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.
