%
464,324 484.158 481,251 472,820
2.68% 2.77% 267% 2.74%
KAWASAKI
12,755 17,144 46,193 80,606 110,246 226,673 291,292 346,736 330,810 352.434 360,742
0.09% 0.14% 0.37% 0.61% 0.80% 1.53% 1.78% 2.00% 1.89% 1.95% 2.09%
SUZUKI
12,237
0.08%
4,186 54,457 112,780 225,282 240.935 379,374 388,683 360,619
0.03% 0.44% 085% 1.63% 1.63% 2.32% 2.24% 2.06%
378.812 354,921
2.10% 2.06%
167
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
equipment are powered by gasoline engines below 25 horsepower, as shown in Section 4.2.
Therefore, an assessment of the major engine manufacturers servicing each of these engine
segments provides more useful information about the possible effects of regulations.
Table 4-19 shows the distribution of engine sales by engine segment. Small (less than 25
horsepower) gasoline engines account for over 98 percent of the small nonroad engine market.
The emission benefits that are derived from various emission mitigation strategies largely
, depend on the design characteristics of the engine themselves. For instance, diesel engines
may marginally emit higher levels of certain pollutants (such as NOX).
Sales and market share estimates for the four biggest selling firms in each of these engine
segments are presented in Tables 4-20 and 4-21. The sale of gasoline engines below 25
horsepower is, as expected, dominated by Briggs & Stratton and Tecumseh. Both Briggs' and
Tecumseh's market shares have increased in recent years, probably reflecting the growing
importance of mass merchandisers to the lawn and garden equipment market.
On the other hand, the sale of gasoline engines between 25 and 50 horsepower is dominated
by those engine manufacturers servicing the recreational vehicles market. Fuji, Suzuki, and
Rotax account for almost 75 percent of engine sales in this segment. As mentioned in Section
4.2, however, PSR's data is not all inclusive. Yamaha, Honda, and Kawasaki (the major
manufacturers of off-road motorcycles and ATV's) are likely to also be important to this
engine market.
Kubota is a major player in both diesel engine segments, accounting for over 35 percent of
diesels sold above 25 horsepower and almost 20 percent of diesels sold between 0 and 25
horsepower. Kubota's smaller diesels are mostly installed into diesel powered lawn and garden
equipment, while their larger diesels service the light agricultural, construction, and industrial
markets. Yanmar is also a major supplier of small diesel engines for generator sets, •- mps,
and
U.S. Environmental Protection Agency 168 413-14
-------
TABLE 4-19
SALES BY ENGINE SEGMENT
FOR SELECTED YEARS
ENGINE SEGMENT
Gasoline
0 to 25 Horsepower
Gasoline
25.01 to 50 Horsepower
Diesel
0 to 25 Horsepower
Diesel
25.01 to 50 Horsepower
1981
14,300,736
88,668
30,676
49,508
1986
14,602,269
76,376
51,881
59,029
1991
17,001,296
113,604
78,779
i
56.038
169
-------
TABLE 4-20
ENGINE SALES FOR THE MAJOR MANUFACTURERS
IN THE GASOLINE SEGMENTS
ENGINE SEGMENT
MANUFACTURER
1981
1982
1933
1984
1985
1986
1987
1988
1989
1990
1991
GASOLINE 8RIGGS & STRATTO 6,597,606
0 TO 25 HORSEPOWER 46.13%
HOMcllTE 1,377,791
9.63%
POULAN 832,509
5 82%
TECUMSEH 2,189,830
15,31%
GASOLINE FUJI HVY IND 22,288
25 TO 50 HORSEPOWER 25.14%
ROTAX 21,795
24.58%
SUZUKI 6,340
7 1 <;«/
/ . 1 3 /o
TELEDYN-WISC 17.128
19.32%
5,731,802
46.98%
1,033,155
8.47%
645,200
5.29%
2,099,603
17.21%
16,678
29.85%
14,760
26.42%
0
0.00%
13,757
24.62%
5,595,619
45.53%
959,093
7.80%
672,160
5.47%
2,156,884
17.55%
14,358
3 1 .00%
10,542
22.76%
0
0,00%
12,013
25.94%
6,001,090
45.61%
920,266
6,99%
757,079
5.75%
2,429,597
18.47%
15,794
28.45%
10,154
1 8.29%
6,300
1 1 ,35%
10,946
19.72%
6,293,571
46.00%
964,339
7,05%
820,403
6.00%
2,516,507
18.40%
21,380
29.21%
12,840
17.54%
13,241
1 8,09%
11,812
16,14%
6,616,320
45,31%
977,490
6.69%
906,000
6.20%
2,511,951
1 7.20%
21,513
28,17%
12,770
16,72%
13,849
18.13%
1 1 ,360
14.88%
7,155,187
44,39%
1,099,285
6.82%
1 ,007,035
6.25%
2,898,895
17.98%
23,097
26.78%
14,808
17.17%
18,768
21,76%
1 1 ,905
13.80%
7,922,279
46.36%
1 ,229,384
7.19%
1,168,844
6.84%
2,996,894
1 7.54%
27.215
26.29%
17,978
17.37%
25,568
24.70%
12,719
12.29%
8,077,685
46.85%
1 ,238,075
7.18%
1,209,796
7.02%
3,057,742
17.74%
30,386
26.87%
20,482
16.11%
27,382
24,21%
12,119
10.72%
8,467,883
47.85%
1,242,195
6.99%
1,191,829
6.71%
3,096,248
17.42%
32,999
28.56%
20,501
17.74%
31,220
27.02%
11,647
10.08%
7,905,570
46,50%
1,241,359
7.30%
1,166,398
6,66%
2,991,045
17.59%
31.355
27,60%
19,476
17.14%
29,659
26.11%
11,274
9.92%
-------
TABLE 4-21
ENGINE SALES FOR THE MAJOR MANUFACTURERS
IN THE DIESEL SEGMENTS
ENGINE SEGMENT MANUFACTURER
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
DIESEL KUBOTA
OTO 25 HORSEPOWER
LISTER-PETTER
MHI
YANMAR
DIESEL DEUTZ
25 TO 50 HORSEPOWER
1SU2U
KUBOTA
PERKINS
4,834
15,76%
2,761
9.00%
404
1 .32%
4,545
14.82%
4,930
9.96%
10,558
21.33%
2.681
5.42%
17,221
34,78%
5,523
1 9.99%
2,801
10.14%
766
2.77%
7,609
27,54%
3,920
6,25%
9,990
21,02%
5.982
12,59%
7,881
16.58%
6.726
22.03%
3,384
1 1 .08%
1.385
4,54%
9,305
30.48%
4,515
9,19%
11,455
23,31%
9,261
18,84%
4,800
9.77%
8,964
22,74%
3,451
8.76%
1,997
5.07%
12,107
30.72%
5,620
9.24%
15,225
25,02%
10.782
17,72%
6,727
1 1 .06%
10,794
26,65%
3,263
8.06%
2,445
6.04%
12,733
31.44%
6,517
11.47%
12,064
21,23%
12.798
22.52%
7,371
12.97%
12,745
24.57%
3,145
6.06%
2,263
4.36%
19,163
36,94%
7,169
12.14%
14.255
24,15%
14,514
24.59%
7,511
12.72%
13,657
20.40%
2,756
4,12%
3,046
4.55%
31,799
47.51%
7,584
12.17%
14,192
22.77%
18,247
29.28%
6,674
10.71%
16,401
21 .89%
3,553
4.74%
3,720
4.96%
33,670
44,93%
7.900
12.47%
13,762
21 .72%
21.757
34.34%
5,845
9.23%
16,001
19.87%
4,508
5.60%
4.860
6.04%
36,3i4
45.20%
8,816
13.97%
13,208
20.93%
22,615
35,83%
5,864
9.29%
14,800
17.86%
5,682
6.86%
8,117
7.38%
35,829
43.24%
8,439
14,36%
12,708
21.63%
21,980
37.37%
5,378
9.15%
14,7S«
18.73%
6,088
7.73%
6,378
8,10%
33,779
42.88%
8,183
14.60%
12.247
21.85%
20,950
37.39%
5,017
8.95%
-------
Jack Faitcett Associates DO NOT CITE OR QUOTE December 1992
other light commercial and industrial equipment. It alone accounts for 43 percent of the
approximately 83,000 diesels sold between 0 and 25 horsepower.
4.3 FINANCIAL AND PRODUCT LINE PROFILE OF MAJOR
MANUFACTURERS
Having identified the major engine and equipment manufacturers operating in the small
nonroad industries, a description of the products that they offer and the financial status of their
operations will help to determine how these firms may be able to cope with regulations.
Optimally, a financial analysis of each firm would best serve the goal of assessing firm specific
regulatory effects. However, financial data was not available for various firms — including
Yanmar, MHI, Perkins, Murray Ohio, and MTD. As a result, the financial portion of the
analytical effort in this section concentrates on the following manufacturers: Briggs & Stratton.
Tecumseh, Kubota, Honda, Teledyne and Black & Decker. Briggs & Stratton and Tecumseh
were selected because of their importance as engine manufacturers to the lawn and garden
equipment industry, and because of the fact that they are engaged solely in the production of
engines. Kubota was selected because of the significant role that it plays as both an engine
and equipment supplier, while Honda's technological advantages and diversity warrants a
focussed analysis of its product line and financial standing. Teledyne was selected because of
its status as a premium line engine manufacturer. Finally, Black & Decker was chosen because
of its importance as a manufacturer of electrically powered lawn and garden equipment.
Although financial data were not available for Yanmar, a brief review of its product line is also
presented.
The financial ratios that were chosen to represent financial strength measure a company in
three important areas61: 1) Profitability — the indication of which is given by the net return
on equity ratio, which measures a firm's return to shareholders, and the net return on assets.
'Definitions of the financial ratios presented in this section are provided in Appendix E.
U.S. Environmental Protection Agency 172 413-14
-------
Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
which indicates the return that a firm receives for each dollar invested in assets, 2)
Leverage — an indication of the company's capacity to meet its short-term and long-term
obligations, measured by the debt to assets and debt to equity ratios, and 3) Liquidity — an
indication of the company's capacity to meet short-run obligations, measured by current and
quick ratios. The financial analysis presented in this section is comparative in nature, in that
a firm's financial health is determined by how well these ratios compare to other firms. From
a regulatory perspective this approach is reasonable, since the one goal from this type of
analysis may be to determine the relative effects of emission control measures across firms.
Tables 4-22 and 4-23 present financial summaries of each engine and equipment manufacturer
for which data was available. As noted above, financial data were not available for all engine
and/or equipment manufacturers that produce products for the small nonroad engine and
equipment industry. As a result, a comprehensive industry-wide financial health assessment
(beyond that provided in Section 2.9) that includes each manufacturer was not possible.
However, a review of the "average" financial statistics presented in Table 4-22 and Table 4-23
may reveal some interesting characteristics of the small nonroad engine and equipment markets.
For the purpose of such a review, the word "average" actually reflects the financial ratios when
calculated across all companies in the respective tables. For example, Table 4-22 shows total
assets across all companies to be roughly 81 million, while net income across all firms is
shown to be roughly 1 million. Therefore, the return on assets (calculated as net income
divided by total assets) across all companies in Table 4-22 is given as 0.01. This figure
constitutes the "average" across all companies for which financial statistics were available.
This was conducted for each ratio except quick ratios where inventories across all firms were
not calculated.
Keeping in mind that not all engine manufacturers are represented in Table 4-22, the "average"
return on equity across engine manufacturers is shown at roughly 4 percent. Given that typical
stock market investments produce returns above 5 percent, a return of 4 percent can be
considered to be relatively low. Such a low return to investment does not bode well for the
U.S. Environmental Protection Agency 173 413-14
-------
TABLE 4.22
Financial Profiles of the Utility Engine Manufacturers
(1991)
(All figures in thousands of dollars unless otherwise noted)
Company
Black & Decker
Bombardier, Inc.
Brlggs & Stratton
Cummins Engine
Daihatsu Motor Co.
Deutz
Emerson Electric Co
Enshu. Ltd.
Honda Motor Co.
Kohler Co.
Nissan Diesel Motor Co
Onan Corp.
Outboard Marine Corp.
Sachs AG'
Stlhl. Inc. (Est ]
Susuki Motor Corp
Tecumseh Products Co.
Teledyna
Volvo
Yamaha Motor Corp.
TOTAL ACROSS COMPANIES
Number ot
Employees
19,810
8,480
22,900
1 1 ,664
16,425
69,500
28
13,500
5.134
3,800
8,100
5,108
500
12,818
12,483
29,400
68,600
12,423
320,873
1991
Sales
4,636,954
2.472,800
950,747
3.405,500
5,937,042
2,665.363
7,427.000
274.063
33,336,765
1,000,000
2,717,607
500,000
983,600
903,746
35,637
7.614,941
1,197,200
3,206,800
14.715,427
3,666,258
97,847.450
Net
Income
53,031
83,784
36,453
(14.100)
1 1 .400
(111,650)
631,900
9,037
542,301
24,219
(85,900)
16,222
1,853
43,509
42,500
(25,400)
(180.438)
47.779
1,126,599
Net Worth
1.027.163
572,625
284,715
693,600
849,617
183,990
3,256,900
65,836
8,429.730
382,997
440,386
136,472
463.300
197,488
12.767
1,472.702
712,800
453.900
6,242.978
1.203,854
27,083,819
Current
Assets
1,729.940
1,310,724
231,058
907,800
2,523,881
1,614,934
2.986,600
160.968
12,539,074
463,693
1,451,544
77,003
500,500
304,962
16,642
3,055,430
635,700
1,140,700
9.409,134
2,027,106
43,069,393
Current
Liabilities
1 ,373.895
827.812
125,760
688,600
2,797,525
632,136
2,093,800
120,412
10,857,634
226,880
1,465,866
134,103
252.100
179,720
6,756
3,215.522
232.600
635.700
8,617,153
1,349,647
35,633,621
Total
Debt
4,505,606
1,233,305
272,076
1,347,600
3,419.168
1,982,487
3.107.500
157,279
14,458,562
469,366
2.129,630
149,349
493,700
338,094
12.072
3.993,986
342,600
1,265,500
11,764.911
2,433,151
53,875,962
Total
Assets
5,532,769
1,850.916
556,791
2,041,200
4,271,382
2,168.380
6,364 i.vo
223,115
22,888,292
852,363
2,570,024
285,821
957,000
543,971
24,839
5,470,214
1,055,400
1.719.400
18,060,959
3,657,078
81,094.334
Current
Ratio
1.26
1.58
1.84
1.32
0.90
2.55
1.43
1.34
1.15
2.04
0.99
0.57
1.99
1.70
2.46
0.95
2.73
1.79
1.09
1.50
1.20
Quick
Ratio
0.81
0.53
1.04
0.62
0.60
0.97
0.66
0.90
0,57
0.76
0,36
096
0.61
1.01
0.66
1.87
1.03
0.66
0.93
Return on
Assets
0.01
0.05
0.07
-0.01
0.003
-0.05
0.10
0.04
0.02
0.00
0.01
0.00
-0.09
0.03
0.07
0.01
0.04
-0,01
-001
0.01
0.01
Return on
Equity
0.05
0.15
0.13
-0.02
0.01
-0.61
0.19
0.14
0.06
0.00
0.02
0.00
-0.19
0.08
0.15
003
0.06
-006
-003
0.04
0.04
Debt to
Assets
0.81
0.67
0.49
0.66
0.80
0.91
0.49
0.70
0.63
0.55
0.83
052
0.52
0.62
0.49
0.73
0.32
0.74
0.65
0.67
0.66
Debt to
Equity
4.39
2.15
0.96
1.94
4.02
10.77
0.95
2.39
1.72
1.23
1.47
1.09
1.07
1.71
0.95
2.71
0.48
2.79
1.88
2.02
1.99
CAP EX
1B91
107.887
152,572
32,038
121.700
310,900
2.024.354
29,700
85.800
97.600
CAP EX to
'91 Salts
2.32%
6.17%
3.37%
3.57%
.__
4.19%
8.07%
__
3.02%
7.17%
3.04%
"Figures for Sachs AQ are for 1986
-------
TABLE 4-23
Financial Profiles of the Utility Equipment Manufacturers
{1991J
(All figures in thousands of dollars unless otherwise noted)
Company
Alfa-Uval
Allied Products Corp,
Allied Signal, Inc.
American Yard Products
Arcico, Inc.
Ariens Company
Blount, Inc.
Caterpillar
Clark £qutprr«nt Co.
Cotter i Co.
Cushman, tnc. [Est.j
Deere & Company
Dixon Industries
Dresser industries
2cho, Inc. f£st.|
Slectrolu*
Ferris Industries
Fuqua Industries
Garden Way, Inc.
Gehl Co.
Gormen Rupp Co.
Ingersoll-Rand
JLG Industries
Kioritl
Komatsu Zenoah Co , Ltd.
Kubota Corporation
Latshaw Enterprises
MTD Products, Inc
Ransomei America Corp.
SCAG Power Equipment |Esl j
Sakai Heavy Industries
Sarlo Power Mowers
Shindalwa, Inc. (Es: j
Simplicity Mtg.
Tenneco, Inc.
Textron, tnc.
Tomkim PLC
Toro Company
Trail Mate, Inc.
Yazoo Mfg. Co.
TOTAL ACROSS COMPANIES .
Number of
Employees
7,800
4,600,
96,300
2,550
850
825
4,600
53,636
8,033
4,200
700
36,500
153
165
150,900
85
'0.700
1,500
1,340
1.048
31.117
1,182
518
648
20.000
too
5.000
1.165
24
4,173
32
28
500
89,000
52.000
10,549
3.560
40
100
608,942
1991
Sales
2,693,638
526,501
11. 83 1,000
550,000
151,855
40,620
672,696
10,162,000
1,190.154
2,139,887
39,603
7.055,000
18,818
4,480,300
9,336
14.582,574
10.000
924,635
200,000
174,920
123.442
3,586.220
94.439
327,871
330.429
6,332.440
20,775
200,000
90,000
167,383
2,000
2875
90,000
13,662,000
7.840,100
1,418,218
711,555
3.485
14,237
92,491,006
Net
income
156,150
[5,768)
273.000
13,384
2,242
(404,000)
(337,520)
59,425
119
(20,200)
2,564
174,300
290
131,083
(50,821)
7,318
7685
150,589
(3,240)
45,000
8,736
51 .305
(1.042)
3,690
10,359
(33)
66
(732,000)
299,500
88,475
9,700
7?
(691)
(60,254)
Net Worth
587,361
120, 8M
2,983,000
(20,595)
66,374
40,620
155,409
4,044,000
237, 49i
112,784
1 1 ,458
2,535,800
18,141
1,763,700
2,518
2,930,349
469
235,431
10,641
77.919
61,258
1,633,058
33,586
167,423
106,688
2,255. 878
8,193
222.900
23.643
23,643
159,618
723
507
(8,«31)
2,968,000
2.927,700
269,703
160,559
5»9
5.5S8
27,239.211
Current
Assets
2,324,908
322,348
4,128,000
239,364
81,667
76,889
252,1536
5,570.000
520,410
575,150
20,442
9,512,100
15,865
1,756,900
3,593
7,118,987
5,242
450,727
18,970
159,983
53,648
1,682.059
58.392
269,850
253,920
4,723,454
14.115
222,778
43,29?
43,297
264,201
1,479
S15
40,968
8.968,000
8,350.300
1,183,820
318.7S3
1,20»
8.091
57,678,339
Current
Liabilities
1 ,689,238
265,884
3,603,000
78,317
21,201
34,281
165.725
3,859,000
327,856
401,701
10,811
6,531,800
1,806
1 ,099,400
1,509
4,849,183
4,873
259,280
31,315
31,298
14,471
776.494
21 ,924
199,445
160.T80
3,995,951
8,780
72,241
21,478
21.478
112,449
500
503
17,247
8,848,000
5.325,800
551,037
107.881
208
1,151
41,523,264
Total
Debt
1,969,710
318,270
7,399,000
379,025
24,444
63,835
340.B10
7,998.000
882,451
650,325
16,623
8,813,600
2,021
1,447,700
2,316
8.654,302
5,935
854,113
39,763
118,100
23,875
1,346.504
36,265
222,835
227,724
5.362,206
10,755
133,231
33,328
33,328
165,888
1,281
812
36,680
15,548,000
12,809,600
970,254
254.745
83fi
3,704
77,201,084
Total
Assets
2,941,493
439,526
10,382,000
515,293
90,818
104,448
496,310
12,042,000
1,119,950
763,109
28,078
11,649,400
20,845
3,309,300
4,838
11,633,781
8,404
1,089,544
50,404
196,019
85,131
2,979,560
74,681
410,827
334,412
7.618,085
18,948
356,131
56,970
56,970
325,505
2,004
1,118
56,621
18,696,000
15,737,300
1,396,237
415.304
1,426
9,282
105.521.240
Current
Ratio
1.38
1.21
1.15
3.06
3.85
2.24
1.52
1.44
1.59
1.43
1.99
1.46
8.78
1.60
2.38
1.47
1.06
1.74
0.54
5.11
3.71
2.18
268
1.35
1.58
1.18
1.81
3.08
2.02
2.02
2.53
2.96
1-82
2.38
1.02
1.57
2.15
2,95
5.87
7.03
1.39
Quick
Ratio
0.80
0.74
0.47
1.00
2.15
1.01
0.72
0.94
0.61
0.94
1.35
8.85
1.02
0.89
0.80
1.24
3.72
1.52
1.02
0.64
0,85
1.17
0.77
0.85
1.93
0.89
0.99
2.07
0.92
0.93
0,61
1,31
1.57
2.07
2.18
2.92
Return on
Assets
0.05
-0.01
0.03
0.00
0.15
0.00
0.005
-0.03
•0,30
O.OB
0.004
-0.00
0.12
0.05
0.08
0.01
0.00
-0.05
0.00
0.04
0.08
0.05
-0,04
0.11
0.03
0.01
-G.05
0.00
006
0.00
0.03
-0.02
o.oe
0,00
-0,04
0.02
0.06
0,02
005
-0.07
-0.0006
Return on
Equity
0.27
•0.05
0.09
0.00
0.20
0.00
0.01
-0.10
-1.42
0.53
0.01
-0.01
0.14
0.10
0.12
0.04
0.00
-0.22
0.00
0.08
0.13
0.09
-0.08
0.27
0.08
0.02
-0.13
0.00
0.16
0.00
0.06
-0,05
0.13
0.00
-0.25
0.10
0.33
0,06
0.13
-0.12
•0.0022
Debt to
ABSCtl
0.67
0.73
0.71
0.74
0.27
0.61
0.69
066
0.79
0.85
0,59
0.76
0,10
0.44
0.48
0.74
0.93
0.78
0.79
0,60
0 28
0.45
0.46
0.54
0.68
0,70
0.57
0.37
0.59
0.59
0.51
0.64
0.55
0.65
0.83
0.81
069
0.61
o.s»
0.40
0.73
Debt to
Equity
3.35
2.65
2.46
2.78
0.37
1.57
2.19
1.98
3.72
5.77
1.45
3.11
0.11
0.82
0.82
2.95
12.65
3.63
3.74
1.52
0.39
0.62
0.94
1.33
2.13
2.38
1.31
0.60
1.41
1.41
1.04
1.77
1.21
1.84
5.24
4.36
3.60
1.59
1.42
0.67
2.83
CAP EXP
1081
—
8.888
738,000
3,593
20,129
719,000
46,441
20,092
298,200
59,500
S.088
8.224
140.900
2,171
328,099
747
884,000
155,600
11,406
CAP EX to
'81 Mra
__
1.31%
8.22%
2.37%
2.68%
7.08%
380%
0,84%
4.23%
6.43%
2.»1*
B.M%
3.83%
2.30%
5.18%
3.8O%
a.54%
1.88%
1.80%
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Jack Faucett Associates DO NOT CITE OR QUOTE December 1992
prospect of future infusions of equity capital into the small nonroad engine market. Moreover,
the "average" return on assets, a measure of the return that a company receives for each dollar
invested in assets, is only about 1 percent. Such low rates of return indicate that the
opportunity cost of investment into this market is relatively high - the rates of return are
relatively low when compared to other investment opportunities. Table 4-23 shows a similar
predicament across equipment manufactures, where the "average" returns on asset and equity
are actually negative.
Similarly, the "average" leverage position across the engine manufacturers shown in Table 4-22
is not very promising. The "average" debt to assets ratio is roughly 66 percent, which suggests
that for every dollar of assets two-thirds of the cost of acquiring that asset was financed by
debt. In addition, the "average" debt to equity ratio for these engine manufacturers is almost
200 percent, suggesting that the composite balance sheet for those manufacturers in Table 4-22
is comprised of 2.3 times as much debt as equity. These relatively high "average" leverage
ratios imply that many engine manufacturers are highly leveraged and may not be in a position
to take on new debt through issuing bonds or through borrowing from lenders. Table 4-23
shows that equipment manufacturers are in a similar, if not worse, position than engine
manufacturers when it comes to leverage. The "average" debt to assets ratio across the
equipment manufacturers shown in Table 4-23 is 73 percent, while the "average" debt to equity
ratio is over 250 percent.
It is important to place the preceding analysis in its proper context. The conclusions that are
drawn regarding the "average" financial standing of these markets may not reflect the true
financial health of the entire small nonroad engine and equipment market. This is due to two
factors. First, not all manufacturers producing products for the small nonroad engine and
equipment industry are represented in the "average" ratios that are discussed. Second, the
manufacturers that are included in Tables 4-22 and 4-23 are not exclusively engaged in the
small nonroad engine and equipment industry. For example. Black & Decker produces many
household appliances that are not nonroad engines or equipment. The financial statistics
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presented for Black & Decker may be driven by economic conditions in markets other than
those for its outdoor products, or lawn and garden equipment. Nevertheless, the data presented
in Tables 4-22 and 4-23 provide a framework from which firm specific conclusions can be
drawn. Such firm specific analyses are the focus of the sections presented below.
4.3.1 Briggs & Stratton
Briggs & Stratton located in Milwaukee, Wisconsin, is the world's largest producer of air-
cooled gasoline engines for outdoor power equipment ranging from 2 to 18 horsepower.
Unlike most other manufacturers of utility engines, Briggs & Stratton's engine sales account
for 93 percent of total sales (roughly $950 million in 1991), making it one of the few firms
that solely participates in the nonroad utility engine industry. The technology level of most
of its products is such that significant investment may be necessary to comply with strict
emission certification standards, if any are imposed.
The product line of Briggs & Stratton is comprised of seven major engine families, which
predominantly service the lawn and garden and light commercial and industrial segments of
the industry. These engine families are;
The Classic, Sprint, and Quantum series predominantly installed in walk-behind
lawn mowers. The Classic is Briggs' base model, while the Quantum is their
top-of-the-line lawnmower engine. Briggs also recently introduced their Europa
line of overhead valve engines targeted for the European market.
The I/C (Industrial Commercial), Twin, and Twin Plus series are mostly
installed in lawn tractors, rear engine riders, and garden tractors. These engines
range from 8 to 18 horsepower.
Briggs' Vanguard series is their top-of-the-line engine. Vanguard is a premium
engine with overhead valve design and cast iron sleeves targeted to medium-
duty equipment manufacturers.
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Table 4-24 provides a comprehensive listing of Briggs & Stratton's product line by engine
model. Most of the engine models available from Briggs are vertical shaft, 4-stroke side-valve
units with ratings between 3.5 and 12.5 horsepower.
Briggs is committed to maintaining its prominence in the lawn and garden industry. As a
major focus of the company's marketing efforts, the lawn and garden market accounted for
over 86 percent of fiscal 1991 OEM designated engine sales, while the remaining 14 percent
were accounted by manufacturers of other power equipment — such as, generators, pumps,
pressure washers, and light construction and agricultural equipment. Exports accounted for 21
percent of Briggs' engine and parts sales in 1991.
A review of Briggs & Stratton's financial position shows that it has the necessary strength to
maintain its prominence in the small engine industry. As Table 4-22 demonstrates, Briggs has
a debt to assets ratio of 49 percent and a debt to equity ratio of 96 percent, well above most
other engine manufacturers. More impressive is the return that Briggs has secured for its
investors, or shareholders, measured by the return on equity. With a return on equity of 13
percent, Briggs is well above the average (approximately 5 percent) for those manufacturers
included Table 4-22. Moreover, Briggs has a return on assets of 7 percent, the second highest
among those engine manufacturers for which financial data were available.
