Seriously speaking

Steve Filipov is definitely not the type of person who shoots from the hip. Rather, he is a keen listener who thinks about what he is going to say, chooses his words carefully and then, with confidence and candor, tells you what he thinks.

What is most impressive about the 37-year-old president of Terex Cranes is not so much that he found success so quickly in his career, but that he handles his success without the need to be slick or superficial. If something is going well, he will tell you. If something is not going well, he will tell you that too. Simply put, he is a straight shooter.

While everyone today is enjoying the ride on this wave of prosperity in the crane industry, Filipov keeps an eye on the storm that may be approaching. He has ideas and plans for Terex Cranes that are ambitious and far reaching, and that cannot be accomplished in a week or a month, or maybe even years. He realizes that the good times of today are to be enjoyed, but not to be taken for granted.

On the other hand, I would be remiss if I painted the picture that Filipov is some ultra serious, grim-faced, crane company president. He is not that at all. After our interview and plant tour in Waverly, IA in May, I had lunch with Filipov and the Terex sales team. Enjoying take-out pizza in the boardroom, a relaxed, easy going and often humorous Filipov emerged. He joined in the banter, reminisced about the “old days,” and told colorful stories about the industry. During our lunch, Filipov was one of the guys – a witty, wisecracking hard-working crane salesman at his best.

How do you describe the Terex distribution model in North America? Do you envision a traditional distribution model?

In North America, we started with nonexclusive dealers, and I think through the last downturn, unfortunately, a lot of those guys disappeared from the market. We are working directly with our national accounts, and we are rebuilding our distribution in North America. But it is in process so it is a little bit early to talk about.

We need to also 'T ink Terex' as we have many other sister companies doing business in North America, such as Genie, Roadbuilding, Construction, where we could better use our complete construction solution, instead of a lifting only solution.

We will be on the road in July meeting with our To p 10 dealers and will be getting their feedback, and then present a solution going forward in September when we have enough facts and data to make the right decision for our customers.

Obviously, our issue today is delivering machines. We've got a strong backlog, [which gives us] some time to work on our distribution. We envision a traditional distribution, but it will be a mix. I think we will still deal direct with national accounts, and we will have a dealer network to serve certain territories. Right now we are going through the process of selecting, who are those dealers, and what are the territories going to be? What are their sales targets going to be? What are the investments that they are going to put in? I think that's an important aspect of this process. In the past we dealt with a lot of people who didn't service the equipment. I think that is one of the things we are going to concentrate on with our partners moving forward. You have got to have a strong service network to be able to service the equipment

The all terrain crane is gaining wide scale acceptance in the US. Has Terex-Demag met your expectations in the North American market?

The all terrain cranes have been selling well. I think the market is up probably about 15 to 20% worldwide. I think we have been successful in this business. I would qualify us as probably having the broadest product range in the all-terrain class – from 30 ton all the way up to 700 ton.

Specifically to North America, I think your question is focused on whether Demag has met my expectations in North America? I would say no it hasn't met my expectation. I think we have a lot more work to do. We went through a recent retrofit program where we went back and serviced, retrofitted, 400 cranes in market, upgrading several things, the Can bus system, the LMI and data logger systems, so that kind of pushed us back a little bit, I think vis-à-vis the customer, that was not a great experience, but we are moving through that.

I do think that we are fairly successful. We are one of the top three manufacturers worldwide of all terrain cranes. In North America, though, it seems to be over the 100 ton mark. T e development of the all terrain into the sub-100 ton category hasn't been very successful because of the truck cranes taking that market, I think mainly because of reliability, and cost, and having to travel long distances in North America. I don't see that trend changing much. In the larger cranes, the technology is only all terrain, so the choice is fairly limited. As projects get bigger, it is going to get easier to use all terrain technology than crawler crane technology.

What about the city crane, which is popular in Europe? Do you envision a city crane for the North American market? What distinguishes the European city crane?

The city crane is more of a European product. But we will sell some in the US. We have sold some on the East and West Coasts, more in the cities, obviously, in Chicago and New York, San Francisco. It is what it is, a city crane. I don't think it's going to be something that will take over the truck crane market. It's another wrench in the tool box.

Why is the truck crane such an American staple?

The truck crane market is specific to North America. Why that is, I think it's because the market is different in North America than anywhere else. In Europe you have owner/operators and they like to have all terrain technology because they like all the bells and whistles, the longer booms and the all terrain maneuverability. While in the US, it's more of a rental tool. As dry hire, the truck cranes are a lot easier to use and a lot easier to maintain. But I think it is specific to the market needs. Besides North America, the truck crane market is growing, obviously in the higher end, higher capacities. We are up to an 80 ton truck crane. I find it hard to see a 100 ton truck crane because moving it is going to be tough, meeting weight and axle requirements. I think we have met the maximum capacity for the truck crane.

