REBUILDING ENGINES FOR FORKLIFTS.

REBUILDING ENGINES FOR FORKLIFTS. Many rebuilders today are looking for ways to increase profits by diversifying or expanding into niche markets. One such niche that may be worth investigating is rebuilding engines for forklifts. Engine rebuilders often classify themselves as an automotive (car and light truck), and/or medium duty/heavy-duty diesel or industrial rebuilder, and usually primarily stay in one market or the other. Some cross the line and do business in both markets, but most tend to stay in familiar territory where they're comfortable. Yet rebuilding forklift engines is essentially no different than rebuilding passenger car engines. The shop equipment and machine skills needed to do both are essentially the same even though the markets themselves are different. We only discovered about half-a-dozen rebuilders who do forklift engines on an exchange basis, and perhaps less than a dozen more who "specialize" in this market niche. A large percentage of shops who do forklift engines are rebuilders who do anything that comes in the door. For them, forklift engines are just another engine to clean and machine. There's nothing that's really unusual or unique about engines for forklifts except perhaps the older obsolete engines for which specs and parts may take some digging to find. But for the most part, they're just another engine for a specialty application. And in today's market, most machine shops should be looking for any and all available jobs that can be handled with existing equipment and manpower. Many who are in the forklift market full-time, or who have dabbled in it from the automotive side of the business, say there's good money to be made doing forklift engines. On average, profit margins tend to be at least 20-30% higher than on comparable passenger car or light truck engines because new industrial engines from OEM dealers tend to be quite expensive in comparison to automotive engines. Parts also cost more, and forklift users expect to pay somewhat higher prices. There's competition between forklift engine rebuilders, but not the cutthroat kind of price competition that has become commonplace in today's automotive market. Consequently, prices are higher (much like the marine market) as are profit margins. One forklift engine rebuilder said, "It's like the automotive engine rebuilding business was 20 years ago. We're still able to make a dollar." Fork it over Unfortunately, the overall size of the forklift market is minuscule compared to the passenger car and light truck engine market, so volumes are low. The Industrial Truck Association estimates the running population of forklifts in the U.S. to be only about 1.5 million - which is less than one percent of the car and truck population in this country. Nobody knows how many forklift engines are actually rebuilt or replaced every year, but from those we spoke with it's likely that an average 5-10% of the forklift population probably gets a replacement engine every year. Most forklift vehicles are worked hard eight or more hours a day, five or six days a week. So the estimated replacement market is somewhere between 75,000 to 150,000 engines annually. Some of these are new engines, but because of the relatively high cost of new engines ($4,000 to $5,000 each), the vast majority are remanufactured engines. Ninety percent of the forklift population are Class 4 or 5 vehicles with four cylinder engines. Class 4 forklifts have cushion tires for indoor use, most are propane fueled, and are rated from 2,000 to 8,000 lbs. lift capacity. Class 5 forklifts, which also have the same load rating, have pneumatic tires for outdoor use and are mostly gasoline powered (though some are diesel-powered). Years ago, the forklift market was the sole domain of U.S. manufacturers such as Continental, Waukasha and Hercules. The manufacturers had an extensive dealer network that could provide both parts and service. But these once familiar names have faded away because they suffered from the same shortcoming: all were powered by obsolete flathead engines. When the fuel crisis hit in the 1970s, everyone started looking for more fuel efficient engines. The Japanese saw a tremendous opportunity and began to sell overhead valve and eventually overhead cam powered forklifts in this country. By the mid-1980s, it's estimated that these fuel efficient, clean burning Japanese engines powered 90% of the new Class 4 and 5 forklifts that were being sold. Today, as much as 75-80% of the running forklift population is powered by Japanese overhead valve or overhead cam engines. There are still a lot of the older Continental, Waukasha and Hercules engines in service, but their numbers continue to dwindle every year. So anyone who rebuilds forklift engines today needs to be familiar with current Japanese engine technology Ñ which is essentially the same technology that's used in today's passenger car engines: overhead cams, aluminum cylinder heads and cast iron blocks. If you're already doing Nissan, Toyota, Mazda or Mitsubishi passenger car engines, or even domestically built bi-metal