4.3.2 Tecumseh
The Tecumseh Products Co. is located in Tecumseh, Michigan. In 1991 Engine and Power
Train products accounted for just 28 percent of Tecumseh's total sales ($337 million out of
total sales of $1,197 million). Nevertheless, Tecumseh is a major force in the nonroad utility
engine industry, offering a wide range of engines for many different applications.
Tecumseh's product line has been positioned to directly compete with Briggs & Stratton. As
a result, Tecumseh's engines are installed into virtually the same equipment types. A major
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TABLE 4-24
BRIGGS & STRATTON ENGINE LINE BY MODEL
Model Series
92500
93900
95700
96700
121700
124700
125700
130700
131700
130900
132900
191700
1 93700
255700
256700
252700
253700
281700
286700
402700
402700
422700
422700
261 700
303700
350700
80200
1 30200
1 70400
1 90400
252400
402417
350400
Engine Family
Classic
Sprint
I/C
I/C
Quantum
Quantum
I/C
l/C
I/C
i/C
i/C
I/C
i/C
I/C
I/C
i/c
I/C
I/C
Quiet
Twin
Twin Pius
Twin
Twin Plus
Vanguard
Vanguard
Vanguard
i/C
I/C
I/C
I/C
I/C
Twin
Vanguard
HP
3.5
3,5
5
5
3.5
5
5
5
5
5
5
8
8
10
10
11
11
12
12.5
16
16
18
18
14
16
18
3
5
7
8
11
16
18
Cycle
4 stroke
A stroke
2 stroke
2 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
4 stroke
Valve
Configuration
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
Side Valve
OHV
OHV
OHV
Side Valve
Side Vatve
Side Valve
Side Valve
Side Valve
Side Valve
OHV
Shaft
Configuration
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Vertical
Horizontal
Horizontal
Horizontal
Horizontal
Horizontal
Horizontal
Horizontal
179
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focus of their marketing effort, however, is toward mowing equipment, especially lawnmowers
(as shown in Section 4.2). Tecumseh's product line includes an entire fleet of four-stroke
engines for rotary mowers. This fleet is composed of the Vantage, Prism, Legend, Premier
(OHV), and Vector engine families, which are mostly characterized by air-cooled 4-stroke,
side-valve units ranging between 3.5 and 5.5 horsepower, although the Premier line also offers
an overhead valve model rated at 4.5 or 5.5 horsepower. In addition, Tecumseh offers two
models of 2-stroke engines that are installed in rotary mowers — the Pro5 and XLProS
models.
Tecumseh's engines are also common in other types of lawn and garden equipment, including
portable handheld equipment, riding mowers, and lawn tractors, Tecumseh markets their
TC200 and TC300 engines for installation into trimmers/edgers/brush cutters, cultivators,
shredders, and snowblowers. Both these models are characterized by air-cooled, two-stroke
technology. The TC200 is available in either 1.6 or 1.19 horsepower, while the TC300 has a
rating of either 2,0 or 1.49 horsepower. For installation into riding mowers, lawn tractors,
and/or wide-area (commercial) mowers, Tecumseh offers engines ranging from 3,73 to 15
horsepower. The higher horsepower models (TEC 1200, TEC 1250, and TEC125/C) employ an
overhead valve design, which improves volumetric efficiency, delivers more horsepower per
inch of displacement, and, thus, provides a fuel efficiency increase of 25 percent over side
valve designs.
Finally, the light construction, light agricultural, and light commercial and industrial equipment
segments are targeted by their full-line of horizontal shaft engines, ranging between 3 and 12
horsepower. This H-series line includes 7 engine models (H30, H35, HS40, H50, H60, HM80.
and HM100) characterized by air-cooled, 4-stroke, side valve designs, Tecumseh offers an
entire line of engines ranging from 2 to 12 horsepower called the Snow King series designed
for cold weather operations. The smaller engines of this series are 2-stroke units, while the
more powerful engines employ 4-stroke, side valve technology.
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A brief review of the financial data shown in Table 4-22 for Tecumseh shows that a return on
assets of 4 percent and a return on equity of 6 percent was achieved for 1991, indicating that
the firm's profitability is in line with most other engine manufacturers. However, Tecumseh's
current ratio of 2.73 and debt to assets ratio of 32 percent indicates that a strong and relatively
liquid financial position characterizes this firm's operations. It is, therefore, apparent that
Tecumseh is in an excellent position to cover its current obligations, finance its short-term
business needs, and take-on long-term financing if necessary. In fact, Tecumseh expects to
finance its working capital requirements for 1992 and early 1993 through internal sources.
4.3.3 Teledyne Total Power
Teledyne, Inc., headquartered in Los Angeles, California, is involved in a variety of industries:
including aircraft engines and parts, semiconductors, and the manufacturing of small internal
and compressed combustion engines which is controlled by Teledyne Total Power.
Teledyne markets three engine -series under the brand names of Wisconsin, Wisconsin Robin,
and Continental. The Wisconsin Robin line is one of the most versatile in the utility engine
industry. Manufactured by Fuji Heavy Industries, these engines range from 2 to 16.2
horsepower and are intended for use in a wide range of power equipment, including various
light commercial equipment (such as concrete saws and sweepers) and most lawn and garden
equipment. Available in 26 air-cooled models, the Wisconsin Robin line offers gasoline and
fuel options and both vertical and horizontal shaft configurations. Most models under this line
are single cylinder rated from 1.5 to 10 horsepower. Eight of the single cylinder models
realize the full potential of the overhead valve design offering superior volumetric efficiency
with less fuel consumption and reduced emissions. This line also includes five single cylinder,
air-cooled, direct injection diesels used for constant speed applications such as those found in
generator sets or pumps.
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The Wisconsin series is comprised of air-cooled units predominantly installed in medium-duty
equipment, rather than lawn and garden equipment. Nine one-, two-, and four-cyiinder
gasoline powered engines (most of which can be adapted to run on alternative fuels) offer
power ranges between 7 to 69.5 horsepower. The single cylinder models range between 4.8
to 12.4 horsepower, while two cylinder models have power outputs of 17 to 28 horsepower.
Finally, the four cylinder models are rated between 30 and 40 horsepower. All models below
50 horsepower are of side valve design. Depending on the engine model, available options
include factory installed LPG conversion kits and/or dual fuel systems.
Teledyne's Continental "R" series is composed of liquid-cooled engines designed for a wide
range of equipment applications requiring engines in the middle power ranges (from 26 to 47
horsepower @ 2400 RPM). All models in these series are overhead valve units powered by
either diesel or gasoline fuel. Teledyne also offers its Continental "TM" series, but these
models exceed 50 horsepower, and therefore are beyond the scope of this study.
Table 4-22 shows that although Teledyne's total 1991 sales were in excess of $3 billion, the
company had a negative consolidated net income in 1991 which led to their posting a negative
return on assets ratio and a negative return on equity ratio. Moreover, both Tetedyne's current
ratio of 1.79 and its debt to asset ratio of 74 percent are higher than most firms presented in
Table 4-22. Much of Teledyne's debt is made up of accrued expenses, however, suggesting
that the firm does not have short-term obligations, nor that it was forced to meet its long-term
debt obligations in 1991.
4.3.4 Yanmar
Yanmar, located in Japan, is the world's largest diesel engine manufacturer in terms of units
sold, offering compressed. ignition engines that range from 5 to 5000 horsepower. As shown
in Section 4.2, Yanmar has secured a substantial share of utility diesel engine sales. The
majority of Yanmar's models that are rated below 50 horsepower are water-cooled diesels with
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power ratings between 8 and 45 horsepower. These water-cooled models are predominantly
3 or 4 cylinder units. The lower horsepower models (those between 9 to 18 horsepower)
employ indirect injection fuel delivery systems, while the larger engines use direct injection.
Yanmar also markets one family of air-cooled, single cylinder, overhead valve, direct injection
diesel engines rated from 2.5 to 10 horsepower installed primarily into generator sets, pumps,
and other light commercial equipment. PSR's database estimates sales of these small diesels
at only 3,000 units per year. Moreover, Yanmar also sells equipment directly imported from
Japan. These include agricultural and lawn and garden tractors, as well as generator sets.
However, sale levels for Yanmar's equipment are low compared to other manufacturers,
4.3.5 Kubota
Located in Osaka, Japan, Kubota is a leading Japanese manufacturer of small diesel engines
and lawn and garden and agricultural equipment. Approximately 45 percent of Kubota's sales
are generated from this segment of their business. In an effort to strengthen its U.S.
operations, Kubota recently acquired a 5.4 percent equity share in Cummins Engine.
Kubota's line of equipment spans the lawn and garden, light agricultural, and light construction
equipment markets. Kubota manufactures a complete line of lawn and garden equipment,
including walk-behind lawnmowers, commercial mower, lawn and garden tractors, commercial
turf equipment, and rotary tillers. Kubota also manufactures generators, pumps, excavators,
and agricultural tractors under 50 horsepower. With the exception of its line of walk-behind
mowers that are equipped with either Briggs & Stratton or Tecumseh engines, most of
Kubota's final products are equipped with engines originally manufactured by Kubota.
Kubota's current line up of diesel engines below 50 horsepower is comprised of the following
series, or engine families.
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The 62mm Stroke Series which includes eight models of 1 to 4 cylinder, 4-
stroke diesel engines with outputs ranging from 4.5 to 26 horsepower, one 3
cylinder, water-cooled gasoline model rated at 19 horsepower (@ 3600 RPM),
and one turbocharged, 4 cylinder diesel model with a power rating of 26
horsepower (@ 3600 RPM),
The 68mm Stroke Series is comprised of four 2 to 3 cylinder, 4-stroke diesei
models with outputs between 10 and 23 horsepower, and one gasoline engine
model rated at 23 horsepower @ 3600 RPM.
The 70mm Stroke Series exclusively includes 4-stroke diesel engines with 1 to
4 cylinders and outputs that range from 7 to 28 horsepower.
The 73.6/78.4mm Stroke Series is a new line of 3 to 4 cylinder, 4-stroke diesel
models ranging between 20 and 42 horsepower.
The 82/92.4mm Stroke Series includes sixteen models rated below 50
horsepower and two models rated above 50 horsepower. The models in this
series are characterized as 4-stroke diesel units employing 2 to 6 cylinders and
rated between 15 and 57 horsepower.
Kubota's diesels are all water-cooled and generally employ indirect injection fuel delivery
systems, although models in the 82mm Stroke Series are available in both direct and indirect
injection. As mentioned above, Kubota also manufactures one water-cooled gasoline engine
which employs the same block as the 62.2mm and 68mm Stroke Series diesel models. This
gasoline model is considered to be more rugged than the typical lawn and garden gasoline
engine, and is commonly installed in light commercial and industrial equipment, as well as
light construction and agricultural equipment.
Table 4-23 presents financial statistics for equipment manufacturers, including Kubota.
Kubota's financial statistics reveal comparatively low return on equity and return on assets
ratios, approximately 2 percent and 1 percent, respectively. The company's debt to assets ratio
is rather high at 70 percent, while its current ratio is only 1.18. As a result, Kubota seems to
be in a comparatively poor financial position. However, it is not clear from Table 4-22 which
facets of Kubota's operations have placed it in this predicament. For example, Kubota's
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profitability suffered as net income from its total operations decreased from 1990 to 1991.
According to Kubota's annual reports, this decrease was primarily due to restructuring costs
incurred in an unrelated segment of Kubota's operations. As a result, it may be the case that
although various other facets of Kubota's operations are suffering from the world-wide
recession, its small nonroad engine and equipment business may be relatively healthy.
4.3.6 Honda Motor Co.
Honda Motor Co., the largest company in the study with sales of over $33 billion, is located
in Tokyo, Japan. Honda is well-known throughout the world for its automobiles, but the
company also manufactures a premium line of lawn and garden equipment and gasoline and
diesel engines for sale to small nonroad equipment manufacturers. However, because of
Honda's success in the motorcycle and automobile industries, only 7 percent of Honda's 1991
sales were derived from the sale of lawn and garden equipment and loose small nonroad
engines.
Honda offers both diesel and gasoline engines for a wide range of nonroad equipment. Their
line of gasoline engines includes twelve models, rated from 2.2 to 13 horsepower, that are
characterized by their modern design and predominantly overhead valve technology. Honda's
G100K1 model is the only side valve engine in its product line — all other models are
overhead valve units. This 2.2 horsepower engine is commonly installed in edgers, pumps, and
small mowers. Honda's GX120 model, on the other hand, is a 4 horsepower overhead valve
engine suitable for edgers, pumps, small construction equipment, and reel-type lawnmowers.
For installation into lawn tractors, pressure washers, and a variety of light construction
equipment, Honda offers its GX360 engine which is a liquid-cooled, twin cylinder unit rated
at 13 horsepower. Honda also offers a sophisticated line of diesel engines which is comprised
of nine models rated at either 6 or 8 horsepower. These 6 and 8 horsepower diesel engines
feature an advanced direct injection system. This system's innovative design incorporates a
compact injector nozzle in a unique new 2-stage injection process that delivers fuel directly to
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the combustion chamber, thus reducing heat loss and improving combustion efficiency.
Honda's diesel engines are commonly installed into light industrial equipment, as well as lawn
and garden tractors.
In addition to a sophisticated line of loose engines, Honda also offers premium lawn and
garden and light commercial equipment. Most of the equipment offered by Honda are
reviewed below.
Honda markets seventeen distinct models of lawnmowers, ranging from 2,4 to
5.5 horsepower. Model HR17EPA is an electrically powered machine, while
model HR173DPA is the only side valve unit offered by Honda. All internal
combustion models employ air-cooled, 4-stroke engines. Other than the side
valve model, Honda's lawnmowers utilize engines with an overhead valve
design.
Three lawn tractor models are offered by Honda, of which the H4514 and
H4518 models are powered by automotive-style, liquid-cooled, twin-cylinder.
overhead cam gasoline engines rated at 14 and 18 horsepower, respectively.
Honda's H4013 lawn tractor utilizes an advanced 13 horsepower overhead valve.
single cylinder, air-cooled gasoline engine.
Honda offers three models of riding mowers that utilize engines with power
ranges between 11 and 13 horsepower. Each model employs 4-stroke, single-
cylinder, air-cooled, overhead valve engines.
'6*
Honda's line of multi-purpose tractors includes four models powered by either
13 or 18 horsepower engines. Models H2013A2 and H5013A4 are powered by-
single cylinder, air-cooled, 4-stroke, overhead valve engines rated at 13
horsepower, while models H5518A2 and H5518A4 employ twin -cylinder, 4-
stroke, liquid cooled overhead valve engines rated at 18 horsepower.
Honda's small nonroad equipment line also includes commercial lawnmowers (multi-spindle
walk-behind models), as well as diesel tractors, tillers, snowblowers, water pumps, portable
generators, and heavy-duty generators. These equipment are also exclusively powered by
Honda's OHV engines.
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Given that 81 percent of Honda's total sales are accounted for by its automobile operations,
Honda's financial statistics likely reflect Honda's performance in the automobile industry rather
than its performance in the small nonroad engine and equipment industry. With this caveat in
mind, Table 4-22 shows that Honda's return on assets is 2 percent, while its return on equity
is 6 percent. These numbers likely reflect a lull in profitability due in part to lagging auto
sales in the U.S and Japan. Its current ratio is 1.15, while its debt to assets ratio is 63 percent.
So, while Honda's liquidity position is relatively poor, the firm is not highly leveraged. Also,
Honda's extensive resources, distribution network, and exceptional brand image likely suggest
that the firm is suffering from the same malady as many other large multinational
corporations — that is, a worldwide recession and slumping consumer demand for its products.
4.3.7 Black & Decker
Black & Decker (B&D) is a global marketer and manufacturer of products used in and around
the home and for commercial applications. B&D's diverse manufacturing activities include
power tools, security hardware, plumbing products, household products, fastening systems,
glass container-making equipment, and outdoor products, which include electric and cordless
rechargeable lawn and garden equipment. B&D's outdoor products operation accounted for
roughly 6.5 percent total 1991 worldwide revenues of $4,637 million. Power tools, on the
other hand, accounted for roughly 24 percent of the $4,637 million in revenues. Although
B&D's outdoor products account for a relatively small share of the firm's sales, B&D lawn and
garden equipment warrant analysis given their prominence as an alternative to gasoline or
diesel powered products.
Black & Decker manufacturers various types of lawn and garden equipment mostly targeted
to the residential consumer. These products are almost exclusively powered by Black &
Decker electric motors, although one edger model is powered by a gasoline engine. B&D
offers the following types of lawn and garden equipment: edgers, string trimmers,
lawnmowers, hedge trimmers, and blower vacuums.
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Black & Decker markets for retail sale four models of lawmowers. none of which are cordless.
These models are:
M200/300 - characterized by an electric motor that provides 6.5 amps of power
at 4000 RPM.
M400/700 - characterized by an electric motor that provides 9 amps of power
at 4000 RMP (M400) and at 3800 RPM (M700).
These mowers are relatively light weight (between 38 and 51 pounds) and are targeted to
consumers with moderate to small size yards appropriate for extension cord use. Black &
Decker has developed a cordless electric lawnmower which is not currently marketed for retail
sale in the U.S.
Similarly, B&D produces four hedge trimmer models that are exclusively powered by B&D
electric motors and that require a cord to operate. Their line of "heavy-duty" hedge trimmers
includes the HT400 and HT500 models powered by a 2.6 amp electric motor and targeted for
"tough" applications. The HT100 and HT200 hedge trimmer models are designed for
applications that require less cutting power. All four models, however, are characterized by
a cord retention system that eliminates accidental cord disconnection.
Black & Decker also offers two types of edgers. The GE600 (or Groom 'N' Edge) is a trade-
mark model that employs a 3.1 amp electric motor and requires an extension cord to operate,
while LE 500 model is a gasoline powered edger with a 1.5 HP engine. This gasoline model
is marketed as a "heavy-duty" edger for maximum performance, while the electric edger is
marketed for lighter applications including grooming. Black & Decker also offers cordless
grass shears that employ 3.6 volts of power through 3 nickel batteries that run continuously for
35 minutes. These shears are hand-held and designed for delicate grooming applications.
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Finally, B&D offers an electrically powered vacuum/mulcher designed for leaf collection. This
blosver vacuum is powered by a Black & Decker electric motor that produces 8.4 amps of
power and requires a cord to operate.
Given that Black & Decker is a producer of alternatively powered small nonroad equipment,
it is also worthwhile to note other major manufacturers of the products that B&D produces.
According to Black & Decker62, its major competitors include Paramount, McCulloh, Weed
Eater, Ryobi, Toro, Homelite, and MTD, Of these, only Ryobi manufacturers their motors as
well.
Keeping in mind that Black & Decker is a highly diversified manufacturing company and that
its outdoor products division only accounts for roughly 6,5 percent of its revenues, Table 4-22
provides B&D's financial statistics. B&D's return on assets ratio is in line with the "average"
across all companies, at roughly 1 percent, while its return on equity ratio is slightly below the
"average" at 4 percent. As with other firms in Table 4-22, Black & Decker exhibits low
returns on investment which implies that investors are likely not to be highly attracted to
investment opportunities in this firm. Furthermore, B&D's leverage position is not promising,
given that its debt to assets ratio is 0.81 and its debt to equity ratio is the second highest in
Table 4-22 at 4,39. Finally, Black & Decker's liquidity position is also not much better than
other firms in Table 4-22. B&D's current ratio is only 1.26, while its quick ratio is even more
disappointing, at only 0.61.
It is likely that the recent economic downturn has adversely influenced the financial health of
Black & Decker. Since that the bulk of its revenue is derived from consumer goods, a
recession that is driven by low consumer confidence and tight consumer budgets (such as the
one that took place in 1990-1991) will undoubtably influence firms like Black & Decker.
62Letter from Cathy Fortkiewicz, Black & Decker (US) Inc., Power Tools Group, September 14,
1992.
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4.4 SECTION SUMMARY
This sub-section summarizes the most important results of the analysis presented in earlier parts
of Section 4. Given the tremendous volume of data that are presented in Sections 4.1, 4.2, and
4.3, only references to tables will be provided. The summary is organized to follow the themes
of each sub-section in Section 4. For example, a summary of the important results in Section
4.1, entitled Small Nonroad Equipment and the Engines that Power Them, will be provided
first, followed by a brief summary of Section 4.2, entitled Concentration in the Production of
Small Nonroad Engines. Finally, a summary of the major conclusions in Section 4.3, entitled
Financial and Product Line Profiles of the Major Manufacturers, will be provided.
The small nonroad engine and equipment industry represents many products and manufacturers
that specialize in the production of engines and equipment, but often not both. As emphasized
in Section 2, this make-shift industry has basically been defined for regulatory and emission
analysis purposes, and, thus, various data, analytical, and definitional obstacles are encountered
when describing this industry. In an attempt to focus the analysis toward the manufacturer
level, rather than at the SIC industry level presented in Section 2, and thereby describe the
technology, and its likely effect on emissions, of the products included under the small nonroad
engine and equipment industry, Section 4 adopts an equipment classification scheme that is
different from that presented in Section 2 of this report. The primary purpose for the adoption
of the scheme in Section 4 was to assure that those equipment with similar engines, uses, and
operational characteristics can be examined as a group. Furthermore, given that emissions are
a function of usage, which is a demand attribute, a supply oriented classification scheme, such
as the SIC system, may incorrectly assign similar equipment into different SIC categories. In
any case, Appendix C provides the technology profiles for each small nonroad equipment type.
Therefore, inconsistency across classifications schemes is not as important as it would be if
technologies were characterized as ''averages'1 across equipment categories.
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As is shown in Table 4-4, the most voluminous (in terms of unit shipments) of the equipment
categories is the Lawn and Garden Equipment class. Lawn and Garden Equipment accounted
for over 69 percent of the small nonroad engine and equipment market in 1991. Second to this
category are Exports of loose engines, with a 1991 share of roughly 19 percent. Light
Construction and Light Agricultural equipment only account for a combined 2.19 percent of
the small nonroad engine and equipment market.
Since the Lawn and Garden Equipment category is such an integral portion of the small
nonroad engine and equipment industry, a review of the most populous (in terms of unit sales)
equipment types within this category is warranted. As can be deduced from Table 4-6,
lawnmowers, trimmers/edgers/brush cutters, chainsaws, and lawn and garden tractors account
for roughly 85 percent of sales in the Lawn and Garden Equipment market (1991 data).
Lawnmowers are almost exclusively powered by 4-stroke, side valve gasoline engines, although
electrically powered lawnmowers are also common (roughly 4 percent of sales). On the other
hand, chainsaws are almost exclusively powered by 2-stroke, reed valve gasoline engines, as
are trimmers/edgers/brush cutters, although, as shown in Section 3, 44 percent of string trimmer
sales are electrically powered units. Electrically powered chainsaws were also popular during
the early 1980's, but data on the percent of chainsaw sales that are electric units were not
available. However, it appears that electric chainsaws have become less popular as of late
because of safety concerns arising from the necessity of an extension cord. Lawn and garden
tractors, in contrast, are exclusively powered by internal combustion engines that are of larger
size that those powering lawnmowers, for example. Lawn and garden tractors are mostly
powered by side valve, 4-stroke engines with ranges roughly between 8 and 20 horsepower.
The sales weighted horsepower for each of these four equipment types has steadily increased
since 1981, likely reflecting a trend in consumer preference toward more powerful equipment.
With the exception of the Lawn and Garden Equipment, Loose Engines, and Exports (Loose
Engines) categories, Light Commercial and Industrial Equipment accounted for the largest
share of unit sales in the small nonroad engine and equipment market in 1991, posting a share
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of 4.74 percent. Of the equipment types included in this category, generator sets accounted
for the bulk of category-wide sales (roughly 60%) in 1991. As shown in Tables 4-12 and 4-13,
generator sets are mostly powered by air-cooled, 4-stroke, gasoline engines.
As shown in Section 4.2, seller concentration is prevalent in the small nonroad engine market.
Briggs & Stratton alone accounted for roughly 46 percent of unit sales of small nonroad
engines in 1991. The top four firms, in terms of market share, accounted for over 75 percent
of unit sales in 1991.63 Moreover, concentration is also prevalent across the various market
niches within the small nonroad engine industry. For example, Briggs & Stratton and
Tecumseh together accounted for roughly 63 percent of the gasoline engines sold in 1991
between 0 and 25 horsepower, while Yanmar and Kubota accounted for almost 62 percent of
the diesel engines sold during that year between the same horsepower range. The fact that
seller concentration is so prevalent suggests that the technologies inherent in the engines of the
biggest sellers should be carefully evaluated when developing regulatory frameworks, since
these technologies are likely extensively represented by the in-use fleets of small nonroad
equipment.
In an effort to go beyond the profitability and financial health analysis presented in Section 2
of this report for the industries found to be relevant to the small nonroad engine and equipment
market, Section 4.3 investigated firm specific financial statistics. Contrary to some of the data
presented in Section 2, which characterized profitability at an aggregate level that is likely not
fully representative of the firms operating in the small nonroad engine and equipment industry.
Section 4.3 shows that both the small nonroad engine and equipment markets are not very
profitable, as far as those firms in Tables 4-22 and 4-23 characterize these markets. At the
market, or industry level, firms operating in the small nonroad engine and equipment industry
h3 Note that this 4-firm concentration ratio differs from the one presented in Table 2-17 of Section
2, which shows a 4-firm concentration ratio of 52 percent. The discrepancy is likely due to the fact that
the 4-firm concentration ratio in Section 4 is based on unit shipments, while that in Section 2 describes
concentration in the value of shipments (i.e., price times quantity).
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exhibit low returns to investment and high leverage. Of the firms explicitly reviewed in
Section 4-3, Tecumseh and Briggs & Stratton immediately stand out as being in strong
financial situations. Briggs & Stratton exhibited a 13 percent return on equity in 1991, well
above most firms for which financial data were available. Tecumseh, on the other hand, had
modest return on investment ratios, but exhibited relatively healthy liquidity and leverage ratios
- a current ratio of 2.73 and a debt to assets ratio of 32 percent - suggesting that the firm is in
a relatively strong and liquid financial position.
Finally, Section 4.3 provided product line profiles for selected manufacturers. Honda's small
nonroad engine product line is predominantly composed of equipment that employ 4-stroke,
overhead valve technologies, while that of Tecumseh and Briggs & Stratton (which account
for the bulk of engine sales) is mostly comprised of models with side valve technology.
Overhead valve technology has been shown to emit less hydrocarbon and carbon monoxide
pollutants than side valve technology.
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SECTION 5
MARKET-BASED EMISSION REDUCTION STRATEGIES APPLIED TO
SMALL NONROAD EMISSIONS
This section investigates emission control strategies that can be applied to mitigate the
contribution of small nonroad engines to the emission inventories of nonattainment (and even
attainment) areas. The analysis focuses on market-based approaches to emission control,
although credence is also paid to command and control approaches.
Section 5.1 reviews the conceptual and theoretical underpinnings of market-based emission
control strategies. Specifically, emission fees, emission subsidies, emission trading, and public
awareness programs are reviewed.
Section 5.2 concentrates on strategies that can be applied to market niches within the small
nonroad engine and equipment industry. Although much of the discussion regards programs
to control emission from lawnmowers, the conceptual frameworks may be applied to virtually
all types of small nonroad equipment. Lawnmowers were selected as an example equipment
type since lawnmowers basically incorporate the spectrum of operational and use issues that
characterize the small nonroad equipment market.
5.1 CATEGORIES OF MARKET MECHANISMS
The standard approach to reducing emissions from a source category such as emissions from
small nonroad engines is to promulgate either a performance standard that states how many
units of a pollutant may be emitted per unit of activity or a technological requirement that
describes in some detail what technology must be used to reduce emissions. These two
approaches are often grouped together under the label of "command and control approaches."
In this section, possible alternatives to the command and control approach are identified and
then evaluated with respect to their applicability to reducing emissions from small nonroad engines.
