Where Are We Going?
In a market where every sale means the lights stay on longer, we look forward to this elusive recovery. Obama’s administration says the economy is already out of the recession and headed into a recovery, but with hands on experience I can officially proclaim “BS”. Just because the staff of the White House is driving nicer cars, doesn’t mean that my friends, family, and colleagues can go back to eating meat and potatoes for dinner.
Every day, I call on contractors, landscapers, and farmers while looking for used equipment to sell and acquire for export. Every day I hear horror stories about the massive losses these folks are enduring and how there is no relief within their sites. Some days, I hate haggling with them because I know how much they paid for these pieces and I know they need every penny they can get. The truth is, this market has diminished all senses of value we thought we once knew. A $300,000 excavator can now go for 20% of what it would have pulled in a good market while an older Cat loader can go for twice what it would have in the past. Mainline brands such as Cat, Komatsu, and Kawasaki are holding their own while value lines like Hyundai, Kobelco, and New Holland are taking a severe beating. Even Case has been fighting a tough battle and Deere? I can’t even give it away right now for some reason.
We look at this market every day, trying to figure out where it is headed so that we can get a jumpstart on the curve and turn out a profit to make up for the staggering losses that have molded our business lives and greatly impacted our personal lives. A few months back, I called on a longtime customer of mine to see if they were looking to sell any pieces. They had been thinking about it for a while and said they’d call me to let me know. A couple weeks later, I got a call from the owners wife and she had to sell a piece of equipment in order to cover their payroll. I bought a dozer from them and went over some other machines that I was interested in. This is a slippery slope. With most companies, once you get that first piece sold, you find necessity to start selling more to cover the jobs you are not getting. I watched their truck get repossessed while at their office. Not a pretty sight.
2011.
As I said in a previous post, I believe 2011 is the year of the rental house. They are going to be poised to recover the quickest. The companies that need to buy inventory will find that the manufacturers will be much more likely to accommodate them with excellent terms and pricing that we haven’t seen in over a decade (with the exception of Caterpillar, who feel they have some secret justification to raise their prices). Rates will slowly recover and utilization rates will increase and eventually hiring will resume in a manner that could indicate an actual recovery. Contractors who lost or sold their equipment will be too gun shy to buy new so used equipment sales and rental will be their answer to filling equipment needs for jobs as they come in.
What’s next?
As the Obama administration enters it’s last two years (hopefully), we should see some form of recovery. The emergence of a stronger political candidate should restore some confidence in the market and we should start to see some money flowing back into the industry. The major competitors, Sunbelt, RSC, United, Hertz, etc will plug millions into revitalizing their aging fleet but they will likely spend money on the value line equipment in order to bolster their bottom lines. With CARB’s recent about face on the emission standards, rental companies may keep some of the machines with high acquisition costs for a few extra years in order to whittle down some debt. The smart ones will put sales veterans in who were successful before the market exploded, because the strong market created “fake” superstars. The day of having a strong area and being successful for that reason only are long gone. It may even make sense to just fold the resume in half and only read the bottom? It will be interesting to see who is the first to push through and launch new programs and pursue new locations and niches. My guess will be that Sunbelt will be the most aggressive and successful at pushing the bar. United will be a close second. Large private competitors like Ahern, Modern, and NES will push to grow their companies and give the majors a run for their money. I hope to see Home Depot finally throw the towel in and let another company come in and manage their rental locations while I am confident that Lowes will begin to pursue different opportunites alternative to having Sunbelt operate out of their stores. This would make a great niche for a smaller company looking to grow exponentially while piggybacking off another major company.
No matter where we are heading, wear a seatbelt it’s gonna be a bumpy ride.