engines, there's no reason why you can't add Japanese forklift engines to your shop's repertoire. The most common brand of forklift you're apt to encounter is still Clark, which has been powered by Mitsubishi engines since the early 1980s. Among the newer forklifts, Hyster and Yale are popular nameplates. Both are powered by Mazda engines. Nissan, Toyota and Mitsubishi forklifts have all used their own respective engines, while Caterpillar used Peugeot engines up until the early 1990s when they switched to Mitsubishi. The blocks and cylinder heads on most of these engines are either similar or identical to those on many passenger cars, so they should hold no surprises. But because of the variety of forklifts a given engine might be used in, there are a lot of differences in flywheels, water pumps, timing covers, manifolds and fuel systems. Identifying the correct application, therefore, is essential if you're remanufacturing and selling forklift engines on an exchange basis. But that shouldn't be a problem if you're custom rebuilding a single engine (unless some of these bolt-on parts have to be replaced or are missing). An insider's perspective Engine Power in Pineville, NC, is one of the major players in the forklift market. The company has been in the forklift market since 1978 and rebuilds about 140 forklift engines a month, says Engine Power's David Couick. "We also distribute for Kubota, Hercules, Nissan and Perkins," said Couick. "About 25-30% of our production is diesel engines, and the rest is gasoline and LP (liquefied petroleum or propane)." Couick says it takes a lot of expertise to sell forklift engines on an exchange basis because of all the application variables. "You have to know which parts are used on which engines, otherwise you can get yourself into trouble real quick, he explained." Most of Engine Power's customers are forklift dealers to whom they sell at wholesale prices. Less than 10% of the company's sales are at list price directly to end users. Couick says Engine Power sells nationwide, but primarily markets east of the Mississippi because freight gets expensive the further west one goes. Engines are shipped complete with oil pan and valve covers. "We warranty all of our engines for one year on both parts and labor, which includes installation," said Couick. "Our price really doesn't reflect this because installation labor can be a big factor if you get a warranty claim. On some of these engines, installation labor can be $750 to $900 because it takes 12 to 15 hours to replace the engine." The most popular engines, says Couick, are Mazda, Mitsubishi and Nissan gasoline engines, along with Perkins diesels. Most are four cylinders, but there are also some V6s. Parts are usually readily available, and can be sourced from various suppliers, however, OEM parts are expensive. "You really need an OEM affiliation to source parts at a reasonable cost," explained Couick. "Being a distributor saves us 20-25% on our parts cost, and also allows us to sell engine kits along with other associated parts to smaller shops or fleets who want to rebuild forklift engines. Kits are really popular because you can get everything you need from one source." Prices for remanufactured engines obviously vary according to the application, but according to those we spoke with can range from $1,695 (dealer price) for a popular Mazda engine up to $5,195 for a turbocharged Perkins six cylinder diesel - plus core charge. Cores are a real challenge in the forklift market, says Couick, because they're hard to find. Most users seem to keep their forklifts forever. They'll go through multiple replacement engines, or have the same engine rebuilt over and over until it's completely worn out; that can make for a very meager supply of good, rebuildable cores. As a result, core prices can range from $200 to $300 or more depending on the engine. "Most automotive core brokers don't know industrial engines so they either can't or won't supply forklift engines," said Couick. "So we buy cores from our own sources or work with a few brokers who know this business." Same business, different name Motor Power in Hopkinsville, KY, is another player in the reman forklift engine market. Mike Green says Motor Power does 25 to 30 of these engines a month and sells nationwide on an exchange basis to forklift dealers as well as independents. Engine parts, though, is actually a larger percentage of the company's overall business. "We sell about 275 engine kits a month for Nissan, Toyota and Mazda engines," he said. "Most of the people who are buying these kits are small AERA (Automotive Engine Rebuilder Association) member machine shops and rebuilders who are doing forklift engines either occasionally or on a small scale basis." Green also says forklifts are a good market, made even better by the fact that remanufactured forklift engines are not readily available through traditional automotive channels. Most forklift operators have to go back to their dealer if they need an engine or parts. Most forklift dealers do not have any shop facilities for rebuilding engines themselves, so