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Although market based emission reduction strategies come in many forms, they all attempt to
alter either the supply or demand side of a market transaction. In the following section, a
number of market based incentive concepts are considered, including various versions of
emission fees, subsidies for emission reductions, emissions trading, and dissemination of
information that would alter the supply or demand for the purchase, use, and maintenance of
small nonroad equipment based on the expected emissions. Those concepts with potential for
use in reducing small nonroad emissions are identified, and, finally, specific scenarios for
market-based incentives are evaluated.
5.1.1 Introduction
In this section the basic concepts behind a variety of market-based incentives are discussed.
Those with potential for application to programs for the reduction of small nonroad emissions
are identified.
5.1.1,1 A Continuum of Approaches
The case for government intervention in the free market states that intervention is justified if
a positive or negative externality exists such that the optimum amount'of a good or service is
not traded in the market. In the case of small nonroad engines, the externality is the emissions
from the engines into the atmosphere. These emissions are not naturally bought or sold in any
market. Furthermore, in the absence of government intervention, no one has a persona!
incentive to produce, sell, or purchase engines based on their emissions characteristics.
The EPA is now considering regulation of small, nonroad engines to reduce their contribution
to emissions of ozone precursors. The intervention could assume any form, from detailed
design specifications of the engines, to performance standards, subsidies, fees (or taxes), or the
creation of markets for permits to release the emissions. These options constitute a continuum
of interventions from the most inflexible to the most flexible. In addition, there are other
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actions that can help to alter market behavior. These include advertising, a favorite of
marketers of commercial goods and services, and product labelling, which can be considered
an effort to provide the knowledge to the consumer that is necessary for a competitive market.
It does not necessarily follow that emission markets or fees for emissions will be the most
efficient form of intervention. Improperly designed market or fee systems can often send the
wrong price signals to buyers and sellers, thus resulting in grossly inefficient uses of resources.
A properly specified design requirement will reduce emissions without causing a large
misallocation of resources. In the following sections, the various approaches will be compared,
and their strengths and weaknesses assessed.
A second issue is the amount of peripheral activity associated with intervention. A tax on the
emission potential of gasoline used in lawnmowers, for example, could entail a number of
complicated procedures to determine the right tax-level for each lawnmower and to ensure that
the tax is paid on each drop of gasoline used in each lawnmower in the United States. Clearly,
such a tax, regardless of its optimal conceptual properties, would require large expenditures for
administration and enforcement.
A third point to be considered in assessing options for reducing emissions from small nonroad
engines is the segment of the market to which it will be applied. Table 5-1 provides an
example by describing the equipment most useful in mowing lawns of various sizes. In the
first column, the size of the lawn is shown. The smallest category — to 1/4 acre — has the
most options. Unpowered push mowers, electric corded mowers, electric cordless mowers,
push mowers with gasoline powered cutting blades, and self-propelled gasoline mowers can
all be used on this size of lawn. It may also be noted that these options will all still be viable
for use on parts of larger lawns on which it is difficult to maneuver riding mowers. As sizes
of lawns increase, some of the options drop out. Electric mowers are not currently available
that can substitute for riding mowers on two acre lawns. Not only do the options change, the
nature of the consumers and suppliers change as well. Much of the equipment useful for
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TABLE 5-1
OPTIONS FOR MOWING BY SIZE OF LAWN
Size of
Lawn
(Acres)
Options for Mowing
0-1/4
*Push a manual mower
*Push an electric mower (w/cord or cordless)
*Push a gasoline-powered mower
*Walk behind a gasoline-powered, self propelled mower
*Hire a lawn service
1/4-1
*Push a gasoline-powered mower
*Walk behind a gasoline-powered, self-propelled mower
i
*Ride a small riding mower or lawn tractor
!*Hlre a lawn service
11-2
*Walk behind a gasoline-powered, self-propelled mower
*Ride a small riding mower or lawn tractor
*Hlre a lawn service
2 or more
*Ride large, fast riding mower
*Use commercial lawn equipment
*Hire a lawn service
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smaller lawns is sold in large chain stores. These are the least costly mowers, and include
gasoline mowers with side valve engines that have higher emissions than overhead valve
engines. Although some consumers seek quality over price in this mass market, most
consumers in this market are likely to be price sensitive. (In economic jargon, the price
elasticity of demand is highly elastic). With respect to equipment used in larger lawns,
consumers will be less sensitive to price (price inelastic). The quality of the engines also
improves because purchasers of machines costing several thousand dollars are concerned about
the durability of their purchase. How this affects the assessment of options for emission
incentives can be shown by example. Consumers of riding mowers will be less responsive to
an emission fee than purchasers of mass merchandized walk behind mowers. Concurrently,
it can be noted that the riding mower is more likely to have low emissions per unit of work
performed than the mass marketed mower as the cheaper quality engines are not as likely to
be employed in these machines. It will, therefore, be necessary to specify the segment of the
market for each set of options discussed in these sections.
5.1.1.2 Efficiency Versus Cost-Effectiveness
In a later section, the cost-effectiveness of several options will be evaluated. In this section,
the concept of cost-effectiveness is placed in its proper context.
"Cost-effectiveness" is an economic concept used in ranking policy options. The standard
method in which it is used is in comparing one or more options to a baseline option. A
specific objective is first identified, such as reduction of VOC emissions per unit of work.
Only a single objective can be used. This procedure can be a problem if, for example, the
policy goal is to reduce, say, VOC's and NOX. The incremental change in the objective
function is calculated for shifts from the baseline policy to policy A, and from the baseline to
policy B. These increments measure the effectiveness of each policy.
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Next, the incremental cost of shifting to policy A from the baseline is calculated as well as the
incremental cost of shifting from the baseline to policy B. Cost-effectiveness is the ratio of
the incremental change in cost to the incremental change in effectiveness. It typically is
measured in $/unit of VOC for a given set of assumptions.
Cost-effectiveness is one of three measures of economic efficiency. The first and most
comprehensive measure of economic efficiency, and hence the most difficult to measure, is
welfare maximization. Welfare is maximized if all allocations of all goods and services, raw
materials, and capital equipment are optimized, and the most efficient production techniques
are employed. It implies a universal optimization. Welfare to society of a specific allocation
implied by a specific policy is compared to that of the optimum,
A second measure of economic efficiency is cost-benefit analysis, which focuses on a single
project and a single set of options. In cost-benefit analysis, the specific costs of a single action
are estimated. This is usually done under the assumption that all other things are held constant.
Specific costs and benefits are identified and then estimated. Then the costs and benefits are
compared. So long as the costs are less than the benefits when both costs and benefits are
expressed monetarily, the project would be an improvement over the status quo. Costs and
benefits can be calculated for several projects. The cost-benefit ratios can be ranked to
determine which of them is best.
As the third measure of economic efficiency, cost-effectiveness does not measure the benefits
in monetary terms as does cost-benefit analysis. Rather, it only measures the effect on a
particular objective of the project. For example, an emission fee on lawnmowers may induce
the public to purchase lawnmowers with lower emissions of VOC's, NOX, and CO, as well as
better fuel efficiency. These mowers may also last longer and need fewer repairs. If the
objective of the fee was to reduce VOC emissions, cost-effectiveness would be measured in
S/unit of VOC reduction. In contrast, a cost-benefit measure would compute the benefits to
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society of reduced VOC's, reduced NOX, reduced CO, and reduced fuel consumption. It would
also take into account where the emissions reductions occurred.
The physical efficiency of action is the amount by which an emission is reduced, and is often
measured in percentages. Thus, a 90 percent reduction in VOC emissions is more efficient
than an 80 percent reduction. While it is important to know the physical units of improvement
due to a policy, economic analysis also requires a consideration of the accompanying costs.
5.1.2 Taxes or Fees Based..on Emissions or Emission Potential
The most classic of economic incentives is a tax (or fee) levied directly on the negative
externality and charged to the party that releases it. This concept stems from welfare theory
in which the optimum allocations and their accompanying prices are derived.
Several versions of taxes (or fees) have been suggested over the years. The original fee
concept developed by economists was levied directly on the emissions and paid by the user of
the polluting equipment. In recent years the idea of using a fee to influence the purchaser's
choice of equipment has been proposed. For example, a fee on the purchase or registration of
automobiles with emissions over a certain level was seriously considered in California. Ideas
for levying fees on producers have also been considered. Both types of fees are discussed in
the following two sections.
5.1.2.1 Fees Levied on Consumers
The original emission fee, as developed in microeconomic theory, was designed to make the
marginal cost to the consumer of causing an emission just equal to the marginal damage to
society of that emission. It would thereby cause the consumer to make the economically
efficient choice of equipment and of the type and amount of use of that equipment. Because
a large amount of information is needed in order to set the fee at the correct level for each
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consumer, a second economic concept was developed. Rather than seeking to achieve the
optimal amount of pollution, the tax could be used to reduce pollution to a level agreed upon
by society. This basic concept can be practically applied to automobiles, although it never has
been. To do so, the emissions expected per gallon from each type of car using each type of
gasoline is computed. A tax per unit of emissions is set and the driver is charged for his/her
expected emissions when filling his/her ^as tank. This is a straightforward application for
taxing the emissions from automobiles. Yet this approach has not been tried in the United
States, due mostly to political resistance. If set high enough, an emission tax on fuels for
motor vehicles would influence all of the following: the amount of driving a person does, his
vehicle and fuel choices, his mode of travel for each type of trip, and the relative location of
his home, employment, and other daily activities. It would also affect the revenues collected
by the government. If substantial gasoline emission tax revenues were collected, other taxes
could be reduced, including income tax, sales tax, and property tax. It would also enhance the
viability of public transportation.
However, this tax concept is much more difficult to apply to small nonroad engines. The tax
collected for each gallon of gasoline must be related to the small nonroad equipment in which
it is used. A person filling a gasoline can at a service station may choose to put the gasoline
in any small nonroad engine.
A simplification of this tax concept is to simply charge a high tax on gasoline. Such a tax
would reduce the use of all gasoline powered equipment without rewarding clean equipment
with a lower tax rate. It would, however, reward equipment with low gasoline consumption.
or those powered by alternative fuels, or by human propulsion.
Another variant on taxing emissions is to tax the emission potential of small nonroad engines.
To do so requires an estimate of the number of hours of use annually, fuel consumption per
hour, and emissions of each pollutant per gallon of fuel. By multiplying these factors, the
annual emissions of each pollutant are estimated. The total expected emissions of each
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pollutant over the life of the equipment is estimated by multiplying the life expectancy of the
equipment by these emissions. A tax per unit of each pollutant emitted over the life of the
equipment can then be charged to the purchaser of the new equipment.
This approach is central to the "fee-bate" system for automobiles proposed in California that
nearly passed the state legislature. The fees collected on the purchases of automobiles with
emissions above the target level would be rebated to purchasers of automobiles with lower
emissions. The purpose of the proposed fee-bate system was to encourage purchasers to
choose cleaner vehicles. A zero emission vehicle such as an electric car would get the largest
rebate. The fees and targets could conceptually be set in a way to make the system revenue
neutral.
There are several drawbacks to this system of fees and rebates. First, it only affects the
decision to purchase the equipment, but not its use after purchase. Dirty equipment, once
purchased, could be used without further penalty. Second, fee-bates only apply to the purchase
of new vehicles. It would take many years for the entire stock of equipment in use to be
influenced by the fee-bate. These two defects deprive the concept of much of its power. In
the case of automobiles, they are remedied by adjustments to the system. The fee-bate would
be applied to an annual registration fee. This action, by itself, would affect all automobiles and
put pressure on owners of vehicles over a year old that produce high emissions to replace them
with lower emitting vehicles. To affect the use of the vehicle throughout the year, the annual
mileage could be read from the odometer and the fee or rebate based on the mileage.
A fee-bate system of the first type (applied at purchase) could be developed for small nonroad
engines. Some of the data needed, such as annual expected use, may be imprecisely known
in many cases, but a "guesstimate'' could be used until better data is collected.
The application of a fee-bate system to small nonroad engines, while feasible, would be more
difficult to implement than for automobiles because institutions such as sales tax and
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registration fee collection for automobiles already exist, while similar institutions for small
nonroad equipment are not as developed. Because the concept of annual registration for small
nonroad equipment does not exist at present, it would be difficult to reach all existing
equipment and adjust for actual usage.
5.1,2,2 Fees Levied on Producers
Fees levied on the producers of equipment that emit pollutants when used by its purchasers are
a further step away from the initial fee idea. These fees seek to directly influence the mix of
equipment produced by shifting the supply curve. This contrasts with fees on consumers that
affect production through a shift in the demand curve, because consumers are not willing to
pay the producers as much for equipment on which they will also have to pay the government
a tax.
In some ways, the taxes levied on the producer and consumer are equivalent. Both raise the
effective price (price plus tax) paid by the consumer, and reduce the market equilibrium
quantity of the product. However, there are two important differences. If the tax is levied on
the producer, distributor, or dealer, the tax can only affect new equipment (or --ossibly used
equipment offered for resale). It is not possible to adapt this tax to reach all equipment, or to
take into account the amount the equipment is used by the purchaser. Second, producers can
adjust prices of their equipment to cover the tax by reallocating costs shared by different
products in a different way. They would do this if it were important for them to match prices
with another product produced by another firm to maintain a market niche. Such pricing
strategy turns out to be an important consideration in the automotive industry, but may or may
not be important in small nonroad equipment.
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5.1.2.3 Examples of Fees
Version 1 The dealer pays a tax based on the expected emissions of criteria air pollutants over
the life of the engine. The dealer may decide to pass the tax on to the purchaser or adjust the
price of the equipment by absorbing all or part of the tax (if he/she wanted to maintain a
competitive price position relative to a cleaner engine). Since most dealers collect sales tax
for state and local government, this version adds little to the administrative machinery. If the
tax on an engine is large enough it could either convince the dealer to stop offering the engine
for sale or the buyer to purchase a less polluting engine. This version does not offer any-
incentive to reduce the usage of high polluting equipment once the equipment is purchased.
Version 2 The purchaser pays a tax to the local, state, or federal government based on the
expected emissions of criteria air pollutants over the life of the engine in the use to which the
purchaser plans to put the engine. The differences between Version 2 and Version 1 are that
the dealer is not involved in the collection of the tax and the tax varies by purchaser. This
could lead to additional administrative costs as an alternative method of tax collection would
have to be devised. Its advantages over version 1 are that it gives more specific price signals
to the buyer, isolates the dealer from the tax collection, and reduces the likelihood that he/she
will be able to manipulate prices to compensate for the tax. This check on the dealer would
especially be operative if the tax per purchaser were to differ by town or region, in addition
to the usage, and the dealer served more than one town or region. He/she would then not have
a single tax target for adjusting price.
Version 3 The owner of a small nonroad engine pays an annual fee to local, state, or federal
authorities based on the emissions potential of the engine. The calculation depends, in part,
on the hours of use of the engine during the preceding year. This provides some incentive for
the owner to increase the use of less polluting equipment relative to more polluting equipment.
The administrative burden of this version, however, is heavier than for Version 2 because the
tax is collected each year, rather than just once when the engine is new, and the usage of the
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equipment must be verified in some way. Unless a rigorous method for measuring usage is
developed, the usage calculation would be subject to high levels of fraud.
Version 4 A tax on gasoline used in small nonroad engines could be levied. In a more
rigorous design, the tax could be based on the emissions of pollutants from the engine. This
would provide an incentive to use less polluting engines or equipment. But determining the
right tax to charge for each piece of equipment and implementing the tax collection would be
difficult. It is possible that future thoughts on this version may center on selling gasoline in
cans that only fit in the tanks of certain engines — the only way that the tank can be filled is
to purchase the appropriate can with the gas already in it. This version is an example of a
measure with good theoretical properties and poor practical properties.
5.1.3 Subsidies to Purchase or Produce Lower Emitting Equipment or to Utilize
Alternative Approaches
5.1.3.1 Concepts
The subsidy approach has many similarities with the fee approach, but there are also some
important differences. Both subsidies and fees make the approach favored by a government
agency relatively less costly when compared to one or more alternative approaches. That fee
and subsidy approaches are not symmetrical can be easily illustrated. A fee system cannot
reduce the cost of the preferred equipment, while a subsidy does not raise the cost of the
equipment the agency seeks to discourage. As an example, consider the case of the
inexpensive department store lawnmower with a low quality side value engine, that for, say.
$100 will mow a quarter acre lawn for, say, seven years. This mower is affordable, and, if
kept out of the rain, it provides the purchaser with service that extends beyond his time
horizon. But its emission levels are high due to its design and the quality of its manufacture.
Ignoring environmental concerns, there is no reason it needs to be cleaner to well serve its
intended market. In contrast, there is, say, a $300 mower that will last, say, 14 years and
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employs an overhead valve engine that has been manufactured to high standards. It emits
fewer pollutants per acre of lawn mowed. Given these two choices, if the government agency
wishes to reduce the sales of the cheaper mower, it can introduce an emission potential tax,
raising the effective price (price plus tax) to a level higher than the better mower. While a
$200 tax on a $100 lawn mower may be unrealistic, it serves to make the point that the
consumer would likely choose the better mower, if it costs the same as the first. However,
many consumers could not afford the $300 and might put off purchasing a new mower (using
perhaps an older, even dirtier mower), or choose yet another option — such as a manual
mower or a lawn service. If, however, the better mower were subsidized by $200, making the
effective price (price minus subsidy) $100, the choice would again go to the better mower
(between the two), but more people could afford it.
There are also other asymmetries with regard to subsidies and fees. If a lawn service were
subsidized, perhaps through an investment tax credit, to buy cleaner mowers, it would reduce
their costs and increase their profits, other things being equal. On the other hand, a fee would
increase their costs and reduce their profits. Subsidies would keep more firms in business, fees
would push them out. If fees and subsidies were set at the socially optimal level, the fee
would lead to economic efficiency while the subsidy (based on emissions reduced) would keep
in business firms whose revenues would not cover their "full social cost" of doing business.
Based on efficiency criteria, these firms should not survive.
One observation based on the preceding analysis is that fees and subsidies can be targeted at
certain approaches. If lawnmower emissions are to be reduced, subsidies can help by reducing
the cost of cleaner equipment, or even by subsidizing alterations in landscape design by helping
to pay for native shrubs or rock gardens. Subsidies can put certain options in reach of many
people, while fees can put other options out of reach. For example, the effective prices of the
two mowers discussed above could both be set at $200 with a subsidy of $100 on the better
one and a fee of $100 oh the dirtier one.
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The major drawback of a policy based on subsidies alone is raising the money to pay for the
subsidy, A mixed program of fees on some units or activities and subsidies on others can help
to balance the books. In choosing funding mechanisms, criteria including efficiency, equity,
and administrative convenience should be weighed. For example, if two candidate funding
mechanisms are raising property tax and charging a fee on emissions from small nonroad
engines equal to the damages they cause, then the emission fee is more efficient, the property
tax is easier to administer, and the equity will depend on the circumstances,
5.1.3.2 Examples
Version 1 A subsidy could be given to manufacturers who offer a clean engine. Under this
system the manufacturers would receive a fixed amount for each engine sold. The firms
receiving the subsidies could use them in different ways. Some might lower the price of the
product to consumers, while others might keep the subsidy and somehow alter the mix of
products offered for sale to include more of the subsidized product. Subsidies to manufacturers
may be most suited to encouraging the introduction of new technology. In this case, the
manufacturer needs some insurance that it will get a return for investing in new equipment.
It could also help them decide which models to produce. If the subsidy makes it possible for
an overhead valve model to be sold more cheaply than a higher polluting side valve model, the
dirtiest lawnmowers might quickly be eliminated from the market place. This subsidy would
require direct expenditure of government money, and may be an open ended drain on the
budget since the government would be committed to paying the subsidy for each unit sold
without really knowing how many would be sold.
Version 2 Investment tax credits may be granted to manufacturers for production machinery
to produce new engine models that emit fewer pollutants. This would encourage the
production of new engine models and alter the mix of available engine models for sale. In
addition, this would possibly reduce revenue collections by the government. But, because the
administrative machinery is already in place, the administrative costs would not be large.
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Version 3 A rebate may be paid by local, state, or federal government to any purchaser who
buys a relatively clean engine model. The purchaser would mail in a card that came with the
engine and was signed by the dealer that the sale was bona fide. Some information about the
purchaser may also be requested. The government agency would then mail the rebate to the
consumer. It may also be possible for the dealer to mail in the rebate form on behalf of the
purchaser. Such a rebate could be applied in certain markets to encourage price conscious
consumers to switch away from low priced, high polluting equipment. For example, the side
valve lawnmowers that discount and department stores carry could be undersold by cleaner
overhead valve models if a rebate slightly larger than the difference in price were offered. The
offer could be for a limited time only or continued for as long as the agency wished. The
administrative mechanisms for the rebate are relatively simple. The agency opens its mail and
releases rebates as appropriate. The major difficulty would be the cost to the government of
providing the subsidy. This measure would be most effective with price conscious consumers
at the "low end" of the market.
Version 4 A fee-bate system could be developed that mixes Version 3 of subsidies with
Version 2 of taxes. A target emission level is selected. A fee is charged for every unit of
emission over the target level emitted by engines that exceed the targeted amount while a
rebate is paid for every emission unit under the target achieved by clean engines. If properly
set, the fees and rebates could net out leaving the program revenue neutral. This measure
could affect the mix of new equipment sold, resulting in a cleaner mix, but would be difficult
to adapt to previously purchased equipment. It would likely have its greatest effect on the low
end of the market where purchasers are more price sensitive. The administrative challenges
posed by a fee-bate are not excessive.
Version 5 A regional in-use emission reduction program could be developed based on the
subsidy concept These types of programs could be "canned" State Implementation Plan (SIP)
programs which Air Quality Management Districts (AQMD) could easily adopt. To reduce
in-use emission, consumers could be given monetary incentives or maintenance warranties
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which would encourage them to take their used mowers to an establishment (non-profit
organization, community college, small business repair shop) to have maintenance performed.
The retrofitting of new technology on in-use engines could also be subsidized under this
approach.
5.1,4 Trading of Emission Reduction Credits or Emission Allocations
There are two basic forms of emission trading: trading of Emission Reduction Credits (ERC's)
and trading of emission allocations. Each will be discussed below and its suitability for use
in reducing the emissions of small nonroad engines will be assessed.
5.1.4.1 Trading of Emission Reduction Credits (ERC's)
Before emission trading can take place, the ownership of the emissions must be established.
There are numerous approaches to this, ranging from grandfathering existing emission patterns
to holding an auction in which the government sells emissions to create a baseline. These
approaches can be used in either an ERC trading system or an emission allocations trading
system.
The second step sets the two systems apart. For ERC's, emission controls must be added, or
specific changes in production schedules must be developed and certified, before an ERC is
granted by the authorities. An ERC shows the size of the reduction in emissions the authority
certifies the firm has made below its emission baseline. Most of the controversy in emission
trading deals with the way in which baselines are established and ERC's granted. There arc
many details and many possibilities by which an ERC might be granted when no true emission
reduction occurs. Therefore, careful attention is usually paid to the emission baseline and the
ERC's.
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Conceptually, the trading of ERC's is similar to a fee-bate system. The firm seeking to
increase its emissions must pay extra for each unit of emissions. A firm decreasing its
emissions is rewarded. A firm keeping its emissions constant has to consider the opportunity
cost of doing so.
The difficulty in adapting emissions trading to motor vehicle emissions and, even more so, to
small nonroad engines is that each unit (e.g., each lawnmower or automobile) emits such a
small amount of emissions that it is costly to establish a baseline for it and to certify an ERC
for its emission reduction. For this reason, most attempts to include emissions from
automobiles have focused on fleets of vehicles. This concept can also be applied to emissions
from small nonroad engines.
However, before the owner of a fleet of lawnmowers can obtain an ERC for lowering fleet
emissions, he/she must do two things. First, he/she must establish his/her emission baseline.
This must conform to any State Implementation Plan (SIP) or Federal Implement Plan (FIP)
already in existence. In accepting the baseline, he/she accepts a limit on his/her emissions per
year (or other time period) and takes specific actions to measure the emission to be sure they
do not exceed the emission limit. The term "cap" is applied to this limit. The cap can be met
by either reducing the usage of the equipment or its emissions per unit of work. In order to
be granted an ERC, the owner must next determine a way to comply with a lower cap and
demonstrate to the authorities that the approach will work and that it can be monitored for
compliance. Then the owner can get an ERC for his/her fleet.
The steps in obtaining an ERC are difficult enough that they are not likely to be applied to a
fleet's emissions unless the fleet's emissions are large enough, or the price per unit for an ERC
is high enough, to justify the effort.
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5.1.4.2 Trading Emission Allocations
The second version of emission trading—trading of emission allocations—differs from ERC
trading in an important way. For ERC trading, an ERC must be created by actually
implementing an emission reduction and having the authority certify it. This is not the case
in trading emission allocations, where the original allocation—not the certified reduction—is
the commodity traded. This is a less rigorous approach. It has lower administrative costs, but
also less assurance that emission limits are met.
An example of trading of emission allocations would begin the same vay as for ERC's—with
the determination of the emission baseline. Again, fleets of lawnmowers would be an example
of a source that may generate enough emissions to be worth the effort of documenting the
baseline. Once the emission allocations are granted, the owner may keep them, sell them, or
buy more. Because he/she accepted a cap on emissions per time period, he/she would need
to purchase additional allocations if he/she needed to increase his/her usage of lawnmowers,
unless a switch to cleaner equipment is made. The owner could sell allocations any time
he/she wanted, but eventually, perhaps by the end of the year, he/she would have to
demonstrate that his/her emissions were within his/her allocation.
The trading of allocations need not be as closely tied to a SIP or FIP. Some trading of
allocations cross state lines. Two examples are the lead in gasoline trading program of the
early 1980's and the acid raid trading program established in the 1990 Clean Air Act
Amendments. Both limit the nationwide total of a pollutant and allocate the total among the
emitters. This can be applied to small nonroad equipment by determining a national limit on
the emission potential of each pollutant of concern (VOC's, NOX, and so forth). Each
equipment manufacturer would be given a share of that limit. This baseline could be
established by granting each manufacturer a share equal to the percentage of emissions its
equipment currently emits times the limit, or an auction could be held and equipment producers
bid for the emissions. A radical approach would be to give the emission certificates to poor
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people in heavily polluted areas and allow them to sell them for whatever price they can get.
The point here is that there is no limit to the variety of ways to create the initial distribution.
Once the distribution is established, manufacturers of equipment could trade with each other,
purchasing allocations as they increase sales, or selling as they produce cleaner equipment.
The thrust of this approach is to produce a cleaner selection of new equipment. It would have
little effect on the use or maintenance of equipment once it is purchased.
5.1.4.3 Examples: Incorporating Small Nonroad Engine Emissions in
Emission Trading Programs
Version 1 Emissions from fleets of: small nonroad equipment owned by a single operator
could be included in a nonattainment area's SIP allowing the person owning a fleet to meet
his/her emission limit by purchasing emissions from other sources, including either other small
nonroad equipment fleets or other emission source types, or selling other sources any excess
emission reductions he/she has achieved. One possibility for developing this system is to allow
owners of small nonroad equipment fleets to "opt in". They would then own the rights to a
small portion of the SIP's emissions. In return, they would have a cap on their annual
emissions. Alternatively, any operator of a certain number of pieces of small nonroad
equipment could be required to have an annual limit and allowed to be involved in emission
trades to meet it. Part of the burden on the fleet operators would be to develop means of
demonstrating that the limit was met. Having found a way to demonstrate compliance, the
means of compliance could be set. An annual limit could be met by reducing the hours
equipment was used or switching to cleaner equipment. If there were a reduction in hours at
firm A, it would have to be demonstrated that they were not picked up by firm B, unless firm
B also met its limit, possibly by using cleaner equipment.
