How were contractors able to stay in the market?


Covid Special, part 8

Following the spread of the virus, many countries started implementing several measures to reduce the movement of people, and that has mainly obstructed the heavy machinery industry because it usually requires on-site work where each project member must be available to work, check, and monitor all the work activities. The people have to deal with many business threats, such as shortage of material supply, employees´ job loss, and most of the small enterprises were not able to pay salaries during lockdowns. The current article focuses on the strategies contractors implemented to compensate for the losses caused by the coronavirus crisis impact. While running the COVID Survey, several questions may be considered to cover the topic. Therefore in the current article, we provide the readers with the results of the questions. To have a deeper insight into the problem, the results are compared for American and European samples.

Selling part of the fleet to improve liquidity

The first of the questions we asked our respondents to gather some information about the compensation strategies contractors used during the crisis targeted on the impact of the crisis on fleet size. Overall, most of our respondents claimed they did not have to sell any part of the fleet (87.8%). Among those who were forced to sell any part of their fleet, about 5.7% of contractors sold up to 10% of their fleet, 2.9% of respondents sold between 10 and 30% of the fleet, 2.1% of the contractors sold between 30 – 50% of the fleet and only 1.5% of contractors participating in the Covid survey sold more than 50% of the fleet. From our point of view, it is much more interesting to focus on differences between Americans and Europeans. We see a downward trend for the size of the sold fleet on both samples. However, the Americans more frequently claimed they did not sell any part of the fleet (93.3% compared to 85.4%), and the opposite, less frequently claimed they indicated the need for selling part of their fleet. The results are presented in the graph below, indicating only 3.9% (compared to 6.4%) of Americans sold up to 10% of the fleet, 1.7% (compared to 3.5%) sold between 10 and 30% of the fleet, 0.6% (compared to 2.7%) sold between 30 and 50% of the fleet, and again 0.6% (compared to 2%) were forced to sell more than 50% of the fleet. The generalizability of the results is a little bit questionable. Our chi-square test analysis revealed the p-value is smaller than 0.1 (p = 0.88). However, we would like to inform our readers that the acceptance of p-values depends on the field of study. Whereas in medical or pharmaceutical researches p < 0.1 would indicate too much risk for error occurrence, in research on social data – survey responses from LECTURA Specs web page visitors – results with p<0.1 may be accepted too. But according to the effect size of our results (V = 0.11, p < 0.1), the region of origin (North America; European union) does not have a big influence on the need for selling part of the contractors´ fleet.

Graph 1

CAPEX 2020 reduction 

Capital expenditures (CAPEX) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. CAPEX is often used to undertake new projects or investments by a company. With a global decline in demand, companies are being forced to reprioritize spend and focus on their cash position. To increase cash flow, we expected many have turned to reduce their capital expenditures (CAPEX). However, despite the expectations, our results revealed that most of the contractors did not plan to reduce their CAPEX (72%), and only 28% of contractors who participated in the covid survey plan to do so. Again, when comparing the results for American and European samples, some differences were found, although with higher levels of statistical significance (p < 0.001), supporting the generalizability of our results. The effect size of the results is, however, still small (V = 0.20, p < 0.001). To conclude, the Europeans were more willing to reduce their CAPEX (34% compared to 14.3%), whereas most Americans did not plan it (85.7% compared to 66%).

Graph 2

Other interventions

So far, our results indicated, there are some statistically significant differences between the Europeans and Americans. However, when inspecting the responses about interventions that would help our respondents invest in their fleet, no generalizable differences were found (p < 0.54). That indicates the current results, presented in the graph below, may be applied only for the respondents who participated in the Covid survey. Overall, 48,3% of contractors need 0% financing, 19.1% would appreciate rent to buy options, 13.7% would rather prefer delayed payment, and only 9.1% of respondents claimed they need special leasing or another type of support.

Graph 3

Institutional support

More interesting results were found when we focused on support providers’ preferences. Overall, 45.6% of contractors claimed they did not need support from anyone, whereas the rest would be grateful if authorities intervene and help them to deal with the crisis. 23.3% of respondents would appreciate fiscal measures by national authorities, 18.5% would prefer liquidity-related measures by banks, 10% needed investment measures by European authorities, and 2.6% of respondents claimed they needed support, but any of the predefined options did not suit their demands. After that, we compared the results for European and American samples. We found the differences are statistically significant (p < 0.001) with medium effect size (V = 0.36; p< 0.001) indicating the region of origin moderately influences the support preferences. For example, most Americans (74.2%) claimed they did not need any support, whereas only about one-third (36.3%) claimed so. The Europeans, on the other hand, considered various forms of support by authorities trustworthy. 28.9% (compared to 6.1%) would prefer fiscal measures by national authorities, and 20.1% of European contractors (compared to 13.6%) needed liquidity related measures banks. Intuitively, the Europeans also preferred investment measures by European authorities (12.7% compared to 1.5%), although some of the American contractors would also expect the European authorities to support the American market. 

Graph 4


While our results indicated that most of our respondents did not need any support, it is important to note the data was collected in June. Since that, due to the second wave of the pandemic, new restrictions and threats have appeared, including, for example, suspension of projects, labor impact and job loss, time overrun, cost overrun, and financial implications. Therefore the longitudinal research, allowing us to explore the trend of time progression of the crisis and its impact on the heavy machinery industry, would provide us with missing information from the second half of the year. 

Would you like to know more about the impact of COVID pandemic on the construction industry? Click here for the full report by LECTURA, ERA and CECE!

or continue reading the Covid Special ==> Part 1: The case study on German and British machine owners: similarities and differences in the coronavirus crisis management

==> Part 2: Differences between the coronavirus crisis impact according to the company size

==> Part 3: Why did some contractors suffer from the decrease during the coronavirus crisis, and others experienced the growth of their business?

==> Part 4: When facing a crisis, what type and from whom people expect to support?

==> Part 5: The influence of the coronavirus crisis on the dealers´ rental economy

==> Part 6: Areas of business for which we observe the greatest and the least impact

==> Part 7: The impacts of the COVID-19 crisis based on regional and historical-political factors


Source: Lectura Press

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