they either have to sell the customer an exchange engine if the customer doesn't want to buy a new engine, or send the customer's old engine out to a rebuilder or local machine shop to have it rebuilt. Some larger companies that have a fleet of forklifts may have the shop facilities to do their own overhauls, but many will still farm out the work to a local machine shop. "Any rebuilder who wants to get into this market should contact local forklift dealers and companies that use forklifts in their business," said Green. Such a grind Grindstaff Engines in Independence, MO, is another niche player that specializes in forklift engines, as well as engines for other industrial applications such as generators and compressors. The company has been selling forklift engines on an exchange basis for the past 15 years, marketing only to forklift dealers. Rick Grindstaff says that although the forklift market is a good one to be in, it isn't as strong as it was two years ago. "We've seen some peaks and valleys," said Grindstaff. "This past summer was poor, but it picked up in the fall." He cautioned that the forklift engine market is a difficult business to break into. "If you're going to sell engines on an exchange basis, you first have to develop an extensive core bank," said Grindstaff. "That isn't easily done because most cores are hard to get and are very expensive. We pay at least $300 for most of the cores we buy, and as much as $500 to $600 for some, if we can find them. You also have to know all the different variations so you can give your customer the correct engine for the application." He also warned that profits aren't necessarily higher with forklift engines, but that people are used to paying more because cores and component parts cost more. "Our biggest competition is from local machine shops and rebuilders who overhaul a customer's engines on a custom basis," said Grindstaff. A southern view Jose Sabatier of Zabatt Engine Service in Jacksonville, FL, said about 10% of his company's business is on forklift engines. "We market in about a 150-mile radius, and do custom rebuilding for forklift dealers, as well as for forklift operators," said Sabatier. "In some cases, we will also remove and install the engine for the customer, which is actually easier than doing a passenger car engine because there are fewer accessories in the way." Is the work profitable? Sabatier says he can generally charge 20-30% more for the same work on a forklift engine with "no arguments" because customers are used to paying so much more at a dealer. He said rebuilders shouldn't be afraid to crossover to forklift engines because they're essentially the same as automotive engines. But Sabatier also cautioned that quality work is a must because a forklift engine works much harder than the average passenger car engine. Two different views There are those that have gotten into but exited the forklift market, for different reasons. "We stopped doing forklift engines three years ago because we needed the production capacity to expand our OEM business," said Mike Jarvis of Franklin Power Products, Franklin, IN. "We're an authorized remanufacturer for Navistar 6.9L and 7.3L gasoline engines, and Ford mid-range truck diesel engines. We also do diesel fuel pumps, injectors and turbochargers. It really wasn't our core business so we stopped. But it can be an ideal niche for a shop that does 10 to 12 engines a week," said Jarvis. Tim Haas of Auto Parts & Machine in Louisville, KY, expressed a different view. "We quit the forklift market three years ago because we found we couldn't do business profitably with forklift dealers. We were doing about six to eight Continental engines a month at $1,200 per engine because that's all the dealers would pay us. I figured we were losing 15 hours per engine on every forklift engine we did. "The dealers were also hitting us with outlandish warranty claims, nine out of 10 of which were not our fault," continued Haas. "The last straw was a warranty claim because the engine wouldn't crank. It turned out to be a bad starter. So we said enough and got out - and immediately saw our shop profitability go up! We now do mostly industrial engines for construction companies and some industrial dealers." Parts Parts for forklift engines are available from a variety of suppliers other than OEM distributors and dealers. Those who sell forklift parts are usually specialty distributors. But many engine parts can also be sourced through traditional automotive channels from familiar suppliers. Parts for older obsolete engines may be harder to find, but are still available from certain supplier specialists. As with most market opportunities, forklifts aren't for everyone. However, for those who understand customer expectations, and such issues as core availability, applications and pricing, rebuilding forklifts may provide added revenue that drops to the bottom line. FORKLIFT OPERATION AND SERVICE. BE SURE TO VISIT THE HOME PAGE FOR INFORMATION ON LIFT TRUCKS REPAIR, SERVICE, TROUBLESHOOTING, AND EVERYTHING YOU NEED TO KNOW ABOUT FORKLIFTS AND THEIR USE.