Version 2 A system for scrapping old small nonroad equipment could be developed along the
lines of a program for scrapping oid cars that has been tested in California. Owners of
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industrial plants that need additional emission reductions to meet their emissions limit buy and
scrap the old car or small nonroad equipment, and take credit for emission reduction. The
calculation of the amount of emission reduction credited to each piece of equipment or vehicle
scrapped is an important step in this approach. The emission rate must be known as well as
the number of miles (or hours) that would have been accumulated in the following year or
years for which a credit will be granted. It must also be known how the person selling the
vehicle (or small nonroad equipment) will replace it. It may be possible to require the party
purchasing the old piece of equipment for emission credit to replace it with a new one that is
substantially cleaner. For the transaction to take place, the price of the new piece of
equipment, plus the amount the buyer would be willing to pay for the old one, would have to
be less than the amount it would cost to purchase emission reduction credits from another
source. In a tight emissions market where emission limits are very stringent, this price may-
turn out to be very high.
Version 3 An industry-wide allowable emission level could be established, with emission
allowances allocated to manufacturers of small nonroad engines. The manufacturers could sell
or buy allowances to cover the emissions of their engines. This program would be conducted
nationwide without reference to regional air pollution requirements. Its major purpose would
be to reduce the engine industry's costs of meeting a nationwide emission average. This
program is analogous to the lead in gasoline trading program of the 1980's.
Version 4 A national interindustry averaging and banking program could be established for
the small nonroad engine industry. There are several possibilities under this type of program.
An average emissions standard would be necessary. Emissions could be averaged across new-
engines, rebuilt or retrofitted (fleet) engines, or both new and fleet engines. Further, alternative
power source engines (alternative fuels, electric, solar, human-powered) could be averaged.
Version 5 In another scenario, a national manufacturer would buy used engines from the
public, then rebuild or retrofit the engines, thereby creating credits. The credits could be
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averaged into the new engine averaging and banking program (see Version 4), or the engines
could be returned to the original owner, thereby creating credits for sale or trade in the original
local area.
5.1.5 Influencing the Market for Small Nonroad Engines Through
Increased Consumer Awareness
5.1.5.1 Concepts
A necessary condition for a competitive (Le., efficient) market place is for persons participating
in the markets to possess complete information about the products they purchase. Because
information is costly, this ideal is never fully met. However, much of the basic information
needed by the consumer is available. Persons buying a lawnmower will be provided the
horsepower, engine type, cutting width, speed, and other information that will help them decide
which will best meet their mowing needs. However, consumers have not been aware of the
quantity of emission emitted by small nonroad engines in general, and lawnmower engines in
particular. Most people have been surprised when they discover the large magnitude of these
emissions. Two kinds of information would help lawnmower purchasers to choose cleaner
alternatives. They would need to know the impact of lawnmower emissions on the overall
pollution problem, and the emission and service characteristics of alternative types of
equipment. This knowledge, by itself, should cause some shifts in demand among pieces of
equipment with similar prices and capabilities but with different emission characteristics.
Information may also accentuate the shift in purchaser decisions when prices of equipment are
altered by emissions fee or subsidy programs.
Two basic approaches to disseminating knowledge are available. They are, in most cases.
complementary. One is to provide information to the public through announcements on radio
and television and ads in magazines and newspapers. Some of the ads could state the general
problem—the extent of emissions from small nonroad engines. Others could get more specific
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and provide a guide to the emission characteristics of various equipment types. The public
could be informed, for example, that hand-held, 2-stroke engines for hedge trimmers produce
more emissions per hour than a 4-stroke lawnmower engine.
The second approach is to inform the buyer about the detailed emissions characteristics of each
piece of equipment available in the market. This can be accomplished by either labelling the
product by requiring that the information appear in the owners manual, or by assuring that the
information is prominently displayed in the sales area. This will allow the consumer to make
pair-wise comparisons between every piece of equipment he/she is considering, as well as other
equipment not originally under consideration.
The labelling requirement is most efficient if done on a national scale. If cities or states were
to enact labelling requirements, it is likely that there would be no conformity. Manufacturers
would have to first be aware of each local requirement and then produce multiple labels to
meet each local requirement. Finally, they would have to ensure that the proper label is
attached to each piece of equipment, depending on its destination. This is more costly and
time consuming than a single labelling requirement for all equipment sold nationwide.
In general, information that EPA develops regarding small nonroad engine emissions should
be disseminated to the public in an organized campaign to assure that the public is informed
of the emissions characteristics of small nonroad equipment. This will have a minor impact
by itself that may be measurable in consumer surveys. It should also make consumers and
producers more responsive to other economic incentives that may be adopted.
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5.1.5.2 Examples
Version 1 A maintenance and spillage education program could be established. The consumer
education program could teach consumers that many emissions are released due to spillage
when refueling and vapor releases while the fuel can and engine are stored between uses. This
information along with methods for reducing these losses could result in altered consumer
behavior. However, evaluating the impact of an education program is a problem. A series of
surveys conducted over the life of an educational campaign, starting before the initial release
of information, could be used to trace the changes in consumer knowledge and attitudes.
Version 2 Public information campaigns can also be used to alert the consumer to the
emissions of a given type of small nonroad equipment and later of the emissions of different
models of that equipment type. Along with a labelling program, this could help to shift
demand for engines to cleaner models.
Version 3 A Green Labelling program could be established. Under this option, consumers
would be able to evaluate the "greenness" of products. For small nonroad engines, the
emissions rates for each pollutant, fuel efficiency, and other relevant data would be inscribed
in a prominent place on the engine. In order for this to lead to reduced emissions, consumers
must have a preference for environmentally friendly products. Consumer preference would
need to be cultivated. An education program may make this approach more feasible.
Voluntary compliance with emission standards depends on green labelling.
5.2 ANALYSIS OF MARKET-BASED EMISSION REDUCTION STRATEGIES
In this section, strategies for using market incentives to help reduce small nonroad emissions
are defined and evaluated. Each strategy is comprised of a mix of concepts developed in
Section 5.1 and may also include elements of a command and control approach. . They will be
compared to a straight command and control approach with respect to cost-effectiveness,
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industry impact, consumer impact, administrative costs and factors, and limitations on the
strategy. The command and control scenario used for the sake of comparison is a performance
standard equivalent to the cleanest overhead valve 4-stroke engines currently produced.
Because small nonroad engines are used in such diverse settings, different strategies will be
needed to reach different groups of users in different stages of the emission reduction program.
Some groups may be ignored while some are the emphasis of multiple strategies. The first part
of this section identifies the strategies to be evaluated. In the process, the factors that affect
the proposed strategy designs are discussed. These include the various market niches in which
small nonroad equipment are sold, dynamic considerations which refer to the stages of the
strategy for introducing cleaner technology, and practices in which different approaches may
be helpful in different stages. The various market strategies are then delineated. In the final
part of this section each strategy is evaluated. *
5.2.1 Identification of Market-Based Emission Reduction Strategies Relevant to
Emissions From Small Nonroad Engines
The concepts discussed in Section 5.1 of this report can be applied to various circumstances.
Some, such as fees on the emission potential of equipment, are broadly applicable, but not
equally effective in most circumstances expected to be encountered. Others, such as an ERC
market for lawnmower fleets, may be narrowly applicable in special circumstances. In
determining the strategies, the settings must first be spelled out. Two aspects of the settings
to be considered in defining strategies are the market niche and the dynamic considerations.
These will be discussed in the next two parts.
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5,2.1,1 Market Niches
Market niches are defined here as specific relationships between consumers of small nonroad
equipment and its producers. Five niches are identified and described in Table 5-2, Each is
discussed below.
Niche 1 One distinct niche is the market for low cost lawnmowers sold through discount and
department stores to price conscious consumers for mowing lawns of modest size. This market
niche is of interest for many reasons. It accounts for a large portion of total emissions from
small nonroad engines. The low cost mowers are of cheaper design that produce more
emissions per unit of work than top quality designs. The consumers in this niche are price
conscious. Furthermore, nearly all engines sold in this niche are produced by two engine
manufacturers: Briggs & Stratton and Tecumseh. Ignoring the emissions aspect of these
mowers, they are nonetheless cost-effective for meeting the needs of homeowners with small
lawns. Alternatives such as human powered push mowers and electric mowers are most viable
in this niche. This niche will receive a great deal of attention in deliberations over regulation
of nonroad emissions.
Niche 2 In other market niches, the equipment already produced may more easily meet
emission standards, This may be the case for the "top end" lawnmowers sold and serviced
through independent dealerships. These are 4-stroke, overhead valve machines built to high
production standards. They are sold to consumers more interested in quality than price. Many
engine manufacturers compete in this market. The independent dealerships selling these
machines are currently in decline. As they go out of business, the ancillary services they offer
will also be lost, including skilled engine and equipment repairs performed locally with short
turnaround. Service is an important issue with respect to small nonroad emissions, given that
well serviced machines emit less pollutants in their later years.
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TABLE 5-2
FIVE NICHES IN THE LAWN MOWING EQUIPMENT
AND SERVICES MARKET
Niche
Description
Market
Features
1
Low cost
gasoline-
powered mowers
Price-sensitive
consumers, mass
merchandizers, little
emphasis on service.
Top end lawn
mowers, riding
mowers, and lawn
tractors
Quality-conscious
consumers, independent
dealers, emphasis
on service.
Lawn equipment
rental agents
Conscious of
total cost of
purchase and
maintenance.
Providers of
lawn, park, and
public grounds
maintenance
services
Fleets of mowers
purchased by single
owner. Cost sensitive
for all costs, control
over large number of
units.
Entire market
for lawn
equipment
Producers selling
in all parts of
market develop
equipment specialize
for each niche.
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Niche 3 Many lawnmowers, for example, are distributed through the rental market. These are
purchased by a firm to be available for rental by the day to homeowners who do not have their
own. These machine are used intensively, especially on spring and summer weekends. They
are purchased by entrepreneurs who consider a bottom line which depends on the initial price,
the cost of maintenance, and the desirability to renters. Desirability of the equipment to renters
depends on the work it can do in a day relative to the daily rental cost. Renters are also
focused on the bottom line. Each unit consumed in Niche 3 produces far more emissions per
year than its counterpart in Niche 1 or 2.
Niche 4 Perhaps the most intensively operated equipment is used by lawn services and
government agencies caring for parks and grounds of public buildings. This equipment may
be used up to seven days a week, and is most likely maintained by the fleet owner. The
special aspect of fleet ownership is that some of the larger ones in areas with poor air quality
may have the potential to produce emission reductions large enough and valuable enough to
participate in ERC markets.
Niche 5 Some market-based strategies and command and control approaches are best applied
across the board. Therefore, one "niche" is the entire market for small nonroad equipment.
5.2.1.2 Dynamic Considerations
Two stages of a program to reduce emissions from small nonroad engines will be considered:
the first is an initial phase in which the public and the producers of equipment and engines are
being prodded to give the program an opportunity and the second is a mature program in which
the goal is to maintain small nonroad emissions at a desired level once the level is initially
achieved.
Initial Phase A good example of a program attuned to the initial phase of an emission
reduction program is a subsidy or tax credit to manufacturers to develop new production lines
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for the new, cleaner equipment designs. This would be especially helpful if the new design
was novel and its acceptability to the public uncertain. The government would share the risk
of the new investment in capital goods with the manufacturer. This program would end once
the new equipment is in place. On the consumer side, rebates for the purchase of new, cleaner
equipment would help at the outset to introduce the product to the public. There may be other
programs more suited to long term maintenance of emission levels.
Mature Phase Most of the programs discussed below are designed for the "long haul." They
communicate the general intent of the government that emissions from small nonroad
equipment shall conform to certain limits. They must be designed in a way that they can be
sustained for the long haul, both from the standpoint of affordability for the government and
viability in communicating the proper message to the public. Also, certain programs that are
aimed at altering the way people do things will take time to manifest their full effect.
5.2.1.3 Delineation of Market-Based Emission Reduction Strategies
Five strategies, selected based on judgements regarding their practicality, political feasibility,
and economic properties, are delineated below. One strategy is listed for each niche.
Strategy I A fee-bate system is the central element of the strategy offered for Niche 1. A
fee-bate system can be thought of as a general case that includes both fees and subsidies. At
one extreme, if the fees on equipment with higher emission levels approach zero, the system
becomes a rebate system. If, on the other hand, rebates approach zero, the system becomes
a fee system. A fee-bate system will reduce the affordability of the less costly, high polluting
units and cause consumers to consider alternatives while, concurrently, increasing the
affordability of the costlier, cleaner machines. Lawnmowers would be subsidized if their
emissions are below a predetermined performance standard and charged a fee if their emissions
exceed it. The fee will be in dollars per annual emission unit based on the average time per
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year spent mowing a quarter acre lawn and set high enough so that some cleaner alternatives
will cost less than the "dirty" machines.
Augmenting the fee-bates will be a partial rebate on annual lawnmower tune-ups and retrofits.
In addition to the fee-bate and maintenance subsidy, Strategy 1 will include consumer
information components including an educational campaign that encourages the choice of
"cleaner" machines, annual maintenance of lawnmowers, and green-labeling.
Strategy 2 Lawnmowers in market Niche 2 are likely to more easily meet a performance
based emission standard. Most of these mowers are manufactured to high standards and have
4-stroke, overhead valve engines. There are, however, many older units that will be kept
running for many more years. Also, products in this category are likely to be price-inelastic
because no substitute technologies, such as electric or human powered mowers, are viable on
the large lawns mowed by consumers in this niche. Two steps can be taken to reduce
emissions in Niche 2. Consumers can be encouraged to maintain their equipment or to switch
to newer, cleaner equipment. Subsidies on maintenance, coupled with educational campaign
and product labeling, may help bring modest reductions to emissions in this niche.
Strategy 3 Firms renting small nonroad equipment will be very price conscious as every
dollar they spend that does not produce more than a dollar in revenues comes out of profits.
Also, a number of pieces of equipment are located in the same place. Thus, it is feasible to
periodically test a sample (or all) of the firm's equipment for emissions and charge a fee per
unit of emissions over a pre-set level (which may be zero). This would provide an incentive
for the rental company to purchase low emissions equipment and to maintain the equipment
to assure that emissions remain low. The strength of the incentive will depend on the size of
the per unit emission fee. To calculate the total fee, the emissions per unit is multiplied by the
number of units for each equipment type the firm rents. Then the sum across equipment types
is calculated. Estimates of the emissions per unit will be based on emissions observed in the
test and the expected annual hours of use of the equipment type. If the fee is higher than the
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cost of purchasing and maintaining low emissions equipment, the fee will cause most rental
agents to spend some money in equipment and labor costs to avoid the fee. Furthermore, the
fee can be equated to the marginal cost of cleanup in other SIP categories. This program could
be established on a regional or local basis, and can also be applied to fleets.
Strategy 4 Lawn service firms and local governments operating fleets of specialized equipment
would be good candidates for inclusion in ERC trading in jurisdictions where pollution levels
are high and, therefore, the prices of ERCs are also likely to be high. The specific design of
the trading program would be determined by the jurisdictions.
Strategy 5 Regardless of strategies for specific niches, the EPA may wish to reduce emissions
from all new small nonroad equipment. This can be done through the use of command and
control strategies, such as requiring certain engine designs or setting performance standards for
engine families. It is also possible to make engine emission limits even more flexible by
allowing emissions from individual engine types to increase so long as other engine types
reduce emissions. The criterion for a pair-wise trade would be that the weighted average of
emissions from the two types is not increased. The weights could be the estimated annual
work performed by engines of the two types. It can be surmised that some trades of emission
rates could result in payments from one firm to another - or that a single producer could alter
emissions characteristics of the various engines it produces.
Other elements of a national strategy could be educational and informational programs
including public information campaigns and product labelling.
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5.2.2 Evaluation of Market-Based Emission Reduction Strategies
In the following discussions, the five strategies delineated above are evaluated for their cost-
effectiveness, impacts on firms in the industry, impacts on consumers, administrative factors,
and their limitations.
5.2.2.1 Strategy 1 - Fee-bates, Education, and Labelling
Strategy 1 was designed for application in the large market for inexpensive lawnmowers in
which discount stores and national chain stores are important players. The key element of the
strategy is the fee-bate, but in this, as in all the other strategies, it is assumed that there will
be a national educational campaign to inform people of the impact of small nonroad emissions
and a national requirement for product labelling. In addition, it is assumed that the command
and control alternative to this strategy is the requirement that each engine meet a specific
emission limit set at a level similar to the emissions achievable by a good quality 4-stroke,
overhead valve engine.
Cost-effectiveness in Reducing Emissions
Assuming first that the command and control requirement limiting emissions from each engine
is in place concurrently, the fee-bate can be used to induce a greater reduction in emissions.
A single set of emissions standards (one for each pollutant) can be set in terms of emissions
per unit of work. Fees per unit of emission would be charged for the purchase of any
equipment with an emission rate higher than the standard. A rebate per unit of emissions
would be paid to the consumer who bought equipment with a lower emission rate. This will
provide an incentive to purchasers to buy cleaner models and to producers to promote their
cleaner models or develop lower emitting equipment. The costs of this strategy would be the
cost of developing the separate standard for the fee-bate, collecting the fees, and processing
the rebates. There may also be a depletion or surplus of revenues from fee-bate collections and
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payments, even if it is designed to be revenue neutral, due to the exact nature of the response.
This is not strictly a cost, but a revenue transfer. If the program induces a response from
producers to modify their engine or equipment design, there will be costs for product
development and production of the new equipment that may increase the price. The size of
the price increase under these circumstances is expected to be less than the reduction of the fee
due to the reduced emissions. Overall, there will be small additional decreases in emissions
to be compared to the costs of establishing the fee-bate program. The size of the emission
reductions will depend on the setting of the emission standards, the setting of the fee for excess
emissions, and the rebate for excess reductions. The major costs under this alternative are the
costs to the producers of meeting the command and control requirements. This alternative does
nothing to reduce the command and control costs, but it does obtain additional reductions at
relatively low costs.
The second alternative for this strategy is to institute fee-bates in place of the command and
control approach. The fee-bate would again encourage consumers to purchase cleaner models,
inducing a reduction in the emission characteristics of the equipment offered for sale. The
magnitude of the decrease in emissions will depend on the size of the fees and rebates as well
as the nature of the consumers' price and cross-price elasticities of demand. It is expected that
these consumers would evidence a highly elastic price elasticity of demand and would be quite
willing to switch to equipment with similar operating characteristics but lower emissions based
on changes in relative prices. Yet, because these same consumers can be expected to also
evidence high income elasticity of demand, they will be sensitive to absolute increases in the
price and reduce their purchases of lawnmowers unless the fee-bate system provides at least
one viable choice at the same price level for which they can currently buy a lawnmower. This
viable choice may prove to be the purchase of an electric model, unless the cost of 4-stroke,
overhead lawnmowers is substantially reduced by high rebates or by mass production and
competition.
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The performance of this alternative depends greatly on the choice of an emission standard, and
the levels at which the rebates and fees are set. If the rebate or fee makes the 4-stroke,
overhead valve engine less costly to the consumer than dirtier alternatives, the dirtier engines
could be totally eliminated. The costs of this could be minor if the response was to stop
producing dirty machines and to increase production of cleaner ones. However, producers may
also decide to produce new, cleaner models. If so it is expected that they will use the most
cost-effective approach to reducing the emissions characteristics. The costs will be lower than
the command and control approach.
Industry Impact
The major industry impact will be due to the requirement to reduce emissions from the lowest
cost lawnmowers. Whether done by command and control or by hefty fees and rebates, the
chief product of two major firms in this industry will essentially be eliminated. These large
and powerful firms can be expected, if regulations are enacted, to introduce substitute products
suitable to the new regulatory environment. However, they will no longer be able to produce
a lawnmower engine that is much more inexpensive than other designs. The market niche in
which they now operate will blend in with the up-scale market. Consumers will be price
sensitive, but there will be smaller differentials in the costs of lawnmowers. Firms that already
produce and market lawnmowers that are close to meeting a standard will have an increased
role supplying the low end of the market. The overall level of sales in this market niche will
depend on the effective price of conforming lawnmowers once the adjustment for a fee or
rebate is accounted for.
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Consumer Impacts
Consumers, as opposed to tax-payers, could benefit from the fee-bate, especially if it is skewed
toward rebates. They would likely get a good quality, 4-stroke, overhead valve iawnmower
for about the same price they once would have paid for a lower quality machine. However,
if the fee-bate is skewed toward fees, the consumer would be adversely affected, because
he/she would have to pay more for a Iawnmower than he/she once did. The higher initial cost
would to some extent be offset by the enhanced quality and longevity of the improved engines.
Administrative Factors
There will be additional program costs for running a fee-bate program. But in some versions,
these costs will be offset by the reduced costs of not running a command and control program.
There is nothing about either the fee-bate or the command and control program that has not
been done before.
One administrative benefit of the fee-bate is that it can be implemented at various
administrative levels. The federal government could run it or it can be administered locally
in specific non-attainment regions where the reductions from small nonroad engines are most
needed.
Strategy Limitations
The chief limiting factor in using fee-bates is that the elasticities of demand are not well known
for specific groups of consumers. Hence, it would be necessary to set fees and rebates based
on best guesses and then adjust them over time. The adjustment process could be expensive
as it creates an unstable decision environment for firms making production decisions.
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5.2.2.2 Strategy 2 - Subsidies for Maintenance
The strategy of subsidizing maintenance of lawnmowers was designed to apply to riding
mowers and lawn tractors. The market for these machines is more price inelastic than for low
cost walk behind mowers. They are also likely to already employ cleaner engines, but even
if they do not, the introduction of cleaner engines will have only a small impact on their price
because the costs of the rest of the machine are substantial. In addition, these machines are
operated for many years. It was therefore considered that a program to encourage owners of
these machines to keep them tuned for low emissions would do the most to reduce emissions
in this category. Designated shops, most likely small businesses, would be certified for low
emission tune-ups and the costs of these tune-ups would be subsidized. At the same time, a
national educational campaign would keep owners of the mowers informed of the importance
of reducing emissions,
While strategy 2 was designed for the high-end market, increased maintenance can result in
significant emission reductions for low-end equipment as well. The shops offering subsidized
maintenance need not be limited to servicing high-end equipment. They could also service
low-end equipment at low cost to the consumer. Because low-end consumers are more price
sensitive than high-end consumers and because the large outlets selling low-end equipment do
not provide fast service, low-end consumers are likely to respond to the subsidized maintenance
program.
Cost-effectiveness in Reducing Emission
Emission tune-ups should be done annually or, in some cases, more frequently. The tune-ups
can reduce emissions by assuring that the equipment's engine operates efficiently. Total
emission reductions due to the program will depend on the number of tune-ups performed and
actions that would have been taken by the owners in the absence of the program. Many
owners already maintain their equipment. To the extent that these owners utilize this program.
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there will be little effect because they were maintaining their equipment in the first place. If
engines that ordinarily would have been neglected are maintained under this program, it will
reduce emissions. The cost-effectiveness of subsidizing maintenance of engines that would not
otherwise have been maintained depends on the cost of subsidy per unit of emission reduction.
The program is judged cost-effective if its cost-effectiveness ratio is equal to or better than
other viable alternatives (such as reducing emissions at a factory or from automobiles). Since
tuneups may cost $50 to $100, then to meet the average cost-effectiveness ratio of $2100 to
$6600 per ion of VOC's, representative of the range of cost-effectiveness for Reasonable
Available Control Technologies (RACT)64 and Enhanced Inspection and Maintenance for
automobiles, an annual tuneup would have to reduce emissions by 22 to 75 pounds.
It is also possible for the authorities to induce the consumer to get a $50 to $100 tuneup with
subsidies in the $5 to $10 range. While smaller subsidies will result in fewer tuneups, each
additional tuneup actually performed will have a cost-effectiveness ratio about ten times higher.
A 2.2 to 7.5 pound reduction in VOC's per annual tuneup would then make the program cost-
effective.
Industry impact
The impact of this strategy on industry will be moderate. This strategy will help keep repair
shops open. To the extent that this happens, and in conjunction with publicity, reductions of
emissions from existing lawnmowers, for example, can be obtained. Should the availability
of repair shops decline, emissions from existing small nonroad engines could increase. This
strategy can help preserve the ability to keep engines operating cleanly.
"Office of Technology Assessment, "Catching Our Breath, New Steps for Reducing Urban Ozone",
OTA-0-412, July 1989.
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Consumer Impact
The impact of this strategy on consumers will be moderate. Consumers would benefit from
continued availability of repair shops and save a small amount of maintenance costs each year.
Because this is a voluntary program for consumers, any consumer who continues to use it has
judged himself to be better off.
Administrative Factors
This program can be established at any jurisdictional level. It would most likely be established
in suburban areas. There is no reason that it must be limited to upscale, large mowers.
Strategy Limitations
The primary limitation on this strategy is the availability of funds for the subsidy. It could,
however, be introduced as part of a package that includes measures that generate revenues.
5.2.2.3 Strategy 3 - Emission Fees for Estimated Annual Emissions from Fleets of
Rental Mowers
The rental market is one opportunity to apply an emission fee on actual emissions. This fee
will provide incentives to the providers of rental equipment to purchase clean equipment and
to keep them maintained. It also sends price signals to the renters of the equipment to
encourage them to use the cleanest equipment that will do the job.
The fee is assessed by measuring the emissions of representative samples of the rental stock
and applying a fee on them based on the hours of usage. Equipment rentals are a viable place
for assessing fees because large amounts of small nonroad equipment are housed in one place.
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Portable measuring devices can be taken to the center once or twice a year. The emission fee
can be charged whether or not a command and control program is in place.
Cost-effectiveness in Reducing Emissions
If a command and control program is in place, the emission fee would still encourage
equipment rental agents to pick and choose based on emissions when selecting their stock each
year. They are constantly seeking to renew their stocks of equipment and would have an
incentive to choose the cleanest even when the choice is among units that have met the
emission standard. Therefore, there will be a moderate effect to induce the manufacturers to
develop cleaner technology for the rental market. These emission reductions will be less than
those achieved by command and control programs, but they will be in addition to the emissions
reductions from command and control. The costs will be the costs to the enforcement agency
of visiting rental agents and measuring their emissions. Since a small amount of time spent
in this activity can result in a substantially cleaner rental fleet, the cost-effectiveness will be
high.
If the emission fee on rentals goes into effect in the absence of the command and control
measure, the potential for emission reductions due to the emission fee is larger. If only the
rental market were given these incentives, the effect on overall production would be relatively
small due to the relatively small impact of the rental market by itself. But in conjunction with
other measures discussed here for application in other market niches, and given sufficiently
large emission fees, an economic incentive package could bring about as large an emission
decrease as command and control, but at smaller cost because of additional options for
achieving it, such as improved maintenance of equipment, altered choices of equipment, and
altered usage rates of existing equipment.
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Industry Impact
The impact on the equipment rental industry would be small as long as it is not the only
market facing increased costs. It will be in a position to minimize the costs it bears by its
choices of equipment and maintenance schedules.
Consumer Impact
The impact on consumers will be small. Most consumers rent equipment only for special jobs
and they will often have a choice to rent clean equipment for which there is little or no
emission fee.
Administrative Factors
This program can be applied at any administrative level. It will be most attractive in
nonattainment areas. An enforcement unit that measures emissions and assesses and collects
the fees will have to be established. The testing equipment will have to be in a mobile unit.
Administrative costs can be reduced by relying on a database based on data from a certification
program in which manufacturers submit new and in-use emission ratings rather than testing.
However, if this is done, the incentive to the rental agency to conduct a high quality
maintenance program is lost.
Strategy Limitations
Although this strategy has good theoretical properties, its application is limited to sites where
there are enough pieces of equipment in one place to justify sending a mobile emission testing
unit. It does not have to be limited to rental fleets. It can be applied to all fleets maintained
in a common location.
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5.2.2.4 Strategy 4 - Emission Trading Using Fleet Emission Reductions
Emission trading is another approach with optimal properties that cannot easily be applied to
all emissions from small nonroad engines. For example, an individual home owner cannot be
expected to have an emission permit for emissions from his/her small nonroad engines.
However, emission trading can be applied to fleets of small nonroad equipment such as lawn
services, golf course maintenance, and park and public grounds maintenance. The concept of
fleets can also be expanded to include any action to reduce emissions in small nonroad engines
by a central party who bears the expense and responsibility for maintaining lower emission
levels. The emission trading would take place at the local level and would be established
through an emission trading program written into a State Implementation Plan (SIP).
