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  1. #1
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    Default Probably Just a Rumor

    I heard a rumor today that Pierce is demanding pre-payments on apparatus orders. I have heard rumors like this in the past and it usually ends up that they (whoever the rumor was about that time) were only offering prepay discounts but were misunderstood.

    I am reasonably sure it is only a rumor. A move like that would be certain to affect business and not in a nice way. It would be like saying, "We are in a financial crisis and might not be around to finish your truck if you don't front some money today." If that wouldn't make a fire department nervous I don't know what would. Regardless of what you might think of Pierce, they didn't get where they are by being stupid.

    Anyone else heard anything about this?


  2. #2
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    Thumbs up

    If indeed it were true it would likely have nothing to do with Pierce having financial troubles. More likely, they have experienced difficulty as of late getting payment for vehicles. This would be a financially sound option to reduce their risk, especially on high dollar items purchased first in the build process like motor, tranny, and other chassis components. The good old days when local government was always trusted to be "good for it" are over.

  3. #3
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    If you want to know the financial standing of a company who you are looking to build a truck, ask for a performance bond. The bonding company rates the rate on the risk of the manufacturer to go out of business. The higher the risk, the higher the rate will be. I have seen rates range from $2.00+ per thousand to over $12.00+ per thousand for a regional builder.

  4. #4
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    Quote Originally Posted by Fire562 View Post
    If you want to know the financial standing of a company who you are looking to build a truck, ask for a performance bond. The bonding company rates the rate on the risk of the manufacturer to go out of business. The higher the risk, the higher the rate will be. I have seen rates range from $2.00+ per thousand to over $12.00+ per thousand for a regional builder.
    Unfortunately, unless the customer has access to the Dealer Cost Worksheet that price isn't generally known. Although, some dealers would probably tell you the rate if you asked, most builders I have worked for were not keen on making the rate public knowledge. One company had a rate low enough to make jaws drop but still preferred the dealers not share the information since it was a cost of the sale.

    I am not sure that most customers are aware that insurance companies give bid bonds for free in hopes of securing a performance bond which they charge for.

  5. #5
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    Default

    We signed a contract for a new tower Monday of this week with no pressure to prepay. We will most likely prepay a large percentage due to their offer of 7.25% interest on all prepayments.

  6. #6
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    Quote Originally Posted by firepundit View Post
    Unfortunately, unless the customer has access to the Dealer Cost Worksheet that price isn't generally known. Although, some dealers would probably tell you the rate if you asked, most builders I have worked for were not keen on making the rate public knowledge. One company had a rate low enough to make jaws drop but still preferred the dealers not share the information since it was a cost of the sale.

    I am not sure that most customers are aware that insurance companies give bid bonds for free in hopes of securing a performance bond which they charge for.
    With a competitive bid process you will have the cost worksheet and can have a performance bond created.

  7. #7
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    They have an engine pre-buy program that allows you to buy a 2009 engine ( engine as in powerplant, not fire engine ) now without having to sign a contract for 240 days. The engine must be paid for in full. This allows you to get a 2009 engine now while they still have them, instead of a 2010 engine with the emision add ons ( DPF, DEF )

    Maybe that is where the rumor came from.
    We do not rise to the occasion. We fall back to our level of training.

  8. #8
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    Quote Originally Posted by lexfd5 View Post
    With a competitive bid process you will have the cost worksheet and can have a performance bond created.
    Having only been involved in a couple thousand competitive bids, I cannot think of a single one where the dealer showed the customer his cost worksheet. Perhaps a price breakdown but never the cost worksheet. After all, it shows his profit.

  9. #9
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    Question Pre-payment

    If Pierce is offering 7.25% on pre-payments you should take that action. I think most manufactuers, banks etc. are in the 3-4% range at best. Are you sure that's an acurate number?

  10. #10
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    Quote Originally Posted by donethat View Post
    If Pierce is offering 7.25% on pre-payments you should take that action. I think most manufactuers, banks etc. are in the 3-4% range at best. Are you sure that's an acurate number?
    Really. Most of the times it is the prime rate plus 1 percent. Kinda makes one think they are really wanting some cash.........

  11. #11
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    Default intrest payments

    Yes I am sure its an accurate number. If you do the math on the numbers it actually slightly higher.

  12. #12
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    It's usually not a good sign if they are paying you a higher interest rate than you can get at a bank. It means they need the cash so they can build your truck and other peoples trucks. On the other hand, they have so much debt that the cost for them to borrow money from the bank is much higher so they would rather pay you the 7.25%.

    Yes, Oshkosh is a large corporation. However, so was GM and Chrysler. Bad things can happen to big companies and many people get caught in the middle. While it may sound good now, departments need to be careful of large prepayment discounts. I would agree with donethat with the norm around 3-4% interest on prepays. Would you write a check for 35K to your Chevy dealer the day you order your new pickup? Why Not?

    The other thing I would be interested to know is how many departments actually end up seeing the full discount or if the manufacturers end up getting them to spend it on change orders?

    Just remember...If you would have told me two years that GM was going to go bankrupt, I'm not sure I would have believed you. If it's too good to be true.....

  13. #13
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    Default Prepay discount

    Don't forget! How long do they hold that money? If you have no penalty clause they can take their time building the truck and make money on the interest for 12 months?

  14. #14
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    Quote Originally Posted by LT2410 View Post
    It's usually not a good sign if they are paying you a higher interest rate than you can get at a bank. It means they need the cash so they can build your truck and other peoples trucks. On the other hand, they have so much debt that the cost for them to borrow money from the bank is much higher so they would rather pay you the 7.25%.

    Yes, Oshkosh is a large corporation. However, so was GM and Chrysler. Bad things can happen to big companies and many people get caught in the middle. While it may sound good now, departments need to be careful of large prepayment discounts. I would agree with donethat with the norm around 3-4% interest on prepays. Would you write a check for 35K to your Chevy dealer the day you order your new pickup? Why Not?

    The other thing I would be interested to know is how many departments actually end up seeing the full discount or if the manufacturers end up getting them to spend it on change orders?

    Just remember...If you would have told me two years that GM was going to go bankrupt, I'm not sure I would have believed you. If it's too good to be true.....
    I'm with you on this one LT. I see it as Pierce (for any number of reasons) is having issues with short-term cash flow.

    Maybe sugar prices are up?

    C6

  15. #15
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    Quote Originally Posted by blsfeich View Post
    Don't forget! How long do they hold that money? If you have no penalty clause they can take their time building the truck and make money on the interest for 12 months?
    Everyone who knows me will tell you I'm all about saving money, but prepaying for any portion of fire apparatus is something I do not encourage.

    I have many specific reasons, but it all boils down to the fact that you lose part of your leverage as a buyer.

    C6

  16. #16
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    Default

    Quote Originally Posted by DFDMAXX View Post
    They have an engine pre-buy program that allows you to buy a 2009 engine ( engine as in powerplant, not fire engine ) now without having to sign a contract for 240 days. The engine must be paid for in full. This allows you to get a 2009 engine now while they still have them, instead of a 2010 engine with the emision add ons ( DPF, DEF )

    Maybe that is where the rumor came from.
    That would make a joke out of a competitive bid situation. Why would anyone bother to bid if they knew you had already bought the engine from Pierce and were just going through the motions in a bid process? Plus, you can pretty well guarantee success for anyone who challenged the process in public or the courts.

    If you take the number of units that go to bid out of the equation, that doesn't leave too many people to take advantage of this program. However, I'll bet that those who can most definitely will.

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