Outside of that, the largest market is China with 10,000 truck cranes a year. It's a lot bigger than the North American market. So we have acquired Changjiang in China. We made the Changjiang acquisition for a number of reasons, the first one is to get into that 10,000 unit market. Changjiang is Number 3 in the market so it keeps us in the top three. They build about 1,000 truck cranes a year. So one, [the acquisition] gets us in that market, and two it gives us a distribution network. They have over 30 dealers in China so we will plug into that network and sell Terex Cranes. And the reason we want to do that is fi rst, so we can get the market acquainted with our products and get them trained up, and second, what we will do parallel to that, is start bringing in technology, whether that is Demag technology or PPM technology, we don't know yet.

Changjiang was a large-scale investment? How much?

I am not going to say. I think what is important is that we acquired a 50% ownership and we have agreement to acquire the other 50% when the law permits. We have management control.

The Chinese market is also trending to higher capacity cranes, and this is where they do not have the technology, and we obviously have it with our Demag brand. So we want to get into that market. T e Chinese have started to export into markets like Australia, Brazil, and the Middle East. So we will work to develop the export business. I don't think they are ready to export into the US yet, or to Europe. That's not going to happen in the short term. But our strategy is really to get in front of it to join up with someone to understand the market. One of the other benefits with Changjiang is we can plug into their supply chain. They manufacture their own axles, their own hydraulic cylinders, and they have an established supply chain where we can plug in. In a place like China, where costs are sometimes 70% less than ours, well it's obviously interesting to be there.

What does the future hold for the Terex boom truck line?

Boom trucks, of course this is a North American market only. They are not exported widely – a little bit to the Middle East. But our boom trucks are doing well. We are number two in the market behind National. We transferred that product line to Waverly in 2000 from Kansas. We have developed new products, and we're moving ahead with a strong product – again another tool to have in the product line. We did go through some growing pains when we did the transfer, but we are past that and we have ramped up production. We are also seeing that market go to the higher end, taking away market from the lower capacity truck cranes, up to 35 to 40 tons.

Labor issues have been a problem in Waverly. Will Terex continue to manufacture its products in Waverly? Are labor issues resolved?

We went through a five-week strike last year. It was resolved with a new contract, a much more modern contract that benefits both Terex and our employees. But it is employee based. Morale is now good. Getting past the strike was hard. But we are past it. We will continue to build and keep Waverly. If we could not have come to an agreement, we had to look at other options, and I would say those options were on the table. But once it was resolved, we have invested heavily in Waverly. We have hired close to 80 new people; we have hired new leadership to help us implement our Terex business system and lean manufacturing.

How has Terex addressed backlog problems?

The products with the longest backlogs are our rough terrains and truck cranes. We're getting to a reasonable delivery time on boom trucks. Crawlers are getting up there. But I think specific to Waverly, we have a big backlog, and we are ramping up as best we can, and I think we have a lot more work to do to catch up on the backlog.

Backlog is a good thing and a bad thing. It gives you a better opportunity to forecast, but our customer base is waiting six to nine months and that's not good either. We need to ramp up and reduce our backlog to a reasonable level. I think three to four months is a reasonable level, a reasonable delivery time. Hopefully by the end of this year we will be at that level. We are having issues with the supply chain and getting all the parts here at the right time.

In terms of the US economy, what do you see in the crystal ball? How long will this boom last?

Well, if I had a crystal ball, I don't think I'd be here working. I'd probably be on the beach in the Cayman Islands. It's not easy to say, but I think the leadership in place takes it seriously. We are planning somewhat for a downturn. Having a strong backlog and the market being strong, I think that 2007 should be a good year for cranes. Beyond that it's difficult to gauge.

We are doing different things, trying stay close to the market to see, what is the general consensus? If our customers slow down on investing, we need to be aware. One thing we have done since the market started picking up is to move up our planning process so that we are ahead of the game. Planning is really the key to understanding when a downturn is going to come, so that we don't have the deep drop-off s we had in the past. But it's a different market today than in the last downturn. T is upturn we are all struggling to put more product out. So the boom is somewhat not as big as it could be, so that may be good [in the event of ] a downturn.