An example of emission reductions in a fleet using the expanded concept of a fleet, is the
Cooperative Research and Development Agreement with EPA in which the electric utility
industry is giving home owners electric lawnmowers in exchange for their internal combustion
models. Conceptually, this program has similarities with the old automobile purchasing
program conducted in Los Angeles. Both programs could be viable sources of emission
reduction credits if documentation of the emission reductions resulting from the programs can
be produced, and it can be demonstrated that the emission credits are either permanent or good
for a designated time period. The major difficulty is that specific emission limits are not in
place on the households operating the equipment in the first place. The difficulties in setting
up an emission trade based on this can be resolved.
Cost-effectiveness in Reducing Emissions
Emission trading will be very cost-effective in that whatever emission controls were used for
an emission reduction credit to be sold in the market will have been created more cheaply than
the alternative emission reductions the other source would have had to install. This follows
from the concept of a voluntary trade in which both parties must profit. The sources creating
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the credit would sell it only if the price it received was more than the cost of creating and
maintaining the control.
Industry Impact
Impacts of emission trades on fleet owners would be positive. Because emission trades are
voluntary, any trade should improve the well-being of both parties.
The only exception to this conclusion is if the fleet were written into a SIP and given a
stringent emission limit that it would not otherwise have had to meet. This is not a cost of
emission trading but of a more stringent requirement put in place prior to emission trading.
However, such strategies are sometimes linked with emission trading. An example is the South
Coast Air Quality Management District's emission trading program called RECLAIM. Even
so, the fleet would have great flexibility in meeting the standard.
Consumer Impact
Impacts on consumers would be small but positive. Each consumer of the fleet services would
absorb a small fraction of any net benefits.
Administrative Factors
There are a number of administrative chores to be done in establishing a SIP. The chief of
these is the documentation of emission limits for each source. This will be accomplished for
many sources through Title V, Permits, of the Clean Air Act Amendments of 1990. However,
many sources using small nonroad equipment are not covered by Title V. These include
homeowners and firms whose largest source of emissions is not large enough to trigger the
reporting requirements of Title V.
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If a iocal agency developing a SIP wishes to include smaller sources they may, but there will
be the added cost of documenting the emissions of every small source in the added SIP
category. Alternatively, a SIP can address a class of emissions, such as emissions from
charcoal lighter fluid. If emissions from small nonroad engines are documented in this way,
any reduction in the emissions that can also be documented and enforced may be used in an
emission trade.
The initial inception of expanded source documentation will be costly, but incremental
additions to it will not be as costly once the administrative mechanisms have been established.
Strategy Limitations
While emission trading will be cost-effective, from the participants' point of view, initial
administrative costs will be high. Also, including emissions from small nonroad engines in a
SIP for emission trading can only be done where an emission trading program is established.
However, in such areas as the South Coast Air Quality Management District, or any other area
for which emission trading programs are weii developed, the inclusion of small nonroad
emissions should be carefully considered.
5.2.2.5 Strategy 5 - Flexible Emission Standards
A possible command and control approach to reductions of emissions from small nonroad
engines is to limit the emission rates for individual engines. This approach reduces the
emissions in all new engines subject to it and may also reduce in-use emissions of the engines
over time if newer engine designs are able to continue to run cleaner than older designs.
Limits on the engines' emission rates can be made more flexible by allowing engine types to
increase emission rates over their initial rate so long as other engine types reduce emissions
by a larger amount.
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The program can be established in many forms. Design parameters include whether:
1) Engine types can be traded against each other, that is, whether 2-stroke can trade
against 4-stroke, 5 horsepower can trade against 25 horsepower, or gasoline can
trade against diesel;
2) Trading is limited to intra-firm trades to maintain a corporate average or inter-
firm trades are allowed;
3) Averages have to be maintained within geographic regions or nationwide:
4) One pollutant or several pollutants are included in the averaging;
5) Averaging is fay expected sales, expected hours of use, or expected engine
production; and
6) Compliance with the average is based on actual sales, production, or use, or only
on a weighted average based on expected sales, production, or use.
For example, the criterion for a pair-wise trade could be that the use-weighted average of
emissions from the two types is not increased. The use-weights could be the estimated work
done by engines of the two types annually. Inter-firm trades of emission rates could result in
payments from one firm to another while a single producer could alter emissions characteristics
of the various engines it produced.
Cost-Effectiveness in Reducing Emissions
This program will be very cost effective, if designed properly. The emission reductions are
created by basic design changes in engines. The averaging program will relax the requirements
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on engines that are difficult to bring into compliance. It will allow continued sales of some
equipment that could not have been sold if each engine had to meet the initial emission rate.
At the same time it will lower the overall cost of reducing national emissions from small
nonroad engines to designated levels. It will also provide incentives for manufacturers to
continue improving emission controls on all their engines as their reward will be that they may
sell more units if each unit is, on average, cleaner.
Critical criteria for program design are as follows:
* Specific pollutants should be averaged. For example, reduced emissions of
VOC's from one engine family are averaged with the increased VOC emissions
from another. If an electric engine is included in the average, it would be
assigned an emission level of either zero, or an amount calculated as its share
of that emission emitted during generation. If electric powered equipment is
included in the average, then its emissions should be included in the weightings
in exactly the same way as gasoline or diesel engine emissions.
« The averaging should be weighted in such a way that the expected annual
emissions are not changed by the averaging. This protects against the
averaging resulting in increased emissions. It also encourages greater emission
reductions from dirtier engines because the cleaner they are the more of them
can be sold.
• The widest possible set of engine families should be included in the
averaging system. This will, for example, permit trading for a specific
pollutant between handheld 2-stroke engines in hedge trimmers and 4-stroke
engines used in lawnmowers. A broad based emission averaging program will
allow improvements in 4-stroke emission control technologies to be used to
offset short-comings in 2-stroke design, allowing 2-stroke engines to be used for
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special purposes where they are especially well suited. The averaging would
still encourage improvements in emission control in 2-stroke engines because
such improvements would reduce the burden on 4-stroke emission controls and
because the number of 2-stroke engines that could be sold and used will be
greater the cleaner 2-stroke engines are.
• Limits on the weighted averages of pollutants across engine types should be
met within designated regions such as air quality control districts. This will
ensure that large quantities of dirtier engines do not end up where they are least
welcome. The issue is less critical in attainment areas.
Industry Impact
Emission averaging should reduce the cost to producers of small nonroad engines relative to
the command and control approach. The broader the averaging rule, the greater the savings
will be. The original emission limits will be modified for engines that are most difficult to
bring into compliance.
The averaging program will encourage industry to engage in a long run emission reduction
research and development program. In the short run, it will alter the production mix, favoring
cleaner engines.
Consumer Impact
Cost to consumers will be lower than under the command and control measures with the same
emission reductions. Consumers will find that dirty engines are still available that would not
have been available under the command and control measures used for comparison. These
engines will be more costly than they would in the absence of any regulatory action due to
scarcity and to a possible manufacturer's markup to compensate for the emissions reductions
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on other models that made it possible for the dirty engine to be available. Under command
and control these engines would not be available unless major technological breakthroughs had
occurred.
Consumers will also find that, relative to command and control, there are more of the cleaner
engines at a lower price. This is because the cost of their improved emissions controls is
partially compensated for by the reduced costs of cleaning the dirtier engines.
Administrative Factors
There are no difficult administrative factors associated with the emission averaging program.
All aspects of this strategy have been conducted before under various programs for auto
emission reductions.
Historical data will have to be collected on sales and expected use levels of each engine type,
each engine type will have to be tested to determine its emissions, in-use data will have to be
collected, and company production records will have to be examined to demonstrate
compliance. Most or all of these things are being done already. They are low cost activities
compared to the savings in compliance costs to manufacturers and the increase in the variety
of engine types available to consumers relative to the case if a strict command and control
approach were adopted instead.
Strategy Limitations
This strategy can best be done at a national level. While it may be possible for a State such
as California, to insist on an emission average within the State, matters would be greatly
simplified if averages were computed at a national level. Manufacturers could then devote
their attentions to designing engines that conform to the average.
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5.3 SECTION SUMMARY
Chapter 5 examines the issues involved in applying market-based emission reduction strategies
to emissions from small nonroad engines. It has two major sections. In Section 5.1 the
categories of market mechanisms are described. This section includes a background discussion
illustrating the range of market mechanisms and placing them in a continuum with command
and control measures. It also includes a discussion of cost-effectiveness, a criterion used later
to assess alternative market mechanisms, describing what cost-effectiveness is and how it
differs from alternative criteria such as cost-benefit. It then discusses four market-based
strategies, assessing their conceptual properties and their applicability to reducing emissions
from small nonroad engines. The strategies discussed are: emission fees, emission subsidies,
emission trading, and public awareness programs.
Section 5.2 then develops five specific strategies to be applied in specific market niches. These
are then evaluated with respect to their cost-effectiveness, impact on the affected industry,
impact on consumers, administrative factors, and strategy limitations. The strategies are fee-
bates on low-end equipment sold in mass markets, maintenance subsidies, emission fees on
fleets of nonroad equipment, emission trading for emissions from fleets, and averaging of
emission standards. Each of the strategies discussed can be useful when applied in an
appropriate circumstance. They may also be combined in a package.
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APPENDIX A
POWER SYSTEMS RESEARCH (PSR)
Since sales data are not readily available from manufacturers, industry associations, product
literature, or other public sources, the principal source of such data has been Power Systems
Research (PSR). PSR has developed various databases which provide information to
organizations in the power equipment industry. These organizations include engine and
component manufacturers, original equipment manufacturers (OEM's), government agencies,
and financial institutions.
PSR's EnginData North America database (EnginDatd) is the most complete compendium of
sales statistics for engines produced in the U.S. or marketed in the U.S. by foreign
manufacturers. In that database, sales refers to the delivery of North American-produced or
imported loose engines to an OEM, either through a distributor or factory-direct channels, or
the delivery of a piece of equipment containing a North American-produced captive engine to
the distributor, or the delivery of a packaged or retrofitted engine by a North American
distributor to the user. Note that this definition of "sales" included exports of North American-
produced loose engines and excludes imports of equipment with installed engines (such as
Deutz agricultural tractors or Yanmar garden tractors). To identify the engine's country of
origin, EnginData has a country code as one of its fields.
Sales of engines are organized into 99 distinct engine applications (or equipment types) and
11 market segments (similar to EPA's equipment categories). In all, data on over 2,050 engine
models produced by more than 120 manufacturers located in over 20 countries is contained in
the database. The basis for PSR's sales information is through continous contact with original
equipment manufacturers (OEM's) who provide PSR with annual engine installations. From
product literature, PSR identifies which engines go in which equipment types, and hence
estimates annual engine sales at the national level.
A-l
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ENGINE MANUFACTURER/SALES ORGANIZATION & COUNTRY OF ORIGIN
AE
AJ
AC
AM
AR
AU
GB
BL
BE
BW
BR
BC
CS
CT
CM
cc
CH
CY
CL
ACME
AJAX
ALUS-CHALMERS
AMC
ARROW SPEC
AUSTIN-ROVER
BEDFORD/AWD
BELARUS
BELL
BMW
BRIGGS&STRAN
BUICK/OLDS/CAD
CASE
CAT
CAT-MITSUBISHI
CHEV/PONT/CAN
CHINA DIESEL
CHRYSLER
CLINTON
IT
US
JP
US
us
JP
us
UK
UK
UR
US
AT
GE
JP
US
us
GE
US
BL
US
JP
CN
MX
US
CH
MX
US
US
ITALY
UNITED STATES
JAPAN
UNPTED STATES
UNfTED STATES
JAPAN
UNITED STATES
UNITED KINGDOM
UNITED KINGDOM
USSR
UNITED STATES
AUSTRIA
GERMANY
JAPAN
UNITED STATES
UNITED STATES
GERMANY
UNITED STATES
BELGIUM
UNITED STATES
JAPAN
CANADA
MEXICO
UNITED STATES
CHINA
MEXICO
UNITED STATES
UNITED STATES
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CB
CO
CU
CR
CUS
CN
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1
DM
DC
DE
DT
DZ
Dl
DV
DO
FM
f
FA
Fl
FOR
COLUMBIA
CONS DIESEL
CUMMINS
CUMMINS GAS
CUSHMAN
CUYUNA
DAIHATSU MTR
DECO-GRAND
DEERE
DET DIESEL
DEUTZ
DINA MOTORES
DIVERSIFIED
DORMAN
FAIR8NKS-MOR
FARYMANN
FIAT
FORCE
US
us
IN
MX
UK
US
IN
US
US
US
JP
US
FR
US
us
CN
FR
GE
IT
MX
JP
UK
MX
US
GE
IT
US
UNITED STATES
UNITED STATES
INDIA
MEXICO
UNITED KINGDOM
UNITED STATES
INDIA
UNITED STATES
UNITED STATES
UNITED STATES
JAPAN
UNITED STATES
FRANCE
UNITED STATES
UNITED STATES
CANADA
FRANCE
GERMANY
ITALY
MEXICO
JAPAN
UNITED KINGDOM
MEXICO
UNITED STATES
(
GERMANY
ITALY
J
UNITED STATES
A-2
-------
ENGINE MANUFACTURER/SALES ORGANIZATION & COUNTRY OF ORIGIN
FO
FU
GE
GM
HL
HA
HE
HI
HM
HN
HY
!(
1L
IDC
IS
IV
JA
JO
KA
KI
FORD
FUJI HVY INO
GEMINI
GM-BRAZIL
GM-HOLDEN LTD.
HATZ
HERCULES
HINO
HOMELITE
HONDA
HYUNDAI MOTOR
ILO
INERTIA DYNAMIC
(SU2U
IVECO
JACOOSEN
JEN8ACH
KAWASAKI
KIORITZ
BZ
CN
GE
rr
MX
SP
UK
us
JP
us
BZ
AU
GE
US
JP
us
JP
us
KR
JP
GE
US
JP
IT
US
AT
JP
JP
BRAZIL
CANADA
GERMANY
fTALY
MEXICO
SPAIN
UNITED KINGDOM
UNfTEO STATES
JAPAN
UNITED STATES
BRAZIL
AUSTRALIA
GERMANY
UNITED STATES
JAPAN
UNITED STATES
JAPAN
UNITED STATES
KOREA
JAPAN
GERMANY
UNITED STATES
JAPAN
ITALY
UNITED STATES
AUSTRIA
JAPAN
JAPAN
l»9*p|
•&-:^>»x-wi
KL
KH
KM
KZ
KU
LA
LAW
LE
LP
LO
MA
MN
MZ
MC
MD
MEM
MB
ME
MH
MM
MI
MT
^A^^:^^
KIRLOSKAR
KOHLER
KOMATSU
IN
MX
US
JP
KOMATSU-ZENOAH JP
KU8OTA
LAMBORGHINI
LAWN-BOY
LEYLAND
LISTER-PETTER
LOM8ARDINI
MACK
MAN
MAZDA
MCCULLOCH
MEDALIST MTR
MEMO
MERCEDES ONZ
JP
IT
US
UK
UK
IT
US
GE
JP
US
US
YG
OZ
GE
SP
MERCURY MARINE US
MH!
MINN-MOLINE
MIT MOTORS
MTU
JP
US
JP
GE
INDIA
MEXICO
UNfTED STATES
JAPAN
JAPAN
JAPAN
ITALY
UNITED STATES
UNITED KINGDOM
UNITED KINGDOM
ITALY
UNITED STATES
GERMANY
JAPAN
UNITED STATES
UNITED STATES
YUGOSLAVIA
BRAZIL
GERMANY
SPAIN
UNITED STATES
JAPAN
UNITED STATES
JAPAN
GERMANY
A-3
-------
ENGINE MANUFACTURER/SALES ORGANIZATION & COUNTRY OF ORIGIN
v§j2*!W*"J3£"iS^Xv!^ ;
MU
MW
NV
NW
Nl
NM
OM
ON
PE
PK
PN
PB
PS
RE
RO
RU
SA
SM
SAT
SC
SP
MURPHY
MWM
NAVISTAR
NEWTON ENG
NISSAN DIESEL
NISSAN MOTOR
OMC
ONAN
PERI
PERKINS
POULAN
POWER BEE
PSA
RENAULT
ROTAX
RUGGERINI
SACM
SAME
SATURN
SCANIA
SHINOAIWA
US
BZ
GE
SP
US
GE
SI
JP
JP
US
us
us
CH
JP
UK
US
US
FR
FR
GE
AT
IT
FR
IT
US
SW
JP
UNITED STATES
BRAZIL
GERMANY
SPAIN
UNITED STATES
GERMANY
SINGAPORE
JAPAN
JAPAN
UNITED STATES
UNITED STATES
UNITED STATES
CHINA
JAPAN
UNITED KINGDOM
UNITED STATES
UNITED STATES
FRANCE
FRANCE
GERMANY
AUSTRIA
ITALY
FRANCE
ITALY
UNITED STATES
SWEDEN
JAPAN
•
SL
ST
SI
SU
SZ
TE
TC
TW
TY
TO
US
UE
VM
VW
W
WK
WA
YM
YN
SLANZI
STEWART&STEV
STIHL
SUPERIOR
SUZUKI
TECUMSEH
TELEDYN CONT
TELEDYN-WISC
TOYO-SHA
TOYOTA
U.S. STEEL
US ENGINES
VM
VOLKSWAGEN
VOLVO
W ACKER
WAUKESHA
YAMAHA
YANMAR
jjj
'*-!-*'A-X&&
rr
us
us
us
JP
us
FR
US
IT
JP
US
JP
JP
US
us
us
IT
BZ
GE
SW
GE
SW
US
JP
JP
ITALY
UNITED STATES
UNITED STATES
UNITED STATES
JAPAN
UNITED STATES
FRANCE
UNITED STATES
ITALY
JAPAN
UNITED STATES
JAPAN
JAPAN
UNITED STATES
UNITED STATES
UNITED STATES
ITALY
BRAZIL
GERMANY
SWEDEN
GERMANY
SWEDEN
UNITED STATES
JAPAN j
JAPAN
A-4
-------
APPENDIX
Relationship Between GDP
and 4-Digit SIC Industries
-------
o
Q
o 20000
CO
•+->
c
0)
•E
Q.
CO
0)
0
1958
GDP and SIC code 3531
1958-1986 (in Constant 1982 dollars)
~i i i i—i—r
1964
•V
-3500
h3000 o
~Tiiiiir
4000
CO
(C
-2500
G9,
Q.
Q
O
-2000
500
1 970
1 976
1982
Year
GDP
SIC code 3531
-------
4500
4000-
= 3500-
Q
o 3000H
2500
9-
!c
*+—
o
0)
_
2000-
1500
1000
500
0
GDP and Selected industries
1958-1986 (in Constant 1982 dollars)
rsj
1958
i T—i—r i—i i —f—r—r
1964 1970
1976
1982
4000
3500
CO
3000 o
c
g
S
[-2500
O
-2000
1500
Year
i- GDP
SIC code 3537 -^- SIC code 3546
-------
8000
C/)
•*-•
C.
£
9-
lc
CO
o
0)
J3
>
7000
6000
5000
4000-
3000
2000
1000
GDP and Selected Industries
1958-1986 (in Constant 1982 dollars)
1958
1970
1—r r i r
1976
4000
3500
3000 o
c
g
m
2500 ^
O
0
-2000
1982
1500
Year
GDP
SIC code 3561 -^- SIC code 3563
SC code 3621
-------
3500
3000
o
Q
c
o
C/5
w *£
Q)
E 1500
Q.
JC
CO
*B 1000
CD
_I3
03
0
1958
GDP and Selected Industries
1 958-1 986 (in Constant 1 982 dollars)
,1
i
7
T r"T
1964
_( r
1970
"I l~"l " i '"V
1976
1982
Year
4000
3500
3000
2500
C/)
J5
Q
c
g
m
Q
O
2000
i- GDP
SIC code 3751
SIC code 3799
-------
APPENDIX C
Technology Penetration Rates By
Equipment and Fuel Type
L-'
-------
Key to technology codes in the tables;
Cooling
Cycle
F_dist - Fuel Delivery System1
Vlv-enf - Valve Configuration
A - Air-cooled
O - Oil-cooled
W - Water-cooled
2 - 2-strokes
4 - 4-strokes
C - Carbureted
D - Direct Injection (Diesel)
I - Indirect Injection (Diesel)
C - Overhead Cam (single)
R - Reed Valve
S - Side Valve
V - Overhead Valve (OHV)
Note that percent in tables reflect either the percent of gasoline sales (GASOLINE TABLES)
or the percent of diesel sales (DIESEL TABLES).
'For some types an H may appear under F_dist, This is an input error in Engine Data which actually
should be an I,
C-l
-------
TECHNOLOGY PENETRATION RATES FOR LAWN AND GARDEN EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
%83
%84
%85
% 86
%87
% 88
% 89
%90
CHAIN SAWS
Cooling
Cycle
F_dist
Vlv_cnf
CHIPPERS/GRINDERS
Cooling
Cycle
F_dist
Vlv_enf
COMM TURF
Cooling
Cycle
F_dist
Vi¥_enf
FRONT MOWERS
Cooling
Cycle
F_dist
Vlv_cnf
LEAF BLOW/VACS
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
2
C
R
HP
A
4
C
S
V
HP
A
W
2
4
C
R
S
V
HP
A
4
C
S
V
HP
A
2
4
C
R
S
V
2.01
1 00.00
100.00
100.00
100.00
34.27
100.00
100.00
100.00
0.00
1 00.00
TO. 76
97.09
2.91
6.38
93.62
100.00
6.38
90.29
3.34
N/A
0.00
0.00
0.00
0.00
0.00
2.58
100.00
65.28
34.72
1 00.00
65.28
34.72
0.00
2.02
100.00
1 00.00
1 00.00
100.00
19.48
100.00
100.00
1 00.00
82.81
17.19
10.67
97.37
2.63
6.08
93.92
1 00.00
6.08
90.64
3.29
N/A
0.00
0.00
0.00
0.00
0.00
1.95
1 00.00
79.25
20.75
100.00
79.25
20.75
0.00
1.98
100.00
1 00.00
100.00
100.00
18.65
100.00
100.00
100.00
92.01
7.99
10.74
96.90
3.10
6.26
93.74
1 00.00
6.26
89.70
4.04
N/A
0.00
0.00
0.00
0.00
0.00
1 88
100.00
80.50
19.50
100.00
80.50
19.50
0,00
2.00
100.00
1 00.00
1 00.00
100.00
19.37
100.00
100.00
100.00
86.08
13.92
11. 05
97.14
2.86
5.88
94.12
1 00,00
5.88
90.50
3.62
N/A
0.00
0.00
0.00
0.00
0.00
1.94
100.00
79.28
20.72
100.00
79.28
20,72
0.00
2.00
100.00
100.00
100.00
100.00
18.91
100.00
100,00
100.00
89.57
10,43
12 33
95.78
4,22
0.96
99.04
100.00
0.96
95.51
3.53
N/A
0,00
0.00
O.QO
0.00
0.00
1.96
100.00
79.30
20.70
100,00
79.30
20.64
0.06
2.01
1 00.00
100.00
100.00
100.00
19.01
100.00
100.00
100.00
94,28
5.72
13 01
96.38
3.62
0.87
99.13
100.00
0.87
88.58
10.56
N/A
0.00
0.00
000
0.00
0,00
2.16
100,00
75.02
24.98
100.00
75.02
24.79
0.19
2.10
1 00.00
100.00
100.00
100.00
19.02
100.00
100.00
100.00
93.72
6.28
12.89
95.11
4,89
0.38
99.62
1 00.00
0.38
87,43
12,20
12,00
100.00
100.00
1 00.00
100.00
0.00
1,81
1 00.00
83.01
16.99
100.00
83.01
16,86
0,13
2.12
100.00
100.00
100.00
100.00
18.99
100.00
100.00
100.00
94 29
5.71
12.74
95.53
4.47
1.26
98.74
100.00
1.26
80.75
17.99
15.15
100.00
100.00
100.00
1 00.00
0.00
1.96
100.00
80.17
19.83
100.00
80. 17
19.70
0.14
2.15
100.00
1 00.00
100.00
100.00
18.95
1 00.00
100.00
1 00.00
S4.S9
5.41
12.94
95.18
4.82
1.35
98.65
100.00
1,35
77.32
21.33
15.21
100.00
100.00
100.00
100.00
0.00
2.14
100.00
76.22
23.78
100.00
76.22
23.60
0.17
2.13
100.00
100.00
1 00.00
100.00
18.88
100.00
100.00
1 00.00
26.76
73.24
12.71
95.69
4.31
1.16
98.84
100.00
1.16
76.71
22.13
15.22
100.00
100.00
100.00
99.06
0.94
2.12
100.00
76.78
23.22
100.00
76,78
23,04
0.18
2.11
100.00
1 00.00
100.00
100.00
18.87
100.00
100.00
1 00.00
25.31
74.69
12.70
95.61
4.39
1.06
98.94
100.00
1.06
76.53
22.41
15.22
100,00
100.00
100.00
99.06
0.94
2.12
100.00
76.75
23.25
100.00
76.75
23.06
0.19
C-2
-------
TECHNOLOGY PENETRATION RATES FOR LAWN AND GARDEN EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 81
%82
%83
%84
%85
% 86
%87
% 88
% 89
%90
LN MOWERS
Cooling
Cycle
F^dist
Vlv_cnf
LN/GDN TRACTORS
Cooling
Cycle
F_dist
Viv_cn*
OTH LN GDN
Cooling
Cycle
F_dl5t
Vlv cnf
REAR ENG RIDER
Cooling
Cycle
F_dist
Vlv cnf
HP
A
2
4
C
F
R
S
V
HP
A
W
4
C
S
V
HP
A
2
4
C
R
S
HP
A
4
C
S
V
3.52
1 00,00
7.59
92.41
100.00
0.00
7.59
92.41
0.00
12.25
99.97
0.03
100.00
1 00.00
97.88
2.12
3.48
100.00
20.04
79.96
1 OO.00
20.04
79.96
8.73
100.00
100.00
100.00
100.00
0.00
3.61
100.00
6.87
93.13
100.00
0.00
687
93.13
0.00
11.90
99.99
0.01
100.00
100.00
98.64
1.36
3.67
100.00
20.59
79.41
100.00
20.59
79.41
8.59
100.00
100.00
100.00
100.00
0.00
3.63
100.00
5.83
94.17
100.00
0.00
5.83
94.17
0.00
12.04
100.00
0.00
100.00
100.00
99.22
0.78
3.64
100.00
14,74
85.26
tOQ.OO
14.74
85.26
8.93
100.00
100.00
1 00.00
100.00
0.00
3.66
100.00
6.89
93 11
100.00
0.00
6.89
93 11
0 00
11,98
100.00
0.00
100.00
1 00.00
99 45
0,55
3.47
100.00
14.95
85.05
1OO.OO
14.95
85.05
9.01
100.00
100.00
100.00
1 00.00
000
3.66
100.00
6.92
93.08
100.00
0.00
6.92
93.07
0.01
12.14
100.00
0.00
100.00
1 00.00
99.55
0.45
3.54
100.00
12.80
87,20
100.00
12.80
87.20
8.96
100.00
100.00
100.00
1 00.00
0.00
3.68
100.00
7.42
92.58
1 00.00
0.00
742
90.64
1,94
12,20
1 00.00
000
100.00
100.00
96.57
3.43
3.59
100.00
13.46
86.54
100.00
13.46
86.54
9.36
1 00.00
100.00
1 00.00
98.18
1.82
3.70
1 00.00
8.44
91.56
1 00.00
0.00
8.44
86.26
5.31
12.30
99.59
0.41
1 00.00
1 00.00
95.75
4.25
3.55
1 00.00
12.82
87.18
100.OO
12.82
87.18
9,37
1 00.00
1 00.00
100.00
98.43
1.57
3.74
100.00
9.27
90,73
1 00.00
0.00
9.27
84.43
6.30
12.49
98.71
1.29
100.00
1 00.00
95.40
4.60
3.54
100.00
12.82
87 18
1OQ.OO
12.82
87.18
9,47
100.00
100.00
100.00
97.51
2.49
3.75
1 00.00
8.94
91.06
100.00
0.00
8.94
84.05
7.01
12.61
98,71
1.29
100.00
100.00
91.75
8.25
3.56
100.00
15.95
84.05
1OO.OO
15.95
84.05
9.69
1 00.00
100.00
100.00
92.44
7.56
3.77
100.00
9.26
90,74
100.00
0.00
9.26
83.51
7.23
12.58
98.79
1,21
1 00.00
1 00.00
90.41
9.59
3.56
100.00
15.95
84.05
10O.OO
15.95
84,05
9,86
1 00.00
100.00
100.00
92.62
7.38
3.78
100.00
9.25
90.75
100.00
0.00
9.25
83.53
7,21
12.58
98.79
1.21
1 00.00
1 00.00
90.19
9.81
3.56
100.00
15.95
84.05
1OO.OO
15.95
84.05
9,74
100.00
100.00
100.00
93,43
6.57
C-3
-------
TECHNOLOGY PENETRATION RATES FOR LAWN AND GARDEN EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 81
%82
% 83
% 84
% 85
%86
% 87
% 88
%89
%90
SHREDDERS
Cooling
Cycle
F_dist
Vlv_cnf
SNOWBLOWER
Cooling
Cycle
F_dist
Vlv_cnf
TILLERS
Cooling
Cycle
F dist
Vlv cnf
TRIM/EDGE/CUTTER
Cooling
Cycle
F_dist
Vlv cnf
WOOD SPLTR
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
2
4
C
R
S
HP
A
2
4
C
R
S
HP
A
2
4
C
R
S
HP
A
2
4
C
R
S
V
HP
A
4
C
S
V
6.40
100.00
0.00
100.00
100.00
0.00
100.00
4 79
100.00
27.77
72.23
100.00
27.77
72.23
3.55
100.00
0.00
100.00
100.00
0.00
100.00
1.14
100.00
98.41
1.59
100.00
98.41
1.59
0.00
4.84
10000
100 00
100.00
100.00
0.00
6.21
100.00
0.00
100.00
100.00
0.00
10000
5.47
100.00
13.73
86.27
100.00
13.73
86.27
3.24
100.00
0.00
100.00
100.00
0.00
100.00
1.16
100.00
98.58
1.42
100.00
9858
1.42
0.00
4.94
100.00
t 00.00
100.00
100.00
0.00
6.80
100.00
0.00
100.00
100.00
0.00
100.00
5 76
100.00
14 47
85.53
100.00
14.47
85 53
3.15
100.00
0.00
100.00
100.00
0.00
100.00
1.15
100.00
98.79
1.21
100.00
98 79
1.21
0.00
5.03
100.00
100.00
100.00
100.00
0.00
6.55
100.00
0.00
100.00
100.00
0.00
100.00
5.86
100.00
15.77
84.23
100.00
15.77
84.23
312
100.00
0.00
100.00
100.00
0.00
10000
1.16
100.00
98.16
1.84
100.00
98 16
1.70
014
4.94
100.00
100.00
100.00
99.94
0.06
6.35
100.00
0.00
100.00
100.00
0.00
100.00
5.77
100.00
17 67
82.33
100.00
17,67
82.33
3.04
100.00
0.00
100.00
100.00
0.00
100.00
1.10
100.00
97.78
2.22
10000
9778
2.05
0.17
5.03
10000
100.00
10000
9994
0.06
6.35
100.00
0.00
100.00
100.00
0.00
100.00
5.75
100.00
18.33
81.67
100.00
18.33
81.67
3.02
100.00
0.00
100.00
100.00
0.00
100.00
1.09
100.00
97.69
2.31
100.00
97.69
2.12
0.19
5.39
100.00
100.00
10000
99.92
0 08
5.96
100.00
9.73
90.27
100.00
9.73
90.27
5.52
100.00
22.21
77.79
100.00
22.21
77.79
2.99
100.00
3.11
96.89
100.00
3.11
96 89
110
100.00
97.56
2.44
100.00
97.56
2.24
0.20
6.86
100.00
100.00
100.00
99.09
0.91
5.60
100.00
14.28
85.72
100.00
14.28
85.72
5.42
100.00
25.34
74.66
100.00
25.34
74.66
2.88
100.00
13.34
86.66
100.00
13.34
86 66
113
100.00
96.83
3.17
100.00
96.83
2.98
019
6.95
1 00.00
100.00
100.00
98.72
1.28
5.40
100.00
20.46
79.54
10000
20.46
79.54
5.23
100.00
28.39
71.61
100.00
28.39
71.61
2.84
100.00
14.53
85.47
100.00
14.53
85.47
1.14
100.00
97.10
2.90
100.00
97 10
2.72
0.18
7.10
100.00
100.00
100 00
97.61
2.39
5.40
1 00.00
19.81
80.19
100.00
19.81
80.19
5.20
100.00
28.56
71.44
100.00
28.56
71.44
2.84
100.00
14.93
85.07
100.00
14.93
85.07
1.14
100.00
97.18
2.82
100.00
97.18
2.64
0.17
6 70
100.00
100.00
100.00
97 79
2.21
5.40
100.00
19.82
80.18
100.00
19.82
80.18
5.20
100.00
28.56
71.44
100.00
28.56
71.44
2.84
100.00
14.93
85.07
100.00
14.93
85.07
1.14
100.00
97.20
2.80
100.00
97.20
2.64
0.16
6 62
100.00
100.00
100.00
97.13
2 87
C-4
-------
TECHNOLOGY PENETRATION RATES FOR LAWN AND GARDEN EQUIPMENT
DIESEL
APPLICATION
TYPE
% 81 % 82 % 83 % 84 % 85 % 86 % 87
%88
% 89 %80 %91
CHIPPERS/GHINDERS
Cooling
Cycle
F_dist
Vlv cnf
COMM TURF
Cooling
Cycle
F dist
Vlv cnf
LN/GDN TRACTORS
Cooling
Cycle
F_dist
Vlv cnf
OTH LN GDN
Cooftng
Cycle
F_dist
Vlw_cnf
REAR ENG RIDER
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
4
D
V
HP
A
W
4
O
I
V
HP
A
W
4
0
I
V
HP
W
4
I
V
HP
W
4
I
V
N/A
0.00
0.00
0.00
0.00
22,88
15.49
84.51
100.00
15.49
84.51
100.00
12.28
92.93
7.07
100.00
100.00
0.00
10000
N/A
O.OO
0.00
0.00
0.00
N/A
0.00
0.00
0,00
0.00
N/A
0.00
0.00
0.00
0.00
22.15
21.95
78,05
1 00.00
21.95
78.05
100.00
J1.49
100.00
0.00
1 00.00
100.00
0.00
100.00
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
35.00
100.00
1 00.00
100.00
100.00
22.73
14.82
85.18
100.00
14.82
85.18
100.00
13.92
66.57
33.43
100.00
66.57
33.43
100.00
N/A
0 00
0.00
0.00
0.00
N/A
0.00
0.00
000
0.00
35.00
100.00
1 00.00
100.00
100.00
22.47
10.96
89.04
100.00
6.74
93.26
100.00
14.34
24.55
75.45
100.00
24.55
75.45
100.00
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
32.52
100.00
1 00.00
100.00
100.00
22.38
9.95
90.05
100.00
5.20
94.80
100.00
14.93
19,30
80.70
1 00.00
13.30
80.70
100.00
N/A
0 00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
28.43
1 00.00
100.00
1 00.00
100.00
21.73
4.76
95.24
100.00
3.51
96.49
100.00
15.40
15.60
84.40
100.00
15.60
84.40
100.00
N/A
000
0.00
0.00
0.00
16.50
100.00
100.00
100.00
1 00.00
2833
100.00
100.00
1 00,00
100.00
20.36
2.01
97 99
100.00
2.01
9799
100.00
16.62
3.63
96.37
100.00
3.63
96.37
100.00
16.50
100.0O
1 00.00
1 00.00
100.00
16.50
100.00
100.00
100.00
100.00
28.76
100.00
100.00
100.00
100.00
20.24
1.53
98.47
100.00
1.53
98,47
100.00
16.96
2.90
97,10
100.00
2.90
97.10
100.00
17 89
10O.OO
100.00
100.00
1 00.00
16.50
100.00
100.00
1 00.00
100.00
31.21
100.00
100.00
100.00
100.00
20.10
1,10
98.90
100.00
1 75
98.25
100.00
17.06
3.28
96.72
100.00
3.28
96.72
100.00
18.54
1 OO.OO
100.00
100.00
100.00
16.50
100.00
1 00.00
100.00
10000
35.00
1 00.00
1 00.00
1 00.00
1 00.00
20.09
1.02
98.98
100.00
1.68
98.32
100.00
17.07
3.2?
96.73
100.00
3.27
96.73
100.00
18.73
1 00.00
1 00.00
1 00.00
100.00
16.50
100.00
100.00
100.00
100.00
35.00
100.00
100.00
100,00
100.00
20.13
0.57
99.43
100.00
1.26
98.74
100.00
17.12
3.25
96.75
100.00
3.25
96.7S
100.00
18.75
100.00
100.00
100.00
10000
16.50
100.00
100.00
1 00.00
100.00
C-5
-------
SALES AND TECHNOLOGY TRENDS FOR AIRPORT SERVICE EQUIPMENT
APPLICATION
1981
1982
1983
1984
1985
1986
1987
1988
1989
GASOLINE
1990
1991
AIRCRAFT
SUPPORT
Diesel
Gasoline
TERMINAL TRACTORS
TOTALS
Diesel
Gasoline
Diesel
Gasoline
62
0
0
735
0
0
797
0
0
114
0
0
549
0
0
663
0
0
535
0
0
354
0
0
889
0
0
613
0
0
131
0
0
744
0
0
638
0
0
197
0
0
835
0
0
649
0
0
112
0
0
761
0
0
720
0
0
35
0
0
755
0
0
698
0
0
37
0
0
735
0
0
726
0
0
26
0
0
752
0
0
642
0
0
30
0
0
672
0
0
655
0
0
23
0
0
678
0
0
APPLICATION
TYPE
%82
%83
% 84
% 85
%86
87
% 88
%90
AIRCRAFT SUPPORT
Cooling
Cycle
F_dist
Vlv cnf
TERMINAL TRACTORS
Cooling
Cycle
F_dist
Vtv cnf
HP
A
4
C
S
V
HP
A
W
4
C
S
V
16.00
100.00
1 0O.OO
10000
100.00
0.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
18.00
100.00
100.00
100.00
100.00
0,00
N/A
0,00
0.00
0,00
0.00
O.QO
0.00
12.16
100.00
100.00
100.00
100 00
0.00
N/A
0.00
0.00
0.00
0.00
0.00
000
11 62
100.00
100.00
100.00
100.00
0,00
N/A
0,00
0.00
0,00
0,00
000
000
11,27
100,00
100.00
100,00
1 00.00
0 00
18.00
100.00
0.00
100.00
100.00
100.00
000
11.07
100.00
100.00
1 00.00
100.00
0.00
18.00
100.00
0.00
100.00
100.00
100.00
0.00
10.88
100.00
1 00.00
100.00
100.00
0 00
18.00
1 00.00
0.00
100.00
100.00
100.00
0.00
10.75
1 00.00
100.00
100,00
100,00
0.00
27.49
64.86
35.14
100.00
100.00
64,86
35,14
10.64
100,00
100.00
10000
98.51
1 49
34.62
38,46
61.54
100.00
100.00
38.46
61.54
10,75
1 00.00
100.00
100,00
98.59
1.41
35.00
33.33
66,67
100.00
100.00
33,33
66.67
10.86
100.00
100.00
100.00
97.83
2.17
45.00
0.00
100.00
100.00
100.00
0.00
100.00
C-6
-------
SALES AND TECHNOLOGY TRENDS FOR AIRPORT SERVICE EQUIPMENT
DIESEL
AIRCRAFT SUPPORT
Cooling
Cycle
F_dist
Vlv_cnf
TERMINAL TRACTORS
Cooling
Cycle
F_dist
Vlv cnf
HP
A
W
4
0
1
V
HP
A
W
4
D
I
V
N/A
0.00
0.00
0.00
0.00
0.00
0.00
41.24
15.37
84.63
100.00
41.90
58.10
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
40.90
16.76
83.24
100.00
44.44
55.56
1 00.00
41.10
15.13
84.87
1 00.00
15.13
84.87
100.00
38.06
28.25
71.75
100.00
65.25
34.75
100.00
41.55
13.24
86 76
1 00.00
13.24
86.76
100.00
24.92
76.34
23.66
100.00
76.34
23.66
100.00
38.23
16.98
83.02
100.00
16.98
83.02
100.00
24.29
78.83
21.17
100.00
78.83
21.17
100.00
32.93
24.50
75.50
1 00.00
42.38
57.62
100.00
27.20
67.19
32.81
10000
67.19
32.81
100.00
33.87
21.43
78.57
100.00
37.50
62.50
1 00.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
33.94
22.16
77.84
100.00
36.22
63.78
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
33.74
23.40
76.60
1 00,00
37.77
62.23
1 00.00
N/A
000
0.00
0.00
0.00
0.00
0.00
31.04
34.01
65.99
1 00.00
46.26
53.74
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
30.36
38.10
61.80
100.00
47.62
52,38
100.00
N/A
0.00
0.00
0.00
000
0.00
0.00
r.t
-------
TECHNOLOGY TRENDS FOR RECREATIONAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
%83
%84
%85
% 86
% 87
%88
%89
%SC
ALL-TERRAIN VEHICLES
Cooling
Cycle
F_dist
V!v_cn<
GOLF CARTS
Cooling
Cycle
F_dist
Vlv_cnf
MINI-DIKES
Cooling
Cycle
F^dist
Vlv crrf
SNOWMOBILE
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
W
2
4
C
c
R
V
HP
A
W
2
4
C
R
S
V
HP
A
4
C
S
HP
A
W
2
C
R
18.00
10000
0,00
0.00
100.00
1 00.00
100.00
0.00
0.00
7.96
100,00
0.00
20.69
79.31
1 00.00
20.69
79.31
0.00
4.17
100.00
1 00.00
100,00
1 00.00
26.83
70.69
29.31
10000
100 00
1 00.00
18.00
1 00.00
0.00
0.00
1 00.00
100.00
100.00
0.00
000
8,22
100,00
0,00
20.00
80-00
100.00
20,00
80.00
0.00
4.18
100,00
100.00
1 00.00
100.00
26,87
74.76
25,24
1 00.00
100.00
100.00
18.00
100.00
0.00
0.00
100.00
100.00
100.00
0.00
0,00
831
100,OO
0.00
19.51
80.49
100.00
19.51
80.49
0,00
418
100.00
100.00
10000
100,00
26,76
76,16
23.84
100,00
100.00
100,00
18,00
100.00
0.00
0.00
1 00.00
100.00
100.00
000
0,00
8.44
100,00
0.00
18.75
81.25
100.00
18.75
81.25
0.00
418
100.00
100.00
100,00
10000
27.31
64.32
35-68
100.00
100.00
100.00
17.72
96,46
3.54
8.86
91.14
1 00.00
91.14
8.86
0.00
8.54
100.00
000
14.27
85.73
100.00
14.27
85.73
0,00
N/A
000
0.00
0,00
0 00
2757
58.87
41.13
1 00.00
100.00
1 00.00
17.39
92.41
7.59
18.97
81.03
100,00
81.03
18.97
0.00
8.54
100.00
0.00
14,29
85,71
100.00
14.29
85.71
0.00
N/A
0.00
0.00
000
000
27.60
58,30
41.70
100.00
100.00
1 00.00
17.13
89.11
10.89
27.24
72,76
100.00
72.76
27.24
0,00
S 54
10000
0.00
14,28
85.72
1 00.00
14,28
85.72
0.00
N/A
0.00
0,00
000
0 00
27.78
54,83
45.17
100.00
100.00
100.00
16.83
85.43
14,57
36,42
63,58
100.00
63,58
36,42
0,00
8.73
100.00
000
24.32
75.68
100,00
24,32
6853
715
N/A
0,00
0 00
0,00
0 00
27.89
52.52
47.48
1 00.00
100,00
100.00
16.55
81.91
18.09
45.22
54.78
100.00
54.78
45.22
000
8.81
1 00.00
0.00
27.99
72.01
100.00
27.99
60.01
12.00
N/A
000
0,00
0,00
0 00
27,86
53-25
46.75
100.00
100.00
100.00
17.3C
83.23
16.77
41.92
58.08
100.00
43.62
41.92
14.46
8.94
99.28
0,72
27.79
72.21
100.00
27.79
52.12
20.09
N/A
0.00
0.00
0.00
0.00
27.90
52.28
47.72
1 00.00
100.00
1 00.00
C-8
-------
TECHNOLOGY TRENDS FOR RECREATIONAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
% 83
%84
% 85
% 86
%87
%88
% 89
%90
SPEC VEH/CAHTS
Cooling
Cycle
F_dist
Vlv^cnf
HP
A
W
2
4
C
R
S
V
10.17
1 00.00
0.00
71.17
28.83
1 00.00
71.17
000
28.83
9.71
100.00
0.00
75.33
24.67
100.00
75.33
0.00
24.67
10,99
100,00
0.00
63.75
36.25
1 00.00
63.75
0.00
36.25
8.54
1 00.00
0.00
31.22
68.78
100.00
31.22
55.22
13.56
8.32
100.00
0.00
32.70
67.30
100.00
32.70
58.89
8.41
8.42
1 00.00
0.00
34,30
65.70
100.00
34,30
57.69
8,01
8.29
1 00.00
0.00
33.78
66.22
100.00
33.78
58.91
7.31
8.34
1 00.00
0.00
36.41
63.59
1 00.00
36.41
54.71
8.88
8.14
99.78
0.22
41.89
58.11
100.00
41.89
46.79
11,32
8.15
98.14
1.86
46.61
53,39
100.00
46,61
41 38
12.01
8.01
98.23
1.77
48.97
51.03
1 00.00
48.97
40.11
10.92
C-9
-------
TECHNOLOGY TRENDS FOR LIGHT COMMERCIAL AND INDUSTRIAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 81
% 82 %83 % 84 % 85 % 86 % 87 % 88 % 89 % 90 % 91
AIR COMPRESSORS
Cooling
Cycle
F_dist
Vlv_cnf
GENTR SETS
Cooling
Cycle
F_dist
Vlv_cnf
PRES WASHERS
Cooling
Cycle
F_dist
Vlv cnf
PUMPS
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
W
4
C
S
V
HP
A
W
2
4
C
R
S
V
HP
A
W
4
C
S
V
HP
A
W
2
4
C
R
S
V
9.97
98.53
1.47
100.00
100.00
96.89
3.11
11.16
99.05
0.95
3.04
96.96
100.00
3.04
94.44
2.53
8.20
100.00
0.00
100.00
100.00
100.00
0.00
6.78
99.94
0.06
27.22
72.78
100.00
27.22
71 19
1.59
8.95
99.68
0.32
100.00
100.00
98.32
1.68
11.28
99.00
1.00
2.89
97.11
100.00
2.89
94.49
2.61
9.00
100.00
0.00
100.00
100.00
99.26
0.74
6.64
99.92
0.08
27.41
72.59
100.00
27.41
71.13
1.47
9.22
99.48
0.52
100.00
100.00
98.24
1.76
12.05
98.55
1 45
2.37
97.63
100.00
2.37
95.40
2.22
8.03
100.00
0.00
100.00
100.00
94 43
5.57
6.66
100.00
0.00
21.17
78.83
100.00
21.17
77.89
0.95
9.28
98.89
1.11
1 00.00
100.00
98.12
1.88
10.1 1
99.15
0.85
2.54
97.46
100.00
2.54
95.96
1.50
7.93
100.00
0.00
100.00
100.00
90.02
9.98
5.84
100.00
0.00
23 18
76.82
100.00
23.18
76.01
0.81
9.42
98.89
1.11
100.00
100.00
98.06
1.94
10.27
97.85
2.15
2.34
97.66
100.00
2.34
95.56
2.09
8.00
99.97
0.03
100.00
100.00
71.86
28.14
5.91
100.00
0.00
24.79
75.21
100.00
24 79
74 01
1.20
9.57
97.32
2.68
1 00.00
100.00
86.31
13.69
10.22
97.61
2.39
2.29
97.71
100.00
2.29
93.99
3.72
7.37
99.97
0.03
100.00
100.00
49.72
50.28
5 89
100.00
0.00
24.03
75.97
100.00
24 03
74.43
1.54
9.80
96.56
3.44
100.00
100.00
85.59
14.41
10.02
97.99
2.01
1.94
98.06
100.00
1.94
94.79
3.27
7.39
99.98
0.02
100.00
100.00
53.40
46.60
5.66
100.00
0.00
23.40
76.60
100.00
23.40
73 58
3.02
9.96
96.29
3.71
100.00
100.00
84.85
15.15
9.53
97.86
2.14
1.76
98.24
100.00
1.76
93.66
4.59
7.26
99.99
0.01
100.00
100.00
5035
49.65
5.53
100.00
0.00
23.22
76.78
100.00
23 22
73 45
3.33
9.94
96.26
3.74
100.00
100.00
84.73
15.27
8 86
98.31
1.69
1.53
98.47
100.00
1.53
90.60
7.87
7.44
99.99
0.01
100.00
100.00
52.42
47.58
5 49
100.00
0.00
22.66
77.34
100.00
22.66
74.01
3 33
9.78
96.68
3.32
1 00.00
100.00
85.03
14.97
8.62
98.37
1.63
1.59
98.41
100.00
1.59
88.49
992
7.50
100.00
0.00
100.00
100.00
53.01
46.99
5.46
100.00
0.00
21.97
78.03
100.00
21 97
74.57
• 3 47
9.78
96.68
3.32
100.00
100.00
85.03
14 97
8.87
97.67
2 33
1.49
98.51
100.00
1.49
87.47
11.04
7.57
100.00
0.00
100.00
100.00
52.09
47.91
5.47
100.00
0.00
21.84
78.16
100.00
21.84
74.54
3 63
C-10
-------
TECHNOLOGY TRENDS FOR LIGHT COMMERCIAL AND INDUSTRIAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 81 % 82
%83
% 84 % 85
%86
% 87 % 88 % 89 % 90
WELDERS
Cooling
Cycle
F_disi
Vlv_cnf
AERIAL LIFTS
Cooling
Cycle
F_dist
Vlv_cnf
FORKLIFTS
Cooling
Cycle
F_dist
Vlv_cnf
OTH GEN INDUST
Cooling
Cycle
F_dist
Vlv cnf
OTH MAT HD
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
W
4
C
s
V
HP
A
W
4
C
S
V