There are factors in the North American market that may help in a downturn, so that the market doesn't go down as fast as it has in other downturns: the Highway bill, Katrina reconstruction eff orts, power generation, and wind energy, maybe even nuclear power. I think if you were trying to look out three to four years, the downturn might be a little less. In 2000, the peak [at Terex] was 1,750 cranes sold and then it dropped off to 700 units in 2003. In the industry as a whole, 5,300 units were sold in 2000 and then it dropped off to 2,600 in 2003. That's a huge drop off. I don't think we will see that. But we have to stay engaged, adapt to the market, and be better at planning.

What is happening with Terex Peiner? Are new machines being built? Are new products on the horizon?

First, we have transferred the Peiner product to Wilmington. We have started manufacturing complete tower cranes in Wilmington. We made the decision in the middle of last year, but we have had challenges making the transition because the market has upticked so fast we are still manufacturing in Germany and Wilmington. But the goal is that when we can catch up, to manufacture complete Peiner towers in Wilmington. It's going to take us a bit of time.

No we don't have a new Peiner product. We will stick with the three – the 315, 415 and 575. We have to consider our biggest tower cranes, Comedil, which is substantially bigger and their technology is more advanced than Peiner. Peiner is a good product and once we get it transferred to Wilmington we will see about developing something together.

Is Comedil really the focus of Terex towers? How has Terex performed in this recent tower crane boom?

Comedil is obviously the focus, being the biggest growth in tower cranes. Comedil is the leader, Number three or Number two in the total market. In the US, Terex is probably Number one or two. But there aren't any market statistics to know for sure. We are one of the market leaders.

[In terms of performance,] the returns are very good. It's a fairly simple product, steel and electronics. With all these high rises under construction, the market is good. What is interesting is that rental businesses now have them in their fleets. We have seen a lot of investments in the past few months – obviously All Erection, AmQuip, P& J and Maxim. AmQuip just ordered two of the large tonne meter luffing tower cranes from Comedil. We are very happy to have those in the States. We sold three of them in Las Vegas to a casino. And now with AmQuip, that puts five into the US market.

Any plans for a bigger telescopic crawler, perhaps a Terex-Demag AC 100 upper on an IHI crawler base?

In October, we launched a 40 ton telescopic from Bendini. T ere are no American buyers yet. We had a 60 ton telescopic crawler we brought into the US in 1997, and it was not successful. Maybe it was too early. We ended up having to sell those machines into Australia where they work in several mine sites to dismantle lattice cranes. T ere's not a huge market.

What about the crawlers? Anything new being introduced?

We are the market leader in crawlers in product line and in market share. We have the IHI from 50 to 275 tons, then the Demag takes over. Demag goes from 300 tons all the way up to the new model, the 3,000 ton. We just sold one of those in the Middle East. We have a pretty good product line in crawlers worldwide, not only in North America. T e Demag is selling well in the in higher capacities.

Where is Terex in the realm of product development? What's on tap for new models for the North American market?

We need to think about new products now, because if we don't, when the downturn comes we'll be suffering. We are bringing out new products. Our 100 ton rough terrain, the RT1100, is the largest RT we have built here. It's a nice project because it was worked on with Waverly and Demag engineering, which was a good partnership. The boom is from Demag and everything else was designed in Waverly. We have the first prototype going through right now and we will have it in production by the end of the year.

What do you like best about your job?

I like dealing with customers. I like to travel, and having 10 manufacturing locations isn't an easy thing to manage – you have to like to travel. I like having the ability to experience different cultures, I speak five languages. I like to engage with people. I like doing this job and Terex is a good company to work for. I've grown up with the company and we still have high aspirations. We are not there yet, but I think we are in a good position. It's definitely a good time to be in the crane business.

How would you describe your management style?

I guess you'd have to ask my team. I think I'm hands on. I learn by doing. I like to spend time in the factory with the employees. I think it's a good way to get feedback, good or bad. Managing the basics is one of the keys; it's what I do well. I expect my leadership team to have the right ethics. I think I am fl exible. I don't always have the right ideas, and I think allowing people to come up with their own ideas is the right thing. I like to say that we are all smarter than one of us. I like input, feedback.

If there's a problem, come to me with it, but come to me with at least two solutions. It's always easy to bring the problem to a boss. I want to hear the solutions. And last but not least, and it should be fi rst, is to put the customer fi rst. I ask our team to put the customer first as best they can. We are trying harder at Terex to put the customer fi rst. Our customers are our most important asset.

What do you do in your leisure time?

I like to spend as much time with my family as I can. I think traveling as much as I do, quality time is very important. I give my wife [and family] merit for putting up with my travels. I try to spend any extra time with them. And for those who know me, they know I like sports cars. I own a few.