HP
A
W
4
C
C
s
V
HP
A
2
4
C
R
S
V
HP
W
4
C
V
21,58
81,13
18.87
1 00.00
1 00.00
61,35
38.65
29.88
97.35
2.65
100.00
100.00
18.05
81.95
41.71
0.00
100.00
100.00
100.00
0.00
0.00
100.00
10,83
100.00
000
100.00
100.00
0.00
93.05
6.95
41.00
100.00
100.00
100.00
1 00.00
18.28
90.16
9.84
100.00
100.00
73.25
26.75
26.55
98.24
1.76
100.00
100.00
41,41
58.59
41.14
4.04
95.96
1 00.00
100.00
0.00
4,04
95.96
11.06
1 00,00
000
1 00.00
100.00
0.00
92.15
7,85
41,01
1 00.00
10000
100.00
100.00
17.96
93.32
6.68
1 00.00
100.00
78,16
21.84
25.31
100.00
0.00
100.00
1 00.00
49.70
50.30
45.88
2.95
97.05
1 00.00
100.00
30.82
2.95
66.22
11.20
100.00
0.00
100,00
100.00
0.00
90.84
9.16
41 01
100,00
100.00
100.00
1 00.00
18.78
90.26
9.74
100.00
100.00
77.95
22.05
24.85
100.00
0.00
100.00
100.00
54.55
45.45
45.59
2.21
97.79
1 00.00
100.00
43.35
2.21
54.44
10.53
100.00
0.00
100.00
100.00
0.00
93.73
6.27
41.04
100.00
100.00
100.00
100.00
18.48
90.86
9.14
100.00
100.00
79.73
20.27
24.09
100.00
0.00
100.00
100.00
58.14
41.86
45.10
3.87
96.13
100.00
1 00.00
50.12
2.98
46.90
13.12
100.00
0.00
100.00
100.00
0.00
85.98
14.02
43.89
1 00.00
100,00
100.00
100.00
19.16
88.65
11.35
100.00
100.00
81.31
18.69
23.78
97.93
2.07
100.00
100.00
62.29
37 71
46.84
6.01
93.99
1 00.00
100.00
70.31
4 56
25.13
13.10
100.00
0 00
100,00
100,00
0.00
85.44
14 56
46.00
100.00
100.00
100.00
100.00
18.73
90.44
9.56
100.00
100.00
80.66
19,34
23.63
94.12
5,88
100.00
1 00.00
65.36
34.64
46,24
3.95
96.05
1 00.00
100.00
37.84
3.07
59.09
13.06
100.00
0.00
100,00
100.00
0.00
85.29
14.71
45.95
100.00
100.00
100.00
100.00
18.59
90.87
9.13
1 00.00
100.00
68.89
31.11
24,72
94.45
5.55
100.00
100.00
55.62
44.38
44,96
1.94
98,06
100.00
100,00
89,32
0.52
10.16
13.01
100.00
0 00
100,00
100.00
0,00
85 10
14 90
45,89
100 00
100.00
100,00
100.00
18.59
90.87
9.13
1 00.00
100.00
68.89
31.11
25.82
93 59
6.41
100.00
100.00
48.61
51.39
44.37
1.51
98.49
1 00.00
1 00.00
79.97
0,48
19.55
1 1.50
1 00.00
13.86
86.14
100.00
13.86
72.77
13,36
45.95
100.00
100.00
1 00.00
100.00
17.45
94.30
5.70
1 00.00
100.00
71.77
28.23
27.40
91.25
8.75
100.00
1 00.00
42.14
57.86
43.88
2.60
97.40
100.00
100.00
78.20
0.50
21.29
1 1.51
100.00
13.84
86.16
1 00.00
13.84
72.63
13,53
44.82
100.00
100.00
100.00
100.00
17.45
94,30
5.70
1 00.00
100,00
71.70
28.30
27.40
91.25
8.75
100.00
100.00
42.14
57.86
43.80
2.80
97.20
1 00.00
100.00
78.06
0.52
21.42
1 1.51
1 00.00
13.85
86.15
100.00
13.85
72.63
13.53
44.85
100.00
100.00
100.00
100.00
C-ll
-------
TECHNOLOGY TRENDS FOR LIGHT COMMERCIAL AND INDUSTRIAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
%83
% 84
% 85
%86
% 87
% 88
% 89
% 90
SCRU8/SWPR
Cooling
Cycle
F_disi
Vlv_cnf
HP
A
W
4
C
s
V
17.09
81.60
18.40
100.00
100.00
75.70
24.30
19.06
88.91
11.09
1 00.00
1 00.00
63.90
30.10
20.66
86.61
13.39
1 00.00
100.00
65.72
34.28
20.83
85.86
14.14
1 00.00
100.00
65.94
34.06
20.52
85.69
14.31
100.00
100.00
65.37
34.63
23.59
75.24
24.76
100.00
1 00.00
55.60
44.40
24.69
68.06
31.94
100.00
100.00
49,04
50.96
25.45
62.72
37.28
100.00
100.00
44.10
55.90
24.97
57.84
42,16
1 00.00
100,00
48.86
51.14
24.60
56.40
43.60
100.00
100.00
46.26
53.74
24.38
56.94
43.06
1 00.00
100.00
45.05
54.95
C-I2
-------
TECHNOLOGY TRENDS FOR LIGHT COMMERCIAL AND INDUSTRIAL EQUIPMENT
DIESEL
APPLICATION
TYPE
% 82 % 83 % 84 % 85 % 86 % 87 % 88 % 89 % 90 % 91
AIR COMPRESSORS
Cooling
Cycle
F_dist
Vlv_cnf
GENTR SETS
Cooling
Cycle
F_dist
Vlv_cnf
PRES WASHERS
Cooling
Cycle
F_dist
Vlv_cnf
PUMPS
Cooling
Cycle
fjilst
Vlv_cn(
HP
A
O
w
4
D
I
V
HP
A
O
W
4
0
H
I
S
V
HP
A
W
4
D
I
V
HP
A
O
W
4
D
H
I
C
V
37.83
51.43
0.00
48.57
1 00.00
68.72
31.28
100.00
21.94
62.62
0.00
37.38
100.00
82.48
0.11
17.41
0,00
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
20.67
84.78
0.00
15.22
100.00
93.12
1.59
5.29
0,00
100.00
37.19
63.69
0.00
36.31
1 00.00
75.62
24.38
100.00
23.57
71 62
0.00
28.38
1 00.00
80.82
0.05
19.13
0.00
100.00
13.89
13.16
86.84
I OQ.QO
13.16
86.84
100.00
19.85
93.77
0.00
6.23
1 00.00
92.19
0.82
6,99
0.00
100.00
37.71
58.06
0.00
41.94
1 00.00
70.88
29.12
100.00
22.36
69.55
0.00
30.45
100.00
79.82
0.06
20.12
0.00
100.00
16.01
35.71
64.29
10O.OO
35.71
64.29
100.00
19.94
94.43
0.00
5.57
100.00
94.26
0.71
5.02
0.00
100.00
37.44
59.20
0.00
40.80
1 00.00
71.78
28.22
100.00
23.17
81.53
0.00
18.47
100.00
86.06
0.05
13.90
0.00
100.00
19,23
61.13
38.87
1 OO.OO
61.13
38.87
100.00
22.08
78.34
0.00
21.66
100.00
92.84
0.63
6.53
0.00
100.00
37.29
63.47
0.00
36.53
1 00.00
74.74
25.26
1 00.00
22.66
70.38
0.00
29.62
1 00.00
76.71
0.08
23.21
0.00
100.00
21.04
60.11
39.89
I OO.OO
54.57
45.43
100.00
21.52
79.87
0,00
20.13
100.00
92.88
0.40
6.72
0.00
100.00
37.67
60.18
0.00
39.82
1 00.00
68.96
31.04
1 00.00
22.54
59.91
0.00
40.09
100.00
69.11
0.00
30,89
0,17
99.83
23,65
52.14
4786
1OO.OO
50.53
49.47
100.00
20.30
92.30
0,00
7.70
100.00
91.88
0.32
7.80
0.00
100.00
37.61
61.11
0.00
38.69
1 00.00
69.26
30.74
100.00
22.28
59.84
0.00
40.16
100.00
72.14
0.00
27.86
0.17
99.83
21.73
29.09
70.91
100.00
29.09
70.91
1 00.00
19.27
91.32
0.00
8.68
100.00
90.80
0.00
9.20
0.00
100.00
36.95
55.84
0.00
44.16
100.00
62.47
37.53
100.00
21.79
59.41
0,00
40.59
100.00
73.24
0.00
26.76
0.12
99.88
22.20
26.99
73.01
100.00
26.99
73.01
100.00
19.67
92.14
0,00
7,86
100.00
91,67
0,00
8.33
0.00
1 00.00
36.85
58.30
0.00
41.70
1 00.00
64.58
35.42
100.00
21.11
61.74
0.00
38.26
1 00.00
75.06
0.00
24.94
0.14
99.86
22.25
30.19
69.81
1 00.00
30.19
69.81
100.00
13.20
92.20
0.00
7.80
100.00
91.50
0.00
8.50
0.08
99.92
35.33
43.36
13.90
42.74
1 00.00
63.43
36.57
1 00.00
16.42
75.33
0.00
24.67
1 00.00
84.15
0.00
15.85
0.14
99.86
22.19
28.88
71.12
1 0O.OO
28.88
71.12
1 00.00
18.31
91.93
0.00
8.07
100.00
91.12
0.00
8.88
0.13
99 87
34.58
36.36
20.88
42.76
100.00
63.41
36.59
1 00.00
15.98
74.47
0.16
25.37
1 00.00
83.97
0.00
16.03
0.14
99.86
22.34
28.91
71.09
1OO.OO
28.91
71.09
100.00
18.18
91.51
0.33
8.16
100.00
91.02
0.00
8.98
0.12
99.88
G-13
-------
TECHNOLOGY TRENDS FOR LIGHT COMMERCIAL AND INDUSTRIAL EQUIPMENT
DIESEL
APPLICATION
TYPE
% 81
82
%83
% 84
,85
% 86
% 87
% 88
%89
%90
WELDERS
Cooling
Cycle
F_dist
Vlv_cnf
AERIAL LIFTS
Cooling
Cycle
F_dist
Vlv_cnf
FORKLIFTS
Cooling
Cycle
F_dist
Vlv_cnf
OTH GEN INOUST
Cooling
Cycle
F_dist
Vlvjjnf
HP
A
O
W
4
D
I
V
HP
A
O
W
4
D
I
C
V
HP
A
W
4
0
I
V
HP
A
W
4
D
I
V
39.86
11.69
0.00
88.31
100.00
96.08
3.92
100.00
28.90
98.19
0.00
1 81
100.00
98.19
1.81
0.00
100.00
37.71
13.32
86.68
100.00
100.00
0.00
100.00
21.55
95.49
4.51
100.00
100.00
0.00
100.00
44.24
9.64
0.00
90.36
100.00
94.46
554
100.00
29.97
97.34
0.00
2.66
1 00.00
97.34
2.66
O.OO
100.00
3744
15.17
84.83
100.00
100.00
0.00
100.00
21.69
96.91
3.09
100.00
100.00
0,00
100 00
41.14
16.88
0.00
83.12
100.00
90.92
9.08
100.00
30.66
98.21
O.QO
1,79
100.00
98.21
1,79
0.00
100.00
35.31
23,11
76 89
100.00
91 08
8,92
100.00
22,02
98,61
1.39
100.00
100,00
0,00
100.00
41.78
20.49
0,00
79.51
100.00
95.38
4.62
100,00
31.33
98,96
0.00
1.04
100.00
98.i6
1.04
0.00
100.00
35.80
30.55
69 45
100.00
89,05
10.95
100.00
21.88
100.00
0.00
100.00
100.00
0.00
100.00
41.01
20.90
0.00
79.10
100.00
94,86
5.14
100.00
31.22
98,21
0,00
1,79
100,00
98,21
1,79
0.00
100.00
34,67
34,02
65,98
1 00.00
76.63
23,37
10000
23,73
100.00
0.00
100.00
100,00
0 00
100,00
35,60
17.06
0.00
82.94
1 00.00
68.88
31.12
100,00
31.00
92.67
0,00
7.33
100,00
92.67
7.33
0.00
100.00
34.98
28.86
71.14
100.00
67.64
32.36
100.00
23.75
91 89
811
100.00
91.89
8.1 1
100.00
34.67
17.75
0.00
82.25
100.00
63.04
36,96
100.00
28.18
68,96
0.00
31.04
100,00
68.96
31.04
0.00
100.00
33,90
41,13
58 87
100.00
50.00
50.00
10000
28.93
73.68
26,32
100,00
73.68
26.32
100.00
32.77
19.78
0.00
80.22
100.00
53.85
46.15
1 00.00
28.10
67.52
0.00
32.48
100.00
67.52
32.48
0.00
100.00
34.50
31.03
68.97
100.00
39.31
60.69
100.00
30.09
71,05
28.95
100,00
71.05
28.95
100.00
32.77
19.78
0.00
80.22
100.00
53.85
46.15
100.00
28.06
63.25
3.93
32.82
100.00
67.18
32.82
0.31
99.69
34.06
12.20
87 80
100.00
20.34
79.66
1 00.00
30.99
75,35
24.65
100.00
77.46
22.54
100.00
32.95
17.37
2.42
8021
100.00
53.85
46.15
100.00
26.65
51.55
14.15
34,30
100.00
65.70
34.30
0.41
99.59
39.88
7.46
92.54
100.00
12,57
87,43
100,00
30.88
7630
23 70
100.00
78.52
21,48
100,00
33.05
16.17
3,63
80.20
100.00
53.85
46.15
100.00
26.39
37.63
34.63
27.74
100.00
72.26
27.74
0.27
99.73
40.04
6.88
93.12
100,00
12,45
87,55
100.00
31,16
76,23
23,77
10000
79.51
20,49
100,00
C-14
-------
TECHNOLOGY TRENDS FOR LIGHT COMMERCIAL AND INDUSTRIAL EQUIPMENT
DIESEL
APPLICATION
TYPE
% 81
%82
%83
% 64
%85
%86
%87
%88
% 89
%90
SCRUB/SWPR
Cooling
Cycle
F_dist
Vlv_cnf
HP
W
4
D
1
V
43.42
1 00,00
1 00.00
3.06
96,94
10O.OO
38.13
1 00.00
1 00.00
1.15
98.85
100.00
37.95
100.00
1 00.00
0,63
99.37
100.00
37.42
100.00
100.00
16.37
83.63
100.00
35.58
100.00
1 00.00
48.79
51.21
100.00
35.61
100.00
100.00
48.16
51.84
1 00.00
33.85
100,00
1 00.00
44.33
55.67
too. oo
33.20
100.00
100.00
43,66
56.34
100.00
33.09
1 00.00
1 00.00
42.65
57.35
100,00
32.98
1 00,00
1 00.00
42.33
57.67
1 00.00
32.S7
1 00.00
100.00
42.34
57,66
1 00.00
C-15
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 81
% 82
% 83
%84
%85
%86
% 87
% 88
% 89
%90
BORE/DRILL RIGS
Cooling
Cycle
F_dist
Vlv_cnf
CEM/MTR MIXERS
Cooling
Cycle
F_dist
Vlv_cnf
CONCRETE/IND SAWS
Cooling
Cycle
F_dist
Vlv cnf
CRANES
Cooling
Cycle
F dist
Vlv_cnf
CRUSH/PROC EQUIP
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
W
4
C
S
V
HP
A
4
C
S
V
HP
A
4
C
S
V
HP
A
W
4
C
S
V
HP
A
4
C
V
16.53
97.14
2.86
100.00
100.00
94.27
5.73
5.60
100.00
100.00
100.00
100.00
0.00
N/A
0.00
0.00
0.00
0.00
0.00
35.60
21.24
78 76
100.00
100.00
21.24
78.76
N/A
0.00
0.00
0.00
0 00
14.76
98.48
1.52
1 00.00
100.00
95.02
4.98
6.49
100.00
100.00
100.00
100.00
0.00
11.03
100 00
100.00
100.00
86.21
13.79
36.14
19.24
80.76
100.00
100.00
19.24
80.76
N/A
000
0.00
0.00
0 00
14.52
100.00
0.00
100.00
100.00
96.24
3.76
7.05
100.00
100.00
100.00
100.00
0.00
13.05
100.00
100.00
100.00
90.88
912
30.35
30.30
69.70
100.00
100 00
30.30
69.70
N/A
0.00
0.00
0.00
0.00
15.15
100.00
0.00
1 00.00
100.00
87.61
12.39
7.26
100.00
100.00
100.00
100 00
0.00
13.35
100.00
100.00
100.00
89.88
10.12
26.41
45.93
54.07
10000
100.00
45.93
54.07
N/A
0.00
0.00
0.00
0.00
16.14
100.00
0.00
100.00
100.00
85.22
14.78
7.23
100.00
100.00
100.00
64.87
35.13
12.56
100.00
100.00
100.00
91.10
890
23 97
56.50
43.50
100.00
10000
56.50
43.50
N/A
0.00
0.00
0.00
000
11.79
100.00
0.00
100.00
1 00.00
88.87
11.13
7.21
100.00
100.00
100.00
62.93
37.07
11.71
100.00
100.00
100.00
82.97
17.03
25.50
48.43
51.57
100.00
100.00
48.43
51.57
N/A
0.00
0.00
0.00
0.00
11.18
100.00
0.00
100.00
100.00
90.29
9.71
7.17
100.00
100.00
100.00
52.83
47.17
11.37
100.00
100.00
100.00
79.41
20.59
27.66
36.70
63.30
100.00
100.00
36 70
63.30
N/A
000
0.00
0.00
0 00
9.84
100.00
0.00
100.00
100.00
92.99
7.01
7.27
100.00
100.00
100.00
52.12
47.88
1 1.21
1 00.00
100.00
100.00
76.72
23.28
27.71
36.51
63.49
100.00
100.00
36.51
63.49
16.00
100.00
100.00
100.00
100.00
10.10
100.00
0.00
100.00
1 00.00
92.45
7.55
7.35
100.00
100.00
100.00
49.38
50.62
10.91
100.00
100.00
100.00
75.75
24.25
27.66
36.70
63.30
1 00.00
100.00
36.70
63.30
11.15
100.00
1 00.00
100.00
100.00
9.53
100.00
0.00
1 00.00
1 00.00
93.07
6.93
7.54
100.00
100.00
100.00
47.13
52.87
10.75
1 00.00
100.00
100.00
73.59
26.41
24.54
48.97
51.03
100.00
100.00
48.97
51 03
11.11
100.00
100.00
100.00
100.00
9.41
100.00
0.00
100.00
100.00
93.29
6.71
7.68
100.00
100.00
100.00
44.71
55.29
10.78
100.00
100.00
100.00
72.72
27.28
24.46
49.22
50.78
100.00
100.00
49.22
50.78
11.10
100.00
100.00
100.00
100.00
C-16
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
%83
%84
%85
%86
%87
%88
%89
%9Q
DUMPERS/TENDERS
Cooling
CycJe
F_dist
Vlv_cnf
LT PLANTS/SIGNAL BDS
Cooling
Cycle
F_dist
Vlv_cnf
PAVERS
Cooling
Cycle
F_dist
Vlv_cnf
PAVING EQ
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
4
C
s
V
HP
A
2
4
C
R
S
HP
A
W
4
C
s
V
HP
A
W
2
4
C
R
S
V
11.26
100.00
100.00
1 00.00
100.00
0.00
4.62
100.00
2.75
97.25
100.00
2.75
97.25
26.18
93.35
6.65
100.00
100.00
26.58
73.42
6.58
99.82
0.18
26.68
7332
1 00.00
26.68
72.44
0.88
11.19
100.00
100.00
100.00
100.00
0.00
4.79
100.00
3.74
96.26
1 00.00
3.74
96.26
25.63
82.35
17.65
100.00
100.00
36.76
63.24
6.70
99.79
0.21
25.46
74.54
1 00.00
25.46
73.71
0.83
9.45
100.00
100.00
1 00.00
100.00
0.00
6.51
100.00
9.55
90.45
1 00.00
9.55
90.45
20.84
1 00.00
0.00
1 00.00
100.00
61.08
38.92
6.49
99.94
0.06
20.43
79.57
1 00.00
20.43
78.96
060
8.83
1 00.00
100.00
100.00
79.78
20.22
7.96
100.00
12.62
87.38
1 00.00
12.62
87.38
23.09
100.00
0.00
100.00
100.00
55.56
44.44
7.22
100.00
0 00
12.03
87.97
100.00
12.03
87.31
0.65
8.93
100.00
TOO.OO
100.00
53.42
46.58
8.79
100.00
17.24
82.76
1 00.00
17.24
82.76
23.61
100.00
0.00
1 00.00
100.00
39.48
60.52
730
100.00
0.00
10.83
89 17
100.00
10.83
88.52
0.66
8.63
1 00.00
100.00
1 00.00
52.21
47.79
5.77
100.00
24.08
75.92
1 00.00
24.08
75.92
22.96
100.00
0.00
100.00
100.00
38.08
61.92
7.21
1 00.00
0.00
10.49
89.51
100.00
10.49
86.47
3.04
8.49
100.00
1 00.00
100.00
51.14
48.86
5.86
100.00
24.87
75.13
100.00
24.87
75.13
22.92
100.00
0.00
100.00
100.00
39.12
60.88
7.22
100.00
0.00
10.49
89.51
100.00
10.49
86.46
3.05
8.44
100.00
1 00.00
100.00
49.15
50.85
6.36
100.00
23.28
76.72
100.00
23.28
76.72
22.15
100.00
0.00
100.00
1 00.00
37.23
62.77
7 21
100.00
0.00
10.48
89 52
100.00
1048
86.32
3 20
8.48
100.00
1 00.00
100.00
47.09
52.91
6.95
100.00
20.52
79.48
1 00.00
20.52
79.48
18.91
100.00
0.00
100.00
1 00.00
56.58
43.42
7.24
1 00.00
0.00
10.44
89.56
100.00
10.44
86.03
3.53
8.75
1 00.00
1 00.00
1 00.00
46.12
53.88
6.78
1 00.00
21.33
78.67
100.00
21.33
78.67
18.90
100.00
0.00
100.00
1 00.00
55.88
44.12
7.30
1 00.00
0.00
10.80
89.20
100.00
10.80
85.28
3.92
8.79
100.00
1 00.00
100.00
46.00
54.00
6.88
1 00.00
19.43
80.57
100.00
19.43
80.57
18.78
100.00
0.00
1 00.00
100.00
55.81
44.19
7.31
100.00
0.00
10.78
89.22
1 00.00
10.78
85.14
4.08
C-17
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
%83
% 84
%85
% 86
%87
% 88
%89
%90
PLATE COMPACTORS
Cooling
Cycle
F__cfist
Vlv_cnf
R,rr LOADER
Cooling
Cycle
F_dist
Vlv_cnf
ROLLERS
Cooling
Cycle
F_dist
Vlv_cnf
ROUGH TRN FORKLFTS
Cooling
Cycle
F_dist
Vlv enf
S/S LOADER
Cooling
Cycle
F dist
Vlv cnf
HP
A
2
4
C
R
S
V
HP
A
W
4
C
V
P
A
W
4
C
S
V
HP
W
4
C
V
HP
A
W
4
C
S
V
3.76
100.00
58.58
41.42
1 00.00
58.58
41.42
0.00
42.01
22.14
77.86
100.00
1 00.00
100.00
20.80
94.71
5.29
100.00
100.00
78.90
21.10
48.60
100.00
SOO.OO
100.00
100.00
24.46
82.60
17.40
100.00
100.00
69.86
30.14
3.75
100.00
56,09
43.91
1 00.00
56.09
43.91
0.00
39.06
25.44
74,56
100.00
100.00
100,00
19.51
95.07
4.93
100.00
100.00
80 01
19 99
47.05
100.00
100.00
100.00
100.00
24.40
86.41
13.59
100.00
100 00
71.45
28.55
4.09
1 00.00
48.47
51.53
100.00
48.47
49.53
2.00
40.22
8.99
91.01
1 00.00
1 00.00
100.00
17.00
95.04
4.96
100.00
100.00
85.25
14.75
46.73
100.00
1 00.00
100.00
100.00
24.07
8762
12.38
100.00
100.00
81.27
18.73
5.41
100.00
1.33
98.67
100.00
1.33
82.98
1569
41 42
7.59
92.41
10000
100.00
100.00
15.09
97.38
2.62
100.00
100.00
87.78
12 22
4692
100.00
1 00.00
100.00
100.00
24.79
83.12
16.88
100.00
100.00
75.77
24.23
5.65
100,00
1.14
98.86
100.00
1.14
78.85
20.01
41,56
7.81
92.19
10000
100.00
100.00
14.70
98,54
1,46
100,00
100,00
81,18
18,82
47,11
100.00
100,00
100,00
100.00
24 92
78.47
21.53
100,00
100 00
73,33
26.67
5.67
100.00
1.18
98.82
100.00
1.18
78.62
20.20
41.58
7.75
92.25
100.00
100.00
100.00
14.66
100.00
0.00
100.00
100.00
83.22
16.78
47 20
100-00
100.00
100.00
100.00
27-17
65.65
3435
100.00
100.00
59.39
40.61
5.67
100.00
1.21
98.79
100.00
1.21
78.23
20.56
41 56
7.83
92.17
100.00
1 00.00
100.00
14.32
1 00.00
0.00
100.00
1 00.00
84,71
15,29
46.83
100.00
100.00
100.00
100,00
23,48
78,39
21.61
100,00
1 00.00
74,08
25,92
5.64
100.00
1.09
98.91
1 00.00
1.09
74.44
24.47
41.57
7.77
92.23
100.00
100.00
100.00
14.34
100.00
0.00
100.00
100.00
8800
12.00
46.62
100.00
100,00
100,00
100 00
24.69
69.12
30,88
1 00,00
100.00
68.43
31.57
5.73
1 00.00
1.11
98.89
100.00
1.11
67.90
30.99
41.57
7.81
92.19
1 00.00
100.00
100.00
14.62
100.00
0.00
100.00
100.00
88.17
1 1.83
46.55
100,00
100.00
100.00
100,00
25.90
65.66
34,34
1 00,00
100.00
64.91
35.09
5.76
100.00
1.14
98.86
1 00.00
1.14
66.61
32.25
40,49
11.43
88.57
1 00.00
1 00.00
1 00.00
14.65
1 00.00
0.00
100.00
100,00
88.00
12.00
48,60
100.00
100.00
100.00
100,00
28.69
56.51
43.48
100,00
100.00
55.81
44 19
5.75
100.00
1.10
98.90
1 00.00
1.10
66.21
32.69
40.48
11.69
88.31
1 00.00
100.00
100.00
14.54
100.00
0.00
100.00
100.00
87.63
12.37
48.60
100.00
100.00
100.00
100.00
28.69
56.50
43.50
100.00
100.00
55.80
44.20
C-18
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
GASOLINE
APPLICATION
TYPE
%82
% 83
%84
%85
%86
% 87
% 88
% 89
%90
SURFACING EQUIP
Cooling
Cycle
F_dist
Vlv_enf
TAMPERS/RAMMERS
Cooling
Cycle
F_dist
Vlv_cnf
TRAC/LDR/BCKHOE
Cooling
Cycle
F_dist
Vlv_cnf
TRENCHERS
Cooling
Cycle
F_dist
Vlv cnf
HP
A
4
C
S
HP
A
2
4
C
R
S
HP
A
W
4
C
S
V
HP
A
4
C
S
V
7.08
1 00.00
1 00.00
1 00.00
100.00
4.49
100.00
90.14
9.86
100.00
90.14
9.86
44.37
7.74
92.26
100.00
100.00
7.74
92.26
16.08
1 00.00
100.00
100.00
87.90
12.10
7.08
100.00
1 00.00
1 00.00
100.00
4.45
1 00.00
90.96
9.04
100.00
90.96
9.04
42.79
15.31
84.69
1 00.00
100.00
15.31
84.69
19.35
100.00
1 00.00
1 00.00
68.93
31.07
7.16
100.00
100.00
1 00.00
100.00
4.24
100.00
95.28
4.72
100.00
95.28
4.72
N/A
0.00
0.00
0.00
0.00
0.00
0.00
19.67
1 00.00
100.00
1 00.00
69.37
30.63
7.22
100.00
1 00.00
1 00.00
100.00
4.00
100.00
100.00
000
100.00
100.00
0.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
19.07
100.00
100.00
100.00
73.22
26.78
7.48
100.00
100.00
100.00
100.00
4.05
100.00
100.00
0.00
100.00
100.00
000
N/A
0.00
0.00
000
0.00
0.00
000
18 85
100.00
1 00.00
100.00
75.92
24.08
7,50
100.00
100.00
100.00
100.00
4.07
100.00
100.00
0.00
100.00
100.00
0.00
N/A
0 00
0.00
0.00
0.00
0.00
0.00
17.85
100.00
100.00
10000
78.27
21.73
7.49
1 00.00
100.00
1 00.00
1 00.00
4.06
100.00
100.00
0.00
100.00
100.00
0.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
17.68
100.00
100.00
100.00
79.00
21.00
7.70
100.00
100.00
100.00
100.00
4 07
100.00
100.00
0.00
100.00
100.00
0 00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
18.00
100.00
100.00
100.00
7789
22.11
7.52
100.00
1 00.00
1 00.00
100.00
4.06
100.00
100.00
0.00
100.00
100.00
0.00
N/A
000
0.00
0.00
0.00
0.00
0.00
17.84
100.00
100.00
100.00
78.82
21.18
7.59
1 00.00
1 00.00
1 00.00
100.00
4.07
100.00
100.00
0.00
100.00
100.00
O.QO
N/A
0.00
0.00
0.00
0.00
0.00
0.00
17.83
1 00.00
100.00
100.00
78.70
21.30
7.59
100.00
100.00
1 00.00
1 00.00
4.07
1 00.00
1 00.00
0.00
100.00
100.00
0.00
N/A
0.00
0.00
0.00
0,00
0.00
0.00
17.83
100.00
100.00
100.00
78.72
21.28
C-19
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
DIESEL
APPLICATION
TYPE
%82
%83
% 84
% 85
%86
% 87
%88
% 89
%90
BORE/DRILL RIGS
Cooling
Cycle
F_dist
Vlv_cnf
CEM/MTR MIXERS
Cooling
Cycle
F_dist
Vlv^cnf
CONCRETE/IND SAWS
Cooling
Cycle
F_dist
Vlvj:nf
CRANES
Cooling
Cycle
F_dist
Viv cnf
CRUSH/PRQC EQUIP
Cooling
Cycle
F dist
Vlv_cnf
HP
A
O
W.
4
D
I
V
HP
A
W
4
O
I
V
HP
A
4
0
V
HP
W
4
I
V
HP
A
4
D
V
30.54
94.77
0.00
5.23
1 00.00
90.85
9.15
100.00
9.10
1 00.00
0.00
100.00
1OO.OO
0.00
100.00
N/A
0.00
0.00
0.00
0.00
N/A
0,00
0.00
0.00
000
N/A
0.00
0.00
0,00
0.00
30.32
96.00
0.00
4.00
1 00.00
92.00
8.00
100.00
9.15
100.00
0.00
100.00
100.0O
O.OO
100.00
N/A
0.00
0.00
0.00
0,00
42.00
100,00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
29.69
96.97
0.00
3.03
100.00
92.42
7.58
100.00
10,17
100.00
0.00
100.00
100.00
0,00
100.00
N/A
0,00
0.00
0.00
0.00
42,00
100.00
100,00
100.00
100.00
45.00
100,00
100.00
100.00
100,00
28.01
97.12
0.00
2.88
100.00
92.09
7.91
100,00
12.74
100.00
0.00
100.00
100.00
0,00
100.00
35.00
100.00
100.00
100.00
100.00
42.00
100.00
100.00
100.00
100.00
45.00
100.00
100.00
100.00
100.00
27.56
97.14
0.00
2.86
100.00
91.43
8,57
100,00
12.38
86.72
13.28
100,00
86,72
13.28
100.00
35.00
100.00
100.00
100.00
100.00
42.00
100.00
100.00
100.00
100 00
45.00
100.00
100.00
100.00
100.00
27.66
97,52
0.00
2.48
100.00
80.75
19.25
100.00
12.60
82.77
17.23
100.00
82.77
17 23
100.00
35.00
100.00
100.00
100.00
100.00
42.00
100.00
100.00
100.00
100.00
38.98
100.00
100.00
100.00
1 00.00
27.59
97.5S
0.00
2.42
1 00.00
80.61
19.39
100.00
12.23
82.80
17 20
100.00
82.80
17.20
100.00
26.81
100.00
100.00
100.00
1 00.00
42.79
100.00
100.00
100.00
100.00
38,26
100.00
100.00
100.00
100.00
27.66
97.45
0.00
2.55
100,00
80.89
19.11
1 00.00
11.99
84 18
15.82
100.00
84.18
15.82
100.00
26,35
100.00
100.00
100.00
100.00
42.83
100.00
100.00
1 00.00
100.00
38,93
100.00
100,00
100.00
100.00
30.79
96.58
0.00
3.42
1 00.00
75.21
24.79
100.00
1 1.73
85.19
14.81
1 00.00
85.19
14.81
100.00
25,39
100.00
100.00
100.00
100.00
43 01
100.00
100.00
100.00
100.00
39.75
100.00
100.00
100.00
100,00
33.35
77.21
19.85
2.94
100.00
79.41
20,59
1 00.00
11.75
85.53
14.47
100.00
85.53
14.47
100.00
25.94
100.00
100.00
1 00. OO
100.00
42.98
100.00
100.00
100.00
100.00
39.72
100,00
100.00
100.00
100.00
33,31
78.36
18.66
2.99
100.00
78.36
21.64
100.00
11.61
85.92
14.08
100.00
85.92
14.08
1 00.00
25.89
1 00.00
100.00
100.00
1 00.00
42.84
100.00
100.00
100.00
100.00
39.70
10000
100.00
100.00
100,00
C-20
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
DIESEL
APPLICATION
TYPE
% 82
%83
% 84
%85
%86
%87
%88
%89
%90
CRWLR DOZERS
Cooling
Cycle
F_dist
Vlv_cnf
DUMPERS/TENDERS
Cooling
Cycle
F_dist
Vlv cnf
GRADERS
Cooling
Cycle
F_dist
Vlv_cnf
LT PLANTS/SIGNAL BDS
Cooling
Cycle
F_dist
Vlv_cnf
OTH CONST
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
W
4
D
I
V
HP
A
4
D
V
HP
A
4
D
V
HP
A
W
4
D
I
V
HP
A
4
D
V
N/A
0.00
0.00
0.00
0.00
0.00
0.00
23.00
100.00
100.00
100.00
100.00
35.00
1 00.00
100.00
100 00
100.00
10.17
96.66
3.34
100.00
100.00
0.00
100 00
20.18
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
23.00
100.00
100.00
100.00
100.00
35.00
100.00
100.00
100.00
100.00
10.53
100.00
0.00
100.00
100.00
0.00
1 00.00
20.90
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0 00
0.00
0.00
10.19
100.00
0.00
100.00
10000
0.00
100 00
20.18
100.00
100 00
100.00
10000
N/A
0.00
0.00
0.00
0.00
0.00
0.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
10.68
100 00
0.00
100.00
100.00
0 00
100.00
18.97
100.00
10000
100 00
100 00
37.71
71.43
28.57
• 100.00
71.43
28.57
100.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0 00
11.23
82 28
17.72
100.00
82.28
17.72
100.00
18.19
100.00
100.00
100.00
100.00
38.25
54.55
45.45
100.00
54.55
45.45
100.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
11 30
81.40
18.60
100.00
81.40
18.60
100.00
16.57
100.00
10000
100.00
100.00
38.12
58.82
41.18
100.00
58.82
41.18
100.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
10.75
82.23
17.77
100.00
82.23
17.77
100 00
15.89
100.00
100.00
10000
10000
38.00
62.50
37.50
100.00
62.50
37.50
100.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
1 1.18
80.66
19.34
100 00
80.66
19.34
100 00
1626
100.00
100.00
100.00
100.00
38.20
56.25
43.75
100.00
56.25
43.75
100.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
11.02
81.27
18.73
100.00
81.27
18 73
1 00.00
16.37
100.00
100.00
100.00
100.00
37.07
73.68
26.32
100.00
73.68
26.32
1 00.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
10.93
81.69
18.31
100.00
81.69
18.31
100.00
16.71
100.00
100.00
1 00.00
100.00
36.62
78.95
21.05
100.00
78.95
21.05
100.00
23.00
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
12.40
77.55
22.45
100.00
77.55
22.45
100.00
16.87
100.00
100.00
100.00
100.00
C-21
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
DIESEL
APPLICATION
TYPE
%82
%83
% 84
%85
% 86
%87
% 88
% 89
%90
% 91
PAVERS
Cooling
Cycle
F_dist
Vlv_cnf
PAVING EQ
Cooling
Cycle
F_dist
Vlv cnf
PLATE COMPACTORS
Cooling
Cycle
F_dist
Vlv cnf
Rrr LOADER
Cooling
Cycle
F_dist
Vlv_cnf
ROLLERS
Cooling
Cycle
F_disl
Vlv cnf
HP
A
W
4
D
I
C
V
HP
A
O
W
4
D
I
V
HP
A
4
D
V
HP
W
4
D
I
V
HP
A
O
W
4
D
I
C
V
36.24
69.39
30.61
100.00
69.39
30.61
0.00
100.00
27.12
100.00
0.00
0.00
100.00
100.00
0.00
100.00
7.34
100.00
1 00.00
10000
100.00
42.03
100.00
100.00
32.79
67.21
100.00
20.43
83.31
0.00
16.69
100.00
100.00
0.00
000
100.00
36.47
39.35
60.65
100.00
39.35
60.65
0.00
100.00
26.68
100.00
0.00
0.00
100.00
100.00
0.00
100.00
7.80
100.00
100.00
100.00
100.00
41.93
100.00
100.00
34.48
65.52
100.00
21.28
83.53
0 00
1647
100.00
100.00
0.00
0.00
100.00
35.14
66.59
33.41
1 00.00
66.59
33.41
0.00
100.00
27.05
100.00
0.00
0.00
100.00
100.00
0.00
100.00
7.92
100.00
100.00
100.00
100.00
42.06
1 00.00
100.00
32.41
67.59
100.00
24.78
83.87
0 00
1613
100.00
100.00
0.00
0.00
100.00
35.29
67.76
32.24
100.00
67.76
32.24
0.00
100.00
27.57
100.00
0.00
0.00
100.00
100.00
0.00
100.00
8.34
100.00
100.00
100.00
100.00
44.00
10000
100.00
0.00
100.00
100.00
2625
72.76
0.00
27.24
100.00
89.25
10.75
0.00
100.00
35.59
43.16
56.84
100.00
80.51
19.49
0.00
100.00
27.58
100.00
0.00
0.00
100.00
100.00
0.00
100.00
9.13
100.00
100.00
100.00
100.00
44 00
100.00
100.00
0.00
100.00
100.00
30.86
65.79
0.00
34.21
100.00
78.85
21.15
000
100.00
35.55
38.67
61.33
100.00
77.11
22.89
0.00
100.00
27.14
100.00
0.00
0.00
100.00
100.00
0.00
100.00
9.38
100.00
100.00
100.00
100.00
40.64
100.00
100.00
0.00
100.00
100.00
32. 51
50.22
0.00
49.78
100.00
65.80
34.20
0.00
100.00
36.02
35.01
64.99
100.00
70.98
29.02
0.00
100.00
27.15
100.00
0.00
0.00
100.00
100.00
0.00
100.00
9.59
100.00
100.00
100.00
100.00
40.24
100.00
100.00
0.00
100.00
100.00
32.55
53 10
0.00
46.90
100.00
66.23
33.77
0.00
100.00
35.84
31.87
68.13
100.00
71.43
28.57
0.00
100.00
27.06
85.37
0.00
14.63
100.00
85.37
14.63
100.00
9.71
100.00
100.00
100.00
100.00
40.23
100.00
100.00
0.00
100.00
100.00
32.84
50.55
0.00
49.45
100.00
64.02
35.98
0.00
10000
35.65
33.78
66.22
100.00
73.10
26.90
2.19
97 81
31.19
72.41
0.00
27.59
100.00
72.41
27.59
100.00
9.32
100.00
100.00
100.00
100.00
40.24
100.00
100.00
0.00
100.00
100.00
32.85
45.67
0.00
54.33
100.00
59.36
40.64
1.65
98.35
35.67
33.72
66.28
100.00
71.24
28.76
2 79
97.21
31.23
72.73
0.00
27.27
100.00
72.73
27.27
100.00
9.29
100.00
100.00
100.00
100.00
N/A
0.00
000
0.00
0.00
0.00
33.33
38.37
6.57
55.06
100.00
58.61
41.39
2.75
97.25
35.07
28.68
66.24
100.00
70.71
29.29
2.93
97.07
31.22
72.73
0 00
27.27
100.00
72.73
27.27
100.00
9.21
100.00
100.00
100.00
100.00
N/A
0.00
0 00
0.00
0.00
0.00
32.69
23.84
20.00
56.16
. 100.00
57.54
42.46
2.76
97 24
C-22
-------
TECHNOLOGY TRENDS FOR LIGHT CONSTRUCTION EQUIPMENT
DIESEL
APPLICATION
TYPE
% 81
%82
%83
% 84
% 85
%86
%87
% 88
%89
%90
ROUGH TRN FORKLFTS
Cooling
Cycle
F_dist
Vlv_cnf
S/S LOADER
Cooling
Cycle
F_dist
Vl«_cnf
TRAC/LDR/BCKHOE
Cooling
Cycle
F_dist
Vtv cnf
TRENCHERS
Cooling
Cycle
F_dist
Vlv_cnf
HP
W
4
0
1
V
HP
A
O
W
4
D
1
V
HP
A
O
W
4
D
1
V
HP
A
O
W
4
D
1
V
44,00
100.00
100.00
0.00
100.00
100.00
33.72
11.66
0.00
88.34
100.00
12.34
87.66
1 00.00
48.00
0.00
0.00
100.00
100.00
100.00
0.00
1 00.00
31.51
69.02
0.00
30.98
100.00
72.54
27.46
100.00
46.44
1 00.00
1 00.00
81.48
18.52
100.00
32.40
6.64
0.00
93.36
100.00
6.64
93.36
100.00
45.85
11.50
0.00
88.50
1 00.00
100.00
0.00
1OO.OO
34.74
79.55
0,00
20.45
100.00
79.55
20.45
100.00
46.24
100.00
1 00.00
74.67
25.33
100.00
32.10
7.61
0.00
92.39
100.00
7.61
92.39
100.00
45.82
11.65
0.00
88.35
100.00
100.00
0.00
100.00
35.13
78.33
0.00
21.67
100.00
78.33
21.67
100.00
46.46
1 00.00
100.00
82.14
17.86
100.00
31.27
917
0,00
90.83
100.00
9.17
90.83
100.00
44.94
17.65
0.00
82.35
100.00
100.00
0.00
100.00
35.35
76.61
0.00
23.39
100.00
76.61
23.39
100,00
47.57
100.00
100.00
51.23
48.77
100,00
31,21
8,56
0.00
91.44
100.00
15.72
84.28
1 00.00
44,52
20.65
0.00
79.35
100.00
100.00
0,00
100.00
35,19
82.37
0.00
17 63
100.00
82.37
17,63
100,00
45.34
100.00
100.00
53.72
46.28
1 00.00
31.49
9,05
0.00
90.95
100.00
19.11
80.89
100.00
44.54
20.46
0.00
79.54
100.00
100.00
0.00
100.00
35,20
77.30
0.00
22.70
100,00
7730
22.70
100,00
4608
100.00
100.00
51.33
48.67
100.00
31.11
7.66
0.00
92-34
100.00
14.74
85.26
100.00
42.64
14.47
0.00
85.53
100,00
89,07
1093
100.00
34 86
78.07
0,00
21.93
100.00
78.07
21-93
100-00
46,08
1 00.00
100.00
44.69
55.31
100.00
31.25
6,70
0.00
93.30
100,00
14.22
85.78
100.00
40.71
19.35
0.00
80.65
100.00
83,46
16,54
100.00
34,68
78.33
0.00
21.67
100.00
78.33
21.67
100.00
44.20
1 00.00
100.00
39.08
60.92
1 00.00
31.36
5.78
0.00
94.22
1 00.00
13.79
86.21
1 00.00
29.30
52.47
0.00
47.53
10000
52,47
47.53
1OO.OO
35.15
71.24
7.31
21.45
100.00
78.55
21.45
100.00
43.05
100.00
100.00
26.70
73.30
100.00
31.42
3.76
1,61
94.63
1 00.00
14.07
85.93
1 00.00
27.82
39.85
12.52
47.63
1 00.00
52.37
47.63
100.OO
34.08
49.31
29.53
21.16
100.00
78.84
21.16
100.00
43.10
1 00.00
100.00
26.95
73.05
100.00
31.34
2.95
2.42
94.63
100.00
14.07
85.93
1 00.00
27.09
33.56
18.87
47.5?
100.00
52.43
47.57
1 00. OO
34. 7t
34.11
44,72
21.17
100.00
78.83
21.17
100.00
C-23
-------
TECHNOLOGY TRENDS FOR LIGHT AGRICULTURAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 82
% 83
%84
% 85
%86
% 87
%88
%89
%90
2-WHEEL TRACTORS
Cooling
Cyel»
F_dist
Vlv_cn(
AG MOWERS
Cooling
Cycle
Fjlist
Viv_cnf
AG TRACTOR
Cooling
Cycle
F_dist
Vl*_cnf
BALERS
Cooling
Cycle
F_dist
Vlv_cnf
HYD POWER UNIT
Cooling
Cycle
F_dist
Vlv_cnf
HP
A
4
C
s
V
HP
A
4
C
S
V
HP
W
4
C
V
HP
A
4
C
V
HP
A
4
C
S
V
3.00
1 00.00
100.00
100.00
1 00.00
0.00
11.20
100.00
100.00
1 00.00
100.00
0.00
48.OO
100.00
100.00
1 00.00
100.00
34.68
100.00
1 00.00
1 00.00
100.00
N/A
0.00
0.00
0.00
0.00
0.00
3.00
1 00.00
100.00
100.00
100.00
0.00
11.43
100,00
100.00
100.00
100.00
0.00
48.00
100.00
100.00
100.00
1 00.00
34.68
100.00
100.00
1 00.00
100.00
9.53
1 00.00
1 00.00
100.00
1 00.00
0.00
3.00
100.00
1 00.00
100.00
100.00
0.00
1 1.44
100.00
100.00
100.00
100.00
0.00
48.00
100.00
1 00.00
100.00
1 00.00
34.69
100.00
100.00
100.00
100.00
14.08
100.00
100.00
100.00
1 00.00
0.00
3.99
100.00
100.00
100.00
100.00
0.00
1 1.34
1 00.00
100.00
100.00
100.00
0.00
48.00
100.00
100.00
100.00
1 00.00
36.35
100.00
1 00.00
100.00
100.00
15.28
100.00
100.00
100.00
98.69
1.31
5.48
100,00
100.00
100.00
100.00
0.00
11.53
100,00
100.00
100.00
100,00
000
48.00
100,00
100,00
100,00
100,00
N/A
0.00
0 00
0.00
0.00
14,84
100,00
100.00
100.00
98.91
1.09
5.45
1 00.00
100.00
100.00
85.06
14.94
11.23
100.00
100.00
1 00.00
98.49
1.51
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
14.80
100.00
1 00.00
100.00
98.95
1.05
5.35
100,00
1 00.00
100.00
76.36
23.64
11.07
100.00
100.00
100.00
93.40
1.60
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
14.68
100.00
100.00
100.00
98.97
1.03
5.16
100.00
100.00
100.00
67.88
32.12
10.68
10000
100.00
100.00
97.95
2.05
N/A
0.00
0.00
0.00
000
N/A
0.00
0.00
000
0.00
14.55
10000
100.00
1 00.00
99,15
0.85
4.82
100.00
1 00.00
100.00
64.89
35.11
9.18
100.00
100.0O
100.00
93,44
6.56
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
14.21
1 00.00
100.00
100.00
99.17
0.83
6.01
1 00.00
100.00
100.00
59.14
40.86
9.28
100.00
100.00
100.00
90.60
9.40
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
0.00
0.00
14,18
100.00
100.00
1 00.00
99,13
0.87
6.08
100.00
100.00
1 00.00
55.71
44.29
9.27
100.00
100.00
100.00
89.29
10.71
N/A
0.00
0.00
0.00
0.00
N/A
0.00
0.00
000
0.00
14.18
100.00
100.00
100.00
99.13
0.87
C-24
-------
TECHNOLOGY TRENDS FOR LIGHT AGRICULTURAL EQUIPMENT
GASOLINE
APPLICATION
TYPE
% 81
% 82
% 83
%84
% 85
% 86
% 87
% 88
% 69
%90
OTH AG/EQ
Cooling
Cycle
F_dist
Vlv_crrf
SPRAYERS
Cooling
Cycle
F^dist
Vlv cnf
TILLERS
Cooling
Cycle
F_dist
Vlv_on(
HP
A
W
4
C
S
V
HP
A
W
4
C
S
V
HP
A
4
C
S
V
11.76
100.00
0,00
1 00.00
100.00
100.00
0.00
7.06
100.00
0.00
100.00
100.00
97.50
2.50
5.93
100.00
1 00.00
100.00
1 00.00
0.00
7,39
95.83
4.17
1 00.00
1 00.00
95,83
4,17
7 09
100.00
0.00
100.00
100.00
97.20
2.80
5.79
100.00
100.00
100.00
100.00
0,00
11.70
74.79
25.21
1 00.00
100.00
74.79
25.21
6.18
100.00
0.00
100.00
100.00
98.73
1.27
5.75
100.00
1 00.00
100.00
1 00.00
0 00
15.54
61.29
38.71
100.00
100.00
61.29
38.71
6.34
100.00
0.00
100.00
100.00
98.48
1.52
5.71
100.00
100.00
100.00
1 00.00
0.00
15.00
62.82
37.18
1 00.00
100.00
58.55
41.45
6.96
99.77
0.23
100.00
100.00
97,70
2.30
5.68
1 00.00
1 00.00
100.00
100.00
0.00
16.30
58.20
41.80
100.00
100.00
0,00
100,00
7.57
99.68
0,32
100.00
1 00.00
94.12
5.88
5.60
1 00.00
1 00.00
100.00
99.96
0.04
15.58
61.83
38.17
100.00
1 00.00
0.00
100.00
7,44
99.61
0.39
100.00
100.00
93.70
630
5.62
100.00
1 00.00
100.00
99.97
0.03
11.73
83.82
16.18
100.00
100.00
0.00
100.00
8 67
99.62
0.38
100.00
100.00
92.68
732
5.59
100.00
1 00.00
100,00
99.97
0.03
11.64
86.32
13.68
1 00.00
100.00
0.00
100.00
7,24
99.57
0.43
100.00
1 00.00
90.14
9.86
5.56
100.00
100.00
1 00.00
99.97
0.03
11.56
86.86
13.14
100.00
100.00
0.00
100.00
7.15
99.57
0.43
100.00
100.00
89.41
10.59
5.56
100.00
1 00.00
1 00.00
99.97
0.03
11.57
86.79
13.21
1 00.00
1 00.00
0.00
100.00
7.13
99.58
0.42
100.00
1 00.00
89.48
10.52
5.56
100.00
1 00.00
1 00.00
99.97
0.03
C-25
-------
TECHNOLOGY TRENDS FOR LIGHT AGRICULTURAL EQUIPMENT
DIESEL
APPLICATION
TYPE
% 81
%82
% 83
% 84
% 85
%86
%87
% 88
% 89
%90
AG TRACTOR
Cooling
Cycle
F_dist
Vlv_cnf
HYD POWER UNIT
Cooling
Cycle
F dist
Vlv cnf
OTH AG/EQ
Cooling
Cycle
F_dist
Vlv cnf
SPRAYERS
Cooling
Cycle
F_dist
Vlv cnf
TILLERS
Cooling
Cycle
F_dist
Vlv cnf
HP
W
4
D
I
V
HP
A
W
4
D
I
V
HP
A
W
4
D
I
V
HP
A
4
D
V
HP
A
4
D
V
47.14
100.00
100.00
99.85
0.15
100.00
N/A
0.00
0.00
0.00
0.00
0.00
0.00
29.02
40.08
59.92
100.00
40.08
59.92
1 00.00
20.01
100.00
10000
100.00
100 00
6.50
100.00
10000
100.00
100.00
47.07
100.00
100.00
99.94
0.06
100.00
45 00
100.00
0.00
100.00
100.00
0.00
100.00
29.10
42.96
57.04
100.00
42.96
57.04
100.00
20.10
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0 00
46.99
100.00
100.00
99.92
0.08
100.00
45.00
100.00
0.00
100.00
100 00
0.00
100.00
29.67
47.99
52.01
100.00
47.99
52.01
100.00
20.10
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
44.20
100.00
100.00
89.19
10.81
100.00
33.47
17.14
82.86
100.00
17.14
82.86
100.00
27.60
29.93
70.07
100.00
29.93
70.07
100.00
22.57
100.00
100.00
100 00
100.00
N/A
0.00
0.00
0.00
0.00
42.79
100.00
100.00
83.80
16.20
100.00
32.09
10 44
89.56
100.00
10.44
89.56
100.00
26.67
25.64
74.36
100.00
25.64
74 36
100.00
23.39
100.00
100.00
100.00
100.00
N/A
0 00
0 00
0.00
0.00
38.96
100.00
100.00
79.22
20.78
100.00
31.89
9.64
90.36
100.00
9.64
90.36
100.00
25.87
26.69
73.31
100.00
39.85
60.15
100.00
24.16
100.00
100.00
100.00
100.00
N/A
0 00
0.00
000
0.00
30.42
100.00
100.00
49.61
50.39
100.00
31.55
8.43
91.57
100.00
8.43
91.57
100.00
26.30
25.64
74.36
100.00
39.56
60.44
100.00
27.25
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
21.92
100.00
100.00
26.20
73.80
100.00
31 60
8.74
91.26
100.00
8.74
91.26
100.00
26.40
25.25
74.75
100.00
39.53
60.47
1 00.00
27.27
100.00
100.00
100.00
100.00
N/A
0.00
0.00
000
0.00
21.98
100.00
100.00
28.00
72.00
100.00
31.66
9.78
90.22
100.00
9.78
90.22
100.00
26.22
24.82
75.18
100.00
38.85
61.15
100.00
27.23
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0 00
21.98
100.00
1 00.00
27.93
72.07
100.00
31 70
10.88
89.12
100.00
10.88
89.12
100.00
26.28
24.91
75.09
100.00
39.25
60.75
100.00
27.33
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
21.98
100.00
100.00
27.93
72.07
100.00
31.69
10.79
89.21
100.00
10.79
89.21
100.00
26.27
24.91
75.09
100.00
39.19
60.81
100.00
27.18
100.00
100.00
100.00
100.00
N/A
0.00
0.00
0.00
0.00
C-26
-------
APPENDIX D
OPEI Horsepower Distribution For
Selected Lawn and Garden Equipment
-------
WALK-BEHIND ROTARY POWERED MOWERS
PERCENTAGE OF ANNUAL UNITS SHIPPED BY HORSEPOWER RANGE
YEAR
1986
1987
1988
1989
1990
1991
3.9 HP & UNDER
74%
71%
71%
69%
61%
59%
4.0 - 4.9 HP
25%
28%
27%
25%
22%
17%
5.0 HP & OVER
1%
1%
2%
6%
17%
24%
Source: OPE1
-------
FRONT ENGINE GARDEN TRACTORS
PERCENTAGE OF ANNUAL UNITS SHIPPED BY HORSEPOWER RANGE
YEAR
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
9.99 HP & UNDER
13%
13%
8%
4%
5%
5%
4%
2%
2%
1%
1%
10.00 - 13.9 HP
84%
80%
86%
86%
81%
82%
82%
83%
82%
79%
74%
14,0 HP & OVER
3%
7%
6%
10%
14%
13%
14%
1 5%
1 5%
20%
24%
Source: OPE1
-------
REAR ENGINE RIDING MOWER
PERCENTAGE OF ANNUAL UNITS SHIPPED BY HORSEPOWER RANGE
p
OJ
^EAR
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
7,99 HP & UNDER
30%
26%
21%
14%
11%
10%
10%
9%
9%
7%
4%
3%
8.00 - 9.99
HP
54%
55%
57%
58%
60%
53%
56%
55%
53%
40%
34%
21%
10.0 HP &
16%
19%
22%
28%
29%
37%
34%
36%
38%
53%
62%
76%
Source: OPEI
-------
RIDING GARDEN TRACTORS
PERCENTAGE OF ANNUAL UNITS SHIPPED BY HORSEPOWER RANGE
^EAR
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
13.9 HP
& UNDER
25%
23%
23%
18%
15%
18%
20%
17%
9%
11%
9%
5%
14.0 -
15.9 HP
14%
10%
12%
11%
8%
9%
9%
8%
11%
8%%
8%
7%
16.0 -
17.9 HP
50%
49%
50%
33%
29%
24%
20%
10%
17%
16%
14%
14%
18.0 -
19.9 HP
34% +
44% +
47% +
60% +
54% +
54% +
58% +
64% +
20,0 HP
& OVER
4%
4%
4%
5%
9%
11%
11%
9%
18.0 HP
& OVER
11%
18%
15%
38%
48%
49%
51%
65%
63%
65%
69%
73%
Source; OPEI
-------
WALK-BEHIND ROTARY TILLERS
PERCENTAGE OF ANNUAL UNITS SHIPPED BY HORSEPOWER
RANGE
D
YEAR
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
6.0 HP &
UNDER
83%
87%
82%
83%
82%
86%
88%
88%
88%
87%
91%
91%
3.99 HP &
UNDER
1 7% +
17% +
17% +
1 5% +
. 19% +
18% +
19%% +
1 3% +
14% +
4.0 -
6.0 HP
66%
70%
65%
68%
69%
70%
68%
78%
77%%
OVER
6.00 HP
17%
13%
18%
17%
18%
14%
12%
12%
12%
13%
9%
9%
Source: OPEI
-------
APPENDIX E
Definition of Financial Ratios
and Terms
-------
Definition of Financial Terms Shown
In Tables 4-22 and 4-23
1. Net Income: Income may be either positive or negative for a given period (such as a fiscal
year). If operations are successful, there is a net income and a corresponding increase in net
assets. Net Income is formally defined as Revenue minus Expenses.
2. Net Worth: Defined as total assets minus total liabilities (see below).
3. Current Assets: Assets expected to be available to pay debts and operating costs in the
near future.
4. Current Liabilities: Debts which will have to be paid from current assets in the near
future,
5. Total Debt: The total amount owed by a firm to all sources of assets.
6. Total Assets: The total economic resources owned by a firm which are capable of giving
service benefits to its future operations and which can be measured objectively in terms of
money.
7. Current Ratio: Defined as current assets divided by current liabilities measures the
relationship of total working capital to the amount of net working capital in measuring the
liquidity of a business.
8. Quick Ratio: Shows the relationship lo current of the total assets which will quickly be
converted into cash. The formula for its calculation is the ratio of cash plus short-term
receivables plus temporary investments to total current liabilities.
9. Return on Assets: Shows the efficiency with which management has employed the assets
of the business, without regard to their source. The formula for its calculation is the ratio of
E-l
-------
net income before interest and tax to average total assets.
10, Return on Equity: Measures a firm's return to its shareholders. The formula for its
calculation is the ratio of net income for the period to the typical balance of stockholders'
equity. Owner's equity shows the amount of assets which the business has obtained from its
owners by way of investment, as well as the amount which has been added or subtracted as
a result of business operations.
11. Debt to Assets: Shows the extent to which a firm's assets were acquired through
borrowing. The formula for its calculation is the ratio of total debt to total assets.
12. Debt to Equity: Ratio which measures the leverage position of a firm. Calculated as total
debt divided by total owner's equity.
13. CAP EX 1991: Capital expenditures in 1991.
14. CAP EX to '91 Sales: The ratio of 1991 capital expenditures to 1991 sales.
E-2
-------
TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completir
1. REPORT NO.
EPA 420-R-93-002
2.
3. I
PB93-161735
4. TITLE AND SUBTITLE
Small Nonroad Engine and Equipment Industry Study
5. REPORT DATE
December 1992
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
8. PERFORMING ORGANIZATION REPORT NO.
JACKFAU-92-413-14
9. PERFORMING ORGANIZATION NAME AND ADDRESS
Jack Faucett Associates
4550 Montgomery Avenue
Bethesda, Maryland 20814
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
6S-WO- 0014
12. SPONSORING AGENCY NAME AND ADDRESS
U.S. Environmental Protection Agency
Office of Mobile Sources
Engineering and Technical Resources Branch
Ann Arbor, MI 48105
13. TYPE OF REPORT AND PERIOD COVERED
Final
14. SPONSORING AGENCY CODE
15. SUPPLEMENTARY NOTES
16. ABSTRACT
The purpose of this report is to describe and analyze the structure, conduct, and
performance of the small nonroad engine and equipment industry and to assess the
technologies represented by the most common engines and equipment. The small
nonroad engine and equipment industry is defined as the market or markets, in which
engines under 50 horsepower are produced and/or incorporated into new or used
nonroad equipment. Examples of the types of equipment in which utility engines
are installed include lawnmowers, cement mixers, 2-wheel tractors, generator sets,
all terrain vehicles, and many other types of equipment used in various applications.
Engine below 50 horsepower are also found in many marine applications, such/as
outboard sailboat auxiliary engines. However, marine engines are excluded from
this study.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b.lDENTIFIERS/OPEN ENDED TERMS
c. COSATl Field/Croup
Air Pollution Standards
Air Quality
Exhaust Emissions
Engines
Agricultural Machinery
Construction Equipment
Recreation
.-G..3 f"rl OTI "i n
------- |